Retail & Brands
Ermenegildo Zegna Group ends FY 2022 with strong revenue(1) growth in line with strategic plan
Excluding the Greater China Region (“GCR”), which was affected by COVID-related restrictions throughout 2022, particularly from mid-March to the end of May and then again in the fourth quarter, revenues were up 42.0% year-over-year for FY 2022 and up 24.7% year-over-year for 4Q 2022 (up 38.6% and up 21.1% at cFX in FY 2022 and 4Q 2022, respectively).
- FY 2022 Revenues1 of €1,493 million, up 15.5% year-over-year, in line with mid-teens guidance; solid double-digit growth in both Zegna and Thom Browne segments
- FY 2022 and 4Q 2022 Revenue growth of 42% and 24.7% year-over-year2, respectively, excluding the Greater China Region
- The Group expects an increase in Cash Surplus3 in the second half of 2022, in line with guidance
- Early signs of recovery seen in the Greater China region
Ermenegildo “Gildo” Zegna, Chairman and CEO of the Zegna Group, said: “I am very pleased with how we performed during 2022, in spite of the continued global economic and geopolitical challenges of the year, as well as how we continued to stand by our commitments to the environment, our employees, and our communities. Despite China continuing to be affected by COVID-related restrictions throughout 2022, our growth for the year shows the soundness and success of our strategy, global reach, and flawless execution, with ongoing success in the Middle East, U.S., and Europe. After my recent trip to Greater China, I am optimistic about China’s reopening as we are witnessing a rebound in our business and the industry at large. We will remain flexible to proactively face external challenges while continuing to strengthen our brands, execute on Our Road strategy, and deliver on our mid-term targets.”
He added: “2022 was another year of important milestones for the Group. In May, we shared our financial ambitions and sustainability strategy at our very first Capital Markets Day, hosted at Oasi Zegna. In August, we launched a unique partnership with Real Madrid, bringing together our two storied brands to become the club’s Official Luxury Travelwear Partner. And as a company built on caring for the environment, we were extremely proud that in September, thanks to our own production and integrated supply chain, we were able to launch Oasi Cashmere, a significant step on Our Road toward traceability and meeting our sustainability goals. Finally, in November, we announced the TOM FORD fashion business transaction alongside The Estée Lauder Companies. Subject to and following the completion of that transaction we will operate the TOM FORD fashion business under a long-term license from The Estée Lauder Companies and acquire the related fashion operations. All of these are strong steps towards realizing our long-term vision for the Group.”
Select Highlights from the Fourth Quarter of 2022
Significant Growth, excluding COVID-related impacts in the Greater China Region
Excluding the GCR, global revenues showed significant growth for both 4Q 2022 and FY 2022, at 24.7% and 42.0% year-over-year, respectively. Revenue growth was especially strong in the U.S., even with a particularly strong comparison base in 4Q 2021, reaching 26.1% year-over-year for 4Q 2022 and 53.5% year-over-year for FY 2022. This comes despite the end of our distribution license with Tom Ford International, which resulted in an 8% reduction of our revenue growth for 4Q 2022 in the U.S.
Revenues in Europe, the Middle East, and Africa (EMEA) also continued to grow by double-digits percentage points compared to 4Q 2021, supported by exceptional results from the Middle East and Africa (MEA), strong performance in Italy, and consistent performance in other countries in Europe.
After a positive 3Q, in 4Q 2022 we saw a 30% decline in revenues from the GCR due to a new wave of particularly impactful COVID-related restrictions put in place in October and November, as well as some further unplanned temporary store closures in December due to a wave of contagion. This resulted in 4Q 2022 Group revenues decreasing 0.5% year-over-year (2.9% at cFX).
Acquisition of Minority Stake in Norda Run
On January 23, 2023, Zegna signed an agreement for the acquisition of a minority stake in Canadian technical trail-running shoe company Norda Run, with the option to gradually increase its stake over the next nine years. The luxury outdoor space continues to be an area of focus for the Group, and Norda Run, which uses the finest materials on the planet to produce the world’s best-performing all-weather footwear, aligns perfectly with Zegna’s values of creating the best products from the best materials. The agreement secures the possibility of accelerating the brand’s growth through a strong industrial and commercial partnership.
Fall 2023 Collection: Oasi Cashmere and The Elder Statesman Partnership
The Fall 2023 show, held during Milan Fashion Week earlier this month, focused on Zegna’s iconic Oasi, with 70% of the collection created using Oasi Cashmere. Oasi Cashmere is a central development on Zegna’s Road to Traceability, and we are committed to certifying its fibers as fully traceable by 2024.
On January 16, 2023, Zegna announced a collaboration with Los Angeles-based The Elder Statesman, and unveiled some items from the collection, including a tweed cashmere coat, during our Fall 2023 show. The full collection will be presented during Paris Fashion Week at the end of February and will be in stores in September 2023.
Thom Browne Wins Trademark Case; Reaches Agreement to Directly Operate Business in Korea
On January 12, 2023, a jury found that at no time did Thom Browne, Inc., infringe on any of the trademarks of adidas America, Inc., in the lawsuit filed by adidas in the U.S.
Today, January 25, 2023, Thom Browne announced an agreement with its Korean partner of 12 years, Samsung C&T Corporation (“Samsung”), pursuant to which Thom Browne will directly operate its Korean business through a newly formed and wholly owned company, Thom Browne Korea. Thom Browne Korea will assume direct responsibility for all activities within the Korean market, with external support from Samsung. Samsung and Thom Browne will continue their successful collaboration through an innovative retail management agreement, effective July 1, 2023, through which Samsung will manage Thom Browne’s wholly owned network of 17 stores in Korea.
Review of Fourth Quarter and Full Year 2022 Preliminary and Unaudited Revenues5
In 4Q 2022, Zegna Group generated revenues of €407 million, a 0.5% year-over-year decrease, bringing total revenues for FY 2022 to €1,493 million, up 15.5% year-over-year. At cFX, revenues grew 11.0% and declined 2.9% year-over-year in FY 2022 and 4Q 2022, respectively. Excluding the GCR, which was affected by COVID-related restrictions throughout 2022, particularly from mid-March to the end of May and then again in the fourth quarter, revenues were up 42.0% year-over-year for FY 2022, and up 24.7% year-over-year for 4Q 2022 (up 38.6% and up 21.1% year-over-year at cFX in FY 2022 and 4Q 2022, respectively). Growth in the fourth quarter was also affected by the end of the Tom Ford International distribution license agreement with the Fall/Winter 2022 season deliveries, which had a negative impact on consolidated revenues for 4Q 2022 of 2.0% year-over-year.
Revenues by Segment
Zegna: Revenues for the Zegna segment, which includes Zegna-branded products as well as the Textile and Third-Party Brands product lines, reached €334 million in 4Q 2022, a decrease of 2.2% year-over-year, with the drop in GCR direct-to-consumer (DTC) revenues and the end of the Tom Ford International distribution license agreement more than offsetting solid performance in other markets. Zegna segment revenues for FY 2022 were €1,177 million, a 13.7% year-over-year increase.
Thom Browne: The Thom Browne segment continues to be a significant growth driver for the Group, with 4Q 2022 revenues of €76 million, up 11.5% year-over-year. In FY 2022, the Thom Browne segment posted revenues of €331 million, up 25.3% year-over-year. Thom Browne saw women’s products growing slightly faster than men’s, while children’s almost doubled. Despite COVID-related restrictions and closures affecting the DTC channel, positive performance was sustained by strong wholesale demand, e-commerce through T-Mall in China, and the contribution of 11 net store openings in 2022, bringing the total number of directly operated stores to 63 at the end of 2022.
Revenues by Product Line
Zegna-Branded Products: Zegna-branded products revenues were €274 million for 4Q 2022, down 2.7% year-over-year, but up double-digit year-over-year excluding GCR, benefitting from the rollout of the One Brand collection since July 2022. Revenues for FY 2022 were €924 million, up 9.0% year-over-year. Shoes showed exceptional performance throughout the year, while growth in the luxury leisurewear segment remained steady. Tailoring and Made-to-Measure both saw a strong rebound in 2022, especially in the U.S. and EMEA.
Thom Browne: Thom Browne continues to be a growth pillar for the Group, with revenues of €76 million in 4Q 2022, up 11.4% year-over-year, bringing FY 2022 revenues to €330 million, up 25.3% year-over-year. The growth was largely driven by wholesale demand.
Textile: Textile revenues were up 7.1% year-over-year for 4Q 2022, reaching €38 million. Revenues for the year were up 33.8% to €137 million, with all the key subsidiaries experiencing healthy double-digit growth.
Third-Party Brands: Third-Party Brands revenues reached €18 million in 4Q 2022, down 18.8% year-over-year, impacted by the termination of the Tom Ford International distribution license which ended with deliveries of the FW 2022 collection, replaced by a supply agreement. Excluding this impact, Third-Party Brand revenues were up by strong double-digits in 4Q 2022. We expect the negative impact to be more than offset by the consolidation of the TOM FORD fashion business subject to and upon closing of the transaction with The Estée Lauder Companies, expected later this year. For FY 2022, Third-Party Brands revenues were up 30.5% year-over-year to reach €98 million, driven by higher Gucci orders and Tom Ford deliveries for SS22/FW22.
Revenues by Geography
The Group saw significant growth across geographies, excluding the GCR due to the rapidly changing nature of the COVID-19 policies in the region. Excluding the GCR, the Group saw a 42.0% increase in revenues in FY 2022 driven by performance in Europe, the Middle East, and the U.S. Revenue growth was 24.7% in 4Q 2022, excluding the GCR.
Activities in Europe, the Middle East, and the U.S. demonstrated the strongest growth in 4Q 2022. EMEA revenues in 4Q 2022 were €140 million, a 22.8% year-over-year increase, of which the Middle East and Africa (MEA6) region represented €24 million, a 34.9% year-over-year growth, building on the region’s robust performance in the earlier quarters of the year. For FY 2022, EMEA revenues reached €520 million, up 36.8% year-over-year. Revenues from the Middle East and Africa (MEA5) region constituted €69 million for the year, a 56.1% year-over-year growth.
North America 4Q 2022 revenues increased 26.7% year-over-year and amounted to €82 million, of which the U.S. made up €77 million, up 26.1% year-over-year. The U.S. continues to be an area of focus for the Group as we execute our strategic growth plan. Revenues in North America reached €295 million in FY 2022, up 54.1% year-over-year, with the U.S. up 53.5% to €270 million.
Group revenues in the GCR were down 30.3% year-over-year for 4Q 2022, reaching €131 million. The decrease was 16.1% for FY 2022, with revenues of €494 million for the year. The drop in revenues was a result of COVID-19 disruptions throughout the year, especially severe during the fourth quarter. After restrictions were eased in early December, we also experienced temporary store closures due to staff shortages. Operations have since normalized, returning to more predictable activities.
Revenues by Channel
In FY 2022, DTC revenues for Zegna-branded products saw an 8.4% year-over-year increase, reaching €773 million. DTC revenues for Thom Browne increased 5.1% year-over-year to €146 million in FY 2022, pushed by high-double-digit performance in the U.S., EMEA, and Japan. The FY 2022 increases in DTC revenues come despite decreases of 6.2% and 10.0% for Zegna-branded products and Thom Browne, respectively, in 4Q 2022, as a result of the COVID-19 disruption in the GCR.
For FY 2022, wholesale revenues reached €570 million, up 30.7% year-over-year, with Thom Browne wholesale revenues growing 47.7% for the year to €184 and Zegna-branded product wholesale revenues growing 12.6% for the year to €151 million. In 4Q 2022, the Group saw growth across the wholesale channel, with revenues totaling €132 million, a 16.1% year-over-year increase. This is attributed to exceptional wholesale growth for Thom Browne of 62.4% year-over-year during the quarter and consistent growth of 20.7% year-over-year for Zegna-branded products during the quarter. At the end of FY 2022, DTC revenues represented 62% of total sales, down from 66% in FY 2021, as a result of the disruptions affecting the GCR, which is mainly a retail market.
The Group expects a moderate improvement in Adjusted EBIT3 and a substantial improvement in Profit for FY 2022 compared to 2021 despite significant headwinds in the GCR. The Group also continues to expect a Cash Surplus increase in the second half of the year, in line with guidance. Medium-term targets remain unchanged as Zegna continues to focus on executing its strategy, targeting €2 billion in revenues and 15% Adjusted EBIT Margin3 in the medium term, excluding the TOM FORD fashion business. This outlook assumes no further future escalation of the war in Ukraine, no significant macroeconomic deterioration, no further disruption linked to the COVID-19 pandemic in the GCR or elsewhere, and no other unforeseen events.
1 Throughout this press release, FY 2022 and 4Q 2022 revenues are preliminary and unaudited.
2 Throughout this press release, revenue growth refers to year-over-year growth.
3 Adjusted EBIT, Adjusted EBIT Margin, and Net Financial Indebtedness/(Cash Surplus) are non-IFRS financial measures. See the Non-IFRS Financial Measures section starting on page 4 of this press release for the definition of such non-IFRS measures.
4 This press release includes information about our revenues measured on a constant currency basis, which is a non-IFRS financial measure. See the Non-IFRS Financial Measures section starting on page 4 of this press release for a definition of such non-IFRS measure.
5 All % changes are calculated on an actual currency exchange rate basis, unless otherwise specified.
6 MEA includes Middle East and African countries and Turkey.
Next Scheduled Announcement
The next scheduled announcement will be the full-year 2022 earnings on April 6, 2023. To receive email alerts of the timing of future financial news releases, as well as future announcements, please register at https://ir.zegnagroup.com.