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Ermenegildo Zegna 2023 Revenues Graze 2B Euros

MILAN — The Ermenegildo Zegna Group closed 2023 on an upward trajectory, with sales grazing 2 billion euros.

In the 12 months ended Dec. 31, gains across all markets, lifted in particular by North America and Greater China, helped drive group revenues up 27.6 percent to north of 1.9 billion euros, compared with 1.5 billion euros in 2022, showing an organic growth rate of 19.3 percent. Figures reported on Wednesday were preliminary, as the group will report full-year financials on April 5.

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In the fourth quarter, sales soared 40.1 percent to 570 million euros, with an organic growth of 19.6 percent, accelerating from a 11.3 percent gain in the third quarter of 2023.

“We are moving beyond being the undisputed number-one leader in menswear,” said chairman and chief executive officer Gildo Zegna said proudly during a conference call with analysts, citing the exposure to womenswear as also contributing to the gains.

“The significant increase in our revenues in 2023, and especially from our network of directly operated stores, is a clear indication that demand for our brands remains healthy, and that we are successfully executing our strategy to increase their desirability and solidify their position as leaders in the luxury market,” the executive continued.

He highlighted the constant improvement in the Zegna brand’s productivity, “ahead of plans by 50 percent,” proving the strength of the group’s execution, “sophisticated clienteling and CRM.”

Zegna has built a supply chain that he said benefits all the group’s brands “and drives Zegna’s leadership in made-to-measure and product customization, which we are focused on further enhancing with the introduction and ongoing rollout of Zegna X [digital customization tool] that is empowering our style advisers to further serve our customers using the latest technology.”

While aware of the current challenges, he expressed his confidence in the group’s attention to cost control and cash protection.

In 2023, revenues for the Zegna segment amounted to 1.32 billion euros, up 12.4 percent compared with 2022, reporting an organic growth rate of 19.5 percent.

Revenues for the fourth quarter totaled 385 million euros, up 15.2 percent and with an organic growth rate of 18.2 percent.

Luxury leisurewear revenues performed strongly, now making up around 50 percent of the Zegna brand’s revenues. Footwear continued to outperform, up high-double digits, representing 13 percent of the product mix. Formalwear was “dynamic,” Zegna said.

Thom Browne Pre-Fall 2023
Thom Browne pre-fall 2023

In 2023, sales of Thom Browne rose 14.9 percent to 380 million euros with an organic growth rate of 17.8 percent. Revenues for the fourth quarter came in at 99 million euros, up 30.2 percent and with an organic growth rate of 24.6 percent. The fourth-quarter growth reflected the expansion in the brand’s direct-to-consumer channel, as well as strong wholesale deliveries compared to the low base of the last quarter in 2022, which was due to a different timing of shipments during the course of 2022, when compared to 2023.

Chief financial officer Gianluca Tagliabue said the group is moving away from seasonal into monthly drops.

Since its consolidation on April 29 last year, revenues for the Tom Ford Fashion segment amounted to 236 million euros, of which 97 million euros were reported in the fourth quarter of 2023, reflecting a strong performance during the holiday season.

Womenswear is outperforming, now making up 30 percent of revenues.

Zegna reiterated that “Tom Ford Fashion should be one of the top 10 luxury brands globally.”

In November 2022, the Estée Lauder Cos. Inc. said it was acquiring the Tom Ford brand in a transaction valuing the company at $2.8 billion. As part of the deal, the Zegna Group and Marcolin entered long-term licensing agreements for Tom Ford Fashion and Tom Ford eyewear, respectively. On Tuesday, Zegna renewed its licensing agreement with Marcolin for its eyewear, first launched in 2015 and which will now continue through the end of 2030.

Tom Ford RTW Spring 2024
Tom Ford spring 2024

Continued growth in the Europe, Middle East and Africa region and the very strong performance in the U.S., driven by strong double-digit retail Zegna sales, together with a rebound in Greater China, were seen as “testaments to the soundness of our long-term strategy,” said the CEO, who stood by the group’s financial goals outlined for the medium term during the Capital Markets Day in December in New York. These include delivering more than 10 percent compounded annual revenues growth and an adjusted operating profit CAGR of around 20 percent, compared with 2023.

“This is expected to generate significant cash surplus even while taking into consideration higher, targeted investments in marketing and capital expenditure to enhance brand desirability and drive growth,” Zegna said.

In 2023, sales in North America soared 41.6 percent to 417 million euros. In the fourth quarter, revenues jumped 60.1 percent to 132 million euros, also supported by the consolidation of Tom Ford Fashion.

In the year, revenues from the U.S. totaled 385 million euros, up 42.3 percent.

The executive said that spending on the Zegna brand in the U.S. almost doubled pre-pandemic levels, which he attributed to the rebranding strategy and execution.

He remained positive on American consumer spending, “not only in the States but also abroad, with stunning numbers,” seeing no slowdown. On the contrary, there has been an increased retail performance in the U.S.

Revenues in the Europe, Middle East and Africa region were up 26.6 percent to 659 million euros, lifted by both domestic spending and foreign consumers.

The United Arab Emirates continued to outperform the rest of the region, with sales of 69 million euros, a 35 percent increase compared with the previous year.

In 2023, sales in the Asia Pacific region amounted to 788 million euros, up 22.2 percent. Of that, 596 million euros came from Greater China, up 20.5 percent on the previous year.

Asked to comment on China, Zegna said that it performed better in the last quarter than in the third quarter, reporting “new traction thanks to the Triple Stitch sneakers, pulling new customers in,” without losing the loyal ones.

He said he had not seen an incremental increase in Chinese tourists in Europe or the U.S. while they did increase in Japan and South East Asia. “There may be an upswing [in Chinese tourists] in the second half but I am still cautious for 2024,” he offered.

Japan also showed growth, posting revenues of 85 million euros, up 29.9 percent.

Sales in Latin America amounted to 38 million euros, a 25.6 percent gain.

Responding to an analyst’s question, Tagliabue said he was “happy” with the group’s organic performance in November and December, which was better than “a softer” October, ending the year on a positive note.

Group direct-to-consumer revenues amounted to 1.26 billion euros, up 37.8 percent on 2022 and accounting for 66.4 percent of the total. Of that, 945 million euros came in from Zegna-branded products, up 22.4 percent year-over-year, also lifted by the increase of 14 stores, reaching a total of 253. There were multiple additions of Zegna boutiques in the U.S., including a unit in East Hampton, the Saks New York Fifth Avenue concession and six new Nordstrom openings. Stores also opened in Courchevel, Saint Moritz, Kuwait City, Jinan and Wuhan.

Last year the group began directly operating the Zegna business in South Korea. This involved the conversion of the 16 Zegna stores in the region to direct-to-consumer points of sale.

Tagliabue said DTC is expected to account for 75 percent of group sales in the medium-term.

Revenues from Thom Browne in this channel amounted to 183 million, up 25.9 percent, reflecting also the shift of the South Korean business from wholesale to DTC.

Thom Browne added six stores, reaching a total of 86. Openings were primarily in the Asia Pacific region, in cities such as Jinan and Wuhan, Shenzhen Bay, Nagoya, Kanagawa, and Tokyo Shinjuku. CEO Lelio Gavazza said he was “particularly happy” with the retail expansion of the brand. “We are running on track and maintain our plans,” he said, also putting an accent on the accessories and womenswear categories.

Tom Ford Fashion contributed 136 million euros in DTC revenues since its consolidation. The brand added 121 stores, of which 51 were directly operated with three openings since the acquisition at Saks New York Fifth Avenue, Dubai and Abu Dhabi.

Group wholesale revenues for the full year 2023 amounted to 635 million euros, up 11.3 percent. Of that, 164 million euros came in from Zegna-branded products, an 8.4 percent gain.

Thom Browne wholesale revenues amounted to 195 million euros, up 5.8 percent.

Tom Ford Fashion wholesale revenues totaled 99 million euros.

Sales of the group’s textile product line amounted to 151 million euros, up 10.4 percent year-over-year and with an organic growth rate of 9.5 percent.

Revenues for the third-party brands product line were 25 million euros, down 74.1 percent, impacted by the end of the distribution licensing agreement for Tom Ford International with the fall 2022 season.

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