#Retail & Brands
Ermenegildo Zegna Group reports strong revenue growth in third quarter of 2022
Ermenegildo “Gildo” Zegna, Chairman and CEO of the Zegna Group, said: “This quarter was one of our strongest yet thanks to exceptional performance by both Zegna and Thom Browne in Europe, the Middle East, and the U.S., as well as a rebound in the Greater China Region. We achieved a number of milestones this quarter as we continue to execute on our strategy and commitments while remaining true to the values that have guided us for 112 years.”
He added: “As always, caring for the natural world around us continues to be a bedrock of everything we do. Last month, we launched Oasi Cashmere, a significant step on our road to traceability. I am also very proud that Oasi Zegna, which is promoted by Zegna Group, received this year’s Biodiversity Conservation Award at the CNMI (Camera Nazionale della Moda Italiana) Sustainable Fashion Awards.
Finally, I would like to congratulate Thom Browne on his appointment as the next Chairman of the Council of Fashion Designers of America, a testament to his creativity, his incredible success, and his leadership in the fashion industry in the U.S. and around the world.”
Select Highlights
Continued global growth for Zegna and Thom Browne
Strong performance for the quarter and for the first nine months of 2022 despite ongoing macroeconomic challenges around the world. Growth in every geography in the third quarter, including a rebound in the Greater China Region.
Our Road to Iconicity: Real Madrid Partnership
Announced a partnership with Real Madrid in August through which Zegna will become the official luxury travelwear partner for the world’s most successful football club.
Alessandro Sartori named WWD’s Menswear Designer of the Year
Zegna artistic director Alessandro Sartori was awarded WWD’s 2022 Menswear Designer of the Year in recognition of his innovative vision that has taken the brand in new directions.
Thom Browne Returns to Paris Women's Fashion Week
Return to Paris Fashion Week for Thom Browne with its well-attended Spring 2023 Fashion Show. Positive media coverage and reviews across traditional and social media, as well as from VIPs and celebrities.
Our Road of Responsible Growth: Sustainability Activities and Ambition
Launched Oasi Cashmere, with the goal of 100% of the cashmere used in this collection being fully traceable by 2024.
Received the Biodiversity Conservation Award at the 2022 CNMI Sustainable Fashion Awards for Oasi Zegna, which is supported by Zegna Group.
Our Commitment to Our Communities
Starting in Europe, in response to the ongoing energy crisis, launched a Group-wide energy efficiency plan that is targeting a 10% reduction in energy consumption from 2021 levels by 2023 in non-industrial sites. Initially implemented at Lanificio Ermenegildo Zegna, the Group's factories in Italy and Switzerland, and stores and offices in Europe. Key initiatives include:
Modifying indoor standard temperatures at all industrial sites, offices, and stores in alignment with requirements recently issued by the Italian government or other jurisdiction-specific restrictions.
Increasing efficiency on lighting and machinery, optimizing operating hours, and greater reliance on automatic switches.
Adjusting the lighting in our shops to an as-needed basis and turning off window lighting between the hours of 10 pm and 8 am.
Launching an energy awareness campaign targeting the Group’s workforce that encourages the adoption of electricity-, gas-, and water-saving practices at work and at home and that rewards employee actions and behaviors that promote energy efficiency.
Review of Third Quarter 2022 Revenues
For the third quarter of 2022, Zegna Group posted revenues of €357 million, up 27.5% year-over-year, and bringing revenues for the first nine months of the year to €1.09 billion, up 22.9% year-over-year.
Revenues by Segment
Zegna: The Zegna segment, which includes Zegna branded products as well as the Textile and Third-Party Brands product lines, continues to show robust growth, with revenues for the quarter of €289 million, up 27.2% year-over-year, showing an acceleration in 3Q thanks to the strength of all product lines.
Thom Browne: The Thom Browne segment continues to be a significant growth driver for the Group, with revenues for the quarter of €69 million, up 29.5% year-over-year.
Revenues by Product Line
Zegna Branded Products: Zegna branded products revenues grew 18.6% year-over-year, reaching €224 million for the quarter. This is a result of the continued success of the Zegna One Brand strategy that was fully launched in our stores at the beginning of July. Our focus on luxury leisurewear continues to prove successful, with steady growth in that line, particularly in knitwear, while the growth in shoes remains robust. Our Tailoring and Made-to-Measure lines have also seen a strong rebound this quarter, particularly in the U.S.
Thom Browne: Thom Browne revenues grew 29.8% year-over-year, reaching €69 million. Womenswear continues to grow faster than menswear, now accounting for almost 30% of the brand’s revenues. Growth across the brand is supported by strong wholesale demand, e-commerce growth through T-Mall in the Greater China Region, and four new store openings during the quarter, bringing the total of directly operated stores to 57 as of September 30, 2022 - up from 53 as of June 30, 2022. The recent appointment of founder Thom Browne as the next Chairman of the Council of Fashion Designers of America is yet another sign of the brand's growing success and momentum.
Textile: Textile revenues for the quarter reached €30 million, up 33.3% year-over-year, with growth across Lanificio Ermenegildo Zegna, Bonotto, and Dondi. Tessitura Ubertino was consolidated as part of the Group as of June 2021. In the first nine months of 2022, Tessitura Ubertino contributed an additional €3.9 million in revenues compared with the first nine months of 2021.
Third-Party Brands: Third-Party Brands revenues grew 64.2% year-over-year, reaching €32 million for the quarter thanks to strong contributions from Tom Ford and Gucci, the latter having more than doubled in comparison to the third quarter of 2021.
Revenues by Geography
The Group continues to see significant growth across all geographies. The Greater China Region has returned to growth for the quarter, enjoying a solid rebound in July and August before new lockdowns started having a negative impact in September. We continue to see dynamic growth in the Middle East and ongoing strength in the U.S. and Europe.
Revenues in the Greater China Region amounted to €116 million for the quarter, up 3.0% year-over-year. This follows the rebound we saw at the end of the second quarter due to the relaxing of COVID-19-related restrictions across several cities in China. Growth for all of APAC was at 13.7% for the quarter, with revenues reaching €153 million. Growth for the quarter was due to the positive DTC performance for both the Zegna and Thom Browne segments before the renewed lockdowns in September that occurred in major Chinese cities, including Chengdu, Shenzhen, and Tianjin.
The EMEA region exhibited the strongest growth for the quarter, at 42.8% year-over-year to reach €119 million in revenues. Of that, €16 million came from the Middle East and Africa (MEA2) region, an 86.4% growth year-over-year for the quarter. The UK also continued to grow, with revenues for the quarter growing 61.6% year-over-year to €15 million.
Revenues for the Americas grew at 38.6% for North America and 33.2% for Latin America, with revenues for the quarter of €77 million and €7 million, respectively. The U.S., an area of focus and strategic growth for the Group, saw revenues increase 38.3% year-over-year to €69 million for the quarter.
Revenues by Channel
Revenues from the Group’s directly operated store network, including e-commerce, were €217 million for the quarter, a 20.7% increase year-over-year. Of that, €180 million was from Zegna branded products and €37 million from Thom Browne - a growth of about 21% for both segments over last year.
Growth in Zegna DTC revenues was driven by strong performance in EMEA, particularly in the Middle East, as well as in the Americas. The September decline in the Greater China Region due to renewed lockdowns was offset by a strong July and August, leading to an overall flat DTC performance for Zegna-branded products in the quarter.
Thom Browne DTC revenues grew 21.6% year-over-year for the quarter, thanks to positive performance across all geographies, including the Greater China Region, which benefited from the additional contribution from e-commerce through T-Mall and new store openings.
Wholesale revenues grew 32.2% year-over-year for the quarter to reach €139 million, with Thom Browne showing particularly robust growth of 41% year-over-year for the quarter to reach €33 million. Third-Party Brands and Textile also grew at nearly 50% year-over-year to reach €63 million.
Fiscal Year 2022 Outlook
In light of the Group’s robust performance during the first nine months of 2022, and despite the continued volatility in the Greater China Region, the Group is confirming its full-year revenue guidance of mid-teens growth. We continue to anticipate solid improvement in our Adjusted EBIT3 despite the step-up in marketing and central costs, and the unfavorable country mix that may affect our margin. We also continue to expect a Cash Surplus3 increase in the second half of the year. This outlook assumes no further escalation or geographic extension of the war in Ukraine, no further significant macroeconomic deterioration, and a continuing uncertainty linked to the COVID-19 pandemic in the Greater China Region, and no other unforeseen events.
Medium-term Outlook: Our Path of Responsible Growth
On May 17, 2022, at its first Capital Markets Day, the Group announced its medium-term financial goals, aiming for revenues to exceed €2 billion and for Adjusted EBIT to reach at least 15% of revenues.
To drive revenue growth, the Group will focus on an increase in store productivity and continuing positive developments related to price and product mix. These actions, together with favorable operational leverage, should reflect positively on profitability. These improvements should more than offset the planned increase in marketing costs, which, together with capital expenditures (expected at 5% of full-year 2022 revenues), will further support our growth.
The Group will continue to pursue its strategy with confidence and determination while monitoring the significant uncertainties, including global health developments, consumer spending in the Greater China Region, and global geopolitical and macroeconomic risks.
The ESG targets announced at the Capital Markets Day in May also reaffirm the Group’s commitment to a path of responsible growth, with financial goals rooted in the Group’s values.
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1 All growth rates referenced in this release are year-over-year measurements unless specified otherwise and are expressed at actual foreign exchange rates.
2 MEA includes Middle East and African countries, as well as Turkey.
3 Adjusted EBIT, Adjusted EBIT Margin and Net Financial Indebtedness / Cash Surplus are non-IFRS financial measure. See the Non-IFRS Financial Measures section starting on page 4 of this communication for the definition of such non-IFRS measures.
