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

Brunello Cucinelli posted a 12% increase in Q3 revenues to 336 million euros, simultaneously reaffirming its adherence to EU sanctions in Russia following a short-seller's allegations of misleading investors. The company stated its Russian operations, now 1.4% of revenue, are winding down, selling only pre-war inventory or low-value items in compliance with regulations. Despite the scrutiny, the luxury group confirmed its "appropriate" inventory levels and maintained its 2025-2026 revenue growth outlook of approximately 10%, driven by strong performance across key regions.

Analysis

Brunello Cucinelli demonstrated operational resilience by posting a 12% year-over-year increase in third-quarter revenues to 336 million euros, while simultaneously addressing a short-seller report from Morpheus Research. The company refuted allegations of misleading investors regarding its Russian business, clarifying that its operations are in full compliance with EU sanctions. Management detailed that its Russian exposure has materially decreased, now accounting for only 1.4% of revenue compared to 2.7% a year prior, and is limited to selling inventory exported before the war or items with a transfer price below the 300-euro sanction threshold. Critically, the company denied using the channel for inventory dumping, stating that inventory levels are appropriate at 28-29% of turnover, consistent with historical norms. Despite the pressure from the short-seller, which has prompted an internal controls review, the company reaffirmed its long-term revenue growth guidance of approximately 10% for both 2025 and 2026, signaling strong confidence underpinned by solid growth in Asia (+16%) and steady performance in Europe and the Americas (both +9%).

Key Decisions for Investors

• Investors should weigh the company's strong fundamental performance, including 12% Q3 revenue growth and a confident long-term outlook, against the headline risk and potential for further scrutiny stemming from the short-seller allegations.
• Monitor the company's stated review of internal controls and any subsequent actions taken regarding Morpheus Research, as these will be key indicators of management's confidence and the potential materiality of the claims.
• Given that the Russian business now constitutes a marginal 1.4% of revenue and is reportedly winding down, focus should remain on the sustained growth momentum in core markets like Asia, which is the primary driver of the company's performance and outlook.