The House That Beats Hermès on Margin Is Not Who You Think
The Margin Nobody Talks About
Brunello Cucinelli posted a 75.2% gross margin in 2025. Hermès posted 71.1%. The brand most of the industry treats as second-tier is quietly outperforming the house everyone cites as the benchmark. Here is what that number means, and why it was never an accident.
There is a story the luxury industry tells about hierarchy. At the top sits Hermès: untouchable, unreplicable, the standard against which all serious houses measure themselves. Below it, a tier of aspirants: Brunello Cucinelli, Loro Piana, The Row. Talented. Disciplined. But not quite there.
The 2025 financial results suggest the hierarchy needs revision.
Brunello Cucinelli closed 2025 with revenues of €1.408 billion and a gross margin, what the company calls its First Margin, of 75.2%. Hermès, in the same year, reported a gross margin of 71.1%.
Four points of gross margin on revenues approaching one and a half billion euros is not a rounding error. It is a structural gap. And it is not new. BC's gross margin was 74.5% in 2024, against Hermès's 70%. The gap held across both years, widening slightly as both houses expanded margin simultaneously.
This is not a story about a single exceptional year. It is a story about architecture: the accumulated result of decisions made over decades about where to sell, how to produce, and how to communicate. Decisions that most growing brands make in the opposite direction.
The question worth asking is not whether the number is real. It is reported in earnings calls and financial statements filed with Euronext, by both houses, within days of each other in February 2026. The question is what produced it, and what independent founders can learn from the answer.
Three Decisions That Built the Number
Gross margin does not emerge from a single choice. It is the accumulated result of decisions made across distribution, production, and communication. Decisions that most growing brands make in the opposite direction. BC made all three consistently, and two years of consecutive results show exactly how.
I. The Channel Shift
The most direct driver of gross margin expansion is where a brand sells its product. Wholesale, selling through department stores and multibrand retailers, transfers a meaningful portion of margin to the intermediary. Owned retail captures it back. BC has been executing this shift deliberately and consistently.
In 2025, BC's retail channel generated €947 million, growing 12.9% at constant exchange rates. Wholesale grew 8.7%. The gap between those two growth rates is not incidental. It reflects a systematic reweighting of the revenue mix toward the higher-margin channel, year after year.
| Channel | FY 2025 Revenue | YoY Growth |
|---|---|---|
| Retail (owned boutiques) | €947M | +12.9% (const. curr.) |
| Wholesale (multibrand / dept. stores) | €461M | +8.7% (const. curr.) |
Each owned boutique is not simply a sales point. It is a margin recapture mechanism. BC controls the price, the client relationship, the environment, and the experience. Nothing is surrendered to a buyer's negotiation or a department store's promotional calendar. By the end of 2025, BC had opened new boutiques in Carmel, Macao, and Shanghai Pudong, along with major expansions in London, Paris, and Los Angeles, all owned and all direct.
It is worth noting what BC also acknowledged publicly: wholesale remains a deliberate part of the strategy, not a channel being abandoned. The Saks Global situation in 2025, which resulted in an €8.1 million provision following the Chapter 11 filing, was an anomaly in over 30 years of that relationship, not a structural indictment of the wholesale model. The point is not that wholesale is wrong. It is that BC manages it as the minority channel, and grows it more slowly than retail, by design.
II. The Production Decision
The second driver is less visible in the revenue line but shows up directly in the margin. BC's CFO confirmed in the February 2026 earnings call that the 75.2% gross margin was driven mainly by the sales mix by distribution channel, product mix, and geography, with in-house production expansion as an explicit contributor to the improving cost structure.
In 2025, BC completed its three-year production investment plan six months ahead of schedule. The Solomeo headquarters was doubled. New men's tailoring facilities were completed in Gubbio and Penne in Umbria. What had previously been outsourced production is now internal, meaning the margin that previously went to external manufacturers now stays within BC.
Of which €46.1 million directed at artisanal production capacity, part of a ten-year plan, 2024 to 2033, aimed at doubling handcrafted output entirely within Italy. The three-year phase of this plan was completed in 2025, six months ahead of the original schedule.
The conventional assumption is that insourcing production increases costs and pressures margin. BC's consecutive years of margin expansion while simultaneously insourcing demonstrate the opposite. The payroll cost increases, headcount grew from 3,101 to 3,327 FTEs in 2025, are more than offset by the removal of external production margin leakage. It is a long-duration trade that most brands are unwilling to make because the upfront investment is visible and the margin payoff is gradual.
III. The Communication Posture
BC spent €96.9 million on communication in 2025, an increase of 5% over 2024, representing 6.9% of revenue. But what BC calls communication is not advertising in the conventional sense. The company's own language, repeated across earnings calls and annual reports, describes a strategy built on small events that enhance the brand's allure without affecting its exclusivity: hospitality in Solomeo, client evenings in Dubai and Shanghai, the Harrods window takeover in London, the world premiere of a documentary film about the founder.
"Our desire remains the constant quest for understated, sophisticated communication fully in line with the brand's values, where hospitality represents a key principle of the corporate identity."
Brunello Cucinelli S.p.A., Full Year 2025 Results Conference Call, February 2026
The practical consequence for margin: BC is not buying reach at scale. It is deepening existing client relationships through curated experiences. That model costs money, €96.9 million is not small, but it does not inflate customer acquisition costs the way paid media campaigns do, and it does not require volume to justify the spend. The margin is protected because the communication model is relationship-based, not reach-based.
Note also what Hermès's own chairman said in the same reporting window: "We do not do marketing, we do not try to create an illusion by paying people to wear our products." BC and Hermès are executing the same communication philosophy, and both are running gross margins that reflect it.
What This Means for Founders Who Are Not BC
Brunello Cucinelli is a publicly listed company with over 130 boutiques, 3,327 employees, and €1.4 billion in annual revenue. The direct mechanics are not replicable at early-stage scale. But the architecture is, because it is built on decisions, not on size.
The 75.2% gross margin BC reported in 2025 is the result of choices made over decades: which channels to prioritise, how to communicate, where to produce, how fast to grow. None of those choices required BC to already be large. They required BC to hold a position when the easier path was available. The easier path is always available.
Every growing brand faces the same pressure points: a department store that wants to carry the product, a distributor offering fast volume, a paid campaign that promises reach. BC's results show what happens to margin when those offers are managed carefully, with retail always growing faster than wholesale. The 75.2% is what that discipline looks like financially, compounding across years.
Margin is determined by distribution before it is determined by production. Where you sell defines what you keep. Every wholesale account accepted is a margin decision, not just a revenue decision. BC grew wholesale revenue 8.7% in 2025. It did not exit the channel. It simply made retail grow faster, consistently, year after year.
Communication spend is not the same as communication effectiveness. BC spent €96.9 million on communication in 2025, a significant sum, oriented entirely around depth of client relationship, not breadth of reach. Events, hospitality, in-store experiences. Volume-based acquisition models erode margin. Relationship-based models protect it.
Production investment is a long-duration margin decision. BC completed a three-year plan to double in-house artisan production capacity in 2025, six months early. The upfront cost is visible; the margin payoff is gradual and compounding. For founders at earlier stages, every production relationship where quality and cost sit outside your control is a future margin problem. BC chose to resolve it structurally, not seasonally.
Scale and margin integrity are not in conflict. BC's gross margin expanded from 72.5% in 2023 to 75.2% in 2025 while revenue grew from roughly €1.1 billion to €1.4 billion. The assumption that growth requires margin sacrifice is not a law. It is the consequence of choosing high-volume, low-control growth paths. BC's three consecutive years of simultaneous revenue growth and margin expansion prove the alternative.
The industry will continue to position Hermès as the unreachable ceiling. The 2025 numbers, from both houses published within six days of each other, suggest that framing serves a particular narrative but not the data. On gross margin, BC is not approaching Hermès territory. It has held a lead over Hermès for at least two consecutive reported years.
The more useful question for any founder building a luxury brand today is not which house to admire, but which decisions, made now, will show up in the margin line in ten years. BC's answer is documented in its financial statements, filed publicly, updated annually, and largely ignored by everyone writing about luxury strategy.
Margin is not something you find at scale. It is something you build into the architecture before scale arrives.
Brunello Cucinelli S.p.A. Full Year 2025 Results Conference Call Transcript. 18 February 2026. investor.brunellocucinelli.com
Brunello Cucinelli S.p.A. Preliminary Revenue Results FY 2025. 12 January 2026. investor.brunellocucinelli.com
Brunello Cucinelli S.p.A. Consolidated Financial Statements 31 December 2024. 13 March 2025. investor.brunellocucinelli.com
Brunello Cucinelli S.p.A. H1 2025 Analyst Presentation. 28 August 2025. investor.brunellocucinelli.com
Hermès International S.A. Full Year 2025 Results Press Release and Earnings Call. 12 February 2026. finance.hermes.com
Hermès International S.A. Universal Registration Document 2024. finance.hermes.com
All financial figures cited are from official company earnings calls, press releases, or audited consolidated financial statements. No third-party estimates or scraped data have been used in this analysis.
