Gildo Zegna is taking “a long-term view facing the short-term challenges.”
Reporting growth in revenues at the Ermenegildo Zegna Group in the first quarter of the year, its chairman and chief executive officer said during a call with analysts on Tuesday that the performance in the period was “in line with what we anticipated” and confirmed the mid-term outlook of a more than 10 percent compound annual revenue growth.
In the first three months ended March 31, group sales rose 8.1 percent to 463.2 million euros, compared with 428.3 million euros in the same period of 2023. At constant currency sales rose 10.7 percent.
“Closing the first quarter of 2024 with double-digit revenue growth on a constant currency basis is reassuring given the challenges that the sector is facing,” the executive said. “Our growth in the Americas — also in double digits — and the ongoing successful delivery of our Zegna One Brand strategy give me additional assurance that we are moving in the right direction.”
He said he was confident in the Thom Browne brand, which is “opening a new important chapter,” and in Tom Ford Fashion, touting the decisions made to accelerate direct control of the businesses, reinforcing the management structure and talent organization, “knowing how critical our people are to delivering results. Finally, we are continuing our focus on clienteling and customer experience, both of which will further strengthen the long-term value of all our brands.”
As reported, Joyce Weng was named president of Tom Ford Fashion, Greater China, South East Asia and Oceania, and Simon Kendall was appointed president of Tom Ford Fashion, Americas.
Zegna admitted “a difficult decision” was made to reduce wholesale accounts for Thom Browne “to protect the exclusivity of the brand long-term and to support its direct-to-consumer development. The indicators are strong and our actions will make it even stronger.”
Impacted by the streamlining of its wholesale channel and a different timing in deliveries, Thom Browne reported a 29.6 percent decrease in sales, which amounted to 79.2 million euros. The brand showed strong results in Japan while the Europe, Middle East and Africa region and Greater China were particularly dented by the wholesale reduction.
In the first quarter, revenues for the Zegna brand, designed by Alessandro Sartori, amounted to 282.9 million euros, up 4 percent, driven by healthy growth in key categories and, in particular, footwear and leisurewear. “It’s the same as building a house, we have strong and unique foundations that can’t be replicated and now we are building the floors,” mused Zegna.
Organic growth was 6.8 percent. Several key regions — mainly the Europe, Middle East and Africa region, the Americas and Japan — saw solid double-digit growth.
The Greater China region recorded a single-digit decline in the quarter. “China is going through a normalization phase,” following the post-pandemic recovery, Zegna said, pointing out that China was the last country where the One Brand strategy was launched.
“We are still working on awareness and clienteling there,” he explained. In addition, the Chinese are buying more in Europe and Japan, he contended.
After staging the Oasi Zegna immersive exhibition at the group’s headquarters in Milan during Salone del Mobile earlier this month, which attracted more than 26,000 visitors, the experience will be brought to Shanghai in May (and an “important event in the same direction” will be held in New York in September, said Zegna).
Chief financial officer Gianluca Tagliabue remarked that no strategic changes will be implemented in China and, on the contrary, investments will continue to fuel the brand’s development in the country, although “cautiously to protect the bottom line.” Responding to an analyst, he said that Zegna in China was up midsingle digit in April and reported “a good increase in Continental Europe — double digit — and in Japan.”
He observed that the “aspirational customer in China is more cautious, while the uber-luxury is delivering above expectations. We are working on the top of the pyramid at Thom Browne and the results will be visible at the end of the year.”
He added that he expected the next quarter to show a double-digit decline at the brand.
Revenues for the Tom Ford Fashion business totaled 65 million euros, driven by a strong performance mainly in the U.S. No comparison was provided with last year, since the brand was consolidated at the end of April 2023. New store openings are expected in Rome and Beijing in the third quarter of the year.
“Looking at the rest of the year, we have a clear and defined path in front of us. I am confident that we are taking the right actions to make our brands even stronger and to deliver on our medium-term ambitions,” Zegna said.
In the quarter, textile revenues dipped 1.7 percent to 33.2 million euros, as a result of lower textile demand from the luxury goods sector.
Direct-to-consumer revenues amounted to 328 million euros, up 20.4 percent on the previous year. The integration of the Tom Ford Fashion business contributed 43.7 million euros in direct-to-consumer revenues for the quarter. The Tom Ford brand is designed by Peter Hawkings.
At the end of March, the group had 646 stores.
In the first quarter, wholesale revenues were down 11.5 percent to 99.1 million euros.
The group’s sales were lifted by strong growth in the Americas, where sales jumped 57.7 percent to 114.2 million euros, representing 25 percent of the total.
“We are focused on the high-end of the range, offering more service and personalization,” Zegna said of the success in that market, where the group has increased its concession agreements.
In the second half, Neiman Marcus will convert the Zegna account in Los Angeles to a concession, as will Harry Rosen in Canada, among others. He paid tribute to the local American team that has “played an incredible part in the acceleration of the customer-centric strategy.” The public listing in New York in December 2021 also contributed to the support, he added. More stores in the U.S. are in the pipeline, he revealed.
Americans also continue to shop in Europe, while the Chinese are “very present” in Japan, South East Asia, Hong Kong and less so in Macao, Zegna said.
Sales in EMEA rose 4.3 percent to 156.6 million euros, accounting for 34 percent of the total. Italy represented around 40 percent of EMEA. The Greater China region recorded revenues of 139.4 million euros, declining 15.3 percent and accounting for 30 percent of the total, with the Zegna brand outperforming the region’s average. Revenues in the rest of Asia Pacific rose by 28.7 percent to 52.4 million euros, mainly driven by strong performance in the Japanese market and the conversion of the Thom Browne and Zegna Korean monobrand stores from wholesale to retail.
The group is to distribute a dividend of around 30 milion euros.
