Zegna owner Thom Brown and Tom Ford Fashion licensee posted uneven and rather disappointing results in the first six months of 2014, linked to major investments to position itself more on the exclusivity niche.
Standardization of luxury + investments in key projects = Zegna performance down in the first half of 2024.
The Italian menswear and textiles group, which owns the Zegna, Thom Brown and Tom Ford Fashion labels in addition to its eponymous fabric brand , did not dazzle with its results in the first six months of the year .
Sales rose by 6.3% year-on-year, but fell by 2.7% in organic terms to 960.1 million euros.
Above all, EBIT, Zegna’s main performance indicator, plunged by 33% to 80.9 million euros.
Finally, net profit plummeted by 40% to 31.3 million euros, meaning that the profit margin fell from 5.8% in the first half of 2023 to 3.3% in the first half of 2024.
Normalization phase
Admittedly, this is not what Gildo Zegna expected. But for Zegna’s CEO, there’s nothing to panic about in the current context. He reminded us that the luxury goods industry was going through “an important normalization phase and continues to face macroeconomic and geopolitical uncertainties worldwide.”
Above all, however, Gildo Zegna reported that the first half of 2024 had “been marked by significant investments”, with “key projects” in“ the Group’s”three brands”, ‘in order to strengthen and foster the ongoing creation of value for each of them’.
In more detail, the brands achieved contrasting performances.
Thom Browne: Achilles heel
The Group’s Achilles heel was Thom Browne, with sales plunging -19.4% (-26.7% on organic growth) to 166.7 million euros in the first half. The New York fashion house, acquired in 2018 by Zegna, was impacted both by the restructuring of its wholesale base and by difficulties in the Asian market.
Adjusted EBIT fell by 36% to €20.2 million.
But the Group is not standing idly by. “We have taken decisive steps to strengthen Thom Browne’s organization, both at headquarters and in key regions,” said Gildo Zegna. We have recruited in merchandising and marketing, in particular to win back the Asian market.
Inaugurations of flagships in Japan (Tokyo) and the United States (New York, Los Angeles) are also in the pipeline.
Sales in textiles, the Group’s historic business, were also in poor form (-1.7% and -0.6% in organic growth) at 71.8 million euros, unsurprising in the current environment.
ZEGNA: exclusive repositioning
The ZEGNA brand, on the other hand, posted growth of +4.6% year-on-year (+5.9% organic) to 566.1 million euros in the first half of 2024.
On the other hand, adjusted EBIT fell by 15% to 84.7 million euros.
In fact, ZEGNA is counting on the long term, by continuing to invest heavily in actions designed to boost its desirability among a very high-end clientele.
Following on from the VILLA ZEGNA in Shanghai last May, in September ZEGNA launched the same pop-up concept, based on an exclusive immersive experience and a tailor-made shopping session (with products not available elsewhere), reserved for its VIP customers. And it was well inspired, since according to the group, this location “generated, in just six days, more revenue than some” of its “American stores over an entire year”.
As a result, VILLA ZEGNA is set to expand into Asia, a major destination, while private VIP areas are due to be inaugurated in the company’s most important global boutiques from 2025 onwards.
Tom Ford Fashion: the new license
Finally, sales of Tom Ford Fashionsoared by +132% (but only +4.7% in organic growth).
But the House, which has just announced the arrival of Haider Ackermann as Artistic Director, was only consolidated for two months in the first half of 2023 (from April 29, 2023). In fact, it was after the takeover of Tom Ford at the end of 2022 that the Estée Lauder Group entrusted its fashion license (men’s, women’s, accessories and underwear) to the Italian group.
And if we consider the brand’s year-on-year sales, growth is only +4.6% (+5.9% organic growth) to 566.1 million euros.
So we’ll have to wait and see if Tom Ford’s fashion really takes off under Zegna’s leadership and Haider Ackermann’s scissors. While the first women’s collection will be shown next March at Paris Fashion Week, Zegna’s CEO and his teams are “convinced” that this arrival “will enable the brand to reach new heights”.
Unleashing untapped potential
In general , Gildo Zegna declared that “luxury must evolve. Those who succeed will be those who adapt while remaining true to their DNA”. For him, profitability is the temporary price to pay for staying in the big league.
And even though “the general environment is likely to remain even more difficult”, Gildo Zegna said he was “convinced” that the projects being undertaken by his three brands “are the right ones to release” their “untapped long-term potential”.
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