Not all luxury brands are suffering. Italian luxury goods maker Brunello Cucinelli, which is known for its pricey suits and cashmere blends, announced a 6.3 percent rise in first-half core profit as “robust sales growth offset rising costs for retail expansion and a one-off hit due to the exit of a senior manager,” per Reuters.
"At this point practically two-thirds into the year, we can safely predict healthy revenue and profits growth for 2016," Chief Executive and Chairman Brunello Cucinelli said in a statement on Wednesday, also welcoming a positive outlook for the Italian market. The brand, which competes with the likes of Prada, Salvatore Ferragamo, Gucci, and Ermenegildo Zegna Group (the latter of which holds a 3 percent stake in Brunello Cucinelli), reported in July a 10 percent rise in revenues for the first half. The rise in revenues was helped by growth in all its markets and the opening of five new directly-owned shops this year.
Brunello Cucinello, which was founded in 1978, has been the subject of significant interest in recent years particularly in connection with its founder’s self-proclaimed “employee-centered approach humanistic capitalism.” Cucinello, 62, quite notably headquarters the company in Solomeo in central Italy, a town that he has worked to revive beginning in the late 1980’s.
He bought the central part of a medieval castle from its absentee owner and moved the company there in 1987. Cucinelli restored the castle for his living quarters and a school, where young people learn arts, including knitting and masonry. Nearby is a library open to employees. Farther down the hill, artisans weave $3,000 cashmere sweaters from the undercoats of rare Hircus goats.
As Bloomberg noted last year, Cucinelli (pictured below, center) insists on balance at his company. That includes a 90-minute respite at 1 p.m., when workers break en masse for lunch that costs a few euros in the subsidized canteen. On this Monday, they’ll dine on steak, pasta, and local produce bathed in Cucinelli’s own olive oil. His Brunello & Federica Cucinelli Foundation extends the philosophy to funding projects that make the world more livable. “Restoring a church or maybe restoring a hospital,” he offers as examples.
He asks the 1,000-member staff to knock off work at 5:30 and not to send business-related e-mails after that to conserve their creative energies. “People need their rest,” Cucinelli says. “If I make you overwork, I have stolen your soul.”
Cucinelli says he’s out to make money with his company, which maintains a $1 billion market valuation. Since listing on the Milan stock exchange in 2012, Brunello Cucinelli SpA has recorded impressive growth. In 2014, for instance, sales increased 10.4 percent to $472.8 million, more than double the average of 37 luxury-goods companies compiled by Bloomberg Intelligence.
He insists that the markup for the company’s goods must be reasonable. His company’s operating margin is 13.8 percent, lower than the average of 17 percent for its peers, according to data compiled by Bloomberg. “Would you buy a product if you knew the manufacturer made a huge, preposterous profit?” he asks. He says his prices reflect his garments’ hyperlocal production, handcraftsmanship, and sustainable sourcing from Mongolia and northern India. He pays employees about 20 percent more than the average Italian manufacturing wage. If this ethos draws customers, all the better, he says. And judging by the company’s consistent revenue increases – and especially compared to its competitors’ struggles – it seems to be working.