Ermenegildo Zegna Sales Up Strong in Q4 on DTC and Asia Growth

Ermenegildo Zegna N.V. reported preliminary unaudited revenues of €1.91 billion for the full year 2023, up 27.6 percent year-over-year (YoY) and up 29.7 percent YoY on a constant-currency (CC) basis, with an organic growth rate of 19.3 percent. Revenues for the fourth quarter of 2023 were €570 million, up 40.1 percent YoY and up 42.9 percent YoY on a constant-currency basis, with an organic growth rate of 19.6 percent.

Ermenegildo “Gildo” Zegna, chairman and CEO, of Zegna Group, said: “I am very proud of the Group’s success over the past year, which is demonstrated by our strong and continued revenue growth. The significant increase in our revenues in 2023, and especially from our network of directly operated stores, is a clear indication that demand for our brands remains healthy and that we are successfully executing our strategy to increase their desirability and solidify their position as leaders in the luxury market. The continuing improvement in the ZEGNA brand productivity, in particular, is a testament to the strength of our execution, supported by our successful merchandising and CRM. Our integrated supply chain benefits all three of our brands and drives ZEGNA’s leadership in Made-to-Measure and product customization. We are focused on further enhancing our Made-to-Measure and personalization offering with the introduction and ongoing rollout of Zegna X, which is empowering our style advisors to further serve our customers using the latest technology.”

“While we have seen broad-based strength, I am particularly pleased by the continued growth in EMEA and the very positive performance in the US, which was driven by strong double-digit Zegna sales via the retail channel. These strengths, coupled with the rebound in the Greater China Region, are testaments to the soundness of our long-term strategy. Our performance across all our key geographies reflects the plans we set out at our second Capital Markets Day at the NYSE in December 2023 and charts a path forward to reach our medium-term goals even in an environment that remains challenging, with the invaluable contributions of our management team and all our employees across the Group and its brands.”

For the full year 2023, Zegna Group generated revenues of €1.91 billion, an increase of 27.6 percent YoY. On a constant-currency basis, revenues grew by 29.7 percent YoY, with an organic growth rate of 19.3 percent. In the fourth quarter of 2023, the Group generated revenues of €570 million, an increase of 40.1 percent YoY. On a constant-currency basis, revenues grew by 42.9 percent, with an organic growth rate of 19.6 percent for the period. Revenues growth in the fourth quarter of 2023 accelerated from the 20.8 percent YoY growth reported in the third quarter of 2023 (on a constant-currency basis, revenues growth was 25.0 percent in the third quarter, with an organic growth rate of 11.3 percent for the same period).

Revenues by Segment

• Zegna
  For the full year 2023, revenues for the Zegna segment amounted to €1.32 billion, up 12.4 percent YoY and 13.8 percent YoY on a constant-currency basis, with an organic growth rate of 19.5 percent. Revenues for the fourth quarter of 2023 were €385 million, up 15.2 percent YoY and up 17.0 percent on a constant-currency basis, with an organic growth rate of 18.2 percent. The company said the Zegna brand’s strong direct-to-consumer (DTC) strategy continued to drive revenues for the segment, more than offsetting lower wholesale revenues that resulted from the planned change to a new drop-based merchandising strategy, whereby some Spring/Summer 2024 deliveries were reportedly shifted purposely from Q4 2023 to 1Q 2024.
• Thom Browne
  For the full year 2023, revenues for the Thom Browne segment amounted to €380 million, up 14.9 percent YoY and up 18.3 percent YoY on a constant-currency basis, with an organic growth rate of 17.8 percent for the year. Revenues for the fourth quarter came in at €99 million, up 30.2 percent YoY and 35.0 percent on a constant-currency basis, with an organic growth rate of 24.6 percent. The fourth quarter growth was said to reflect the expansion in the brand’s direct-to-consumer channel, as well as strong wholesale deliveries compared to the low base of Q4 2022, which was reportedly due to a different timing of shipments during 2022 when compared to 2023.
• Tom Ford Fashion
  Revenues for the Tom Ford Fashion segment since its consolidation on April 29, 2023, were €236 million, of which €97 million was recognized in the fourth quarter of the year, reflecting strong performance during the holiday season.

Inter-segment eliminations reportedly grew from negative €15 million in fiscal 2022 to negative €33 million in fiscal2023 mainly as a result of the acquisition of TFI since Tom Ford products revenues, previously recorded in Third Party Brands, are recorded as inter-company starting from April 29, 2023.

Revenues by Product Line

• Zegna-Branded Products
  For the full year 2023, revenues for Zegna-branded products were €1.11 billion, up 20.1 percent YoY and up 22.3 percent on a constant-currency basis, with an organic growth rate of 22.3 percent. Revenues for Q4 2023 were €326 million, up 18.8 percent YoY and up 20.9 percent on a constant-currency and organic growth basis. In 2023, luxury leisurewear revenues grew at a faster rate than the brand’s average and now constitute approximately 50 percent of Zegna-branded product revenues. Footwear also reportedly outperformed the brand’s average growth rate and now make up 13 percent of product line revenues, while formalwear and MTM also continued to see dynamic growth. The growth in Zegna-branded products was said to reflect the desirability of the brand and the strong appeal of luxury leisurewear and shoes supports the Group’s strategy to meet changing consumer needs, while maintaining focus on quality.
• Thom Browne
  For the full year 2023, revenues for the Thom Browne product line were €378 million, up 14.7 percent YoY and up 18.0 percent on a constant-currency basis, with an organic growth rate of 17.5 percent. Revenues for Q4 2023 came in at €98 million, up 29.9 percent YoY and up 34.8 percent on a constant-currency basis, with an organic growth rate of 24.3 percent. The strong growth came on the back of the brand’s DTC expansion strategy, as well as from the focus on womenswear, which continues to grow at a faster pace and reached 30 percent of  Thom Browne’s total revenues in fiscal 2023.
• Tom Ford Fashion
  For the full year 2023, revenues for the Tom Ford Fashion product line, calculated as of its consolidation on April 29, 2023, came in at €236 million. Revenues for Q4 2023 came in at €97 million.

Textile
For the full year 2023, revenues for the Group’s Textile product line amounted to €151 million, up 10.4 percent YoY and up 9.4 percent on a constant-currency basis, with an organic growth rate of 9.5 percent. Fourth quarter 2023 revenues were €42 million, up 13.1 percent YoY and up 12.0 percent on a constant-currency basis, with an organic growth rate of 12.1 percent. The double-digit growth in Textile revenues was said to be supported in particular by Lanificio Zegna.

Third-Party Brands
For the full year 2023, revenues for the Third-Party Brands product line were €25 million, down 74.1 percent YoY and down 74.2 percent on a constant-currency basis, with an organic growth rate of negative 17.4 percent. Fourth quarter 2023 revenues came in at €5 million, down 70.6 percent YoY and down 69.9 percent on a constant-currency basis, with an organic growth rate of -33.5 percent. The revenues of the Third-Party Brands product line was impacted by the end of the distribution licensing agreement for Tom Ford International5.

Revenues by Channel

• Direct-to-Consumer 
  DTC revenues for the full year 2023 amounted to €1.27 billion, up 37.8 percent YoY and up 42.1 percent on a constant-currency basis, with an organic growth rate of 24.5 percent. DTC revenues reportedly comprised 66.4 percent of Group revenues in fiscal 2023, up from 61.5 percent in fiscal 2022. Of that, €945 million reportedly came in from Zegna-branded products, up 22.4 percent YoY and up 25.4 percent on a constant-currency basis and organic growth. This was said to reflect strong double-digit growth across all markets due to significant productivity gains in all the quarters of the year, and the contribution of 14 net DTC openings to reach a total of 253 DTC monobrand stores as of December 31, 2023. Revenues from Thom Browne DTC amounted to €183 million, up 25.9 percent YoY and up 34.1 percent on a constant-currency basis, with an organic growth rate of 19.7 percent, reflecting, among other factors, the shift of the South Korean business from wholesale to DTC and an additional six net new openings to reach a total of 86 DTC monobrand stores as of December 31, 2023. Tom Ford Fashion contributed €136 million in DTC revenues since its consolidation on April 29, 2023.

  For fourth quarter 2023, DTC revenues amounted to €400 million, up a significant 46.3 percent YoY and up 50.6 percent on a constant-currency basis, with an organic growth rate of 24.3 percent. This represented an acceleration from the third quarter organic growth rate of 12.9 percent, mainly driven by the Zegna brand. Zegna-branded products contributed €284 million in DTC revenues in Q4 2023, up 23.4 percent YoY and up 26.3 percent on a constant-currency and organic growth basis (compared with 14.0 percent in Q3 2023), sustained by strong double-digit same-store sales growth in most geographies, including a nearly 40 percent increase in the Greater China Region. DTC revenues for Thom Browne in Q4 2023 came in at €57 million, up 33.0 percent YoY and up 41.4 percent on a constant-currency basis, with an organic growth rate of 13.3 percent. For Q4 2023, Tom Ford Fashion DTC revenues were €58 million.

• Wholesale
  Wholesale revenues for the full year 2023 amounted to €635 million, up 11.3 percent YoY and up 10.7 percent on a constant-currency basis, with an organic growth rate of 9.6 percent. Of that, €164 million came in from Zegna-branded products, where wholesale revenues were up 8.4 percent YoY and up 7.0 percent on a constant-currency and organic growth basis. Thom Browne wholesale revenues reflected the conversion of the South Korean points of sales from wholesale to DTC on July 1, 2023, and came in at €195 million for the year, up 5.8 percent YoY and up 6.0 percent on a constant-currency basis, with an organic growth rate of 15.7 percent. Since its consolidation on April 29, 2023, Tom Ford Fashion wholesale revenues were €99 million. Third-Party Brands and Textile contributed €176 million, down 24.8 percent YoY and down 25.5 percent on a constant-currency basis, with an organic growth rate of 5.8 percent.

  For Q4 2023, Group wholesale revenues came in at €169 million, up 27.6 percent YoY and up 27.5 percent on a constant-currency basis, with an organic growth rate of 8.9 percent. Zegna-branded products wholesale revenues for Q4 2023 amounted to €42 million, down 5.5 percent YoY and down 6.5 percent on a constant-currency and organic growth basis. The drop was said to be mainly attributable to the conversion from wholesale into retail of the Saks Fifth Avenue New York location and to the planned shift to a drop-based merchandising strategy, whereby a portion of planned Spring/Summer 2024 deliveries were purposely shifted from Q4 2023 to 1Q 2024. Thom Browne wholesale revenues for Q4 2023 came in at €41 million, up 25.8 percent YoY and up 26.5 percent on a constant-currency basis, with an organic growth rate of 39.7 percent. Thom Browne’s wholesale revenues reflected the low base of Q4 2022, which was due to a different timing of shipments during 2022 when compared to 2023 while being also affected by the South Korean business being moved from wholesale to retail after its internalization. Tom Ford Fashion wholesale revenues for the quarter came in at €38 million. Third-Party Brands and Textile contributed €48 million in Q4 2023, down 14.2 percent YoY and down 14.3 percent on a constant-currency basis, with an organic growth rate of 4.1 percent.

Revenues by Geography
Revenues for both the full year and the fourth quarter of 2023 were strong across all key geographies, with double-digit growth across all regions compared to 2022. The most significant growth was reported in North America, which saw revenues grow by 41.6 percent YoY for the full year and 60.1 percent YoY for the fourth quarter, also supported by the consolidation of Tom Ford Fashion.

• EMEA
  For the full year 2023, revenues in EMEA amounted to €659 million, up 26.6 percent YoY and up 27.7 percent on a constant-currency basis, with an organic growth rate of 18.8 percent. Q4 2023 revenues in EMEA came in at €184 million, up 30.9 percent YoY and up 32.7 percent on a constant-currency basis, with an organic growth rate of 14.2 percent supported by the strong growth of the Zegna-branded products in the DTC channel slightly offset by more muted wholesale reflecting the already mentioned new merchandising strategy. Activity in Europe remained dynamic throughout the year reflecting strong activity for both domestic and foreign consumers. The UAE continued to outperform the rest of the region, recording revenues for the full year 2023 and Q4 2023 of €69 million and €24 million, respectively, up 35.0 percent YoY for the full year and 22.4 percent YoY for the quarter. Growth on a constant-currency basis was 38.2 percent and 26.7 percent, and organic growth was 30.9 percent and 20.2 percent, respectively for the full year and the fourth quarter 2023.
• North America
  For the full year 2023, revenues in North America came in at €417 million, up 41.6 percent YoY and up 40.4 percent on a constant-currency basis, with an organic growth rate of 11.4 percent. Revenues from the U.S. were €385 million, up 42.3 percent YoY and up 40.9 percent on a constant-currency basis, with an organic growth rate of 10.4 percent. North America revenues for Q4 2023 were €132 million, up 60.1 percent YoY and up 60.9 percent on a constant-currency basis, with an organic growth rate of 3.2 percent. Of that, the U.S. contributed €125 million, up 63.4 percent YoY and up 64.4 percent on a constant-currency basis, with an organic growth rate of 4.4 percent. The organic growth rate was in the high teens for Zegna-branded products DTC, partly offset by lower wholesale in Q4 2023, as a result of the impact of the aforementioned shift in wholesale deliveries, and the conversion from wholesale into retail of the Saks Fifth Avenue store in New York. Despite a volatile consumer backdrop, the significant growth in the U.S.—where spending on ZEGNA is almost double pre-pandemic levels—speaks to the success of the ZEGNA One Brand strategy and execution. It is also due to the resilience of the Group’s ultra-luxury offering and the continuing and growing desirability of our brands.
• APAC
  For the full year 2023, revenues in APAC were €788 million, up 22.2 percent YoY and up 27.3 percent on a constant-currency basis, with an organic growth rate of 23.7 percent. Of that, €596 million came from the Greater China Region, up 20.5 percent YoY and up 25.7 percent on a constant-currency basis, with an organic growth rate of 24.2 percent. Japan also showed significant growth, with revenues of €85 million, up 29.9 percent YoY and up 39.8 percent on a constant-currency basis, with an organic growth rate of 28.3 percent. In the fourth quarter, APAC revenues were €241 million, up 39.0 percent YoY and up 44.3 percent on a constant-currency basis, with an organic growth rate of 32.0 percent. Fourth quarter 2023 revenues from the Greater China Region amounted to €176 million, up 35.0 percent YoY and up 39.3 percent on a constant-currency basis, with an organic growth rate of 36.1 percent, thanks to the Zegna One Brand strategy execution and also as a result of the adverse impact of Covid-19-related restrictions in Q4 2022. Q4 2023 revenues from Japan came in at €26 million, up 27.0 percent YoY and up 39.6 percent on a constant-currency basis, with an organic growth rate of 20.7 percent.
• Latin America
  For the full year 2023, revenues in Latin America were €38 million, up 25.6 percent YoY and up 16.2 percent on a constant-currency and organic growth basis. Q4 2023 revenues came in at €13 million, up 29.6 percent YoY and up 20.9 percent on a constant-currency and organic growth basis.

Outlook
At its second Capital Markets Day, held in New York City on December 5, 2023, the Group announced its updated financial goals for the medium term. Within this time frame, the Group is aiming to deliver over 10 percent compounded annual revenue growth and an Adjusted EBIT CAGR of around 20 percent, compared to fiscal 2023. This is expected to generate a significant cash surplus even while taking into consideration higher, targeted investments in marketing and capital expenditure to enhance brand desirability and drive growth. The Group’s medium-term targets assume no major future worsening of the global geopolitical, health, macroeconomic and financial markets situation, and no other unforeseen events.