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Investing.com -- Bernstein has upgraded its rating on Brunello Cucinelli (BIT:BCU) to “outperform” from “market-perform,” maintaining a price target of BC.IM €119.
The revision follows a recent price correction of approximately a decline of 12%, which Bernstein said “offers investors the opportunity to enter a high-quality, defensive luxury name at a discount.”
The upgrade comes amid scrutiny from two short reports questioning Cucinelli’s standing as an “ethical and sustainable luxury brand.”
One report suggested the company was selling current-season products in Russian stores. Brunello Cucinelli clarified that its directly operated stores in Russia remain closed, and “all the activity taking place through concession or wholesale, in line with peers.”
Staff from the closed boutiques are engaging in one-to-one sales at showrooms “at the request of final clients.”
Bernstein noted that photos cited in the reports “were misinterpreted,” as the 2025 EAC date on product tags refers to technical conformity renewals rather than production dates.
Bernstein said its fieldwork “didn’t point anything out of line with EU regulations,” and the company has been methodically addressing each allegation.
Investor confidence is further supported by continued demand from high-net-worth individuals. Bernstein’s visits to Geneva, Paris, and London indicated that “HNWIs are stronger than ever,” positioning Brunello Cucinelli to benefit from the increasing appetite for luxury products.
The company focuses on approximately 500,000 clients in the top income bracket, giving it a narrowly defined but resilient customer base.
Management anticipates an improvement in organic growth quarter-on-quarter, led by retail. Retail growth is expected to reach the low teens in Q3 FY25E, driven primarily by like-for-like sales and new store openings in Shanghai and Abu Dhabi. Foreign exchange impacts are forecast to be lower than in Q2 FY25 due to hedging.
Wholesale sales are expected to rise modestly at high single digits, following early deliveries in Q2 FY25.
By geography, Italy is expected to remain flat after a strong Q2 FY25 driven by early wholesale deliveries, while the rest of Europe is projected to grow above 10%.
The Americas are seen accelerating quarter-on-quarter to double-digit organic growth, with implemented price increases in the U.S. (+mid-single digits) mitigating tariffs.
Asia is expected to improve to high-teens growth, aided by low comps from Q3 FY24, while China remains stable at double-digit sales.
“So, we do not see any clear and present danger on current trading ,” the brokerage said and sees “no material reason to imply reputational and multiple damage” to the company at this point.
With solid fundamentals, continued luxury demand, and a recent share price correction, Bernstein views the stock as an attractive opportunity for investors seeking exposure to the high end of the luxury market.