Ermenegildo Zegna(ZGN) - 2024 Q4 - Annual Report

Ermenegildo Zegna Group Full Year 2024 Results Management Commentary The Group achieved €184 million Adjusted EBIT in a challenging 2024, driven by ZEGNA's performance and strategic brand integrations, maintaining a cautious 2025 outlook - The ZEGNA brand led the Group's performance, driven by its competitive edge and a disciplined focus on key projects and cost control[5] - Strategic actions in 2024 included streamlining Thom Browne's wholesale channel to enhance its Direct-to-Consumer focus and continuing the integration of TOM FORD FASHION[5] - The Group's Filiera (supply chain) is emphasized as a core R&D powerhouse and a key driver of innovation for all its brands[6] - The outlook for 2025 is cautious, with a primary focus on protecting brand identity through discipline, agility, and focused execution[7] Key Financial Highlights FY 2024 revenues grew 2.2% to €1,946.6 million, but profit declined to €90.9 million and Adjusted EBIT to €184.0 million FY 2024 Key Financial Metrics | Metric | FY 2024 | FY 2023 | Change (YoY) | | :--- | :--- | :--- | :--- | | Revenues | €1,946.6M | €1,904.5M | +2.2% | | Profit | €90.9M | €135.7M | -33.0% | | Adjusted EBIT | €184.0M | €220.2M | -16.4% | | Gross Profit Margin | 66.6% | 64.3% | +2.3 p.p. | | Profit Margin | 4.7% | 7.1% | -2.4 p.p. | - The Group proposes a dividend of €0.12 per ordinary share[8] - Profit performance was impacted by a normalized effective tax rate of 30% in FY 2024, compared to a lower 20% rate in FY 2023[8][16] - Strategic investments in talent, store network, and marketing continued throughout the year to build a foundation for sustainable growth[8] Detailed Financial Analysis Results of Operations FY 2024 revenues grew 2.2% to €1,946.6 million with gross margin at 66.6%, but increased SG&A and tax rates reduced net profit to €90.9 million Consolidated Income Statement Summary (FY 2024 vs FY 2023) | Metric (€ thousands) | 2024 | 2023 | | :--- | :--- | :--- | | Revenues | 1,946,647 | 1,904,549 | | Gross profit | 1,296,560 | 1,224,314 | | Operating profit | 166,852 | 208,148 | | Profit before taxes | 130,608 | 169,094 | | Profit | 90,861 | 135,661 | - The gross profit margin improved to 66.6% from 64.3%, primarily due to the increased proportion of Direct-to-Consumer (DTC) revenues, which reached 78% of branded product sales[12] - SG&A expenses increased to €1,008.3 million (51.8% of revenues) from €901.4 million (47.3% of revenues) in FY 2023, reflecting investments in talent, the store network, and organizational structure[13] - The decrease in profit was partly due to the effective tax rate normalizing to 30% from 20% in the prior year and a €6.1 million increase in foreign exchange losses[16] Segment Performance Analysis In FY 2024, Zegna revenues grew 2.0%, Thom Browne declined 17.2%, and Tom Ford Fashion grew 33.5%, with segment profitability impacted by strategic investments Revenues by Segment (FY 2024 vs FY 2023) | Segment (€ thousands) | 2024 | 2023 | Change % | | :--- | :--- | :--- | :--- | | Zegna | 1,348,839 | 1,322,045 | +2.0% | | Thom Browne | 314,818 | 380,287 | -17.2% | | Tom Ford Fashion | 314,514 | 235,544 | +33.5% | Adjusted EBIT & Margin by Segment (FY 2024 vs FY 2023) | Segment | Adj. EBIT 2024 (€M) | Adj. EBIT Margin 2024 | Adj. EBIT 2023 (€M) | Adj. EBIT Margin 2023 | | :--- | :--- | :--- | :--- | :--- | | Zegna | 187.6 | 13.9% | 193.5 | 14.6% | | Thom Browne | 27.3 | 8.7% | 59.0 | 15.5% | | Tom Ford Fashion | (10.1) | (3.2%) | (1.7) | (0.7%) | - The Thom Browne segment's Adjusted EBIT margin decline was a consequence of lower revenues and investments made to reinforce its retail organization[23] - The Tom Ford Fashion segment's operating loss widened due to investments in talent, store network, and reinforcement of business functions like compliance and IT to support future growth[24] Financial Position and Cash Flow FY 2024 saw increased capital expenditure to €125.5 million and a shift from net cash surplus to €94.2 million net financial indebtedness due to M&A, with Free Cash Flow at €10.1 million Key Financial Position & Cash Flow Metrics (FY 2024 vs FY 2023) | Metric (€ thousands) | At Dec 31, 2024 | At Dec 31, 2023 | | :--- | :--- | :--- | | Capital Expenditure | 125,529 | 77,877 | | Trade Working Capital | 460,034 | 448,909 | | Net Financial Indebtedness/(Cash Surplus) | 94,225 | 10,810 | | Free Cash Flow | 10,051 | 71,773 | - The increase in capital expenditure is mainly attributable to the expansion of the DTC channel for all brands, IT infrastructure reinforcement, and initial investments in a new shoe production plant[27] - The shift to a Net Financial Indebtedness position primarily reflects cash-out for M&A transactions, including acquisitions of Korean businesses for Thom Browne and ZEGNA[29] - Despite lower operating profit and higher capex, the Group maintained positive Free Cash Flow generation of €10.1 million[31] Outlook and Corporate Information Mid-term Targets and Subsequent Events The Group updated its 2027 targets to €2.2-€2.4 billion revenues and €250-€300 million Adjusted EBIT, proposing a €0.12 per share dividend Updated Mid-Term Targets (2027) | Metric | Target Range | | :--- | :--- | | Revenues | €2,200 - €2,400 million | | Adjusted EBIT | €250 - €300 million | - The Board of Directors proposed a dividend of €0.12 per share, subject to shareholder approval at the AGM on June 26, 2025[32] Corporate Overview and Investor Information Ermenegildo Zegna Group, a global luxury company with ZEGNA, Thom Browne, and TOM FORD FASHION brands, will host a conference call on March 27, 2025, with key financial releases scheduled throughout the year - The Group will host a conference call and webcast on March 27, 2025, to discuss the financial results[34] Upcoming Financial Releases in 2025 | Date | Event | | :--- | :--- | | April 24, 2025 | Q1 2025 Revenues | | July 30, 2025 | H1 2025 Preliminary Revenues | | September 5, 2025 | H1 2025 Financial Results | | October 23, 2025 | Q3 2025 Revenues | Appendix: Detailed Financial Tables Detailed Revenue Breakdowns FY 2024 revenues of €1,946.6 million saw ZEGNA grow 4.9%, Thom Browne decline 16.8%, and TOM FORD FASHION grow 33.5%, with DTC at 77.6% of branded sales Revenues by Brand and Product Line (FY 2024 vs FY 2023) | Brand/Product Line (€ thousands) | 2024 | 2023 | Change % | | :--- | :--- | :--- | :--- | | ZEGNA brand | 1,163,722 | 1,109,491 | +4.9% | | Thom Browne | 314,712 | 378,410 | -16.8% | | TOM FORD FASHION | 314,514 | 235,531 | +33.5% | | Textile | 138,153 | 150,986 | -8.5% | Revenues by Geographic Area (FY 2024 vs FY 2023) | Geographic Area (€ thousands) | 2024 | 2023 | Change % | | :--- | :--- | :--- | :--- | | EMEA | 680,259 | 658,694 | +3.3% | | Americas | 524,790 | 454,890 | +15.4% | | Greater China Region | 509,378 | 595,515 | -14.5% | | Rest of APAC | 229,877 | 192,492 | +19.4% | - Direct-to-Consumer (DTC) revenues grew 9.9% to €1,390.7 million, now accounting for 77.6% of branded product sales, up from 73.4% in 2023 Conversely, wholesale branded revenues declined by 12.2%[45] - The total number of monobrand stores increased to 664 at the end of 2024 from 636 at the end of 2023, with growth primarily in the DTC channel[50] Consolidated Financial Statements The FY 2024 consolidated financial statements show profit declined to €90.9 million, total assets grew to €2,834.0 million, and a net cash decrease of €77.1 million Consolidated Statement of Profit and Loss (FY 2024) | Metric (€ thousands) | 2024 | 2023 | | :--- | :--- | :--- | | Revenues | 1,946,647 | 1,904,549 | | Operating profit | 166,852 | 208,148 | | Profit | 90,861 | 135,661 | | Basic earnings per share | €0.31 | €0.49 | Consolidated Statement of Financial Position (at Dec 31) | Metric (€ thousands) | 2024 | 2023 | | :--- | :--- | :--- | | Total assets | 2,833,973 | 2,767,011 | | Total equity | 982,887 | 900,896 | | Total liabilities | 1,851,086 | 1,866,115 | Consolidated Cash Flow Statement (FY 2024) | Metric (€ thousands) | 2024 | 2023 | | :--- | :--- | :--- | | Net cash flows from operating activities | 279,129 | 275,382 | | Net cash flows (used in)/from investing activities | (126,014) | 21,786 | | Net cash flows used in financing activities | (234,534) | (250,494) | | Net (decrease)/increase in cash | (77,149) | 41,958 | Non-IFRS Financial Measures Reconciliation This section reconciles non-IFRS measures including Adjusted EBIT, Net Financial Indebtedness, and Free Cash Flow, and details Constant Currency and Organic Growth revenue calculations - Adjusted EBIT of €184.0 million was calculated by adjusting operating profit (€166.9M) for items including €11.2M in net store impairments and €4.9M in severance indemnities[66] - Free Cash Flow of €10.1 million is derived from net cash from operating activities (€279.1M) less payments for property, plant & equipment (€100.1M), intangible assets (€25.4M), and lease liabilities (€143.5M)[82] Reconciliation of Reported to Organic Revenue Growth (FY 2024) | | Reported Growth | less FX | Constant Currency | less Acq. & Disp. | less License Chg. | Organic Growth | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Total Group | 2.2% | (1.2%) | 3.4% | 5.7% | (0.4%) | (1.9%) | | Zegna Segment | 2.0% | (1.4%) | 3.4% | 0.7% | 0.2% | 2.5% | | Thom Browne | (17.2%) | (0.8%) | (16.4%) | 4.4% | — | (20.8%) | | Tom Ford Fashion | 33.5% | (0.8%) | 34.3% | 35.0% | — | (0.7%) |