Zegna Sees Growth in Asia, Europe After H1 and Confirms 2 Billion Euros in Sales by 2025
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MILAN — Ermenegildo Zegna Group said it sees opportunities for growth in Asia and Europe and confirmed its target to reach 2 billion euros in sales by the end of fiscal 2025.
This target was first expressed during the group’s Capital Markets Day in May 2022. The year 2023 will “comfortably” support the growth trajectory of the company, said Gildo Zegna, chairman and chief executive officer of the Ermenegildo Zegna Group, during the company’s preliminary first-half sales conference call with analysts on Thursday.
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The group also expects an operating profit margin of 15 percent by the end of 2025. This target does not include business generated from the newly consolidated Tom Ford Fashion segment, he added.
“We are strong in America and there is a strong opportunity to expand in Asia and Europe,” said Zegna, noting the family-run company is one of the few quiet luxury players active in the U.S.
Earlier Thursday, the company posted double-digit growth across the Zegna and Thom Browne businesses. A rebound in China and momentum in the U.S. and Europe helped Ermenegildo Zegna Group report 23.9 percent growth in the first half.
In the six months ended June 30, revenues amounted to 903 million euros, compared with 729 million euros in the same period last year. Revenues for the first half of 2023 reflect the consolidation of Tom Ford International starting from April 29, as well as the consolidation of tannery Pelletteria Tizeta.
The increases were in-line with expectations of double-digit growth in the teens and or low 20s, commented Bernstein senior analyst Luca Solca, explaining that double-digit growth was important to “ascertain that they can grow organically in the same ballpark as top companies,” Solca said, adding that direct-to-consumer results were particularly encouraging.
“This would entail higher retail space productivity — hence operating leverage,” he added.
Zegna’s direct-to-consumer channel’s momentum was robust across both Zegna and Thom Browne, which grew 32.7 percent and 25.3 percent, respectively, in the second quarter of 2023.
In the period from April 29 to June 30, Tom Ford Fashion reported revenues of 64 million euros. Gildo Zegna expressed an eagerness to work with Lelio Gavazza, who was recently appointed to the newly created position of chief executive officer of Tom Ford Fashion, effective Sept. 18. He added that the company is gearing up to build Tom Ford Fashion among the top 10 luxury fashion names in the world.
During the call, management commented on the evolution of the Zegna consumer’s ever-higher spending power. In Greater China, the group is working toward transitioning its Z Zegna stores and said it is experiencing quality growth in the area, and abroad as well, now that Chinese customers are traveling again. The key to success there, Zegna said, is ensuring stores are offering its elevated services like its made-to-measure arm, which offers delivery in just two weeks.
“Made-to-measure is on fire. We need to execute those in a faster way and ensure every store offers these new opportunities,” he added, commenting that the group is poised to take advantage of “low hanging fruits” or opportunities to boost sales inside the store and beyond.
The company said it would give more in-depth details on its earnings and on the performance of Tom Ford Fashion during its final first-half results conference call scheduled for Sept. 13.
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