MILAN — Exports that increased margins and were more balanced around the world helped the Ermenegildo Zegna Group close 2012 with a 13 percent increase in profits. Further gains and more investments in its retail network are expected in 2013.
This story first appeared in the May 3, 2013 issue of WWD. Subscribe Today.
“We have been saving for a rainy day,” chief executive officer Gildo Zegna told WWD. “We generated good margins, because we have been very careful to avoid heavy discounting both at retail and wholesale — also in the U.S.”
The executive also cited more homogenous growth around the world compared with past years, when sales were largely channeled through Greater China.
In the 12 months ended Dec. 31, the Italian men’s wear group saw net profits climb to 130 million euros, or $166.4 million, compared with 115.1 million euros, or $160 million, in 2011.
Earnings before interest, taxes, depreciation and amortization reached 250.2 million euros, or $320.2 million — 19.8 percent of sales — up 7.5 percent from 233 million euros, or $323.9 million, the previous year.
Sales increased 11.9 percent to 1.26 billion, or $1.61 billion, compared with 1.13 billion euros, or $1.57 billion.
Dollar amounts have been converted at average exchange rates for the periods to which they refer.
Over 90 percent of sales came from exports, with emerging markets accounting for 46 percent of total revenues. The main markets driving growth were Greater China, the U.S., Russia and the Middle East. Conversely, Spain, Japan and Korea contracted. Europe was positive overall, with sales in Italy, France and the U.K. increased by tourists.
Zegna pointed to a slowdown in Greater China in the last quarter of 2012 and in the first quarter of this year, which he described as “strange,” and will need to be “followed carefully.” Additionally, the negative trend in the global economy may impact the luxury industry, he continued.
“It’s not easy to make forecasts but we are well equipped. We remain positive, we are confident that we can generate positive financial results, and we hope this is a transition,” the ceo said.
Zegna expects to grow in 2013, although “not along the same lines as last year.” That said, he underscored the company will invest more in 2013 than in 2012, although he declined to provide details. Investments will be mainly aimed at improving and expanding the group’s retail network, and in communication and advertisement.
“The brand is well-positioned, but we continue to relocate to bigger spaces and renew stores with [architect] Peter Marino. Our customers travel and we want to offer the same freshness and modernity everywhere around the world, not only in new and emerging countries,” said Zegna, adding that about 70 percent of group stores have been renovated over the past two years.
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“We are renewing and extending our Chicago boutique, relocating in Beverly Hills, redid Costa Mesa and will open in Dallas. The U.S. is one of the areas where we are more positive, and we hope in a positive trend, although April was slow,” he said.
Zegna stressed that wholesale remains key, and that after pruning a number of points of sale in Europe and the U.S., he expects growth from that channel as well. In the U.S., he said the company relies on “great collaborations with major stores,” from Nordstrom to Neiman Marcus and Saks Fifth Avenue, where corners are also being renovated.
Last year, global retail generated 78 percent of sales, showing a 16 percentage point growth in four years.
At the end of 2012, the company had 543 stores, of which 303 were directly operated. An additional 30 openings are scheduled for 2013, including stores in Geneva, London, Cancun, Abu Dhabi, Kuwait City, Singapore, Hanoi, Brisbane and a number of Chinese cities, including Beijing and Shanghai.
“In 2013, we will continue to invest in Europe, the U.S., Mexico, People’s Republic of China, Australia and Singapore and in new markets, such as Nigeria and Vietnam, to expand our retail network,” said Zegna. Just back from a two-day event in Sydney to celebrate the 50th anniversary of the Ermenegildo Zegna Extrafine Wool Trophy, the executive said he expects Australia to become one of the “top 10” countries for the group.
Asked about the men’s wear market today, Zegna said he feels this is “a good moment” for the category, noting that two areas in particular are “growing strongly, luxury sportswear and accessories,” in addition to Su Misura, or made-to-measure tailoring, which can be further developed.
In 2013, the company will unveil the first collections overseen by Stefano Pilati. He started Jan. 1 as creative director of the group’s Agnona women’s line and head of design at Ermenegildo Zegna, with responsibility for that brand’s fashion show as well as for the Ermenegildo Zegna Couture collection. Zegna declined to provide a peek into the designer’s work, but was upbeat, touting “good progress,” adding that Pilati is “ready to surprise,” and admitting there are “great expectations for his first show in Milan” in June.
The Trivero, Italy-based company took a 3 percent stake in Brunello Cucinelli last year, and on the back of the Pomellato sale to Kering (the former PPR) last week, and asked about potential investments in other brands, Zegna said he had “enough on his plate” and reiterated that he had no interest in publicly listing the family-owned company.