Ermenegildo Zegna(US:ZGN)2024-04-23 18:20Financial Data and Key Metrics Changes - In Q1 2024, group revenues reached €463 million, an increase of 8% year-over-year, and 11% when excluding a 3 percentage point negative currency headwind. On an organic basis, revenues were down 5% [17][18][21] - The Thom Browne segment revenues declined by 30% reported and 35% on an organic basis, driven by a challenging comparison with Q1 of the previous year and the decision to streamline the wholesale channel [18][19] - Direct-to-consumer (DTC) channel grew by 20% year-over-year, or 3% organic, contributing positively to group performance [21] Business Line Data and Key Metrics Changes - Zegna brand recorded a solid 7% organic growth, with strong contributions from the Triple Stitch shoe family and the Second Skin drop [27][40] - The textile product line showed a flattish performance with a -1% organic change, reflecting cautious outlook in the B2B sector [20][61] - TOM FORD FASHION generated €65 million in revenue, with initial positive signs from new collections introduced in February [41][62] Market Data and Key Metrics Changes - In the Americas, organic growth was strong at 10%, with the U.S. market showing outstanding double-digit performance [67] - Greater China region revenues declined by 13% organic, with Thom Browne significantly below this mark, while Zegna experienced a single-digit decline [67] - EMEA recorded a negative 6.5% organic growth, primarily due to Thom Browne's performance, while Zegna showed double-digit positive growth in both channels [44] Company Strategy and Development Direction - The company is focusing on enhancing Thom Browne's long-term value by reducing exposure to the wholesale channel and taking direct control of operations [7][8] - The one brand strategy is being emphasized, particularly in China, where the company aims to build a strong brand foundation [10][14] - The company is actively working on brand awareness and client experience, with significant events planned to engage customers [31][36] Management's Comments on Operating Environment and Future Outlook - Management noted a normalization phase in the Chinese market post-COVID, with cautious consumer outlook, especially among aspirational clients [23][27] - The company remains confident in its long-term growth strategy, despite short-term challenges in the luxury sector [26][67] - Management is taking measures to protect the bottom line on the cost side without compromising the long-term health of the brand [127][133] Other Important Information - The company opened 24 net new stores in Q1, with a significant number converted from wholesale to retail in Korea [70] - The company won the Fuorisalone Award of Sustainability during the Salone Del Mobile event in Milan, highlighting its commitment to sustainability [34] Q&A Session Summary Question: Trends by consumer nationality for Zegna DTC - Management indicated that Chinese consumer spending is down mid-single-digit year-over-year, while European demand is solid with double-digit growth across markets [52][54] Question: Impact of marketing strategies on brand exclusivity - Management emphasized the importance of balancing exclusivity with broader audience engagement, citing successful events in Milan as a model for future marketing efforts [57][88] Question: Expectations for tourism from China - Management expects a solid return of Chinese tourists in key markets, particularly in Japan and Europe, with a focus on enhancing customer experiences [119][124]