Q4 2022 Ermenegildo Zegna NV Corporate Sales Call
As our made in Italy base.
<unk> continues to develop into a reward top supplier of the finest fabrics.
For our brands and another luxury and professional labels and we've seen good numbers from the platform and <unk> will discuss later in the day.
Also it's an ability finally.
That has been always a foundation.
Our value.
<unk>.
I would say has been.
<unk> completed with 26 specific committed during our capital market day this year.
We are on track to meeting this commitment from their highs of Kashmir launch.
The submission of our targets through the science based target initiative.
Yes.
One example of our progress so far is the fact that we are now at 25% of our journey to electric or hybrid blogging corporate vical by 'twenty five on Tom Brown update I'll leave it there but onto the revolvers that with some interesting information to share Rodrigo. Thank you.
Thank you. Thank you Gilles good morning, or good afternoon.
Introduce some of the updates from Tom Brown.
We are very pleased that Tom Brown to continue to contribute to the strong is a strong driver for the thing our group I also want to briefly note. How pleased we are with the jury's decision in federal Court.
Earlier this month with respect to the litigation with Adidas.
It's very big the jury found that Tom don't have never infringe on any of the trademark rights of Adidas.
Some will continue to bring <unk> wholly unique and distinctive design aesthetics to this great brand.
Earlier today.
<unk> announced an agreement with its partner of 12 years in Korea, Samsung CMT.
Corporation does.
To directly operate our Korean business, which consists of 17 stores through a newly created and wholly owned company Tom Brown Korea.
Korea will assume direct responsibility for all activities within the Korean market.
At the same time turnaround in Samsung CMT will continue to.
Continue the successful partnership through an innovative retail management agreement effective July 2023.
Through which Samsung will operate the tamron stores.
In Korea.
Our goal remains to double Terminalling revenues and we're solidly on track to do so by capitalizing on the brand's unique appeal.
Taking on Fogger of its integration of our business and with the support of the group and utilization of some of Zaniest platforms and experience.
While at the same time pursuing operating this uniquely to the brand and growing internationally for the brand's reach.
To the Korean case, I would summarize that.
<unk> for the brand and company is a win for the talent that runs that business. The Samsung <unk> built a really successful business in Korea with us and they said when most important for our clients, which is the most important element of the success of our brands.
And with lethal pass back to Gilles to continuing to update.
Thank you.
Yeah.
Okay I think that these are overall a significant milestones.
Across ASEAN umbrella brand or take surplus for our sustainability efforts.
Of other strategic steps, we are taking us.
And despite the challenging environment last year this milestone and our revenue showed that our strategy is working and that we are on track to achieve our mid term goals.
I am, particularly proud of the work done as our revenue were achieved despite several headwinds with growth driven by both senior and two broad segments and even with this impact. This segment saw full year revenue growth almost 14% year over year, what Tom Brown revenue grew over 20%.
Year over year.
At this point that we said there is a logo for a deeper look at the revenue for the quarter and the year. Thank you.
Luca.
Thank you Bill.
Good morning, everybody just given our headline numbers. So I will go right into the split first starting from the breakdown by segment that page seven.
As you have seen and as we anticipate that starting from this quarter.
We begin to provide our growth numbers of sales in constant currency also in line with common practice and we will continue doing so ended during the presentation.
Also commence some time on the constant currency first Zhonya segment looking at the fourth quarter segment revenues were down two 2% year over year to $334 million due to the impact of catheter related restriction in China in October November and the temporary store closures we are.
In December resulting from staff illness. After the restrictions were lifted excluding GTR, which is the most.
Meaningful way of looking at the trajectory of the <unk>.
Trajectory of the business growth in the fourth quarter. It would have been healthy double digit and then show. It afterwards in the view of the breakdown by geography for full year 'twenty two zenia segments revenues were up 13, 7%, reaching 1 billion 170.
This thanks to the success of the Dania, one brand strategy, which was delivering the stores with a full winter of 'twenty two collection and the upward the repositioning of <unk> branded products as we have seen throughout the year shoes luxury leisure wear categories continued to perform very strongly and tailoring and meet some measure as seen at <unk>.
<unk> rebound throughout U S and Europe .
The textile and third party products, which both fall under this segment and also seen a strong rebound in <unk> activity in 'twenty, two and we will break down these numbers in a few minutes when we see the breakdown by product line moving to some brown as a legal thing homegrown segment, 11%.
In the quarter and 25% year over year.
We are seeing across our whole Tom Brown product lines, the growth with women's wear growing slightly faster than men's and children more than doubling on Tom Brown. We are also seeing the positive impact of the rollout of e-commerce too small in the greater China region soluble or theirs.
For 'twenty, two and successful selling campaign of spring 2003.
Now moving to page nine.
Which is important because it gives you a plastic visibility the two speed world that we have been managing this year.
Our performance around the world, excluding greater China region continues to be very strong.
China Aside our revenues were up 24% in the quarter and 42% in the year.
Translate this numbers in constant they don't they are not so different 24%.
Fourth quarter becomes 21 in constant and 42% for the year It becomes 39 in constant.
Currency for the whole 2022 compared to prior year U S, which continues to be an area of focus for us so revenue growing 26% in the fourth quarter and <unk> 53 in the year, reaching almost $77 million and 270 million euro for the quarter and year respectively.
It is important to remark that in U S. This growth happened. Despite the end of our old Tom Ford distribution agreement, which had an impact on Q4 revenues for U S of a negative eight percentage points.
And this was more than offset of course by the strength of the Dania and some brand collections in the market.
Europe Middle East and Africa continued double digit growth in the fourth quarter with revenues growing global 23% to $140 million for the quarter, bringing full year revenue and.
20, plus 37, 37% year over year.
Of that the middle East region constitutes $24 million for the quarter, plus 35% increase over Q4 of 'twenty. One. This brings total revenues from the middle East and Africa at almost $70 million for the year plus 56% increase from 2020.
One <unk>.
<unk> and the rest of Europe also had a positive contribution to the region with 41% growth in revenues in Italy in 'twenty, two plus 43% from the UK and consistent performance and all the other countries driven by both.
Strong domestic demand and dynamic tourist traffic in the region.
Excluding greater China region Asia Pac revenues were at $42 million for the quarter, plus 27% versus the first quarter of last year for the full year Asia Pac revenues, excluding China were slightly above $150 million plus 40% year.
Over a year with China reopening these parts of the world will be probably one of the first to benefit from resumed traveling and we are ready to meet this advantage looking at the greater China region on its own revenues for the quarter came in at $130 million minus 30% from the same period.
2021, SKU all the factors that were mentioned before by Jean Louis myself for the full year Greater China region revenues were at $494 million.
A 16% drop from 'twenty one it is worth highlighting that while we had expected the difficult fourth quarter in China as we discussed when we reported our third quarter figures in October the actual magnitude of this disruption the minus 30% in Q4 ended duration of the store closures.
It was more severe than expected.
Customer traffic saw significant clients and we had around 10% of our stores closed in average in Q4.
On the positive side, we removed markdowns in our DTC in China, starting from this quarter, thus aligning the region to the rest of the world and this change at a low single digit percentage point on GTR of Q4.
Moving to page 11.
The breakdown by product line as we mentioned zenia branded products were negatively impacted.
By Greater China region restrictions, which led to a minus two 7% in the quarter.
Number of $274 million looking at the full year Zenia branded products were up 9% to 934 million Europe on an actual currency basis sneakers the categories of luxury these where such as knitwear five bucket pant fabric caldor over shirts as well as made to measure.
Tailoring Brown all of this drove the growth, especially in U S Europe and Middle East.
As for Tom Brown revenues for the quarters were up 11, 4% and up 25% for the year as we previously mentioned the brand was seeing solid growth across all product offerings and strong wholesale demand.
<unk> revenues were up 7% in the quarter and 33% over the year in 22, reaching 37% and 137 million respectively in quarter and in the year all of our textile brands were up by double digits for the year, it's important to remind that we had the desktop.
Amateur regarding to <unk>, which was consolidated mid 'twenty, one and this contributed to an additional $4 million to $5 million in the year.
Third party brand revenue grew 30% year over year on a full year basis. Thanks to the strong deliveries of spring and fall 2002 for Tom Tom Ford, which were the last deliveries under the former distribution agreement and also strong deliveries for the other brands.
We serve such as Gucci on.
On the other hand, the termination of the old Tom Ford Distributional licensed cost third party brands revenue to be down 18% for the fourth quarter as the agreement shifted from distribution to manufacturing only and manufacturing only a formula where of course this would change when we.
We'll have the full consolidation of some fourth international after.
The deal closing.
We move to page <unk>.
Yes.
Yes.
And finally, let's talk about channel split by between wholesale and we feel that start from wholesale.
Which grew double digits for both the quarter and the full year at 16%, respectively, and 37% in the year. Some brown wholesale continued to grow at an exceptionally strong right, 62% in the fourth quarter and 47, 7% for the year, thanks to strong deliveries of.
Both seasonal products and classic collections.
Looking at the senior wholesale in Q4 was plus 21% and plus 12, 6% in the year and this is important to remark that FM. Despite the termination of our shipments to Russia. Since February 22, which is a good sign of the strength of the brand out also.
Of our stores.
Moving to the DTC revenues for the group, including E. Commerce was down six 8% for the fourth quarter, but up seven 8% for the year and it's important to look at the Xenia DTC.
Excluding greater China region, because it is a clear indication of how the brand is performing and then the DTC, excluding greater China region was up 27% in constant currency for the fourth quarter and 45% in constant currency for the year, which is the indication of our strong results everywhere.
Sure.
Basically where we didn't suffer the disruptions Tom Brown DTC revenues were down 10 in the fourth quarter due to the same restrictions in China, which for Tom Brian is a primary primarily DTC market.
Excluding <unk> retail sales for some ground were up double digits.
Looking at the whole year, Tom Brown DTC revenues were up five to 146 million Europe and up by a very solid double digits, excluding China pushed by strong performance in U S Europe , Japan, and the solid E Commerce performance.
To remember that some around added 11 stores directly operated to its network through the year, reaching at this point a total of 63. Thus at the end of December and now is well positioned to capitalize fully on the China reopening reopening on the country's dania gradually reduce the DTC store by.
Six this has to be read also in line with these dania discontinuation, which occurred with the one brand strategy.
With that let me turn back to <unk> to talk about the final remarks, adjusted EBIT and profit guidance for the year.
And which I remember once again, we will be sharing in April .
Okay. Thank you Luca.
Despite the significant headwinds from the greater China region, especially from March to May and then again in the fourth quarter, we met our full year revenue guidance and we continue to expect a moderate improvement adjusted David.
A substantial improvement in our profit for 'twenty to 'twenty two.
We are happy about that as a result the.
Which were achieved in spite of a significant deterioration in trading conditions in China for all the reasons we've discussed.
On the other hand, the response that we continue to see as well around the world, which is evident in last year performance and this year, so far I mean out of beans, our confidence in our strategy and target.
Happy to see early signs of inflection in China too.
Strong growth in the rest of the region.
We maintain our medium term target unchanged.
Targeting 2 billion in revenue and 15% adjusted EBIT margin in the medium term.
This is all excluding the new toll for the fashion agreement, which we expect to be finalized later this year and which we will present the displayed include details.
Soon as possible. After this summer of course this is all assuming no further deterioration of the wearing a green.
<unk> normalization of the Covid pandemic in China with significant macroeconomic deterioration.
Other unforeseen events.
We are now ready to answer questions. Thank you.
Thank you Gilles Hi.
You can go ahead.
A question and answer session.
Keep in mind I have received a couple of questions offline.
Why don't you start with opening yet.
The phone lines for questions. Thank you.
Okay.
Thank you if you would like to ask a question. Please press Star then one on your telephone keypad now.
We have our first question on the phone lines from.
C G tebaldi with UBS. Please go ahead.
Hi, Hello, everyone and thank you so much for the presentation.
So I have two questions the first one.
And then Joey will be great. If you can elaborate a little bit tomorrow.
Recent trip in China.
There are quite eager to understand how the situation is evolving there. It sounds like you are really optimistic.
And.
Youre starting to see early signs of a rebound there.
And to give us an idea do you think that Q1 is already going to be let's say abnormal quarter in China or do you think.
There is still a.
A bit of a tail impact of all of this.
What is that restriction.
Adam maybe mobility restrictions in terms of people being sick or start being impacted at all.
The second question when we think about the rest of the World and you have very very strong growth in 2022 that also continued in the fourth quarter.
And so when we look ahead into 2023 do you think it can be another year of double digit growth for the rest of the world, Excluding China or are we getting to a point where your comp base is now you've got four wells for a few years.
So do you think we're getting to a stage where maybe the growth.
With start to somewhat moderate or maybe just specific regions, where you're starting to see.
Any sign of growth slowing at all.
And then thirdly on your profitability.
We saw the slight change in the freezing.
In terms of the expectations for Dci, which completely understandable because at that.
China impact.
If I remember correctly.
In the past you mentioned that China is a little bit more profitable.
For the for the brands for the group.
So I was wondering if in 2023.
See the return of tourism in China, So people start to move back to Europe and spend a bit less in mainland China and a good morning, Europe do you expect this to be.
Headwinds for your group margin. Thank you.
Yes.
So a lot of interesting question.
Thanks.
So with that.
No.
I must say that.
That'll be a been there first election of the burner to enter China Im talking about the luxury side.
On the seventh of January and there was therefore days Hong Kong Macau So.
Because our visa restriction of equipment into China, which I will do it.
Quickly as possible.
The reason why I wanted to check the temperature I wanted to see my people again, and then it seemed for about three years and I must say that I came back more positive than I expected.
Not only because of a positive mind, because I failed to energy.
Of landlords of consumer of Investor.
And the final clients.
Wanted to come back and to assure that <unk> is still in good shape.
I was in Macao is so their major operator, and they had a full booking.
For this Chinese new year week ready to go.
All the store look perfect sort of great merchandise and so ready to go so that was the energy and I think that the one there is a positive energy it means that we.
We will start.
Start there.
Running again.
I must say that.
The in the in the mainland China, where I think we are off to a good start.
In particular.
During these first two.
Weeks.
And the traffic is not yet what you used to be but is up.
And I think that you know.
China is back and we back stronger in the course of the year. So.
Keep a positive mind.
After this trip.
The rest of the war the rest of the award I must say that I've never fully understood I mean, all the negative press.
Chris.
Out of Europe and about.
In the past.
Six to eight months in.
I think that.
The real economy at least for the luxury is kind of.
And I must say that we have enjoyed.
Probably growth higher than we expected.
In 'twenty, two and to be honest with you my wish is that we consider the course at all.
Let's put it this way in the locals.
<unk> bye.
Regardless of the field organization, regardless of their theory, blazer, regardless or that in those costs.
Our interest cost I mean, if you are a brand that keeps creating excellent products excellent service and believes in innovation and is capable to surprise the final customer.
I don't see why it should be different than it was 22 I cannot give you any numbers, we do have a numbers whether we can share.
No.
I am.
On that regard.
So on the positive side plus.
One piece of good news is that about.
<unk>.
The Chinese is that it seems that the.
Firstly, the destination will be on call in order to travel outside the country second destination seems to be Japan.
Third destination seems to be Thailand.
Okay I don't expect.
I get to see them much in Europe to be honest with you or in other states. It surely not in the in the first half of the year hopefully we'll start seeing somebody in the second half, but I think that we have.
<unk> pro prudent or the Chinese traveling to Europe at this stage during the course of the industry, but we remain positive instead.
Then consuming more at home and traveling more across Asia.
I leave the profitability side with Luca.
Yes, Susan.
I think the answer is no fear that China business back in China, where Mike, especially as where it might dilute the margin we have we.
We have lost if we if you let me ask this worth 100 million of.
Revenues in greater China, because there was a decline of 16% this year. So if those 100 million.
Revenue pop.
Pop up in Europe , which property is digital is saying is unlikely in the short term or it comes out in Taiwan or Korea or.
The Delta price is not that much of course, it's more interesting to have the margin in China, but we took also advantage thing that was not mentioned during the call, but we took advantage of to our realized prices and so China prices.
Also with the renminbi.
Weaker now at 730.
<unk>.
The even the price index is not as it used to be before COVID-19. So we realign them by raising prices in Europe, especially in Europe more than in China.
And so we are ready to take advantage of Chinese consumers being back either in mainland oral software and without without any fear of any diminution in March.
Okay.
And sorry, just.
Two very quick follow ups.
On the first one.
And then mainland China I think.
Hello, gentlemen.
Send that traffic is not yet back what it used to be but its up so sorry I was just confused.
If you meant that the traffic is already.
Year on year, or it's not sorry, I'm just confused on that and then secondly, you Sir.
Please go ahead.
Oh go ahead.
And then just on the on the profitability so.
So.
<unk> kind of readjusted, the price gap and can you remind us more or less what is China compared to Europe and so.
These price gaps now be more in line to me is that it doesn't matter where they shop.
Wanted to understand.
To see that I understood correctly. Thank you.
The topic is up.
<unk>.
I would say double digit.
Compared to last year.
But there is not yet where it was.
And so we hope that gradually will will increase.
Maybe there are some differences in or around.
The country about.
The trend is positive.
Yeah, Luca you want to respond to that pricing.
Pricing at this point, we are let's say between 130 <unk> hundred 40 <unk>.
Apparel.
And under him.
In leather goods, which assumes an impact something like that.
Yes.
Was not the case was higher before and this.
Reductions came through price increase.
Higher in Europe than in China.
Sure.
Okay. Thank you.
Thank you.
Breakout we can move to the next question. Please.
Perfect. Our next question comes from the line of Matthew <unk> of Deutsche Bank. Please go ahead. Your line is now open.
Hi, yes. Thank you for taking my questions just a couple of quick follow ups.
We've just discussed.
In terms of I guess.
The increase in pricing last year, and then what Youre thinking about this year can you kind of quantify exactly how much that's been so so mid single digit high single digit just some context around that would be useful.
And then in terms of I guess the percentage of sales from Chinese consumers coming into Europe , do you have a sort of like thereof.
What the magnitude of kind of Chinese consumer spending in your it was on a pre COVID-19 basis.
And then just two quick final questions. One was just in terms of its Tom Brown in Korea can you give an indication of sort of the.
The magnitude of that switch in terms of how it should help sales growth into next year and then just as a last question I know, you've obviously focused around iconic building blocks as being a big part of your medium term strategy.
Sort of.
Grace and the Triple stack shoe.
How is that kind of trended across this year have you seen an acceleration how should we sort of think about that thank you.
Yes, let me start with the last one and then I'll let gianluca.
The first one and they will do the second one.
No.
I would say that.
Iconic as not only the three per stage, which we.
We have seen a continuous growth throughout the year.
He is and across the country.
I must say that.
We are expanding the family as a measure of Opex for winter wheat.
Introduced in there.
Evolution of the acquisition or the integration, which is going to be very attractive we have expanded quite a range. We have expanded our leather offer.
For instance, the inside of the shoes a warmer.
And accounting fabrics or.
It keeps your fleet.
And so we see that.
Hum.
These trends will continue.
And that makes us very.
Please because it's issue that gives you.
Several possibility to wear and the possibility to wear with different lifestyle as their family expense. So.
Besides that we have either.
<unk> projects.
Projects and product and they must say that Kashmir traceable customer offers the customer is going to become.
Any comment.
Not only through the network.
Through the buffer.
Hum.
Other luxury outdoor pieces.
The goal in the.
In the scheme direction. So I think that is a mix.
Between the technicality and luxury.
And so I think that these are some of the.
Iqos.
And we will continue the journey.
Across our next season.
I cannot anticipate you entity, but we have another extraordinary project to continue the <unk> route.
I think it's really important not only in helping.
Our local focus and exciting but also to improve our penetration throughout the digital award.
And in social media, you know I think that is.
When you are at a stronger icon is easier to get a story behind us I think that.
It helps in the journey to create a more appealing and model brand.
I don't know if that answer the question.
Yes, Im sorry did you USA C Grayson.
Great great.
Yes, I think we will continue growth.
This year, along similar lines as we have seen in 'twenty two as a matter of fact, we still have some market to cohort so.
Some markets are fully benefit.
Okay got it.
But they didn't fully so it just that the quest.
<unk> two.
The other good thing is to do it.
The balance between retail and wholesale.
Initially, we really boosted the product to retail finally Jose is coming in as I appreciate it.
When they come back we feel and I must say these essential program at about 50% of the shows it.
<unk> family these things to replace wood program that was incredibly helpful.
These product and another product that we have the broadest.
So this way or the other five buckets.
Ben without both iconic pieces.
And that really enjoying the same advantage of their ability to grow so I think as it is a mix.
Merchandising of our supply chain.
<unk>.
Storytelling.
Social media that creates the bus besides the product we sell it we said things are either.
Gianluca you pick the right one.
And price increase price increase you referred to spring 2003, and two the upcoming fall 'twenty, three which we are selling now.
In average, but it's an average that six two faces in average we might be in the mid single digit.
But it's more on the high side.
For the Western World and it's in the low side in China as I mentioned before so it's a symmetrical.
With regards to Chinese in Europe recovery. This is a tough questions.
To test my memory.
I think it's around 15%, but I think the freedom to come back to you.
Through franchise. The number is substantially different I think it was something like 50% channel needs in Europe .
Okay. Thank you.
Rodrigo on Tom Brown.
Sure I think your question was focused on Korea, where.
We're extremely pleased with the evolution of our business, which was done in a very collaborative way with Samsung.
Gonna be a meaningful evolution of our sales and profit in the <unk>.
Media business is a very important business for Tom Brown extremely well position.
And I have to recognize the great job that Samsung has done so as I said earlier the wind for branded company because we continue to expand our DTC with benefits on data benefits on Parker stock availability in Stoke efficiencies in the country.
And I spoke about.
Opportunities.
From a data point of view from clients is the win because we secured the best potential talent to run our business with us and it's a win for the client because ultimately the most important is the client experience and the client opportunity. We are very strong client telling us. This is just it couldnt be it couldnt have been a better news for our future and the Korea business.
Alright, thank you.
Okay.
I think we can move to the next question.
We now have Oliver Chen of Cowen. Please go ahead. Your line is open.
Hi, Thank you very much regarding what you're seeing in China, what are your thoughts on inventories.
How youre thinking about inventories in the context of reopening on your comments on traffic Kildow would love your thoughts on if you think they will continue to be volatile and how traffic may proceed.
Second question on the U S continues to be quite remarkable and then the one brand strategy looks really solid what are key priorities for the U S market elder statesman is a great L. A brand would love your thoughts.
Strategically on wireless.
Sure.
And third question sustainability is a core competency and then yet.
Would love your thoughts on how this appeal to the younger customer and the consumer side of traceability, and what Youre seeing with demand there. Thanks a lot.
Yes, Okay, let me pick on a minute ago, So we change it.
Yeah.
Sure.
For the second.
<unk>.
Still strong both in retail and wholesale.
I don't know how other do but we are doing particularly well because.
Our rebranding and our re merchandising.
Appealing and I think that is very unique.
There are several of the.
The other competitive language in early or available.
Because I think we have a good fall over from.
The more mature clientele, but we have we are gaining a lot of interest by a younger clients.
Im not saying thats either of them.
The loyal but.
Patients. So we are talking to my generation the 50 and 60, we showed the backhaul of data.
Tailoring what was the backbone as a backbone tailoring, but we are getting more and more to this earlier.
<unk>.
Sure.
I appreciate the what do we do it.
So that says it is it is a journey.
So.
Second we are opening more store I think that our network in America is okay, but I think that.
Regionally, we saw the area or maybe or does it go so when we go to consider Amit.
<unk>.
Can be appealing to us.
Gradually expanding.
Number of doors third.
There is a.
It does formation.
Graduate escalation from wholesale into concession.
And so the ability for Linzess will be finally opening our fifth Avenue.
Store.
In.
Down in New York.
I think it would be a big game changer.
It does.
We're opening the blooming.
Bloomingdale after the success, we had in the 57.
Sure.
Our store and so I think that all of that.
As it is.
<unk> is really helping.
Uh huh.
Our our enrolled.
Germany, the United States.
Traffic in China.
Yes.
EBIT situation remains open the consumer is there and is willing to do.
Send money I think that he is spending very little money.
<unk> like the American consumer and whether there is a way of America Mitchell and explore the last year is because the.
Consumer I mean sitting at home or wherever in the country and it was anxious to world where their money I think that is a similar story with the Chinese so as soon as you open up and people are not afraid to be seen.
Around.
Bill.
We they offer of luxury brands.
I mean, the real lift.
B.
Yeah.
I do too.
So I think that it will be a intermediate gradual improvement in that.
I do believe that the <unk>.
Currently we stay open and the situation would improve both inland and.
Outside by favoring first Asian destination before.
European or American work, but it's very hard to make.
Surely if you asked three different brands.
Traditionally it's one of the reasons.
We see a difference.
That's my feeling and I must say that.
I hope not to be wrong, because it will be the third time that China bounces back strong.
When China.
Comes back comes back strong.
More than the other okay.
Each time, we can say on Edgar came out so they are so so.
And we are talking about.
Luxury consumer.
That is more resilient to many of the phenomenon that really ought to be able to more and more of the energy prices ratio that assertion and sole provider you can offer him or her something special.
And something exclusive I think that is.
Keep spending.
Yeah.
So thats my point of view.
Just look how would you like to take the question on inventory in China.
Yes. So I finished the question also Deutsche Bank before so Chinese in Europe pre Covid 2019 were 14, 9%. So it was close to the 50% data.
Inventories in China.
I think it's interesting to share how we manage inventory in China. This year.
And then where we stand at this point, we were adding an integrated supply chain. We were quick quick enough. During the first disruption of March me in March may to redirect several merchandise.
The two was devoted to China on essentials and on the last theme of the spring.
Full summer season.
We redirected merchandise to the market that needed. So this out not losing not missing sales opportunity either in Dubai or in U S or in the touristic destinations in Europe .
In terms of full winter and especially spring 'twenty.
We didn't cut so much the open to buy in at this site.
I need to take advantage as the market is growing we have a good inventory coverage on the spring 2000, and through and essentials for the months to come.
So we see this way.
And finally, the sustainability and youngest customers question.
About the younger customer I think I've answered in.
The new.
Products that we're launching.
Really well received by the younger lines.
I was coming back.
It's not that they just.
By end once and they stay out on the sustainability side that I think the angle there.
Is that it does stability <unk>.
Ability.
Is.
Important because a they understand where their material problems and so every time you see aussie because it means that the.
Fiber is traceable.
Or is in the process will be fully available.
So.
We will continue along that.
And I think that the younger customer, yes is more sensitive.
To that phenomenon than most of the customer.
Think that everybody is.
Interested to know whether or not only the product by the fiber come from and understanding.
Articulate process.
We see though and as you know from ship to shop.
Zia is it at least.
Unique to anybody else do that it takes electric platform. Thank you.
Thank you. Thank you.
Okay, great because we have a few other questions on the line.
On TV Com Brown I've been wearing it for a decade Rodrigo just what's happening with S. K U.
<unk> over time.
Maybe we can follow up offline the assortment has attractively expanded but would love your thoughts there. Thank you.
With regards.
Thank you. Thank you.
Long term client just understand you're talking about.
Price of the collections.
Yes, breadth and depth and as you continue to have really nice growth, how you see the assortment evolving yes.
Oh well.
Inc. During coverage we also.
Over seven years for being with the company, we did a significant expansion, namely women's has become a significant business at the same time I think we have also focused our collections and specifically during COVID-19.
We managed to really focus on collections by a third.
We are very very focused approach.
We are.
Having a vertical system season, this business of large archives.
Items that are being sold at least weekly or daily for over a year and then we continue to fit them in specific periods of the year and we also have very focus as our collections. While we are working farmers. So so.
A strong focus in vaccine shoes.
For the next years to come and to make that business as we committed in the capital markets to make them a quarter of our revenue.
Over the next couple of years so.
We have focused expansion, but very focused at the same time, we do lap the size of our stores, we do like the clarity of the message and we do like also the system less focus of the classics collections with a focus on seasonality in munis.
That's regards thanks.
Thank you.
Greg can we move to the next question. Please.
Of course, the next question comes from Ed <unk> of Morgan Stanley . Your line is now open.
Yeah. Good afternoon, good morning, guys and congratulations on a good set of results. So a few.
For me first one just on the clarification on China. So just to make sure I understood. You said that traffic was up double digit.
At the beginning of the year, but it was not yet where it was before but so youre talking sequentially right not year over year, because I assume trafficking and.
In January 22 was up back then so just issue if you could clarify that that would be helpful.
Number two on China, sorry, I know you already had a lot of questions, but your sales were down 16% as you said in the full year.
And not.
Not to pin you with detailed guidance or anything but.
If you were to be up 20% that would mean.
Kind of flattish versus 'twenty one.
30% up 9% versus 21 so.
Would that be kind of a range and you think of <unk>.
I know you don't have a crystal ball and there are many uncertainties.
How you think about the.
The rebound that would be helpful and so may be.
Last one longer term question. So you have a great success with your cash utilization efforts over the past few years.
Some of your peers have.
So the trend towards more return.
From a well have you kind of noticed the same or is it just simply that men wanting to dress up better overall after the pandemic either you know pharma, where all cash release. Thank you.
SaaS with the last one.
Seems as it is.
Similar question.
Now.
We are part of that.
The fact that again not talking about clothing any longer it doesn't mean that we are out of that on the contrary that remains at the core of Xena.
The fact is that unless we keep talking about casual wear the message doesn't get through the customer mind.
And so that's why we you ended it is a story of affiliated with those sets with any longer but they are still.
Many suits and a good offer available we offer a supermajor measure program and we keep selling suite. So.
For me it is the effect of a bleed.
I would say to give you a trend.
Not yet back to the Sue so I always setting in 19.
But we are not very far so it means that from the.
They're down that we had that in <unk>.
We have been gradually coming back and I must say that this quarter, we have seen an uplift.
In the city of <unk>.
Clothing, which is Susan <unk> and I would say a.
Good trend of NATO measure. So we are promoting the casual wear but we are still selling.
A good number of suits and jackets so.
Our made to measure.
<unk> is increasing.
In terms of traffic.
Im comparing traffic.
For the period.
No.
We are tracking traffic.
On a weekly basis.
So.
I can tell you that traffic is up.
Double digit compared to the same periods of 2020 tools. So that's the comparison.
Point is that we had quarterly which.
We had a good percentage of our stores that were closed and so the fact that they are open.
Surely it makes a difference and even though we had the second phase of covered and we add to the close the shop because of Covid.
So theres been so both through so many phases in 'twenty two that is really hard to compare notes, but when I see.
These uplifts or traffic I compared it to MPW, we'd ship traffic was.
Already quite normalized.
John you want to answer too.
The last question on China to the other question in China was about was about.
What we see relative to 2019, China and <unk> in terms of potential I don't I don't think we can do much.
Then maybe the launch to give some context, we are not giving of course, we are not giving guidance on 2023, we will give it in <unk>.
Hello.
Reiterating what Jim was saying of course compared to last year, you have to take into consideration that there is a slight difference in timing of Chinese new year.
But if you look and we did it and we looked at 2020 before.
<unk> start of the pandemic. So if you isolate until the 20th of January of that year.
Our comparable because the Chinese new year that year was under 25. This year is on the 22nd so comparing notes before the pandemic.
Burst out we are.
Quite significantly so.
The double digit John was mentioning so we are tracking well compared to that normal and same Chinese new year.
We are comparing tracking well against our budget, which of course doesn't mean anything to you.
Okay.
We are seeing good traction of course, it's just three four weeks and we are subject to the volatility of risk off.
After Chinese new year some.
A wave of the illness hopefully not.
That's why we cannot commit to 'twenty guidance.
I think anybody nobody can do it in this moment, because we have seen so many ups and downs.
Okay. Thank you so much guys.
Thank you Ed.
Move to the next question please.
Thank you. Your next question comes from Mark with Joseph Feldman Advisors. Your line is now open.
Hello, everyone and thank you for the question.
My first question is from Rodrigo.
Observed a wide range of promotional activity across different wholesale channels, but Tom Brown.
Specifically when we look at companies like Farfetch, we see a much higher level of promotion percent discounts and a greater percent of total skus being discounted and I'm going to look at other wholesale channels the level of promotional activity, it's there, but it's less.
And many skus remain full price so specifically for Tom Brown, how is the company thinking about the optimization of wholesale channels.
You can answer for all the brands Thom Browne Dania and Tom Ford over the next year and then my second question for you though is.
If you could comment on a recent article that suggested that some of the.
The millionaires and billionaires of the crypto currency industry are shifting their luxury fashion preferences from let's call them flat year brands like say, a versace to what I would call understated elegance of Dania is this something you were on the article actually specifically called out Dania. So is this something you are seeing in your sales activities specifically in the U.
And can you discuss how your marketing campaign and outreach targets. This group of buyers if at all thank you.
So with the last one.
Okay, I think that you kicked in in the in the <unk>.
Key niche I don't know whether you saw I don't know, which article you saw that I enjoyed that.
And the FDR to go along.
Ultra luxury or you buy luxury consumers, but I think really focusing with yes.
And take in New York as an example.
And I enjoy the really the interactive mobile user exactly this is what is happening is zhonya.
We have lifted the bowl way up.
And we are literally doing extremely well in New York.
Capital of the United States, because we have it.
We are finally offering the best of the crops that zhonya can head.
And so I think this goes beyond the disclosure.
The talk of his organization.
Of course organization as part of that but we are literally selling also in the clothing tailoring.
<unk>.
Most of what we sell is handmade tailoring, what we call our go to align.
And in the most expensive fabrics it.
We have introduced the project call that when we meet well, which is defined as to what an award is this by this cashier.
And we can keep it in that stock and we create in that.
I can project it.
Actually we never talked about because.
Just some more color and more side. So my corner is coming back.
The worst of Kashmir is coming back. So every time, there is something Super special something Super exclusive.
There is certain customer.
Go for it so yes.
We are encountering that and it's hard to say.
You know.
<unk>.
After their requests because we are talking about extremely exclusive product.
Very refined and limited.
Material.
Harmful fine so we are shortly.
<unk>.
Creating something.
More.
Appropriate.
Further demand already for fall winter 2004, but we see a strong increment in the niche because to be honest with you.
Very few who can who.
You can go for that it could be the zhonya.
It could be that or beyond in particular.
Then you might have some glitch in early you might have some ketone.
That's it.
And you know.
That's the reality and I would say probably is more of an immense phenomenon than a womens phenomenon.
So.
If we take.
Take advantage of our unique made to measure.
<unk>.
You can really dress up any type of men.
Do that.
Providing a great service and making sure that if you don't have in their stuff in the shop, you can lead them.
The product at home.
And each service so.
Is becoming an important part of our Amira.
American retail business.
And to be honest, we do that as part, which I think is it is important it was mentioned that anywhere.
Even in Goa is becoming for tailoring something very very important because if you go forward as well.
Do you want to show up the branches not an object you just want to have something unique something especially and nobody else can do so that's another big niche.
That we are.
Coming up with and we are going to have in every major store.
Anywhere.
Yeah.
<unk> offer.
Not only are tuxedo.
It's creating a casual style within that.
Upper luxury.
Even aware so and to be honest with you if I may say so forward I mean is there.
Best example of that.
And so I don't see why it cannot be expanded further with going forward, but until so far this hour.
Surely we will.
<unk> debt with senior.
Julie we have not taking enough.
Care of that niche.
People just want to go out at night, and Joy themselves and just were exclusive things I mean, I don't know I am sure you have I don't know your age but.
I've got two.
Signing the authorities, Illinois.
They have more wedding in one year then the wording.
Pardon My 60 is all of life. So it's and every time you look at whether Youre doing something different not only the sheet, but also the heat. So together long story short, yes, we are on top of that and I think he is going to be.
And interesting opportunity studying these days, but I don't see why we cannot take it through throughout our country.
So it's just a matter to us.
Establishing.
Our reputation that and provided.
Into our superior store with appropriate service.
I hope that answers Mark and will leave.
To answer your last question.
Sure. Thank you for the question just to clarify we really believe on a healthy business for the long term that's why we'd be.
At least through the ownership of Daniels for Tom Brown with Tom and then we just to clarify we only discount product path Christmas, which is a number of weeks later than the number of brands across the world. In fact, we did see a lot of competition discounting offering discounts officially.
Four weeks ahead of time in China and also in other in the Western World. We did not followed that that policy. The only thing that we discount Easter.
Seasonality of the fashion part of the collection.
Excluding let me down jackets and outerwear for this season so.
With regard to the Farfetch, we have a very deep partnership we work with them on several platforms, we'd be working so deeply with them across the board since 2017.
Can confirm you that over the past years I've always confirm for us that we have the lowest level of Martin contribution in the platform. So I I have different information.
We are a seasonal brown with absolutely we're a fashion brand in luxury brand, we have a substantial one less business, which is not discounted and we have a component which is seasonality. We still are closing brown luxury. So there would be a component of markup, but it's certainly healthy tight we only have <unk>.
Seven stores until Christmas last year, which are outlets for us out of 105 at the end of the year with the Aix opening just after Christmas. So we have a very very limited component of <unk>.
Martin in our overall revenue so its very healthy we don't sell any product upside to be discounted and its only dealt with in our outlets can vary and they vary.
Hey.
Elegant way in.
Months after they left the store so we really believe in that.
And we want to continue that way just to finish on wholesale versus DTC clearly with the announcement today of the.
Korea us taking over the ownership of the business in Korea, our DTC will naturally become bigger than wholesale as we have said in the past, we do like wholesale, but we do like wholesale because of the opportunity to put product.
In front of many more eyeballs, our biggest goal is to expand our customer base, while keeping our customer base very very well served and taking care of and continue to evolve with them for that of course is good is excellent but we are.
$50 from the world in fashion and luxury we work with them not to push volume, but just to represent a collection of well to buy it with a point of view with creativity is fashion the way. They also buy it and and our goal is just to keep that component without pushing volume out of having the best representation and culture.
Thank you for the clarification great answer.
Look forward to speaking to all of these same best of luck.
Thank you so thank you Mark and thank you everyone.
Thank you operator, I will give back the line to yields with closing that.
Corn.
Unless there are.
Any additional question.
Thank you I can confirm we have no further questions. So I will close this call here. Thank you for joining and you may now disconnect your lines.
Thank you bye bye.
Okay.
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