Zegna Group Eyes 2B Euros In Revenue
● The ambitious plan was revealed during Zegna’s first Capital Markets Day since its IPO last December.
MILAN — The Ermenegildo Zegna Group is aiming for revenues to exceed 2 billion euros in the mid-term, chairman and chief executive officer Gildo Zegna revealed Tuesday during the company’s first Capital Markets Day since its IPO in December.
“Sure, we believe the target is ambitious as we continue to invest in capex, make sure the group becomes a stronger reality, capturing a new customer, growing our brands’ awareness, tech and digital [capabilities], and our supply chain so everything will run smoothly and with speed, which is very important,” the executive said, speaking from the Oasi Zegna in Trivero, where the company is headquartered.
“There is no better place to address the audience,” he said, underscoring how
the location speaks of the roots, values and history of Zegna. “We’ve had great weather and a good number of investors and analysts.”
The medium-term goal is quantifiable in four to five years, “or less,” starting from 2021, according to the CEO. In this period, the group is also aiming for adjusted operating profits to reach a margin on sales of at least 15 percent.
For context, revenues last year increased 27 percent to 1.3 billion euros, as reported. In the 12 months ended Dec. 31, sales of the Zegna brand rose 23 percent to 1 billion euros, and revenues at Thom Browne, which the company owns, climbed 47 percent to 264 million euros.
Group adjusted operating profit amounted to 149 million euros, up more than seven times from the 20 million euros recorded in 2020, thanks to higher full-price sales in the mix and improved efficiencies.
In the three months ended March 31, revenues at the Italian group rose 25.4 percent to 377.6 million euros.
Zegna acknowledged the slowdown in China, impacted by the lockdowns caused by the pandemic, but said he was “positive the country will turn around as it has in the past,” touting many markets that performed better than expected, such as the U.S. and the Middle East.
Chief financial and operating officer Gianluca Tagliabue said, “If we isolate China and the current volatility, the rest of the world grew 48 percent” last year.
The 2022 guidance for growth in the low teens lies in a “key assumption that China will be back to normal in the fourth quarter,” he said, adding that the group was “well ahead of the plan” presented during its initial public offering process in 2021.
Zegna expects the medium-term target growth for the group to be delivered by an increase in store productivity and continued development of the price mix, which are expected to be key drivers of the top line, positively impacting profitability together with favorable operational leverage. “Having one single Zegna brand allows us to optimize our store spaces,” he said.
These improvements are seen as offsetting the increase in marketing investments, which — together with capital expenditure now at about 5 percent of group revenues — are expected to support the Zegna rebrand, launched at the end of last year, and the overall growth strategy.
Holding the event at Oasi Zegna was also symbolic given the company’s ongoing and now increased commitment to the environment. Gildo’s son Edoardo Zegna, chief marketing, digital and sustainability officer, mapped out the group’s environmental, social and governance initiatives.
In 2022, the group will complete the submission of GHG emissions reduction targets in line with the Science-Based Targets initiative (SBTi) and by early 2023, it will appoint a diversity, equity and inclusion officer and governance.
By 2024, Zegna will be using an innovative and open digital platform to allow suppliers to share their energy sources, water, chemical and emissions data, as well as product certifications, covering at least 30 percent of its supply volume.
By that same year, the group aims to have 100 percent of its electricity in Europe and the U.S. come from renewable sources, extending to all the group’s operations by 2027 (scope 2).
By 2026, more than 50 percent of the top priority raw materials used in Zegna Group products will be traceable to their point of origin, exceeding 95 percent by 2030.
Starting this year, long-term equity incentive plans granted to eligible executives will be linked to achieving these targets.
Edoardo Zegna emphasized the importance of Made in Italy transparency and traceability and said the “Oasi Cashmere” certified for full traceability and launched in September will be extended and trademarked to all fabrics.
“Giving back to the community comes from the company’s founder [his greatgrandfather Ermenegildo Zegna] and the Oasi Zegna is a mission to extend our environmental legacy,” said the young executive, adding that the group is pledging to plant 10,000 trees in every city where Zegna boutiques will open or relocate, starting from 2023.
Thom Browne CEO Rodrigo Bazan sees that brand’s revenues doubling in the medium term, and an expansion of its network of stores from 51 to 150 in five years, including franchised units and shops-in-shop.
“It’s absolutely doable and reasonable,” Bazan said. He trumpeted the company’s client-centric strategy, and the brand’s “clear and unique path.”
He committed to growing sales of womenswear to account for 40 percent of the total, up from 10 percent in 2015. The category has “become a business,” he said. Bazan also underscored that the growth of the brand has been healthy. “We were not pushed by Zegna [which acquired a majority stake in Thom Browne in 2018] and we are well under way with things that have been in place for years now.”
Bazan noted that clienteling now represents 47 percent of the business, that the brand has the “smallest promotional sales,” and it has seen strong growth in the direct-to-consumer channel.
Zegna believes both brands have “many opportunities for organic growth” across geographies and that no M&A activity is in sight, although he is “examining some papers, but the year is challenging.”
As reported, Zegna teamed with Prada’s CEO Patrizio Bertelli on the acquisition of Filati Biagioli Modesto and he reiterated the “very good relationship, trust and admiration” for the executive and the Prada company. “We’ve seen good progress [after the acquisition], and if other things came along we would consider them, but there is no more to say now. Biagioli is growing very well, there is a higher request for knitwear now that is hitting the roof,” he offered.
Zegna has been building its supply chain over the years and the CEO said a plant in Parma, Italy, helps keep up with the growing demand for shoes, including the triple stitch sneakers, which are “fun, comfortable and colorful,” as
The 2022 guidance for growth in the low teens lies in a “key assumption that China will be back to normal in the fourth quarter,” CFO Gianluca Tagliabue said.
he described them, and have become “an iconic piece as rebranding to luxury leisure wear is gaining traction.” Shoes and made to measure now represent 42 percent of sales and 38 percent of sales, respectively.
The company has renewed the production collaboration with Tom Ford and with Gucci, Zegna said, and three capsule collaborations are expected by the end of the year, but the executive and his son were both mum on details. “They will help us to reach a new consumer and create iconic recognizable products,” is all Edoardo Zegna would say.
Zegna gave a thumbs up to the public listing. “We managed through ups and downs pretty well, and there is a sense of urgency, unity and discipline within the organization that I have never seen.” He said it has also been important to build relations with investors and analysts through personal meetings to exchange ideas. “It’s been time well spent.”