Brunello Cucinelli Rejects Short Seller Claims on Russian Operations and Denies Inventory Dumping

The Italian fashion group Brunello Cucinelli has publicly rejected recent accusations made by short sellers regarding its business activities in Russia, asserting its operations are significantly reduced and in full compliance with European Union regulations. This refutation comes amidst strict EU sanctions implemented in 2022, which banned the export of luxury goods exceeding 300 euros to Russia, a measure designed to impact the country's elite following its invasion of Ukraine.

The controversy was sparked by a report from financial analysis group Morpheus Research, which earlier Thursday announced it had shorted Cucinelli's Milan-listed shares. Morpheus alleged that Cucinelli had misled investors and continued to operate several stores in Moscow, purportedly selling a wide array of high-end clothing and accessories, and maintaining trade with Russian partners despite the ongoing sanctions. The report further claimed that the fashion company might be utilizing the Russian market to offload excess inventory.

In response, Brunello Cucinelli, headquartered in central Italy, issued a statement clarifying its position. The company confirmed that staff in its Russian showroom primarily provide customer care services for existing clients. It also stated that its spaces within larger multi-brand stores remain open, but any products available for sale are those legally permissible for shipment to Russia, in addition to inventory that was delivered prior to the imposition of sanctions. Cucinelli emphasized that inspections conducted by Italy's Customs Agency have confirmed the full compliance of its procedures, though specific dates for these inspections were not provided.

Directly addressing the allegation of using the Russian market for inventory reduction, Cucinelli, renowned for its luxurious cashmere products, asserted 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." The company further revealed that the share of Russian sales on its total turnover has dramatically decreased by more than two-thirds since 2021, with the market now representing just 2% of its total revenue. Exports to its Russian unit have also fallen significantly, from 16 million euros in 2021 to 5 million euros in 2024, out of an almost 1.3 billion euros ($1.52 billion) in total revenue anticipated by the end of 2024.

The Morpheus report had an immediate and severe impact on Cucinelli's market standing, causing its shares to drop by almost 5%. This prompted the Italian Bourse to temporarily suspend trading in the stock. By the market close, Cucinelli's shares had plunged over 17.3%, settling at 85 euros. In light of these developments and the potential damage to its brand image, Cucinelli announced it is considering legal action against Morpheus Research, aiming to "protect its reputation and the interests of all its stakeholders."