MILAN — A contraction in China and Russia, a strong euro, extraordinary tax charges, and investments in the relaunch of the group’s Agnona brand and its production structure weighed on the Ermenegildo Zegna Group’s profitability in 2014.

This story first appeared in the April 13, 2015 issue of WWD. Subscribe Today.

Last year, the privately owned Italian clothing and textile firm saw its net profit drop 39 percent to 71 million euros, or $94.4 million,  from 116.3 million euros, or $154.7 million in 2013. Earnings before interest, taxes, depreciation and amortization decreased 28 percent to 185 million euros, or $246 million, compared with 257 million euros, or $341.8 million, in the previous year.

Sales were down 4.7 percent to 1.21 billion euros, or $1.6 billion, from 1.27 billion euros, or $1.69 billion.

Dollar amounts are converted at the average exchange rate for the periods to which they refer.

Exports continue to generate more than 90 percent of the company’s sales. Despite the slowdown, China remains the group’s main market, followed by the U.S.

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Chief executive officer Gildo Zegna underscored “the contraction in spending on men’s wear in the People’s Republic of China and the Russian Federation. We have responded to this situation and are continuing to address it by investing in directly operated retail and in wholesale through strong partnerships with big retail chains in North America.” Zegna noted that the company has completed the reorganization of production started in 2013, and widened the control of its industrial process through the acquisition of a controlling interest in a Merino sheep farm in New England, Australia.

The group is committed to supporting “projects in favor of local communities and environmental defense in 2015, with donations worth over 5 percent of net profits,” Zegna said. In addition, the company will continue to upgrade and develop its Oasi Zegna and support young talents. Case in point: the funding of the Ermenegildo Zegna Founder Scholarships, “which, in 2014, assigned the first 14 scholarships for advanced specialization in international universities for graduates who were born or are permanent residents in our country, and who undertake to return to Italy following their studies abroad,” observed Zegna.

The group also invested around 20 million euros, or $26.6 million, in Italy to strengthen the control of its industrial chain. It brought its clothing production center in the new facility in San Pietro Mosezzo, near Novara; its leather goods, outerwear and footwear facilities in Parma, and its knitwear unit in Verrone, near the northern town of Biella. “These production centers were built to guarantee products of increasingly high quality and service levels, in compliance with environmental and health standards,” said the company.

At the end of 2014, the group counted 525 stores, of which 298 are directly operated. In 2015, the company will open strategic banners in cities such as Miami, New York, Osaka and Tokyo.

In the last two years, 200 additional employees have joined the company.

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