Brunello Cucinelli rejects short sellers' report over Russia business

ROME (Reuters) -Italian fashion group Brunello Cucinelli on Thursday rejected reports by short sellers that it is still conducting substantial business in Russia, saying its reduced activities in the area are in full compliance with European Union regulations. 

Following Russia's invasion of Ukraine in 2022, the EU banned exports of luxury goods worth more than 300 euros ($350.28) to Russia, designed as a blow to the country's elite. 

Earlier on Thursday, financial analysis group Morpheus Research published a report saying it had shorted Cucinelli's Milan-listed shares.

It claimed the company misled investors and keeps operating several stores in Moscow, selling a wide range of high-end clothing and accessories, and still trading with Russian partners despite sanctions.

The fashion company, based in central Italy, said in a statement that staff in its Russian showroom provided customer care services for clients.

Its spaces in larger multi-brand stores are still open and products for sale are those that can be legally shipped to Russia, along with inventory delivered before sanctions were introduced, the group said, without elaborating.

Cucinelli added that inspections by Italy's Customs Agency confirmed full compliance in the procedures but did not say when they took place.

The Morpheus report also alleged that Cucinelli is using the Russian market to get rid of excess inventory but the brand, known for its high-end plush cashmere products, responded that "figures provide a clear and accurate perspective on this matter and rule out any speculation regarding the use of the Russian market to reduce stock or clear excess inventory".

Cucinelli also said the company was considering legal action against Morpheus "to protect its reputation and the interests of all its stakeholders".

The move by Morpheus sent Cucinelli shares down almost 5%, prompting the Italian Bourse to suspend trading in the stock. The shares closed down over 17.3% at 85 euros.

Cucinelli, with almost 1.3 billion euros ($1.52 billion) in revenue at the end of 2024, said the share of Russian sales on its total turnover has fallen by more than two-thirds from 2021 and that the market now accounted for just 2% of its revenue.

Exports to its Russian unit fell to 5 million euros in 2024 from 16 million euros in 2021, it added.

($1 = 0.8558 euros)

(Reporting by Giulia Segreti; Editing by Gavin Jones and Richard Chang)