Ermenegildo Zegna(US:ZGN)2022-08-26 19:48Financial Data and Key Metrics Changes - The company reported a revenue growth of 21% year-over-year, reaching approximately €730 million in the first half of 2022 [10] - Excluding Mainland China, which was affected by COVID-19 lockdowns, the growth rate was 53%, with the U.S. and Europe doubling [10] - Adjusted EBIT margin increased by 20 basis points to 11.3%, despite planned cost increases and an unfavorable country mix due to the weaker Greater China region [11][30] - Profit for the first half was €21 million, down from €32 million the previous year, primarily due to an increase in the value of the put option liability related to Thom Browne [43] Business Line Data and Key Metrics Changes - Zegna segment sales increased by 19%, with EBIT margin rising from 8.4% to 9.2% [42][64] - Thom Browne experienced a 30% growth in sales, although EBIT margin slightly decreased to 17% due to growth investments [42] - Textile sales surged by 55%, and Third-Party brands grew by 44%, driven by strong deliveries to clients like Tom Ford and Gucci [57] Market Data and Key Metrics Changes - DTC (Direct-to-Consumer) sales increased by 13%, representing 59% of total revenues, with a growth rate of 4% in the second quarter [58] - In Greater China, DTC revenues in June were higher than in June 2021, indicating a positive rebound post-lockdowns [53] - The company noted a strong rebound in Western Europe, with a return of tourists contributing to sales growth [40][54] Company Strategy and Development Direction - The company is focused on its One Brand strategy, which aims to enhance brand recognition and customer engagement [13][14] - A significant milestone was the launch of the Zegna One Brand rebranding project, which is expected to continue with 80 more rebranding efforts in the second half of the year [13] - The partnership with Real Madrid is seen as a strategic move to amplify brand visibility and attract new customers [8][16] Management's Comments on Operating Environment and Future Outlook - Management expressed satisfaction with the results despite a complex macroeconomic and geopolitical context [6] - The company raised its full-year revenue guidance from low-teens to mid-teens growth, citing strong order visibility and positive trends in consumer behavior [71][76] - Management remains cautious about potential volatility in the market, particularly in Greater China, but sees positive trends in North America and Europe [90][91] Other Important Information - The company is committed to sustainability, with initiatives including sustainability-linked financing agreements and a target for 25% of its corporate vehicle fleet to be electric or hybrid by 2025 [29] - The company plans to eliminate end-of-season sales by 2023 as part of its strategy to enhance luxury positioning [112] Q&A Session Summary Question: Changes in consumer behavior due to macroeconomic conditions - Management noted that while there are concerns, luxury sector demand remains strong, particularly in North America and Europe, with a positive trend in consumer engagement [86][90] Question: Outlook for H2 and marketing spend - Management acknowledged the strong performance in H1 and indicated that the guidance for H2 is conservative, factoring in potential volatility, especially in Greater China [91][92] Question: Markdown reduction and investment quantification - The company confirmed a low incidence of markdowns in H1 and plans to eliminate markdowns across all channels by 2023 [111] - Marketing investments are expected to increase by 20-25% in 2022 and 2023, with a focus on amplifying brand visibility [119][120]