Brunello Cucinelli SpA

MIL:BC

Earnings Call Transcript 2020-Q1

[Operator]

Good evening. Chorus Call operator speaking. Welcome to the presentation of results of the First Quarter 2020 of the Brunello Cucinelli Group. [Operator Instructions]

The speakers will be Brunello Cucinelli, Chairman and CEO of the company; Moreno Ciarapica, CFO; and Pietro Arnaboldi, Head of Investor Relations. [Operator Instructions]

And now I'd like to give the floor to Brunello Cucinelli. The floor is yours.

[Brunello Cucinelli, executive]

Good evening, everyone. Welcome back. It is always a great pleasure to speak with you: investors, analysts and journalists.

As usual, I find that these calls are pretty relevant in order to exchange our views. So we are all here in Solomeo, beautiful splendid day with Riccardo, Luca, Moreno, Dario, CFO and Co-CFO, respectively. And we would like to tell you how we would like to organize and structure the following call.

So first of all, I'd like to tell you how we are working and living. I'd like to read out the figures you're already familiar with, how we are managing 2020 and how we have planned 2021 with a pretty sound visibility in 2022, too. And then once again -- we'd like to, once again, give you some colors on our 10-year program, the Plan 2019, 2028.

What about today, the current mood? I have to say that today, too, we only had 1 positive case here in Umbria, so I would say the situation is looking up. After a very strong period from the emotional point of view, especially the first 10, 20 days of March, that was the beginning of this pandemic, you see it was pretty tough. And now the second half, I would say, until last week, the days were slightly better because we were seeing -- we're seeing that the skies were clearing up somehow.

Now we're all back to work. So the collection style 23% of people for 10 days. And then last month, everybody came back.

So I have to say that we are back to normal. And the first day was pretty moving and emotional with serological samples and tests for everybody.

And face masks, of course, these are -- this is not compulsory, but every employee decided voluntarily to take these tests. This is a choice, a process that we have done together with Perugia University because they asked us to under -- that all our employees undergo these very important tests. In 40 minutes, we have the full results with these 4 scientists working for us.

And this is very interesting because they need these figures to map out, in this case, Umbria region. So we have done everything. An important thing I'd like to say, we have 2 doctors, a special Gazebo, a special area dedicated to the test and the sampling.

And then there is the foundation too, the foundation both with special machinery. And this machinery is able to read out and process all data in 40 minutes. And we carry out tests also to friends or people coming from far away because you see, if they come to the company and maybe they spend a couple of days with us, having the possibility to take a test and knowing everything after 40 minutes, then you have a different feeling.

So it was a good choice to cooperate with the Perugia University and the hospital. So how do we work now? We have tried to convert all this into somehow a new attitude with a focused dedication, humbleness, courage and creativity. This is what we want to put in place.

And first of all, we said to ourselves that we should be changing what can be changed, and we should be able to accept what cannot be changed. Like my great Master 16th Century of the greatest Humanist Thomas Omar said to me -- stated for me. So we decided that until the end of the year -- well, actually, I decided it -- until the end of the year, we won't be using that many adjectives and many formalities. We must be very quick, very down to earth, very pragmatic, to the point and ready to change our strategy whenever it is necessary even on a daily basis.

So jokingly, but not very much so, I have always thought that you only take part in the Olympics once in your life. And this has been a sort of Olympic games for our company. And I'll read out the comments because I'm sure you already knew the figures.

So EUR 156.7 million net revenues, minus 2.3% year-on-year, current change and 2.9% constant exchange rate, vis-à-vis EUR 106.4 million in the first -- March 31, first quarter of 2019. North America, plus 9.5%; Europe, minus 2.2%; Italy, minus 13.9%; China, minus 27%; rest of the world, plus 6.6%.

Performance per channel, minus 7.4% monobrand retail, plus 2% wholesale and monobrand wholesale, plus 0.5%. So what about my comment on this?

The current year was off to a very, very good start from an economic and brand image point of view until February 29, the end of February, the only exception being China due to the COVID-19 epidemic.

Our company reacted to the health emergency immediately by taking action to protect the health of all its employees, co-workers, suppliers and customers all over the world.

The precautionary measures adopted and the exceptional provisions introduced by the governments of several countries around the world in order to contain the spread of the virus have resulted in the closure of a significant number of boutiques around the world and only affected sales in the last weeks of the first quarter, thus reducing the overall result in a limited manner. The economic and financial impact of the pandemic is expected mainly in the second quarter with sales significantly affected by the closure of a still significant number of boutiques around the world.

Great attention is devoted to the planning of the 2-year period 2021, '22, for which we envisage a buoyant and sizable recovery of the business, allowing us to continue to work for our 10-year plan 2019-2028, which should lead us to double our turnover. We believe these to be strongly temporary circumstances. For this reason, our attention is focused on the management of the current year and the healthy control of costs, keeping our company structure strong and also poised to fully resume business.

We keep up our planning efforts and confirm our sound strategic investment program for everything related to the distribution and production side of the company as well as the supports of the brand as a whole.

So how do we manage the current year? So we can say that since mid-March, we decided to call all our analysts, investors and suppliers, and we decided to organize one, so to speak, meeting, virtual meeting a month with the financial community. At the beginning of April, we published the revenues of the first quarter. And in mid-April, we organized something very interesting and very appealing, a virtual roadshow for 3 days. And I would say that this was really, really important to have this exchange of views.

And we think that what is happening in the world is a crisis that we want to call temporary, a temporary one, very strong and sharp, but not as sharp as in 2008. I remember in 2008, banks would go bankrupt, we didn't know where to go. And I remember that my father sent me to withdraw from the Cassa di Risparmio bank, EUR 16,000 in savings that he had deposited there. But I'd like to compare the situation with an anecdote that really was important for me. When we were farmers, we lived in a family with 13 people. We had no electricity, we lived -- we worked the land with animals. And I was 10, and I remember fully well because my grandfather passed away 2 months after what I'm telling you about -- the story I'm telling you.

And then there was a huge hailstorm that summer that destroyed our harvest. We didn't have any policy -- insurance policy on that. And then in the evening, it was pretty gloomy, the mood there, my mother, the ladies there, everybody was crying. And my grandfather, he said to me, you see he wanted to comfort me, to reassure me, to calm me down for that great tragedy that had hit us because, of course, to have a harvest was important for our livelihood.

And the day after, the neighbor, a farmer neighbor, basically lent us about 20 bales of wheat. And then we returned the favor the year later. And about this, my father, who is 98 and I always go and visit him every evening, the other day, he said to me, you see after the huge hailstorm, however, of course, we harvested what was left. But when we went back to work, the land for the seed and the sowing of the following year, we were even more careful. We were even more fond of what we were doing so that maybe we could have some sort of recovery in the following harvest. So we -- these are the great choices that we have made. So we think that this has been some sort of hailstorm for the world.

So what about the choices that we have made. First of all, we want to devote 40% of our time to managing 2020. And 60% of our time to planning for 2021 and '22 that we want to start some sort of new time because this is what it's like.

So until February 29, everything was going well, and the world economy was going well. We had completed all our summer collection deliveries as usual. And we had already in-house all the orders for the fall/winter 2020 for the 3 collections: women's, men and kids. By the way, it went very well, both in terms of numbers and in terms of taste because it's always very important to have the feedback from the press to know whether your brand is contemporary or not.

How do we manage now 2020 ongoing? The first idea is to protect the brand and all the creative and organizational minds working for it. This is what really matters. And we also try to achieve sustainable balanced results. Over the last -- you see, we have been listed for 8 years, but over the past 7 years, we have doubled.

So our company is 40 years old, but if we think of the period 2000 to 2019, we grew by 11 % -- we have grown by 11% on average. So what did we do in mid-March as soon as the company closed down?

So we actually closed the company a week in advance because I, myself, and everybody, we were very scared because we had the example of China before our own eyes. And we made a huge decision back then to maintain all our employees, to maintain the same salary of 2019, starting from China, the first ones that were locked down. And we knew that 6 or 7 weeks later, we knew that we would resume our business in the best way possible with new excitement, drawing inspiration from our Chinese employees who really, for us, represented for the good and for the bad. They have really been an example of timing and mood.

I remember fully well the letter that we received on the day of the last call, March 11. So 2 months after they had started the situation. So what did we do? We spoke to all of them, with all our employees over there, and we asked 2 things of them. So well, actually we asked all our employees to work more until the end of August, half an hour every day more -- every Saturday morning. And until the end of August, only have one week off because usually, we would take 2 weeks off in August. This way, by the end of August, we will have caught up completely in delivering the winter goods and also preparing the collection.

The second important thing, maybe even more important is we should try and be even more special from the human point of view because once this painful situation is over, we will come across people who are feared who are scared maybe because they are grieving the loss of some beloved ones. Maybe they've lost their job and also a bit frightened by -- petrified by the world coming up.

So this is precisely where we have to be extremely careful. And I'm saying it to you and also to the people here with me, surrounding me. We have to listen and we have to not be arrogant at all because this is what we want to do.

If you see, the reactions of our employees were very touching and moving. So we can deduct that there's a very strong sense of belonging to the company, to the area, to the region. I am, myself, I'm strongly Italian. When someone speaks ill about Italy, I really regret it. And this is what I call the great value of the community. There is no doubt that this represents this human sustainability that we are so fond of.

Another important topic is production. The whole of production takes place in Italy, as you know, 75% in Umbria and the remaining 25% in Tuscany and market Veneto.

We have 364 micro workshops with 15 employees on average. They all have welcomed the idea to work through August so that we can say at the end of August, we will have caught up the delay with the previous year.

These micro companies that I really wanted to highlight, they were not really hit by huge losses because they only have basically workforces. So thanks to the furlough scheme of the government, they can basically redress their losses. But they provide us with a lot of flexibility with the delivery time because they are basically made up -- made of workforce. And therefore, we feel some sort of confidence and peace of mind, both for production for 2020 and also for the new collections that will come out in July and August.

Another important thing is the value of the multi-brand accounts. You see, for us, this business is 45% of our revenues with 500 accounts, about 10 department stores and then the rest 490 wonderful specialty stores.

We have known them for many years, have a business relation for many years, never had any problems there.

In the past few years, in the former Soviet Union and in China, many multi-brand stores, specialty stores, have blossomed. Therefore, we believe that for the coming years, we will have the possibility to definitely expand our business with these special players who are coming in the offing. So you see nobody has canceled their orders for winter.

And honestly speaking, fall/winter, we really believe very much in that because we think that, generally speaking, you see our clients might receive a bit less of what they ordered because of the production issues of other companies, of other vendors. That's why they're really asking us for help for -- in case of -- for any reassortments if the market was to go the way we expect.

Another important thing to be mentioned is the idea of redressing the seasons in stores and the coming out of new collections. I think in the past 5 to 6 years, we had really stretched it. We had crossed the line, meaning that we would showcase in the shop windows, strong cashmere coats in June. And speaking with many players, we actually see a trend emerging, some sort of rebalancing of the dates when the goods are displayed in the stores, I would say, with one month delay.

So we are going back to normal, which means that in July -- in June, you will have 80% of summer goods, and you'd start showing off some sort of winter garments.

Another important topic -- still another one. Everything is important. So spring/summer '21 collections. In July and August, we will present the new connections, as usual, with the usual timing. And they will be delivered physically to our showrooms. So in New York, Tokyo, Shanghai, London, Paris, Milan, Moscow. I think that there is no doubt that before making an order, you need to touch the product. You need to feel it. You see it live. Of course, if it's not possible, you can also see -- visualize it online. But if you can actually do it, it will be a completely different experience. So I'd like to say that as far as we are concerned, our collections will be very much -- very new. They should not look old. They should look new and maybe even more new than in the past year. And why is that? Because I think that after 2 days' lockdown -- sorry, 2 months' lockdown in our homes maybe in front of the computer, we have seen it all.

And we will definitely feel the need to step into brick-and-mortar stores to see, to touch, to be maybe picked by our maybe salespeople. You see, for example, I wanted to buy 2 tennis rackets because I've always played tennis since when I was young, I didn't want to buy them online. And I -- that's why I want to go to the physical store so that I can have some sort of explanation there.

I think that this will become true in early July when we have to show the fall/winter garments in the stores. And there is no doubt that in January already for the next spring/summer, the stores must be beautiful, very modern, very groomed, visual must be very appealing, enticing and also DSAs must be special because everything -- because we need to display new goods.

Then e-commerce. It's something we really believe in. So this part of the year, we have had a 50% increase because, of course, the starting point is just 3% the brunellocucinelli.com. But it's very important. We had really reinforced our structure in terms of space and people by specialty space so we can double our business without any problem. So we have the facilities for it.

We think that it is a very important means for image related or communication of the company. So e-commerce is something serious on the online world. But I also wanted to convey my personal thoughts on this.

Following 2 months' lockdown and always online, I don't know about you, but I really am fed up with these calls -- no, sorry, not with the calls that we're having now, obviously. But I really am fed up with them being online and screen and stuff. And I think in the past 2 months, we have really visualized everything, every single thing. So there is a huge need to go back to physical things, of course, complying with the safety and security regulations. So I think that physical stores will play an important role in the future like we were saying before. And also for the coming years, I want to go back to physical stores.

I love brick-and-mortar stores, and this maybe will redress the balance between technology and human factor. And there is no doubt that this time, once again, will bring customers to carefully think before making their purchase. You see products. They need to understand where it has been made, how it has been made, where the harm has been made to the environment.

So we think that there will be a return to the great -- the striking difference between true luxury, not accessible luxury. And the difference between a product that is handcrafted, recognizable, artisanal, exclusive and expensive. Of course, if we talk about our product, it's expensive, but that can be mended and reused over time.

And then on the other hand, commoditized goods, industrial goods made all over the world with a very large distribution and with a low price. I think there will be a very clear-cut distinction.

And now I'd like to talk about investments 2020. We have maintained our strategic investments unchanged, both in distribution and production. And many investments took place in the first half of the year. We opened the meat packing district store in New York in a beautiful neighborhood. London, it is ready. But we have to wait for the reopening restart, then Paris too, 3 very important stores, all in all.

In the second half of the year, we have seized the opportunity we have been waiting for, for many years because in some locations, it takes years for something to come your way. And we will expand our store in New York.

In Tokyo, we will go to Omotesando, change location. And also in St. Petersburg, we will relocate to a beautiful building we have been waiting for, for a long time.

So as far as our plan is concerned, we will pull forward EUR 6 million, EUR 7 million from 2021, and we will pull them forward through 2020 for November.

Then cost control, another important topic.

So we have always tried to keep costs under control, always envisaging a restart -- when the restart came, we would be poised and ready. And as a matter of fact, we are ready to start.

And we have -- with our partners, we have basically followed a very good conduct of behaving properly, respecting human dignity and sustainability. We have chosen to behave well. And because, see, we have all been victims of this, it has been a hailstorm for the whole of mankind with one difference. The hailstorm that happened when I was little, only economic damage was the consequence, whereas in this case, there was a human toll, unfortunately.

This is something I want to say to you, in 1453, there was Mr. Benedetto Cotrugli, who was born in Dubrovnik in Croatia. And in 1453, he wrote a beautiful booklet on the art of doing business. The book is called The Book of the Art of Trade and Commerce. So basically, it is the first book about the sort of way of doing business in an honorable manner. He was a merchant. And this -- it was forgotten for 5 centuries, this renaissance text.

I think that this book is very, very contemporary, especially when we talk about the specific form of capitalism. Mr. Cotrugli basically points out something very interesting. He said one should become rich with honor according to justice. When you buy or sell, you should respect and apply a fair price in order to preserve the human race.

I find this very, very beautiful. If you're interested, we have it in Italian. But we can have it translated into English, too, because it really is worth the while.

Last point, very important for 2020, the inventory. You see for 2020, in the second half of the year when we talk about the winter production, well, we are confident because we are flexible in our manufacturing. Because we manufacture everything here in the neighborhood with the 364 workshops.

As far as the summer goods is concerned in the DOS stores now, once the season is over, say, at the end of August, we will then decide what -- how to proceed by very carefully breaking down the evergreen items from the seasonal ones. So usually, we deliver much early starting from December. And when we reach February, mid-March, the sellouts have already reached a good point, plus the online.

So we expect quite good results. But one thing must be restated, a very important thing. We believe that in the next season, stores should display a very attractive and contemporary product. You see a year for fashion is a long time. Since I still have 3 or 4 minutes, I'd like to say something more.

When I was young, there was a very important knitwear manufacturer, an entrepreneur, a very refined 60-year old. And he was a romantic man, too. So he called me and he said, I bought a huge lot of Shetland wool, and he had paid 20% of the value. And he said to me, Brunello, I think it was a bargain. And I said, listen, Mr. Fagioli. I don't know whether it was a bargain, but who will you sell the Shetland wool? Shetland wool is an itchy kind of product and nobody is going to buy it.

And then I can't tell you how it ended, but it definitely did not end well. Then another important thing, whatever. So 2021, 2022, we call it a time for redressing the balance.

For 2021, we envisage revenues growing 5% over 2019. EBITDA, around 14%, 15%. Whereas for 2022, we guide for revenues up 10%, with EBITDA in line with our current standard.

So for -- we still have a plan 2019, 2028, and we still believe in this 10-year plan. And now for 2021, investments, 6% of revenues because more or less 1% or 1.2% has -- will be pulled forward to the end of 2020 for the 3 openings.

Then in 2021, we need to redress the balance in the inventory with the -- and also the working capital needs to be redressed. So the net financial position must be redressed and also rebalanced and also the dividend.

Until the beginning of April, we thought we would have a general shareholders meeting in April and then pay out a dividend. But you see we have -- the government and the banks in Italy, they have basically recommended the following to us: to postpone the dividend payout, to discuss the issue again in autumn when things will have settled down a bit and maybe pay out the dividend in 2021.

So if the conditions are met, I think we can definitely pay out the dividend in spring.

Now on May 21, we will hold our General Shareholders' meeting, whereas according to the plan, Luca Lisandroni and Riccardo Stefanelli will be appointed CEOs or will be subject for approval. Well, actually, it's been nearly 2 years that they have acted as CEOs.

And I myself would like to be the Executive Chairman and Creative Director of the company. This has always been my dream to cover this position. And now, I'd like to make a very special wish to these 2 guys sitting in front of me, these 40 year olds. I've never said to them this. I'm going to say that I have a lot of esteem, high regards for them as managers and as human beings who believe in great values of mankind.

So you will have to really take the helm in this year of very important changes. But my master and genius, Einstein, taught us something very interesting.

From pain and grief, you should draw the genius of creativity and the strength of innovation. And this is a beautiful statement for now.

So conclusions. From the human point of view, we believe that the worst is over. But of course, I'm talking about Italy, I refer to Italy. And China, still some countries are lagging behind, like the U.K. or the U.S. And my hope is for you to believe that maybe we are approaching the last mile of this situation.

So we have planned 2021 with the very same care with -- which my father said, we should be sowing the fields for the coming year.

So this is my opinion, by the way. The strong liquidity in the banks and the injection of huge amounts of money into the market by different governments will make 2021 market with huge opportunities. And I really think that. Therefore, for this year, we are confident that the second half of the year will make us catch up on what we will have missed in the second quarter with the closure of stores.

So to conclude, I'd like to say that personally speaking, I am convinced that very soon, I can feel that our scientists will give us a good gift by when -- saying to us that they have found the cure.

And then maybe they will have found a vaccine. But you see, I myself spent 2 months talking to the head doctor of the hospital on a daily basis. So sometimes it was very harsh and also talking about face masks. And by the way, many people helped us out in the first phase, giving us the face masks. And now we, ourselves, can help out, can reach out to others because face masks, you see they don't cost much, but they're not always so available.

And then to conclude, I'd like to borrow this statement that I read the other day by my friend Jeff Bezos.

When he commented results, and he said, we need humbleness, prowess, ideas and money.

So I wanted to repeat it because I found it very, very interesting. So we are open for all the questions you want to ask us.

Last thing I'd like to say as far as the financial side is concerned, we have enough funding from banks with the classic credit lines without having resorted to the aid from the government because we thought that it would be better to leave the money for the companies that might be in dire straits.

[Operator]

[Operator Instructions] The first question is from Flavio Cereda, Jefferies.

[Flavio Cereda-Parini, analyst]

Brunello, I'll be speaking Italian.

[Brunello Cucinelli, executive]

Yes, yes, you're doing it for me. Thank you, Flavio. Thank you.

[Flavio Cereda-Parini, analyst]

And then good luck to Luca and Riccardo, they made it.

[Brunello Cucinelli, executive]

No, no, they haven't made it yet so slow down. The election -- the appointment will happen on May 21.

[Flavio Cereda-Parini, analyst]

So you have always been a good -- strong supporter of multi brands, especially in your traditional markets and then the new ones. And today, we read the piece of news on Neiman Marcus, the most important client for you in the U.S. So what's your take on that? What kind of risk do you see there? This is my question.

[Brunello Cucinelli, executive]

Yes, good question because today, we received the piece of news that they have adopted this Chapter 11 voluntarily. And so that everything that happens after May 7 will be in continuity, thanks to the funding of $675 million.

So it is not a liquidation. So what I say, Flavio, is the following: if we divide the financial management of this beautiful brand, which I'm not familiar with, you see I'm just talking about the core business. If we exclude the financial management, I would say that this is the best luxury player in the world. You see I know 32 of their stores, and they are really, really beautiful. I have to say that we have been paid up completely.

You see, Flavio, they own the beautiful multibrand that of Bergdorf Goodman in New York, and they also own mytheresa in Germany because -- and for us, based -- it is one of the best online multi-brand stores, retailers in the world. Typical Flavio, if I lived in the U.S., if I had a lot of money, I would buy Neiman Marcus myself now because it is a marvelous department store. And I'm talking about taste, luxury. And by the way, in January, when I -- they came to place their orders in January and February, they kept repeating the great value -- how important luxury is. So for us, this is a beautiful piece of news that this beautiful brand has found a solution, a way of sorting out this situation.

[Operator]

Next question from Francesca Di Pasquantonio, Deutsche Bank.

[Brunello Cucinelli, executive]

Ask the question in Italian, Francesca.

Maybe she has her phone on the mute, so we can't really hear her. Your line is open. Mr. -- Mrs. Pasquantonio. But we can't hear you Francesca. If we can't hear you, Francesca, you can send us a message or something after the call. We are here for you or maybe we can answer to some other questions and then you come back again.

[Operator]

[Operator Instructions] Next question from Paola Carboni, Equita.

[Paola Carboni, analyst]

It's a pleasure to talk to you. I have a question on the inventory, the topic you hinted at before? And if...

[Brunello Cucinelli, executive]

Do you maybe have another question to ask me? Paola, ask us another question. You have a spare question to ask.

[Paola Carboni, analyst]

So the spring/summer season will last a bit longer like other players are saying. And then you will decide what to do. But at the same time, the spring/summer 2021 collections must be very fresh and contemporary. Yes. So we will understand later on how much carryover goods we have for the following season and where we have to apply some sort of write-downs or maybe to use the outlet stores. But I think that thanks to your approach, you won't have a lot of carryover because you will prefer to maintain a freshness of your product. I wanted to understand this better.

[Brunello Cucinelli, executive]

You see the world is going towards some kind of taste that is a bit more in line -- akin to ours, but you can't have basic collections because we will have 6 months when they will be visualized by everybody, and they will -- may be sold at different prices. So to date, Paola, I'd like to say that maybe the end of August is the right time to rediscuss this issue. That's why we decided to make -- to meet -- to speak to you analysts once every month and to organize a roadshow once every month to update you on the state of the matters, not the matter because we -- I think that together, we can definitely navigate this hailstorm better.

[Paola Carboni, analyst]

Yes. Then you'll update us later on.

[Brunello Cucinelli, executive]

Yes. We'll speak to you soon.

[Operator]

Next question from Andrea Randone, Intermonte.

[Andrea Randone, analyst]

My question is pretty trivial, but it can help us maybe sum up. Maybe give us an overview on the stores that you had opened and closed at the beginning of April, what the current situation is and when you think that -- based on the current measures, when do you think they will be nearly all open?

[Brunello Cucinelli, executive]

This is not a boring question, not at all because you see every day, we are looking forward to our stores reopening. But I keep saying that we have to reopen only when we are safe because you see, I was very scared myself in January already. But Andrea, now we are working with -- in a good state of mind. We see Germany, Austria, Switzerland and Italy, we might start again to -- we might reopen in a few days. Then in China, you know the situation there. So I'm pretty confident that I would say towards the end of May, probably the whole world more or less with different rules will have reopened.

Of course, we have 3 scenarios in front of us. There's a negative one, a medium one and a positive one. So today, I would say that I am pretty positive for the winter season because I'm fully confident that they will find a treatment.

You see the scientists, the lady doctor, the head of the hospital, said to me, you see 25 days -- being hospitalized 25 days ago. It was not the same as being hospitalized now. And you see she actually offered to do this thing without this project, with a test for everybody. Because if you can catch the disease right from the beginning, it really is the best way because you have to really detect the asymptomatic patients, especially among the young people. And I feel very confident because of that, that in the short term, we will find a cure, we will find a treatment. And if I say that maybe, if tomorrow, they were to say to us, that the cure has been found, I don't know what we'll do because you see everybody will be very happy.

And I think that by the end of the year, we will be able to redress the balance and rebalance the way in which we live because this will be over, the epidemic will be over.

[Andrea Randone, analyst]

Thank you very much, Brunello. I share your view.

[Brunello Cucinelli, executive]

Well, you see history teaches us, Andrea, and everybody in the world is working on finding a cure, is going out of their way. And I think they have made really huge steps ahead in the last month, in the last -- and I'm talking about the treatment.

So I want to have this positive view. But you see we work here, but we really respect the social distancing. The canteen is closed. We have really our windows open, we sanitize the factory and the business on the -- sorry, the facilities on a daily basis. And you see -- my father said, you see -- he said, I have lived through so much. And he personally experienced the 1958 flu and his father, the Spanish flu. So everything will be over soon.

[Operator]

Follow-up question from Paola Carboni.

[Paola Carboni, analyst]

Yes, I apologize. I wanted to raise another point on the retail. So at the end of spring/summer -- sorry, the question is on the wholesale, when they take -- will take stock of the situation at the end of the summer, what will be your approach in case there's a whole lot of unsold goods, for example?

[Brunello Cucinelli, executive]

Well, no, no, no, no. This is a wholesale relationship that we have with them. So we are open to help them with payments, of course, but then it is a wholesale, it's up to them. The goods are theirs and they have to manage it, to handle it. So this is the reason why we did not go and basically negotiate for rent, for example. Many landlords say we can have you pay in 6 months or 7 months and defer your payments.

But I'd also like to mention, once an important landlord said to me. He said, you see -- you asked us for help and we postponed your payments by 7, 8 months. Your neighbor, he basically refused to pay. So not only will he pay, and he must pay in April, but when in 2 years' time he wants to renew the contract, it will be tough for him because he will want to renew it.

Because these are beautiful locations. So that's why we have to say once again, Paola, that it is a hailstorm that hits each and every one of us. We all have our income statement. We can help each other out. We asked money from our banks that we can support our supply chain, for example, but you see, we have very important accounts and department stores. We never had any losses with them in the past.

[Paola Carboni, analyst]

And still on this. Well, maybe I can ask this question later. I'll think about it first.

[Brunello Cucinelli, executive]

Yes, about the wholesale, Paola, what I'd like to say is that not many people believe in it. But I, however, instead, I'm convinced that it is still a great business.

First of all, they are the ones that really tell you how your brand is doing. They are the ones that make you -- that mix you with the best brands, with the young brands. And if your collection looks old, they force you to change.

So I have no doubt on payments from them, and I have no doubt on the relationship, they will not cancel their orders.

How can they cancel their life? You should consider this. If you have 100, for example, they say that, on average -- they know that 25 -- 30% of the goods they order will not be delivered. So how can they do their business if they don't have their goods available?

So when they say they might not accept it, they can't -- it's not true because [indiscernible] again New York -- in Frankfurt, they cannot do that. They must collect their goods. [indiscernible] Frankfurt, for example. It is a very serious kind of relationship. I really want to highlight. It's a very serious relationship. And the whole development that we have in Russia with 125 specialties -- beautiful specialty stores. And what is happening in China goes to prove that. In my opinion, we can coexist in the same city where we can have both our mono-brand and our multi-brand space. But the multi-brand is always more fascinating because they mix different products.

[Paola Carboni, analyst]

Yes. The doubt I had was, it's the ways -- flexibility with these partners, not do any reassortment so maybe you won't have any reassortment there?

[Brunello Cucinelli, executive]

No. No, Paola, I wish it was. We have a production structure, whereby we will catch up on everything by August, just by working half an hour more. So we're not concerned at all. I wish it went like that. And we do have a possibility to do reassortment. And I really, really rely on us for that.

[Operator]

Next question by Francesca Di Pasquantonio, Deutsche Bank.

[Brunello Cucinelli, executive]

Oh, we have retrieved Francesca? No, maybe we have not. Maybe you have your phone on mute because your line is open but we can't hear you.

[Francesca Di Pasquantonio, analyst]

How many stores are open as a percentage?

[Brunello Cucinelli, executive]

So I would say 50%, Francesca, but in about 10 days or so, it will be better.

[Francesca Di Pasquantonio, analyst]

Do you have an agreement for returned goods with Neiman Marcus, was the question.

[Brunello Cucinelli, executive]

No, no, no. We have been working with them for 20 years. They always paid cash to us. Honestly speaking, we are honored that they consider us the best ready-to-wear company in the world together with another beautiful company, super wonderful company, Chanel. And so we do not have any kind of agreement of that kind with them. So we do not have any -- we don't work on consignment with them.

[Francesca Di Pasquantonio, analyst]

And also, how do you want to manage the unsold goods?

[Brunello Cucinelli, executive]

Well, we will let you know in September, Francesca.

[Francesca Di Pasquantonio, analyst]

And for cost, is it correct to assume that there will be no efficiencies to be gained because you are focusing on growth, future growth?

[Brunello Cucinelli, executive]

Well, the structure that we have in place after opening the 3 beautiful stores this year and the 3 stores that we are about to open were the 3 expansions and a new one, wonderful -- sorry, 2 relocations and an expansion.

So for 2021, not big investments there. We have these beautiful locations. And we have stores where we might not have 50 people a minute, but it's -- we really are -- I'm very confident because we feel -- we know that the people have the need to go back into the stores. And I'm very confident, Francesca. I won't say we are not a complex company. So it's not that we have a huge number of stores. So we are very, very confident.

So we were able to answer Francesca's questions.

[Operator]

[Operator Instructions] Ms. Cucinelli, no more questions booked for you for the time being.

[Brunello Cucinelli, executive]

Well, then, thank you very much for everything. Whatever you might need, any clarifications, you can give us a call. Oh, no, something important I wanted to say. So the results we will publish on July 14 for revenues by June 30. We want to have a call in July, not just to comment on the results, but to maybe make -- take stock of how things are going, collections and so on. So we will speak to you at least once a month. And of course, you can give us a call on a daily basis, whenever you want. Thank you very much to all of you.

[Operator]

The conference is ended. You can now disconnect your phones. Thank you.