Brunello Cucinelli Seeks to Reassure Investors After Short Seller Accusations

Brunello Cucinelli executives used the brand’s third-quarter results to hit back against a short seller’s allegations that the company had misled investors about its Russian business and discounting practices, while reaffirming that sales are on track to grow 10 percent this year.

“We have the feeling it is going very well both in terms of numbers and product image,” said Cucinelli, who is executive chairman and creative director at the brand he founded nearly 50 years ago, speaking through a translator on a call with analysts and investors. “If … this short selling activity had not occurred, it would have been preferable and less demanding for me, the two CEOs and for [investor relations], but it’s part of being listed on a stock exchange.”

His comments come days after a report by short seller Morpheus Research, which claimed the Italian luxury cashmere label continues to operate stores it said it had shut in Russia and appeared to be shipping goods to the country in violation of European sanctions that prohibited imports of high-value luxury products in response to Russia’s invasion of Ukraine in 2022. It also alleged the label was discounting heavily to shift excess stock.

Brunello Cucinelli brought forward its third-quarter results to reassure investors, after the report’s release caused the company’s share price to drop 17 percent in a single day last week. The stock is still down around 12 percent since the report came out.

The company used its earnings call to methodically rebut the claims against it, and to reassert the narrative that it is one of the few luxury brands whose business is still strong. Its inventory levels are in line with historic volumes and appropriate for a company that deals primarily in ready-to-wear, which requires regular turnover to remain relevant and contemporary, it said.

“Today we feel balanced and sales in stores are very, very good,” Cucinelli said.

The company rejected the claims regarding its Russian business, which it said is fully compliant with regulations. Its stores remain closed, with any sales generated through one-to-one client dealings and based on inventory already in the country, it said, adding any shipments to wholesale clients are compliant with EU restrictions. Retail revenue from the country accounted for just 1.4 percent of sales at the end of the company’s third quarter.

“Our Russian business is like a candle that is melting hand in hand with the use of the inventory we had in Russia and the reduction in the number of employees,” co-CEO Luca Lisandroni said.

Since 2022, the company has undergone over 100 customs checks, and “there was nothing to report on this. Never,” said Lisandroni. Following last week’s report, the brand is conducting its own investigation into its internal controls and has hired a law firm to verify its findings, he added.

Many of the questions put to executives on the call focused on the Russia allegations and how the company planned to respond. Still, several analysts have already brushed off concerns. Earlier this week, Bernstein upgraded the label to outperform.

Meanwhile, the brand continued to deliver consistent growth despite a broader luxury downturn.

Sales hit €335.5 million ($393.8 million) in the third quarter, up over 12 percent at constant exchange rates, driven by strong appetite from buyers in the Americas and Europe and double-digit growth in Asia. Sell-through rates for the company’s current collection are strong and its showing during Milan Fashion Week last week was well received, it said. Guidance of 10 percent revenue growth in 2025 and 2026 remains unchanged.

Cucinelli concluded the call by telling a story that doubled as a metaphor for the experience of riding the market as a public company.

“We were sitting at a bar once and a foreigner turned up and he was great at playing cards and he sat at our café for four days and he won every hand,” he said. “Not me because I refused to play with him. But these are the rules of the game. There are ups and downs.”