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Luxury jeweler Lugano has become the star unit since it was acquired in 2021 by parent company Compass Diversified.
The high-end Newport Beach retailer reported 2024 sales jumped 53% to $471 million; its sales have more than doubled in the past two years. Its operating income last year climbed 83% to $183.2 million. Lugano’s profit has more than tripled from $53 million reported in 2022.
“Lugano continues to post exceptional results with annual sales growth of more than 50%,” Compass Chief Operating Officer Patrick Maciariello told analysts on a February conference call.
“This performance is a direct result of the company’s disruptive business model, redefining the greater than $160 billion luxury collectibles market.”
Compass, while technically based in Westport, Connecticut, has several of its top executives working out of its Costa Mesa office.
It purchased a controlling interest in Lugano for $265.1 million in 2021; Compass currently has 55% of Lugano’s stock on a diluted basis.
Compass’ filing revealed that “the average sale price per retail transaction increased from approximately $400,000 in the prior year to about $450,000 in the current year” thanks to its highly affluent consumers.
Compass Chief Executive Elias Sabo told analysts on the call that buyers of Lugano products don’t depend on the economy.
“If the economy does well, they buy. If the economy doesn’t do well, they buy,” he said.
Led by founders Moti and Idit Ferder, Lugano currently has nine retail locations including Chicago, London, Aspen, Houston and Newport Beach. Three more stores, which the brand refers to as “salons,” are scheduled to open in 2025.
The Compass Model
Compass (NYSE: CODI) is a collection of nine different companies, including Primaloft for apparel insulation, Sterno for portable food warming systems and AMT for aerospace products.
Lugano was by far the most profitable unit last year, providing 58% of the company’s operating income. It is now Compass’ second biggest firm with 21% of its revenue.
Compass’ largest brand, by sales, is Costa Mesa-based retailer 5.11, designer and maker of tactical apparel and gear for first responders. Its sales last year were flat at $532.1 million. Its operating income declined 17% to $38.8 million.
Overall, Compass reported 2024 sales climbed 12% to $2.2 billion while operating income increased 170% to $230.1 million. At press time, Compass’ shares hovered near a 52-week low of $18.88 with a market cap of $1.5 billion.
Open Stores Ahead
Maciariello added that one new Lugano store will open in the first half of 2025 with the other two opening in the second half.
“Lugano continues to consume significant amounts of working capital as they invest in their long-term growth,” he said.
CEO Sabo told analysts the company would continue to fund Lugano.
Compass’ capital expenditures are expected to land between $80 million to $90 million, “driven by growth investments at Lugano as well as other businesses,” according to Chief Financial Officer Stephen Keller.
Sabo added that he is confident Lugano “will once again have good growth” following the new store openings.
“We are excited about the continued growth potential at Lugano and believe the momentum will continue,” Maciariello said.