Brunello Cucinelli SpA shares had their steepest drop on record after short seller Morpheus Research alleged the luxury Italian cashmere brand is misleading investors about its Russian business and engaging in “aggressive discounting.
The Italian firm rejected the claims and said its Russian subsidiary is fully compliant with all regulations and it’s considering legal action to protect its reputation.
Cucinelli’s shares fell as much as 15 percent as trading resumed after a near four-hour suspension. It was the stock’s steepest decline since Cucinelli’s 2012 initial public offering.
Morpheus, which includes alumni of Hindenburg Research, said a three-month investigation it carried out showed that Cucinelli continues to operate stores in Russia even though the company said it had closed them. Sales of luxury goods in Russia have been sanctioned by the European Union since the country’s 2022 invasion of Ukraine. It also claimed that Cucinelli is discounting too heavily to get rid of excess stock.
Morpheus said secret visits to stores in Russia showed that Cucinelli boutiques are selling items worth thousands of dollars with tags that show they were made in Italy in 2024 and 2025, according to a statement published online. Cucinelli products are also for sale in a Russian department store, while trade data showed intermediaries in countries like Lithuania, Iran and China have been exporting Cucinelli goods to Russia, it added.
The claims come not long after hedge fund manager Pertento Partners also told the Financial Times that Cucinelli continues to operate in Russia in violation of the EU sanctions.
However, Cucinelli said the company’s Russian sales have decreased by more than two-thirds compared with 2021, and now accounts for about 2 percent of the company’s total. It added that the value of exports to its Russian subsidiary has also fallen from €16 million ($18.7 million) in 2021 to €5 million in 2024.
“We believe these 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 said.
Morpheus said its research showed Cucinelli is aggressively discounting its products to manage its “bloated inventory,” with items ending up in stores like TJ Maxx, diluting its exclusive positioning. Morpheus calculated that Cucinelli had 404 days of inventory in the 12 months through the first half of 2025, “the highest of any luxury peer we could identify.” It said the company’s inventory write-down provisions have grown every year since 2020, peaking at nearly €100 million.
In addition, Morpheus said Cucinelli is capitalising significant and growing rent costs under IFRS accounting standards, but if these were fully expensed then its earnings before interest, tax, depreciation and amortisation would be 36 percent lower than the reported number and year-on-year growth would be about half of the 12.9 percent rate for the first half of 2025.
“Even ignoring our findings, Cucinelli trades at about 46 times next year’s earnings, a higher multiple than any luxury peer, despite slowing revenue growth, average operating margins, and rising competition from peers like Khaite and The Row, each reporting triple-digit growth,” Morpheus said.
Cucinelli was founded in 1978 by company namesake and current Chairman Brunello Cucinelli, who is an advocate of a more “humanistic” form of capitalism. He has previously extolled the virtue of artisans in Cucinelli’s workshops taking a “minute to look at the sky, listen to the church bells, instead of only sewing and stitching in a basement.”
Morpheus announced itself as a “new investigative research group dedicated to exposing corporate misconduct and fraud” in a March 14 X post. On that same day, Nate Anderson, who earlier this year disbanded Hindenburg Research, said Morpheus included some of his former team members.
“Chairman Cucinelli frequently discusses the idea of moral sustainability, including a focus on how ‘you should live with honesty.’ In the spirit of this ethos, we believe shareholders deserve more honesty with respect to Cucinelli’s Russian operations and inventory management,” Morpheus said.
By Deirdre Hipwell
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