MILAN — At Zegna, there’s only way one to go and it’s up, according to chairman and chief executive officer Gildo Zegna.
“We now have a single brand positioned in the pure luxury leisurewear range with more iconic products and special orders. This is the right direction — up,” said the executive during a conference call with analysts and the press on Tuesday. He touted the rebranding of Zegna ahead of the initial public offering last year, which is already showing “strong traction.”
“We wanted to surprise the market and the trend of our stock has reacted positively. We outpaced our plans and we remain positive for 2022,” he continued, commenting on the Ermenegildo Zegna Group’s first set of results as a public company, which saw a 27 percent increase in 2021 preliminary revenues to 1.3 billion euros. Compared with 2019, group sales inched down 2 percent.
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Indeed, pressed by analysts, chief financial and operating officer Gianluca Tagliabue said sales could grow “at least” by 13 percent in 2022. Also, the group expects for 2021 to report an adjusted operating profit margin of around 10 percent, up from 9 percent in 2020, and to further improve in 2022.
“We declared during our road show that we were targeting a 15 percent operating profit margin to reach as soon as possible and we are committed to reaching that goal in the near future,” said Tagliabue.
While once again dismissing the idea of expanding into the women’s category, Zegna believes further gains can be achieved through organic growth and one-off collaborations, as well as by further enhancing the brand’s sneakers category; thanks to full-price sell-through with collections that have more recognizable items and carryovers; by increasing the value of products, and by continuing to focus on highly profitable markets such as the U.S. and Greater China.
To be sure, the two regions lifted the group’s business in the 12 months ended Dec. 31.
Sales in North America, which includes Canada, climbed 46 percent to 191 million euros, due largely to a very strong performance in the U.S., “one of the highlights of 2021,” said Zegna, where revenues climbed 53 percent. The executive expects the solid trend in the U.S. to continue, attracting new customers and responding to the group’s omnichannel platform.
In the Asia-Pacific area, sales increased 26 percent to 696 million euros, with the Greater China region continuing a two-year upward trend, growing 34 percent since 2020 and 28 percent since 2019. “China remains very important for us and we will devote a lot of attention to that market. Customers there love innovation and surprises, we see it every time we have a new project,” said Zegna.
The Europe, Middle East and Africa area reported a 20 percent increase in revenues to 380 million euros, driven by a rebound in Italy’s sales to above pre-COVID-19 levels in 2019, and by the “outstanding performance” of the United Arab Emirates. Dubai will continue to grow beyond the Expo, contended Zegna, and remains “interesting for an international and affluent traveler,” the kind who is now less prevalent in London. Russia also remains “quite strong,” he said.
While Korea performed well last year and its strength is expected to persist, revenues in Japan and the remaining parts of APAC continued to be negatively affected by COVID-19 restrictions, although Zegna believes Japan will recover soon.
Last year, revenues of the Zegna brand increased 23 percent to 1.03 billion euros, and sales of the Thom Browne label also boosted the group’s performance, climbing 47 percent and totaling 263 million euros.
Compared with 2019, sales of the Zegna brand declined 11 percent, hurt by the impact of the pandemic and the lockdowns, but its chairman expects to see strong results from the rebranding. Compared with 2019, Thom Browne sales climbed 64 percent.
Zegna-branded products, which include apparel, bags, shoes and leather goods, as well as licensed goods and royalties, registered revenues that rose 33 percent.
The Thom Browne label, acquired by the group in 2018, grew in every channel, geography and product line in men’s and women’s categories.
Both Zegna and Rodrigo Bazan, CEO of Thom Browne, expressed confidence in China this year, recently seeing only a few disruptions caused by the pandemic in the region.
Bazan said Thom Browne was planning new store openings in Asia, while strengthening its presence in Europe and the U.S. “There is growth potential for the brand, both in terms of retail and online. We have a very strong relationship with e-tailers and there’s been an increased interest in the women’s category,” said Bazan. “We’ve seen an outstanding growth in our direct-to-consumer, a very strong trend in North America and the brand is healthy across the board.”
He cited “very strong momentum” in Milan with the recent opening of a women’s store. “Every market is localized now,” he said.
The strong momentum of the American designer’s brand led to 127 percent revenue growth in the retail channel compared with 2019, significantly exceeding store footprint expansion.
Last year the Zegna brand’s retail revenues rose 35 percent to 713 million euros.
The group’s retail channel overall was up 39 percent to 851.4 million euros, representing 66 percent of total sales, reflecting its strategic focus on brand equity and an increasingly selective approach to wholesale distribution.
That said, group wholesale revenues also rose during the period, up 14 percent to 437.6 million euros. In this channel, Zegna products were up 24 percent to 134 million euros, thanks to the strong performance of North America and APAC. Thom Browne wholesale sales grew 32 percent to 125 million euros thanks mainly to EMEA and APAC.
After doing so at Bloomingdale’s, Zegna is considering investing in additional concessions at Nordstrom.
Given the rebranding, Zegna is also planning to remodel its stores, following its Boston unit, including the Milan flagship on Via Montenapoleone.
The executive also revealed that the 2022 collections will be the last using fur for the Zegna and Thom Browne labels. Zegna admitted that the use of fur was “immaterial” at the group, accounting for less than 1 percent, but that the decision was in line with its sustainability goals. “It was due, we did it at the right time and we believe there are many alternatives to the use of furs, we have lots of ideas for the cold season,” he said.
Asked to comment on the metaverse and nonfungible tokens, Zegna admitted “it was an interesting topic we are studying. We are learning, I don’t have an opinion but I’m keeping an open mind, we need to understand what it means and what it could do for us. We will take no action until we understand,” he concluded.
Shares started trading under the ZGN ticker on Dec. 20 at $10.30. By midday on Tuesday in New York, shares were up 1.85 percent.
Zegna listed in New York after entering into a business agreement with Investindustrial Acquisition Corp., a special purpose acquisition corporation, sponsored by investment subsidiaries of Investindustrial VII LP.
IAC raised total gross proceeds of $402.5 million in its IPO. The Zegna family continues to control the luxury company with a stake of nearly 66 percent. Investindustrial has a stake of around 13 percent stake and about 21 percent is free floating.
Based on the transaction value, the merged entity had an initial enterprise value of $3.1 billion with a market capitalization of $2.4 billion. The transaction delivered about $761 million in gross proceeds.