Ermenegildo Zegna(ZGN)2024-10-22 16:47Financial Data and Key Metrics Changes - For the first nine months, revenues reached €1,357 million, up 2% year-on-year on a reported basis, with a 3% increase in constant currency, but a 4% decline in organic terms [10] - In Q3, the Group reported revenues of €397 million, down 8% year-on-year on a reported basis, with a 6% decline in constant currency and a 7% decrease in organic terms [11][12] - The Zegna segment contributed €944 million, with the ZEGNA brand up 5% organically, while Thom Browne and Tom Ford Fashion segments reported revenues of €220 million and €214 million respectively [11] Business Line Data and Key Metrics Changes - The ZEGNA brand recorded a 3% organic growth in Q3, driven by a 4% increase in the DTC channel, with strong performance in EMEA, Americas, and Japan [12][18] - Thom Browne's revenues in Q3 were €53 million, down 27% organically, primarily due to the decision to streamline the wholesale business and challenges in Greater China [13] - Tom Ford Fashion reported Q3 revenues of €65 million, down 11% organically, with a positive DTC channel growth of 3% [14][21] Market Data and Key Metrics Changes - The Greater China region saw a revenue decline of 22% in Q3, attributed to subdued consumer confidence [16] - EMEA recorded a -2% organic growth in Q3, with positive performance from the ZEGNA brand offset by declines in wholesale for Thom Browne and Tom Ford Fashion [15] - The Americas experienced a -3% organic growth in Q3, with DTC channel performing well but negatively impacted by wholesale performance [15] Company Strategy and Development Direction - The company is focusing on long-term brand reinforcement despite short-term impacts on results, including streamlining Thom Browne's wholesale business and investing in marketing and retail talent [8][9] - The appointment of Haider Ackermann as Creative Director for Tom Ford Fashion aims to enhance the brand's potential, with new collections expected in mid-2025 [8] - The strategy includes a shift towards DTC channels and a focus on high-quality customer interactions, particularly in China [27][50] Management Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding the Chinese market, indicating that challenges may persist into early 2025, but noted positive signs such as increasing average selling prices and attracting younger customers [25][26] - The company anticipates a stronger position in 2025, with careful planning and investment in brands and talent [9] - Management acknowledged the volatility in the current environment but remains committed to executing their strategy effectively [33][34] Other Important Information - The company opened several new stores in Q3, including locations in New York and Beijing, and plans to continue expanding its retail footprint [3][4][18] - The DTC channel grew 1% organically in Q3, with significant contributions from ZEGNA and Tom Ford Fashion, while wholesale performance declined by 24% [17] Q&A Session Summary Question: Insights on China consumer confidence and future expectations - Management indicated that consumer confidence in China remains subdued, with expectations of continued challenges into early 2025, but noted positive trends in younger customer engagement and average selling prices [25][26] Question: Current trading in October and margin expectations - October performance has been slightly better than Q3, but management remains cautious due to ongoing volatility [33] Question: Confirmation of Thom Browne wholesale guidance - Management confirmed a guidance of -35% for Thom Browne wholesale for the full year, indicating a decline in Q4 but at a lower extent than year-to-date metrics [34] Question: Performance of ZEGNA brand DTC and geographical insights - Positive growth was noted from European and American customers, while Greater China residents showed a mid-teens negative performance, primarily driven by Mainland China [38][39] Question: Evolution of retail store footprint in China - Management is focused on increasing store productivity and enhancing customer engagement, with plans for further store openings and consolidations as needed [49][50] Question: Pricing strategy across brands - The company plans moderate price increases to offset cost inflation and currency fluctuations, without a structural repositioning of prices [54][55]