Zegna Playing Offense Not Defense in 2024; Third Quarter Sales Rise – WWD

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MILAN — Solid growth across geographies and channels for both the Zegna and Thom Browne labels boosted the Ermenegildo Zegna Group’s preliminary sales in the third quarter.

Gildo Zegna, chairman and chief executive officer, said that the Tom Ford spring 2024 collection was well received, during a conference call with analysts on Tuesday to comment on the quarterly results. Zegna also said he had returned several times to China in recent months and cited a rebound in sales across the board in the first nine months of the year within Greater China and a rise in purchases made by Chinese in other Asian destination cities like Tokyo.

“I think we can be positive for the rest of the year and the coming year 2024,” he said.

A strong set of first-half financial results, including a net profit that more than doubled, and strong sales in July and August led management to forecast a “substantially higher” result in the fourth quarter compared to the third quarter.

During the call, the company declined to release new guidance figures; however, it said that the results support the group’s full-year 2023 and midterm outlook. The company also reiterated that it is aiming for annual revenues to exceed 2 billion euros and adjusted operating profit to reach at least 15 percent of revenues by 2025.

The latter was a forecast first made in May last year during the group’s first Capital Markets Day and it excludes the Tom Ford Fashion segment, as the investor day was held before The Estée Lauder Companies Inc. acquired the American designer’s company in November in a deal valued at $2.8 billion. 

The executive said Tom Ford Fashion, following the first show by Peter Hawkings on Sept. 21 in Milan, is “off to a good start.”

“You will see some of the line already in early delivery by yearend and we are enhancing the collections in the stores,” he added, noting that more information will be divulged during the group’s second Capital Markets Day, planned for Dec. 5 at the New York Stock Exchange. The group was publicly listed in New York in December 2021.

Gildo Zegna

Courtesy of Zegna

In the third quarter of the year, the group’s preliminary, unaudited revenues totaled 431.1 million euros, up 20.8 percent compared with 356.9 million euros in 2022.

During the call, the company said it was pleased with the performance of its brands worldwide. Sales in Europe, the Middle East and Africa fueled growth organically, rising 18.5 percent, while North America rose 12.3 percent, and Latin America was 9 percent higher. The Asia Pacific region rose 5.4 percent, driven in large part by Japan, which rocketed 30.9 percent boosted by a revival of tourism spending. The Greater China area trailed, rising just 3.5 percent, though management said it remained confident in its strategy there.

Chief financial and operating officer Gianluca Tagliabue said he was positive on the Chinese cluster and domestic purchasing as the firm continues to cater to the ultra high end in the region.

“We remain strongly positive on China, which is a very important market… we are in the middle of a transformation there,” he said, adding that the company is working on organizing events and revamping its stores. In South Korea, where it has been present since 1997, Zegna said that it will now directly operate its South Korean business beginning in early 2024.

In the period, sales of the Zegna segment rose 12.7 percent to 297.8 million euros and Thom Browne segment revenues were up 8.5 percent to 73.64 million euros. The company celebrated Thom Browne’s 20th anniversary with events in boutiques worldwide during the year. The Tom Ford Fashion segment reported sales of 74.6 million euros. Direct-to-consumer sales rose 12.9 percent to 281.8 million, while wholesale rose 8.1 percent to 148.2 million. As of Sept. 30, the group had 635 stores, up from 503. This increase was due in large part to the addition of 121 Tom Ford Fashion stores.

The group has been investing in its direct-to-consumer channel, opening stores for the Thom Browne and Zegna units in cities such as Saint Moritz and Copenhagen, and renewing boutiques in Beverly Hills and Florence. In September, Zegna said the group was “well ahead of plans in terms of store productivity,” slated to increase by 50 percent by 2025.

Management confirmed the group’s strategy to increase marketing expenses into 2024.

In response to questions raised by analysts about currency headwinds, Tagliabue assured that its hedging policy is well-poised to offset risks.

The company did, however, release a disclaimer in its press released stating that “the group’s medium-term targets assume no major future worsening of the global geopolitical, health, macroeconomic and financial markets situation and no other unforeseen events.”

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