After short-seller report, Cucinelli reaffirms that it operates in Russia in line with EU rules

By Elisa Anzolin

MILAN (Reuters) -Italian luxury company Brunello Cucinelli reaffirmed on Wednesday that it operated in Russia in full compliance with European Union  regulations, as it posted a 12% increase in revenues in the third quarter, to 336 million euros ($394 million).

Shares in the cashmere group have been under pressure after a short-seller last week accused the company of misleading investors about its Russian business, an allegation it has denied.

The group said that its three flagship stores in Russia had remained closed once EU sanctions were introduced following the invasion of Ukraine in 2022. Some staff in Russia remained engaged in one-to-one sales activities and its spaces in multibrand structures remained operational.

However, they are selling goods exported there before the war or with a transfer price below 300 euros, in accordance with EU rules. Usually that price is multiplied three or more times to get to the final retail price.

'APPROPRIATE INVENTORY LEVELS'

"Our Russian business is like a candle, which burns as the inventory we had in Russia runs out and the number of employees decreases," said executive chairman and company founder Brunello Cucinelli in a conference call with analysts.

Russia accounted for 1.4% of the group's revenues at the end of September, down from 2.7% a year earlier, according to the statement.

The group added that its inventory levels, amounting to approximately 28-29% of turnover, were "appropriate and balanced" and in line with the brand's historical figures. The cashmere group denied any claim that it was using the Russian market for reduction of excess inventory.

During the conference call, executives said the group was reviewing its internal controls, without giving further details. They said the group  would subsequently decide what further action to take with regard to short-seller Morpheus Research.   

CUCINELLI CONFIRMS 2025 OUTLOOK

The group, the first in the European luxury industry to provide an update on the latest quarter, confirmed its expectations for revenues to increase by around 10% in 2025 and 2026.

Over the first nine months, sales in Asia grew 16%, with China - still a small market for the Italian fashion house - up by double figures.

Sales in Europe and in the Americas rose around 9%.

($1 = 0.8523 euros)

(Reporting by Elisa AnzolinEditing by Keith Weir)