Q1 2024 Ermenegildo Zegna NV Earnings Call
Operator: Hello all, and thank you for your patience. Today's call will begin in a couple of minutes. Thank you for standing by.
Hello, and thank you for your patience today's call will begin in a couple of minutes time. Thank you for standing by.
Operator: Hello all, and welcome to the Ermenegildo Zegna Group's first quarter 2024 revenue. My name is Lydia, and I'll be your operator today. If you'd like to ask a question during the Q&A, you can do so by pressing the star followed by the number 1 on your telephone keypad. I'll now hand you over to Paolo Durante, Chief of External Relations, to begin.
[music].
Paolo Durante: Thank you and good afternoon, good morning to everyone. Thank you for being here with us for this Ermenegildo Zegna Group First Quarter 2024 Revenues Conference Call. All the materials for today's presentation are on our website, and you should also have received it in... Just let me introduce the management. Today on the call, we have our group CEO, Gildo Zegna, and our group CEO and CFO, Gianluca Tagliabue. Before we begin, as usual, I need to point out that we will make certain forward-looking statements during the call.
Hello, and welcome to a manager that they knew group first quarter 2020, followed by the knee.
Lithia Adobe: My name is Lithia Adobe you're right each day.
Lithia Adobe: If you'd like to ask a question during the Q&A you can do side by pressing star followed by the number one on your telephone keypad.
Joanne Chang: I'll now hand, you over to Apollo Joanne Chang chief of external relations to begin.
Joanne Chang: Thank you and that's been a good morning to everyone.
Paolo Durante: Our actual results may be materially different from those expressed or implied by these forward-looking statements, which are also subject to a number of risks and uncertainties, including those described in our text filings. Please refer to the follow-up statement included in today's presentation. After this boring part, I will leave the floor to our Chairman and CEO, Mr. Gildo Zegna.
Joanne Chang: Thank you for being here with us that are produced.
Joanne Chang: And when it goes.
Joanne Chang: But first quarter of 'twenty 'twenty, four revenues kind of status quo.
Joanne Chang: Oh, yes, what today presentation is on our website that and you should also have received it.
Joanne Chang: Right.
Speaker Change: Yes, So let me introduce the meadows landstar today on the call we had our group CEO, Jean Dania, and and our group of C. O M CFO Gianluca Italia Board.
Gildo Zegna: Hello everybody, good morning and good afternoon. Thank you for joining today's conference call about the first quarter of 2024. I have new results for Ermenegildo Zegna Rubello. A few weeks ago, as you recall, we shared how the group is continuing to develop our three brands for the long term and how we are tackling what we believe are short-term challenges in the luxury sector. You will see today that our Q1 revenue came in line with what we had anticipated. And if we give you an overview of our performance this quarter, then Gianluca will go through the numbers in detail.
Speaker Change: Before we begin as.
Speaker Change: As usual I need to point out that we will make certain forward looking statements during the call and our actual results may be materially different from those expressed or implied by these forward looking statements.
Speaker Change: We try to also subject to a number of bodies and that's.
Speaker Change: That said these are including those described in our SEC filings.
Speaker Change: It means that in fact, that's what we're looking at say three quarters.
Speaker Change: Statements are included.
Speaker Change: In today's presentation.
Speaker Change: It does get boring bonds that I leave a different order, our chairman and CEO Mr. Dania.
Dania: Hello, Good afternoon.
Dania: Afternoon. Thank you for joining today's conference call on the first quarter blended rate before.
Four nanometer.
Dania: So if you're a weeks ago as you'll recall, we shared how the group is continuing to develop all three brands for the long term.
Gildo Zegna: I want to underscore that our Q1 results have left me reassured. The Zegna brand continues to show its strength, with a solid 7% organic growth this quarter and double-digit organic growth in most markets, including the U.S. and EMEA, where the brand is delivering outstanding results. I'm also confident in the strength of our other two great friends.
Dania: How we are tackling what we believe are short term challenges in there that sort of cycle.
Dania: You will see today that our Q1 revenue came in line with what we had anticipated.
Dania: Let me give you another view them all.
Dania: Before this quarter, then Gianluca will go through the numbers in detail.
Gianluca Ambrogio Tagliabue: I want to underscore that our Q1 of those jobs and let me assure it.
Gianluca Ambrogio Tagliabue: Yeah, Brian continues to show its strength with the.
Gianluca Ambrogio Tagliabue: Solid 7%.
Gildo Zegna: Once on 4th Fashion, it is only beginning its journey with the group, and some key projects will be announced in the coming months. Tom Brown is opening an important new chapter, which I want to provide some color on. Tom Brown has been a critical factor of our success since he became part of our group, delivering sound double-digit growth every year and tripling its revenues. Its superior performance has been fueled by the capacity of the brand to closely engage with its community and capture certain sectors and trends, especially in Asia. In recent months, we have made the difficult decision to reduce Tom Brown's exposure to the wholesale channel.
This quarter and double digit organic growth and more small cells, including the U S and EMEA what their brand is delivering outstanding results.
Gianluca Ambrogio Tagliabue: I'm also confident on the status of our.
Gianluca Ambrogio Tagliabue: Other two right.
Gianluca Ambrogio Tagliabue: One so important fashion is only beginning the journey, we can do and some key project will be announced in the coming months. So brown is opening an important new chapter, which I want to provide some color on.
Gianluca Ambrogio Tagliabue: So brown has been a crazy outside so Paulo success since it became part of all with the goal delivering solid double digit growth every year for replay.
Gianluca Ambrogio Tagliabue: This superior performance has been fueled by the capacity of the brand to closely engage with this community and perhaps you're at certain sectors.
Gildo Zegna: We took direct control of the brand's operation in Korea, where the brand has strong recognition and is performing ahead of the sector. In China, we have reinforced our regional management team. We've also worked on the collections themselves to protect the exclusivity of the highly recognizable products. All these will further enhance Tom Brown's long-term value.
Gianluca Ambrogio Tagliabue: Especially in Asia.
Gianluca Ambrogio Tagliabue: Just a month, we have made the difficult decision to reduce some brown exposure to the wholesale channel.
Gianluca Ambrogio Tagliabue: Direct control of the brand's ablation Korea, where the brand is strong the reclamation and you're sort of forming ahead of the sector.
Gianluca Ambrogio Tagliabue: In China, we have reinforced salaries our management team.
Gianluca Ambrogio Tagliabue: We are also war.
Gianluca Ambrogio Tagliabue: Collection themselves to protect the exclusivity of the highly recognizable clause.
Gildo Zegna: While it will take some time to reap the rewards of this decision, our indicators already confirm that the brand is strong and that our action will make it even stronger. Some of the evidence we have of that includes the success of the SACS activation for top clients in the U.S., largely focused on women ready to work, proving a good response to this category and accessories. The strongest sponsor we achieved for the FRET partnership, which we just launched at an exhibition during the Sarajevo Mobile in Milan. The Endless Success of Tom Brown Fashion Shows and the many friends of the brand who continue to be attracted to it, search for it, and proudly wear it, constantly proving their love.
Gianluca Ambrogio Tagliabue: All of these will further enhance some brown long term value while it will take some time, so even though there was a good decision our indications already confirmed that the brand is strong.
Gianluca Ambrogio Tagliabue: One action, we make it even so all of those.
Gianluca Ambrogio Tagliabue: Some of the evidence we have of that includes the success of the SaaS saturation for Coke life in the U S largely focus on OEM and ready to do whatever protein. They go to a sponsor of this category and on accessories.
Gianluca Ambrogio Tagliabue: The strong response, and we achieved under the partnership we just slows then exhibition during this that or the multi let.
Gianluca Ambrogio Tagliabue: In Milan.
Gianluca Ambrogio Tagliabue: The endless successful Tom Brown fashion shows.
Gianluca Ambrogio Tagliabue: And the remaining friends of the brand will continue to be attracted to eat so choice and proud of the work and constantly calling their loyalty.
Gildo Zegna: And last but not least, the brand's continued success in the very important Japanese market. Let me also say a few words specifically about China in general and for the Zegna brand in particular. The Chinese market is currently experiencing a normalization phase for COVID, which is good news. For Zegna, the Chinese market was the last to launch the One Brand Strategy.
Last but not least the bronco deemed a success in the very important Japanese market.
Gianluca Ambrogio Tagliabue: Let me also say if you watch it specifically on China in general and for the Daniel brand in particular.
Gianluca Ambrogio Tagliabue: The Chinese market is currently experiencing a normalization Facebook call it which is good news for <unk> its.
Gianluca Ambrogio Tagliabue: The China model has allowed us to launch the one brand strategy is.
Gildo Zegna: It is also where the entry to the luxury offer is higher than other regions. You're still working on brand awareness, the Garland Experiencing Store, in merchandising. But even more, we are working on creating a brand experience. At the end of May, we have an important private event in Shanghai, the first ever client-focused event organized in China. It is by invitation only and reserved for our very important client, customer, and prospect.
Gianluca Ambrogio Tagliabue: Also where the MTA to luxury offer was higher than other regions.
Gianluca Ambrogio Tagliabue: We're still working on brand awareness.
Gianluca Ambrogio Tagliabue: But I have experience in store and.
Gianluca Ambrogio Tagliabue: In merchandising, but even more we are working on creating better experiences.
Gianluca Ambrogio Tagliabue: At the end of May we had an important probably the best in show by the first ever client focus have been localized in China.
Gianluca Ambrogio Tagliabue: Is by invitation only.
Gianluca Ambrogio Tagliabue: So for our very important customer and its prospects.
Gildo Zegna: Alessandro Sartori, Executive Director, Leo Wu, the Brand Ambassador, and my two sons, Edoardo and Alessandro. It will be an immersive experience into the Zen world, into the brand's deep legacy, essence, and authenticity. And we just did in Milan.
Gianluca Ambrogio Tagliabue: Self storage.
Gianluca Ambrogio Tagliabue: Yeah.
Gianluca Ambrogio Tagliabue: Hey, Brandon Boston, Tucson, Eldorado Lafayette and Houston.
Gianluca Ambrogio Tagliabue: There will be an immersive experience to the zero or they sell the brands deep legacy.
Gianluca Ambrogio Tagliabue: Since an outcome deserved it.
Gianluca Ambrogio Tagliabue: And we adjusted and Melendy will bring Aussie exactly Shiloh.
Gildo Zegna: We will bring all this to China, and we will also bring the OSI Lima project to Shanghai. We know that what Zegna started with a one-brand strategy is a journey, which I like to think of as building a house. It's Herebrand House and Stone Foundations.
Gianluca Ambrogio Tagliabue: And we also will bring the Aussie Lima projects nationwide.
Gianluca Ambrogio Tagliabue: We know that one day I thought that was the one brand strategy is a journey.
Gianluca Ambrogio Tagliabue: Which I like to think of like building a house.
Gianluca Ambrogio Tagliabue: The Tam around the house or cell foundations.
Gildo Zegna: Now we need to build the floors. We know this will take time, but we also know that the Zegna House was built on unique foundations that can't be replicated by anyone, and it is the brand's unique legacy that will continue to foster its success in China and around the world. Earlier, I mentioned what you did in Milan. Now, let me use the last few minutes to explain what we did during the Second Almobile. Something I'm really, extremely proud of.
Gianluca Ambrogio Tagliabue: To date the floors.
Gianluca Ambrogio Tagliabue: We know these things take time, but we also know that it's in your house is was based on the unique foundation.
Gianluca Ambrogio Tagliabue: Replicated by any one offs.
Gianluca Ambrogio Tagliabue: And it is in Brian's unique legacy, but we'll continue can cross the success in China and around the world.
Gianluca Ambrogio Tagliabue: Earlier, almost all of them as Orlando.
Gianluca Ambrogio Tagliabue: Let me use the last few minutes, explaining what we began to sell in model something I'm really extremely proud the loans ores at dania.
Gildo Zegna: The launch of all the Zegna community. During our last call, I mentioned that we were going to take over the city of Milan during design week with the launch of Orsigia in Milano, the donation of the flower bed to our home city, and the immersive experience at our headquarter, open to the public for one week to launch the Born in Orsig book, buried solid. This has been a unique opportunity to increase the knowledge of Aussie Zegna and boost the desirability of the brand.
Gianluca Ambrogio Tagliabue: During our last call I mentioned that we were going to take over the city of millet.
Gianluca Ambrogio Tagliabue: You are in the design week with the launch of all of US in Milano donation off the flower beds to our home city and the most expedient, it's our head for it to open to the public for the one week to launch the mall in Aussie book, but it's solid.
Gianluca Ambrogio Tagliabue: This has been an unique opportunity.
Gianluca Ambrogio Tagliabue: He is our knowledge of the garage is dania and boost their theirs.
Gianluca Ambrogio Tagliabue: Well.
Gildo Zegna: When I told you we were going to take over the city, I personally was not expecting such an incredible outcome. More than 26,000 people visited the installation in six days. And we also organized special dinners for our friends, circle, with a lighting moment for our top customers. Record revenue ever between our Milanese stores, led by the Monte Napoleone shop. We created three talks based on the graphics of the book that were given to visitors for the location of the city and terminated within 15 minutes every day, and we had queues of people waiting to receive one. The Toads quickly became a must-have of the Salone, especially among Generation X and Generation Y attendees.
And I told you we were going to take all of the Cfe I personally was a little bit.
Gianluca Ambrogio Tagliabue: Making such an incredible awesome.
Gianluca Ambrogio Tagliabue: More than 26000.
Gianluca Ambrogio Tagliabue: People visited the installation of six days and we also organized especially boomers well a friend circle with a lie at the moment, what our top customers.
Gianluca Ambrogio Tagliabue: I had called about revenue Atlanta between our stores led by.
Gianluca Ambrogio Tagliabue: Mark it up with all of that shop.
Gianluca Ambrogio Tagliabue: We can aid, but also please don't space based on the graphics.
Gianluca Ambrogio Tagliabue: Book.
Gianluca Ambrogio Tagliabue: Given to digital collocation of the safety and terminated within 15 minutes every day.
Gianluca Ambrogio Tagliabue: And we had teams of people waiting till they see one.
Gianluca Ambrogio Tagliabue: Dogs quickly became a mustang over the shallower that especially our model generation actions relation why attendees.
Gildo Zegna: Some 500 articles worldwide covering the event. And last but not least, Zegna also won the Cori Salone Award of Sustainability. We noticed that we accomplished all this without talking about it beforehand. This was all through providing unique experiences and through living out our values and our legacy. One word, through our authenticity and Creating A Dream Around Our Brains.
Gianluca Ambrogio Tagliabue: Five of the articles worldwide call it end of it.
Gianluca Ambrogio Tagliabue: And last but not least also won the Florida Solar award of sustainability.
Gianluca Ambrogio Tagliabue: Yes.
Gianluca Ambrogio Tagliabue: You will notice that we accomplished all this without talking about product.
Gianluca Ambrogio Tagliabue: This was all true providing unique experiences until living.
Gianluca Ambrogio Tagliabue: Our values and our legacy one was through our outbound efficiency.
Gianluca Ambrogio Tagliabue: And anything that you met all of our brand.
Gianluca Ambrogio Tagliabue: As you recall Gideon back there's always been a powerful tool.
Gildo Zegna: As you recall, giving back has always been a part of JNF; it is part of our history and embedded in our DNA. This is what the founder taught me, and he led by example, that we must support and give back to our communities, our cities, the planet, and to our home. I think that we have to give a big hug to the team because of this great accomplishment. And I know this is another step, an important one, in building an even stronger brand in the direction we have been pursuing since the launch of the One Brand Strategy, to make Zegna the best brand in the entire Amnesty.
Gianluca Ambrogio Tagliabue: Part of always sort of embedded in our DNA.
Gianluca Ambrogio Tagliabue: This is what the founder and he led by example that we must support and give back to our communities our business into the collateral.
Gianluca Ambrogio Tagliabue: All at home.
Gianluca Ambrogio Tagliabue: I think that we have will be developed.
Gianluca Ambrogio Tagliabue: Absolutely.
Gianluca Ambrogio Tagliabue: It goes in Williamsburg accomplishment.
Gianluca Ambrogio Tagliabue: And I know you've got other states and important one ingredient and move into a stronger brand in the direction that we have been pursuing since the launch of the one brand strategy will make dania the best brand names unless luxury.
Gildo Zegna: As I said, it is just one step. Others will follow. After Milan, Shanghai will be the second city where we bring Argentina, and you will need to wait to find out the third, which is already planned, and I promise you it will be worth the wait. Thank you for your attention, and let me now turn to Gianluca to go into the financials in detail.
Gianluca Ambrogio Tagliabue: As I said, we just want instead.
Gianluca Ambrogio Tagliabue: Others would follow after the Mcdonald Shanghai will be the second city wildly will bring audience failure.
Gianluca Ambrogio Tagliabue: And you will need to wait to find out the third which is already play they promise you it will be worth the wait.
Speaker Change: Thank you for your attention and lot, we know Turkey is a little too.
Speaker Change: To go into the federal subsidy leaders.
Gianluca Ambrogio Tagliabue: Thank you, Gildo. Good afternoon, everybody.
Speaker Change: Thank you Jill good.
Good afternoon, everybody, let's move to page nine of the presentation, where you find our consolidated revenues for the quarter and the buy segment information first of all let me make a general comment as you know Q1 consolidated revenues include Tom Ford fashion business, which was integrated in the group.
Gianluca Ambrogio Tagliabue: Let's move to page 9 of the presentation, where you find our consolidated revenues for the quarter and the bi-segment information. First of all, let me make a general comment. As you know, Q1 consolidated revenues include Tom Ford Fashion Business, which was integrated into the group since April 29, 23, and includes also the consolidation and acquisition of the South Korean business for Tom Brown on July the 1st of last year and for Zegna, the Korean business, on January the 1st of this year, pursuant to which the group started to directly operate the business for Tom Brown and for Zegna in that market.
Speaker Change: Since April the 29th of 23 and includes also the consolidation and the acquisition of the South Korean business forthcoming Brown on July the first of last year and four dania.
Speaker Change: <unk> business on January the first of this year.
Speaker Change: Pursuant to which the group started to directly operate the business for Tom Brown and towards in that market. So therefore, when we refer to organic revenue growth. We neutralized from the group perimeter effects from Tom Ford Fashion edition, and the Korean related changes with Copa and we apply.
Gianluca Ambrogio Tagliabue: Therefore, when we refer to organic revenue growth, we neutralize from the group perimeter the effects of Tom Ford Fashion Edition and the Korean-related changes in scope, and we apply also the constant currency approach. In line with the Q1 outlook provided during the last conference call on April 5, in the first quarter of this year, group revenues reached 463 million euros, up 8% year-over-year, 11% when we exclude three percentage points of negative currency. On an organic basis, revenues were down 5%.
Speaker Change: So the constant currency approach.
Speaker Change: In line with Q1 outlook provided during the last conference call on April 5th in the first quarter of this year group revenues reached 463 million in Europe up 8% year over year, 11%, when we exclude three percentage points of negative currency headwind on a organic basis in red.
Speaker Change: <unk> were down 5% Zenia segment recorded positive growth plus 2% on a reported basis and plus four on an organic basis, notwithstanding the textile product line, which requires a flattish performance currencies has been have been add wind in the quarter for the.
Gianluca Ambrogio Tagliabue: Zegna's segment recorded positive growth, plus 2% on a reported basis and plus four on an organic basis, notwithstanding the textile product line, which recorded a slack-ish performance. Currencies have been a headwind in the quarter for the group, and also for the Zegna segment, mainly related to Remembe, and to a lesser extent to the yen and to the U.S. dollar depreci As anticipated in the quarter, Tom Brown's segment revenues declined 30% reported and 35 on an organic basis. I will comment in detail later on this performance.
Speaker Change: And also for the Dania segment, mainly related to <unk> and to a lesser extent to the yen to the U S dollar depreciation compared to one year ago as anticipated in the quarter as Tom Brown segment revenues declined 30% reported and 35 on an organic basis I will comment in details late.
Speaker Change: This performance, let me only anticipate that the decline is being driven not only by a demanding these a comparison I'm looking at Q1 of last year, namely in wholesale but also by the decision to streamline the Tom Brown, our wholesale channel and by some sector challenges in the Chinese market going forward.
Gianluca Ambrogio Tagliabue: Let me only anticipate that the decline has been driven not only by demanding days of comparison looking at Q1 of last year, namely in wholesale, but also by the decision to streamline the Tom Brown wholesale channel and by some sectors challenges in the Chinese market. The Tom Ford fashion segment recorded 65 million revenue. Given that in Q1 of last year, Tom Ford Fashion was not part of the group, we do not have a base of comparison. I will provide some more colors on Tom Ford Fashion later in the presentation.
Speaker Change: Fashion segment recorded 65 million of revenue.
Speaker Change: Given that Q1 of last year don't forward fashion was not part of the group. We do not have a base of comparison I will provide some more colors on two important question later in the presentation ear I can just add that the performance has been in line with our expectations. The brand CEO and his team are working to set the basis for the.
Gianluca Ambrogio Tagliabue: Here I can just add that the performance has been in line with our expectations. The CEO and his team are working to set the basis for the future development of the brand. Moving now to page 10, we can look at the revenues by brand and product line. In Q1 of this year, the Zegna brand recorded a solid plus 7% organic growth.
Speaker Change: Future development of the brand.
Speaker Change: Moving now to page 10 of the presentation weekend.
Speaker Change: Look at the revenues by brand that probably in Q1 of this year Zhonya brand recorded a solid plus 7% organic growth the product categories that contributed the most of this performance our of course, our triple stage hue family, which continued to deliver solid double digit growth also thanks to the <unk>.
Gianluca Ambrogio Tagliabue: The product categories that contributed the most to this performance were, of course, our triple-stitch shoe family, which continues to deliver some double-digit growth, also thanks to the success of the second skin drop. But there was also a positive trend in luxury leisure wear and our proprietary made-to-measure business. As we already commented, Tom Brown brand performance, as much as for the segment, declined as a consequence of our decision to reduce the wholesale business and also as a consequence of lower than expected VTC results, in particular in the greater China region.
Speaker Change: Excess of the second scheme drop but also there was a positive trend on luxury leisure wear and our proprietary made to measure business.
Speaker Change: As we already commented Tom Brown brand performance as much as for the segment declined for our decision to reduce the wholesale business and also as a consequence of lower than expected DTC results in particular in greater China region. In this performance. The result, there is centrally the decision.
Gianluca Ambrogio Tagliabue: In this performance, there is, centrally, the decision to protect the Tom Brown key branded products and their desirability by limiting their exposure, in particular, in Hong Kong. Looking at Tom Ford Fashion, let me make a quick comment on the new collections designed by Peter Hawking, which have been introduced in stores since February with good sales performance. Of course, it is still early, but I would say that the initial signs are positive.
Speaker Change: To protect the Tom Brown key branded products and their desirability by limiting their exposure in particular online.
Speaker Change: Looking at non Port fashion, let me make a quick comment on the new collection designed by Peter All Kings, which has been introduced in stores from February with good sales performance of course. It is still early but I would say that the initial signs are positive a quick word on textiles the flattish.
Gianluca Ambrogio Tagliabue: A quick word on textiles, the flat fish, which is minus one. The organic performance of this product line reflects the cautious outlook that we are observing in this B2B sector with many companies being cautious on their raw materials for this. Under the other revenue line, we now include mainly the revenues that we generate with third-party brands. This line of business can now be considered marginal since, with the acquisition of 100% of Tom Ford International, we integrated the Tom Ford fashion business within the group, while before, it was accounted for within the third-party brand's revenues. This explains the substantial decline reported, given the changing scope.
Speaker Change: Which is minus one organic performance of this product line, reflecting the cautious outlook that we are observing in this lead to be sector, which mainly come with many companies being cautious on their raw material for this under the other revenue line. We now include mainly the <unk>.
Speaker Change: Revenues that we generate with third party brands. This line of business can now be consider.
Speaker Change: Marginal since with the acquisition of 100% of some important international we integrated the Tom Ford fashion business within the group while before it was accounted within the third party brands revenues. These explains the substantial decline reported given the change in scope.
Gianluca Ambrogio Tagliabue: Moving now to revenues by distribution channel on page 11. I would limit the comments here because we will then analyze this performance by channel specifically for each brand, which I believe will provide you with more insight. Still, a couple of quick comments.
Moving now to revenues by distribution channel. It's page 11, I would limit the comments here because we will then analyzed this performance by channel specifically for each brand, which I believe will provide you more insights.
Speaker Change: Still a couple of quick comments DTC channel grew 20% year over year or 3% organic driving the group performance. Thanks to Dania, Brent positive contribution and thanks to the integration of going forward DTC channel in the quarter DTC accounted for 71% of group revenue.
Gianluca Ambrogio Tagliabue: DTC channel grew 20% year-over-year, or 3% organically, driving the group performance, thanks to the Zegna brand's positive contribution and thanks to the integration of Tom Ford DTC. In the quarter, DTC accounted for 71% of group revenues, or 77% of the three trends, that is excluding textile and other revenue lines that are, by definition, B2B and wholesale. The wholesale performance for the three brands, Zegna, Tom Brown, and Tom Ford Fashion, was negative 12% year over year and 26% organic, reflecting the negative performance at Tom Brown Wholesale and the already mentioned acquisitions of the Korean businesses, which were converted from wholesale to retail.
Speaker Change: Or 77% of the three brands that.
Speaker Change: That is excluding textile and other revenues lines that are by definition b to b and all sale.
Speaker Change: The wholesale performance supported the three brands vignette on Brian come forward fashion was negative 12% year over year, and 26% organic reflecting the negative performance Tom Brown wholesale.
Speaker Change: And you already mentioned acquisitions of the Korean businesses, which were converted from wholesale to retail of course. These two effects have been.
Gianluca Ambrogio Tagliabue: Of course, these two effects have been partially offset by the positive contribution of Tom Ford Fashion Edition. Moving to page 12, with the split by geography. Before commenting on the performance by a region, let me underline that we have partially revised and, I believe, simplified the way we report revenues by geographical area in line with the sector's best practice. We therefore now report NIA, the Americas.
Speaker Change: Partially offset by the positive contribution of Tom Ford Fashion addition.
Speaker Change: Moving to page 12.
Speaker Change: With the split by geography before commencing the performance by region. Let me underline that we are partially revised and they believe it simplified the way we report revenues by geographical area in line with sector as best practice.
Speaker Change: We therefore now reports EMEA and the Americas, We continue to report the revenue support from the greater China region, and the rest of Asia.
Gianluca Ambrogio Tagliabue: We continue to report revenues from the greater China region and the rest of Asia, and the rest of APEC altogether. Looking at DEMEA, DEMEA recorded a negative 6.5% organic growth, exclusively related to tone brown performance, in particular for the wholesale channel, while Zegna was double-digit positive in both channels in the region, and the Middle East continued to drive the growth of the region with outstanding double-digit growth. Moving to Americas, this region recorded a strong plus 10% growth on an organic basis and plus 58% including the tone forward fashion integration.
Speaker Change: Rest of APAC altogether.
Speaker Change: Looking at EMEA EMEA record than a negative six 5% growth organic exclusively related to Tom Brown performance in particular for the wholesale channel while Zane yet was double digits positive in both channels in the region and Middle East continued to drive the growth of the region.
Speaker Change: With outstanding double digit growth moving to Americas. This region recorded a strong plus 10% growth on an organic basis, and plus 58%, including the tongue forward fashion integration Vinny.
Gianluca Ambrogio Tagliabue: Zegna DTC revenues significantly outperformed the organic growth of the region. US, Mexico, and Brazil have been the best performing markets. US in particular, the most important market, of course, of the area, reported organic growth higher than the average of the region thanks to the Zegna brand outstanding double-digit performance in the US. Greater China region revenues declined by 13% organically, with Tom Brown significantly below this mark, and Zegna down single-digit.
Speaker Change: Then your DTC revenues to seek linked significantly outperformed the organic growth of the region U S, Mexico, and Brazil have been the best performer markets U S. In particular, the most important market of course of the IRS reported organic growth higher than the average of the region. Thanks to Dania brands.
Speaker Change: Outstanding double digit performance in U S.
Speaker Change: Greater China region revenues declined by 13% organic with Thom Browne significantly below this Marc and Zane yet down single digits.
Gianluca Ambrogio Tagliabue: As Gildo mentioned in his introductory speech, the sector is seeing a normalization phase in GCR after the immediate post-COVID bounce-back, and we are seeing a more cautious consumer outlook, especially on the side of the aspirational clients. With the Zegna brand, we can confirm that the high-end market is overperforming. For instance, our second skin drop performed extremely well in China, and the uber-luxury trunk shows we are organizing are delivering above-expectations results, and also make-to-measure orders are growing nicely.
Speaker Change: As Jim mentioned in his introductory speech the sector has seen.
Speaker Change: A normalization facing JCR after the immediate post COVID-19 bounce back and we are seeing a more cautious consumer outlook, especially on the side of the expiration of our clients with Zynga brand. We can confirm that the end market is over performing for instance.
Speaker Change: Our second skin dropped performed extremely well in China and the Uber luxury trunk shows we are organizing our delivering above expectations result, and also make to measure or theirs are growing nicely. So.
Gianluca Ambrogio Tagliabue: Tom Brown is also working on its top of the pyramid clientele. And, more importantly, we have reinforced the management team, and they expect that some initial results should be visible towards the end of the year. In the rest of APAC, let me underline the strong performance in Japan for all our three brands. In terms of the group of nationalities, I will anticipate a question that I know you might ask.
Speaker Change: And Brian also is working on its top of the pyramid clientele and more importantly, we have reinforced the management team and I expect that some initial results should be visible towards the end of the year.
Speaker Change: In the rest of APAC, let me underline the strong performance in Japan for all our three brands.
Speaker Change: In terms of cluster of nationality I will anticipate the question that I know you might ask for Xenia DTC in the U S cluster keeps on growing on a solid double digit pattern compared to last year, while the cluster of dania clients from greater China is likely negative versus Q1.
Gianluca Ambrogio Tagliabue: For Zegna DTC, the U.S. cluster keeps on growing at a solid double-digit rate compared to last year, while the cluster of Zegna clients from greater China is likely negative versus Q1 of last year, even if Chinese are buying more outside China, both in Europe and even more in Japan. But you know that for the Zegna brand in particular, the largest part of Chinese buy domestically. Therefore, the trend of revenues in GCR as a region is not that different from the trend of the cluster of Chinese residents.
Speaker Change: Of last year, even if Chinese are buying more outside China, both in Europe, and even more in Japan, but you know that for Zane Yeah, Brian in particular, the largest part of Chinese buy domestically. Therefore, the timing of revenues in the CR as a region is not that different from the <unk>.
Speaker Change: Trend of the cluster of Chinese regiments itself.
Speaker Change: Let's now move to the brand breakdown by channel starting at page 15 buy the thing you Brian in Q1 via DTC revenues grew by six three organic accounting at this point for 85% over the Brian revenues, the DTC channel recorded that sound double.
Gianluca Ambrogio Tagliabue: Let's now move to the brand breakdown by channel starting at page 15, with the Zegna brand. In Q1, Zegna DTC revenues grew by 6.3 percent organically, accounting at this point for 85% of the brand revenues. The DTC channel recorded sound double-digit organic sales growth in EMEA, in the Americas, and the rest of Asia Pacific, while GCR was, as I said before, mid-single-digit. In the quarter, the brand opened 24 net new stores, from 253 at the end of last year to 277 at the end of March of this year.
Speaker Change: Digit organic sales growth in EMEA, and Americas and rest of Asia.
Speaker Change: <unk> Pacific while <unk> was as I said before mid single digit negative.
Speaker Change: In the quarter. The brand opened 24 net new stores from 253 at the end of last year to 277 at the end of March of this year within this 24 net openings sixteens are the store converted in Korea from wholesale to retail for our shop in shop.
Gianluca Ambrogio Tagliabue: Within these 24 net openings, 16 are stores converted in Korea from wholesale to retail, four are shopping shops converted into concessions in North America, and the remaining net four are two in travel retail, Zurich and Shanghai, and the last two are openings in China and Beijing and one in Paris, La Samaritaine.
Speaker Change: Converted into concession North America, and the remaining net for our two in travel retail Zurich in Shanghai and the last two are opening seeing China, Nanjing and one in Paris, but somebody said.
Gianluca Ambrogio Tagliabue: Wholesale for the Zegna brand recorded a plus 9% organic, again deducting the effect of Korea, with good growth in all markets. I remember that since spring 24, we are moving the merchandising calendar of our collections towards a buy-drop approach, which will influence the time of deliveries in the quarter as anticipated Q1, as a benefit of some shift of deliveries from Q4 of last year to Q1. In any event, we anticipate that for Zegna Brand, the wholesale business in the year is expected to be flattish versus 2023 in organic terms, which means, again, taking aside the Korean takeover effect.
Speaker Change: Wholesale four Zhonya brand reported that the plus 9% organic again deducting the effect of Korea with good growth in all markets I remember that since spring 'twenty four we are moving the merchandising calendar of our collections towards by drop approach, which will influence.
Speaker Change: Ruins, the time of deliveries in the quarter as anticipated Q1 as benefit of some shift of deliveries from Q4 of last year to Q1 in any event.
Speaker Change: We anticipate that for Zynga brand the wholesale business in the year would be.
Speaker Change: <unk> is expected to be flattish versus 2023 in organic terms, which means again, taking aside this quarter I am taking over effects.
Speaker Change: Moving to page 17.
Gianluca Ambrogio Tagliabue: Moving to page 17, the breakdown by channel for Sound Brown in Q1, DTC grew by 4.4%, which is minus 14% excluding the effect of the conversion from wholesale to retail of the Coriander. Rest of APAC, Fortum Browne, outperformed, especially in Japan. America's performed better than the average.
Speaker Change: The breakdown by channel four it sound Brown in Q1, DTC grew by four 4%, which is at minus 14% excluding the effect of the conversion from wholesale to retail of the Korean business. The rest of APAC for Tom Brown outperformed, especially in Japan.
Speaker Change: Eric has performed better than the average JCR underperformed versus.
Gianluca Ambrogio Tagliabue: GCR underperformed versus. Commenting on the auxil performance, let me underline that it has been impacted by three main effects. Demanding a base of comparison, Q1 of last year was a very important quarter of shipment. Spring 24 deliveries that have been taken into account in Q4 of 23, and more importantly, by the decision to rebalance the channel. The first two factors should be less relevant in the coming quarters, in particular in Q2 and Q3, while with regard to the wholesale selection, we expect it will continue also in the next quarters.
Speaker Change: Momentum the wholesale performance, let me underline that it has been impacted by three main effect.
Speaker Change: Demanding base of comparison Q1 of last year was.
Very important quarter of shipments spring 'twenty four deliveries that have been accounted in Q4 of 'twenty three.
Speaker Change: And more importantly by the decision to rebalance that channel. The first two factors should be less relevant in the coming quarters in particular in Q2 and Q3, while the with regard to the wholesale collection. We expect it will continue also in the next quarters.
Gianluca Ambrogio Tagliabue: However, the magnitude of this selection should be significantly lower. Let's now move to page 19 for a few comments on Tom Ford Fashion, which reached 65 million euros with a DTC contribution close to 70% for the brand. You know that quarterly performance cannot be considered as a proxy for year-end results.
Speaker Change: The magnitude of this selection should be significantly lower.
Speaker Change: Let's now move to page 19 for few comments on two important fashion, which reached 65 million euros with the DTC contribution close to 70% for the Brian you know that quarterly performance cannot be considered as a proxy for year end result, this is true for most of the business.
Gianluca Ambrogio Tagliabue: This is true for most businesses, and it is even truer in this case for many reasons. First of all, Tom Ford Fashion delivered some spring wholesale orders in April. The new collection designed by Peter Hawking hit the stores only in March, contributing revenues for only a few weeks, and last but not least, some important new openings are expected in the second part of the year. To help you understand the trend of this brand, I would just add that Q1 contribution to Tom Ford Fashion's yearly revenues should be assumed closer to 20% rather than 20%.
Speaker Change: And this is even truer in this case for many reasons first of all don't fourth fashion delivered some wholesale spring wholesale orders in April.
Speaker Change: The new collection designed by Peter Hawkins hit the stores only March contributing for revenues for only a few weeks and last but not least coming towards the new openings are expected in the second part of the year. Therefore.
Speaker Change: To help you understand the trend of this brand I would just add that Q1 contribution to Tom Ford fashion yearly revenues.
Speaker Change: It should be assumed closer to 20% rather than 25%.
Gianluca Ambrogio Tagliabue: Before moving to Q&A, let me just comment on page 21 that at the end of the group, at the end of the group, that's 417 DOS, an increase of 27 net versus December, of which we have already commented 20 are coming from the wholesale to retail conversions of Zegna, while Tom Ford in the Porter opened three small stores. And now I hand it over to the operator for Question No. Thank you.
Speaker Change: Before moving to Q&A, Let me just comment on page 21 that at the end of the group and of course that the group has 417.
Speaker Change: Thus an increase of 27 net.
Speaker Change: Versus December of which we already commented 20 are coming from the.
Speaker Change: All sales to retail conversions of Dania wild come forward in the quarter opened three small stores and now and it over to the operator for Q&A sessions.
Operator: Thank you, operator. You can open the Q&A session now.
Speaker Change: Thank you operator, you can now open the Q&A.
Speaker Change: Thank you.
Operator: Please press star followed by the number 1 if you'd like to ask a question and ensure your device is unmuted locally when it's your turn to speak. If you change your mind or your question has already been answered, you can withdraw your question by pressing star followed by the number 2. Our first question today comes from Chris Huang of UBS. Your line is open, please go ahead.
Speaker Change: Today's press Star followed by the number one if you'd like to ask a question I mean, showing your devices, Amit likely by nature tend to speak.
Speaker Change: Have you changed your mind on your question has already been answered. It comes through your question by pressing star followed by the number case.
Speaker Change: Our first question today comes from Chris one of UBS your.
Chris: Your line is open. Please go ahead.
Chris Huang: Hello, hi, thanks for taking my questions. I have three.
Chris: Hello, Hi, Thanks for taking my questions I have three.
Chris: Firstly on current trends Kent can you maybe give us an early indication of how things have shaped up recently after a three weeks into the quarter.
Chris Huang: Firstly, on current trends, can you maybe give us an early indication of how things have shaped up recently as we're three weeks into the quarter? If it's too early to comment, perhaps add some sense of how March has performed relative to the overall Q1. Secondly, on Trans by Consumer Nationality for the ZANATDC, I know you've commented a little bit high level, but is it possible to kind of further quantify? Is it fair to say that Chinese is probably down low by a single digit year every year? And how are the European consumers, the local Europeans, doing for ZANI and Q1? Last one, at least, Tom Brown.
Chris: If it's too early to comment maybe perhaps Ali some sense of how much have performed relative to the overall Q1 secondly.
Chris: Secondly, on China, if I come from an Optionality for the thing at PTC I know you commented a little bit high level.
Chris: But is it possible to kind of.
Chris: Further quantify is it fair to say that Chinese is probably down low to mid single digit year over year and how are the European consumers. The local Europeans doing foreseeing that in Q1 last one Ollie's Army Tom Brown I know you commented that you're expecting some more wholesale impact.
Chris: For the coming quarters, but.
Chris: Smaller magnitude or can you just maybe deep.
Chris: Deep dive more a little bit into what kind of magnitude are you expecting here or is it still going to be double digit high.
Chris Huang: I know you commented that you're expecting some more wholesale impact for the coming quarters, but with a smaller magnet. Can you just maybe deep dive more a little bit into what kind of magnitude are we expecting here? Is it still going to be double-digit? High teens? Any color on that would be super helpful. Thank you very much.
Speaker Change: High teens any color on that would be super helpful. Thank you very much.
Speaker Change: Okay.
Speaker Change: Thank you. Thank you Chris I think narrow question for Luke just on the first one now when you ask about the exit rate and actually did you ask the China range I know that I'm, sorry, I didn't get.
Speaker Change: And if possible and in general in all form China Marcelo Nevada.
Speaker Change: Thank you.
Of course.
Speaker Change: So hi, Chris.
Luke: The March exit rate at the group level was roughly in line with the quarter trend of course here. It makes sense. My comment is more on the exit rate of the DTC because wholesale follows its delivery schedule. So I would say that DTC is basically not the friend.
Gildo Zegna: Thank you. Thank you, Chris. I think they're all questions for Gianluca. Just on the first one, when you asked about the exit rate, did you ask about China or in general?
Luke: March versus.
Chris Huang: If possible, in general, and also in China. The more color, the better. Thank you.
Luke: <unk>.
Luke: In terms of nationality I think you asked about.
Luke: China.
Luke: Closer to the mid single digit.
Gianluca Ambrogio Tagliabue: So, hi Chris. The March exit rate at the group level was roughly in line with the quarter trend. Of course, here it makes sense. My comment is more on the exit rate of the DTC because wholesale follows its delivery schedule. So I would say that DTC is basically not different in March versus the quarter. In terms of nationality, I think you asked about. We are closer to the mid-single-digit, not double-digit, for Zegna
Luke: Okay.
Luke: <unk> digit four of Dania, Florida Dania.
Luke: We are we have observed good.
Luke: The increase in Europe and Japan.
Luke: We have already commented in other terms any way more than 90% of the spending.
Luke: Of residents in greater China full into the stores all in greater China itself. So we are talking about an important growth on a smaller part of the business.
Luke: As we have already commented our clients and to be to appreciate more the service on a local basis.
Luke: So considering the operation for instance.
Gianluca Ambrogio Tagliabue: We have observed a good increase in Europe and Japan. As we have already commented in other terms, anyway, more than 90% of the spending of residents in greater China falls into the stores of Greater China itself. So we are talking about important growth in a smaller part of the business. Because, as we have already commented, our clients tend to appreciate the service more on a local basis, also considering alterations, for instance. So it's an important growth, but on that size slice of the business, which is slightly less than 10%.
Luke: So it's an important growth buck on on that size, the slice of the business which is.
Luke: Slightly less than 10%.
Luke: Europe.
Luke: Europe.
Luke: Europe demand is very solid I think our growth is.
Luke: Across across all the markets.
Luke: Above the double digit mark.
Luke: So we are in Europe Continental Europe, I think we always did.
Luke: Detach the good performance in Middle East in Dubai, but also in Continental Europe, we are seeing a very very healthy trend.
Luke: So I think that is on the thing aside.
Gianluca Ambrogio Tagliabue: Local, European demand is very solid; I think our group is across across all the markets, it's above the double-digit mark. So we are in Europe, continental Europe. I think we always detach the good performance in the Middle East and Dubai, but also in continental Europe, we are seeing a very, very healthy. So I think that is, on the thing aside, the only point that Gildo remarked was the execution of the One Brand Strategy in Greater China, where we have positive signs of traction with the IN consumers and the rest of the world performing extremely well. The next quarter, we are not expecting a 50% decline, but much lower, probably still in the double digit range. Okay, we can go with the second. Thank you, Chris. We can go with the second question.
Luke: Only point that you in the remarks was the execution of the one brand strategy in greater China, and where we have.
Luke: Citic sign of traction on the.
Luke: On the high end consumers and the rest of the world performing extremely well, let's say something around that.
Speaker Change: So uh huh.
Speaker Change: Next quarter, we are not expecting a 50% decline much lower.
Speaker Change: <unk>.
Speaker Change: Probably still in the double digit range.
Speaker Change: Okay, well, we can go with this call and thank you Chris.
Speaker Change: We can go with the second question.
Speaker Change: Our next question comes from Anthony <unk> from BNP Paribas.
Anthony: Please go ahead your line is open.
Anthony: Yes. Thank you. Good morning, It's also when you shop, you from buying back I Hope sure your win I just have.
Anthony: Three questions. Please so.
Anthony: The first 20, if you can.
Anthony: The price increases.
Operator: Our next question comes from Anthony Charchafji from BNP Paribas. Please go ahead; your line is open.
Anthony: Year to date.
Speaker Change: Hi, Brent.
Brent: It would be the first question.
Brent: My second question would be on the dump truck the fashion.
Anthony Charchafji: Yes, thank you. Good morning. It's Anthony Charchafji from BNP Paiva.
Brent: 65 million in Q1 would you be able to say if it was purely.
Anthony Charchafji: I hope you're well. I just have three questions, please. So the first one, if you can tell us the price increases year-to-date by brand, that would be the first question. My second question would be on Tom Ford fashion at $65 million in Q1. Would you be able to say if it was up year-on-year versus the pro forma of Q1 2023? And as well, I mean, I understand that there might be some delay in terms of spring-summer delivery, so maybe it can be beneficial to Q2.
Speaker Change: That's just a push out of Q1, 'twenty three and that's when a light.
Speaker Change: Understand that there might be some that some delay in camera first tanks are now daily value. So maybe it can be beneficial to Q2.
Speaker Change: And my my first question would be on the marketing.
Speaker Change: Interesting direct origination in there in Milan is great traction.
Speaker Change: Oh Zenyatta saves are our highly concentrated to a few customers.
Speaker Change: Do you think that opening of the branch to a great General Gen skews the way to go or do you prefer to further increase the business we use.
Anthony Charchafji: And my third question would be on marketing. I mean, it's very interesting, the activation in Milan with great traction. I mean, as Zegna sales are highly concentrated on a few customers, do you think that opening the brand to a greater audience is the way to go, or do you prefer to further increase business with existing clients, so in a way, staying very exclusive? Thank you.
Speaker Change: Existing clients so in a way you're staying very exclusive thank you.
Speaker Change: Hi.
Speaker Change: Yes.
Speaker Change: Okay. Thank you. Thank you Anthony.
Speaker Change: First one that's far so again look at that and I'll leave at that.
The interesting one on the marketing or <unk>.
Anthony So the price increase after full winter of 'twenty, four we anticipated that our price increases would be.
Gianluca Ambrogio Tagliabue: Okay, thank you. Thank you, Anthony. The first one for Gianluca, and then I'll leave for the third, the interesting one on marketing to Gildo.
Speaker Change: On the low single digit side, so more to offset cost rather than increasing really the price on.
Gianluca Ambrogio Tagliabue: Anthony, so the price increase after fall and winter 24, we anticipated that our price increases would be on the low single-digit side, so more to a set cost rather than increasing really the price on a strategic positioning. So we are, we are going with this pattern. We have gone with this pattern on spring 24, and also fall 24 is following the same logic, small adjustment. So the big step up, we said, is already behind us.
Speaker Change: Our strategic positioning.
Speaker Change: We are we.
Speaker Change: We are growing with this pattern, we have gone with respect their own spring 'twenty four and also for 'twenty. Four is following the same logic small adjustments so the big step up.
Speaker Change: We said that is already behind us.
Speaker Change: In terms of $64 million for Tom Ford.
Speaker Change: Yes, as I said, the 20% and 25% that includes the fact that we are expecting the next quarters Q2 to be higher than than Q1 also due to timing of deliveries, but also thanks to all the actions openings that we have.
Gianluca Ambrogio Tagliabue: In terms of $64 million for Tom Ford, yes, as I said, the 20% and not 25% includes the fact that we are expecting the next quarter's Q2 to be higher than Q1, also through timing of deliveries, but also thanks to all the actions openings that we are planning to do. In terms of marketing, I think Gildo, you want to take it on the market whether we are
Speaker Change: Yeah.
Speaker Change: We are plan.
Speaker Change: Planning to do in terms of marketing I think Jim do you want to take it on the market decide whether.
Speaker Change: We are exclusive agnosticism or marketing or things that are working in.
Jim: <unk>, Oh policy and the opportunity that we have to agree that there's the ability of all of their brands. So I think there will be.
Gildo Zegna: On marketing, I think that what we did in Milan proves our authority and the opportunity that we have to increase the desirability of all the brands. So I think that we will be acting in two directions. On the one hand, we need to increase our forte in very important clients. Today we have 4% of clients that give us 40% of our revenue. I think that we probably can go slightly higher than that in the future by doing what he did in Milan around the world. So I think that the Shanghai event is something that we expect quite a lot. We will have in September another important event in New York to go in the same direction.
Speaker Change: Is too.
Speaker Change: Avenue's on one side.
Speaker Change: Increase our fault.
Speaker Change: Very important clients. They we had 4% of the Cline.
Speaker Change: Giving us 40% of the revenue.
Speaker Change: Things that are we probably is going to slightly higher.
Speaker Change: And that in the future.
By doing what you did in Yunnan.
Speaker Change: Around the world So I think that this.
Speaker Change: Shanghai event.
Speaker Change: Thanks.
Speaker Change: Quite a lot we will have a September another important event in New York.
Speaker Change: To go into.
Speaker Change: In the same direction and so.
Gildo Zegna: And so that will take advantage of our personalization project that takes into consideration bespoke, special items, a very high-value item that the customer can buy by appointment only, and they cannot find in the store. And so I think that this is one thing. The other side is icons.
We are taking advantage of our personalization project that Stacy consideration.
Speaker Change: Bespoke they give us.
Speaker Change: <unk> spend.
Speaker Change: Specialized so dig English has already shown a very high value add some there is a customer can buy a floor and they cannot find it in the store and so I think that is a is one thing the other side is.
Speaker Change: Iqos three per stage.
Gildo Zegna: The triple-stitch second skin has been the highlight of the season in terms of icons product, and I must say that an interesting part of those customers knew. So that surely will drive additional business, and the goal is to have those customers come back to us, not only sticking with and buying one product. And I do believe that amplification in Milan with all these young people can drive additional customers into the store and into the online business. I must say that retail business this season has been quite good for the brand. And surely all these promotions have helped to go in that direction.
Speaker Change: <unk> has been the high end of that.
Speaker Change: The season in terms of kind of items Bravo.
I must say that the interest part of those customer rule. So.
Speaker Change: That surely.
Speaker Change: Dry.
Speaker Change: <unk> business and the goal is to have both cast allowed to come back to us.
Speaker Change: The only sticking and buying one product and they do believe they're going to vacation what in Milan with all these young people can drive additional customer into the store and into the online business I must say that the east tailored business.
Speaker Change: This season has been quite good for the Zale brand from surely old is it.
Speaker Change: Promotion.
Speaker Change: It helps to go in that direction.
Gildo Zegna: Thank you. We will leave the floor to another question. Thank you.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: Thank you Anthony.
Speaker Change: We leave the floor.
Speaker Change: So another question. Thank you.
Operator: The next question comes from Oliver Chen of TD Cowen. Please go ahead.
Speaker Change: The next question comes from Oliver Chen of TD Cowen. Please go ahead.
Katie Ann: Hi there. Thank you. This is Katie Ann on behalf of Oliver Chen.
Oliver Chen: Hi, there. Thank you this is katie on for that Sam Congrats.
Katie Ann: Congratulations on the strong growth within the U.S. We just want to ask a quick question about that growth and how much of that is related to strength within the DTC channel and how would you characterize the relative health of the U.S. consumer versus other clientele across the globe, between Europe as well as China and Japan. And then the follow-up to that is really around tourism. What are your expectations for tourism this year, specifically from China? Thank you.
Oliver Chen: Congratulations on the strong growth within the U S.
Katie: We just want to ask a quick question around.
Katie: That U S growth and how much of that is related to strength within the teaching E channel and how would you characterize the relative health of the U S consumer versus.
Katie: Other clientele across across the CRO between especially in Europe, as well as our China and Japan.
Katie: And then the follow up to that is really around tourism.
Katie: What are your expectations for tourism.
Katie: Yeah, specifically from from China.
Yeah.
Katie Ann: Sorry, the first question is on the US market or US nationalities. Maybe it was not as clear to us.
Katie: Sorry.
Katie: The first question is on the U S market absolutely.
Absolutely externalities.
Katie: Maybe it was not clear to us.
Katie:
Katie: So first question is Uh huh.
Katie Ann: The first question is... Sure, apologies. The first question is on U.S. growth, and what were the key drivers for growth in the U.S.? Okay.
Speaker Change: Sure apologies. The first question on the U S growth and what were the key drivers in that what the growth is in the U S market.
Perfect.
Gildo Zegna: Clearly, for Zegna. For the Zegna Brand. Now, thank you.
Speaker Change: Okay.
Speaker Change: Clearly for us.
Speaker Change: For example brands no. Thank you.
Speaker Change: I think we are we are quite unique in their growth. If you see the traction we gained last year and this year, we are blue in ER.
Gildo Zegna: I think we are quite unique in growth. If you see the traction we gained last year and this year, we have proven... I think it's quite different from most other brands because we decided to focus on the high end of the market, and we decided to become more retail and retail sales. And I think that we increased the specialization factor, we increased the service factor, and we have created this incredible form of outreach phenomenon by which you can... [inaudible] SAC's Fifth Avenue store that we converted last year has proven to be extremely productive.
Speaker Change: Quite different from.
Speaker Change: Most of other brands, because we decided to focus on the high.
Speaker Change: And of the market and we decided to become more of a bit of a wholesaler.
Speaker Change: And I think that we increase.
Speaker Change: If there's a recession factor we increase is certainly a factor.
Speaker Change: And we have created these incredible corticolous outreach phenomenon, but we'd certainly again.
Speaker Change: Attract.
Speaker Change: Our customer buy in application.
Speaker Change: I will say is associate there and they can propose the news that interaction or the new <unk>.
Speaker Change: Drop that we receive a merchandise on a monthly basis, so I think.
Speaker Change: There's been a mix.
Speaker Change: <unk> and <unk>.
Speaker Change: I'm going to hand, and converting more wholesale.
Speaker Change: <unk> and.
So again, making the last example of effects.
Speaker Change: Revenue story as we go along.
Gildo Zegna: We'll be converting our biggest flea market store in LA into our biggest flea market store in the second half of the year. We'll be completely converting our major customer in Canada, Harry Rosen, several doors in the second half of the year. And this doesn't mean a drop there was a customer is working with them because I do believe that there are a number of good customers, wealthy customers that still like to shop at Neiman, at SAC's, at Nostrum.
Speaker Change: Last year, I mean has proven to be.
Speaker Change: It was extremely productive we'd be converting.
Speaker Change: The biggest biggest neiman Marcus store in L. A.
In the second half of the year will be called European Society of our major customer you've kind of had any of those.
Speaker Change: 700 doors in the second half of the year and this doesn't mean that dropped there once the customer is working.
Speaker Change: We're working with them.
Speaker Change: I do believe that there is a number of good.
Speaker Change: Customer who was the customer delight into sharp agreement.
Speaker Change: Accident and lost some.
Gildo Zegna: And so we would like to make sure that it stays with us, but with a different approach. Zegna decided to move not away from the power suit into the luxury leisure wear wardrobe, which is in line with the new trend of not only American but top customers. And we have done it very, very well. I think that really was the starter. I must say that the fact that we went IPO on Wall Street surely was quite an incredible marketing tool, because you know, Americans like to invest in the brands they believe in. And so I think that was good support.
Speaker Change: And so we.
Speaker Change: We'd like to make sure they stay with us.
Speaker Change: With a different approach or more.
Speaker Change:
Speaker Change: Utilizing all the strength of our brand and making sure that we can create.
Speaker Change: Scale.
Speaker Change: And say stop in merchandising marketing and in the following I mean, the different journey of the customer. So I think that this has been the.
Speaker Change: The strength that we.
Speaker Change: We utilized in America, and we see that you can only go better.
Speaker Change: Hi, permanent convert to tell you the most important things that are behind them.
Speaker Change: The fact that Zane decided to move not away from Power's suite into luxury leisure wear.
Speaker Change: Wardrobe, which.
Speaker Change: Which is in line with the new trend.
Speaker Change: I'm not going anywhere from anything about those top customer and we have done it very very well.
Speaker Change: That really is.
Speaker Change: It was the starter I must say that the fact that we ran.
Speaker Change: I feel the worst right.
Speaker Change: We're glad that incredible marketing tool because you know.
Speaker Change: Americans like to invest in the brand and they believe in and so I think that was a good support.
Speaker Change: <unk>.
Speaker Change: These are the reason why America, Germany has been.
Gildo Zegna: I think that this is the reason why America's journey has been ahead of many, a high-end retail-oriented team, very customer-centric, that has been able to accelerate what we started a couple of years ago. And I think that in any success, the team is playing an incredible part. And so when we said that we were relatively positive about the outcome of the other brands, we are taking some measures to make major changes in the retail world and to follow what they have done so well in the United States. And the second one on tourism, I think it's for Gianluca. I have just one point to be sure.
Speaker Change: Ahead of many other countries.
Speaker Change: And last but not least the theme I think that we have a.
Speaker Change: Super.
Speaker Change: High end retail oriented team very customer centric.
Speaker Change: <unk> has been able to accelerate.
Speaker Change: We started a couple of years ago, and I think that in naming success.
Speaker Change: The team is playing an incredible part and so when we said that we are right now.
Speaker Change: I think deposit deeper on the on the outcome of the other brands.
Speaker Change: We are taking some measures to make major changes.
Speaker Change: Into the retail.
Speaker Change: Ward.
Speaker Change: And to follow up what that has done so well.
Speaker Change: In the United States.
Speaker Change: And then second one on employees and I think it's a general rule.
Speaker Change: Just one point to be sure.
Gianluca Ambrogio Tagliabue: So the growth in America is, of course, the conversion and all that, but there are also positive comps, very positive comps, so it's not just about moving wholesale dollars into retail, but the like for like doors of the new brand are very, very solid. I think something that I was referring to was that when we become retailers, not only do we convert, but we accelerate the growth of those brands. The productivity, sure. We said that the productivity increased by 50%, and to be honest with you, there is an opportunity also to open more stores.
Speaker Change: So the growth in America is of course, the conversion and the but the results show positive comps.
Speaker Change: As part of any positive comps. So it's not just about moving wholesale dollars into retail, but the like for like doors of linear brands.
Speaker Change: Eddie solid.
Speaker Change: A positive so that was I think something that the ones that are starting.
Speaker Change: When we become what I say Larry.
Speaker Change: Not only we can go after that actually we accelerated the growth of Illinois.
Speaker Change: Sure.
Speaker Change: Yes, it is the reverse inquiries.
Speaker Change: Inquiries, there, 60% and to be honest with you.
Speaker Change: There is an opportunity also doable more store.
Gianluca Ambrogio Tagliabue: We have done some openings this year, and most probably, more will come next year. And on tourism, how we see the tourism flow globally for the year and for... [inaudible] Americans very present in Europe like last year also in Q1. We are seeing Chinese very present in Japan to a lower extent, Southeast Asia, of course, Hong Kong, probably less so in Macau, probably less so than it used to be. That is the area that we are not seeing yet. Solid Traction
Speaker Change: Yes, that's another we have done.
Speaker Change: <unk>.
Speaker Change: Opening this year and there was probably more would come next year.
Speaker Change: And until there is no how we see the tourism.
Speaker Change: Well I believe for the EIA in Florida.
Speaker Change: Oh, and then J D.
Speaker Change: We are seeing.
Americans vary.
Speaker Change: Present in Europe like last year also in Q1, we are seeing Chinese very present in Japan.
Speaker Change: Japan to a lower extent southeast Asia.
Speaker Change: Of course, Hong Kong.
Probably less less so in Macau, probably less so than it used to be but that is the area, where we are not seeing yet.
Speaker Change: <unk> solid traction.
Speaker Change: Uh huh.
Gianluca Ambrogio Tagliabue: You're seeing the Eastern.
We are seeing middle eastern.
Gildo Zegna: Gildo Zegna, Oliver Charchafji, Edoardo Zegna, Adrian Duverger, Anthony Charchafji, and Ermenegildo
Very solid in Europe.
Speaker Change: Those are that's what we expect we had a record season last summer in Europe.
Gildo Zegna: We expect, we had a record season last summer in Europe, with American Middle East, and we do expect to have a similar traction this year, in particular because, in Europe, we have several openings in some good resort areas, some resort areas we were not, and I can tell you that the few resort areas have proven to be successful. There are more stores, but the customer sees the brands and relates to that, and I think this will accelerate.
Speaker Change: American and middle Eastern and we do expect gorilla is similar to that.
Speaker Change: This year in particular, because we have several openings in some good those are the areas. Some of those days were lost.
I can tell you that if your windows or did I read it right.
Speaker Change: To be successful there was more stores about before the customer sees the brands and it relates to that.
Speaker Change: And I think these are.
Speaker Change: Right.
Speaker Change: Okay. I think we answer your question nice and any it can come back later and I think we have.
Gildo Zegna: Okay, I think we answered your question. If there is another, you can come back later. And I think we have another question from the audience.
Speaker Change: Another question from the audience.
Operator: The next question is from Louise Singlehurst of Goldman Sachs. Please go ahead.
Speaker Change: The next question today comes from.
Goldman Sachs: We think we'll have a Goldman Sachs. Please go ahead.
Louise Susan Singlehurst: Hi, good afternoon, everyone. Thank you for taking my questions. I'll stick to two, please. Just in terms of the outlook, I wonder if you could just confirm that obviously you are happy with the above 10% sales CAGR, the 20% EBIT CAGR in the medium term, and if there's anything in the period that you've seen that makes you feel differently about any of the regions? Obviously, we've talked about the China, US, and European cluster. And then my second question, just given the weakness in China, which isn't a surprise given the tough comp base, but is there anything that we should be considering for the margin implications for the Zegna brand with a negative drag from China for the first half? Thank you.
Goldman Sachs: Hi, Good afternoon, everyone. Thank you for taking my questions I'll stick to two please.
In terms of the outlook I Wonder if you could just confirm.
The above 10% sales cargo the 20% EBIT.
Speaker Change: Medium term and if there's anything.
Goldman Sachs: In the period that you're seeing that makes you feel differently about any of the regions. Obviously, you've talked about the China U S and European cluster and then my second question, just given the weakness in China, which isn't a surprise given the tough comp base, but is there anything that we should be considering for the margin implications for the <unk> brand with NEC.
Goldman Sachs: It is drag from China for the first half thank you.
Louise Susan Singlehurst: Thank you, Louise. I'll leave it to Gianluca, I think both of them, and then Gildo wants to add anything.
Speaker Change: Thank you Luisa leads to generally look I think both of them at.
Speaker Change: Once thought that anything.
Gianluca Ambrogio Tagliabue: Hi Louise. So yeah, we are confirming the outlook for the midterm. We disclosed that in New York, so there are no changes in our outlook. And as it refers to China, of course, being cautious, we are also taking actions to protect the bottom line on the cost side without hurting the long-term health of the brand. So, for instance, the big event in Shanghai in May, we keep on doing it. We are not totally changing the direction, but there are, of course, some discretions, topics that we can control are in our target in order to ensure SAC. Deriving a softness is also working on the cost in China.
Speaker Change: So yes, we are confirming the outlook for the midterm, we will disclose the in New York. So there are no changes in our outlook.
Speaker Change: And as it refers to China.
Speaker Change: Of course.
Speaker Change: Being cautious we are activating also actions to protect the bottom line on the cost side without hurting the long term health of the brands. So for instance, the big event in Shanghai in May we keep on doing it.
Speaker Change: We are not changing it.
Speaker Change: Totally the direction, but of course some discretional.
Speaker Change: Opex that we can control are our target in order to.
Speaker Change: Offset.
Speaker Change: The revenue softness also working on the cost line in China, well I think that the lending Bulletin board is where we are.
Gildo Zegna: No, I think that one important point is that we are a manager of inventory in a tent way, in a careful way this year. And so probably some special attention will go to the level of inventory to make sure that we have the right things, but we don't have too much. I think that the fact that we manage, we never talk enough about the fact that we are an integrated chain, thanks also to the texting platform.
Speaker Change: Our management of inventory.
Speaker Change: We you know.
Speaker Change: <unk> turned away in a careful way these are easier and so probably.
Speaker Change: Some special eventually go.
Speaker Change: The level of inventory to make sure that we have are the right things, whether we don't have too much.
Speaker Change: I think that the trend that we manage.
Speaker Change: We never okay enough.
Speaker Change: Enough about our.
Speaker Change: We have an integrated chain thinks it will also take some blood flow and the thing that through the integrated supply chain, we can surely.
Gildo Zegna: And I think that through this integrated supply chain, we can surely do a good job to control the level of inventory. And I think that this is probably the area in which we are putting a lot of attention. And as a matter of fact, we will have our team travel to several cities in China to understand, you know, if the merchandising degree among cities has to be changed or what we can do, you know, to enhance the attraction of our brand and, in particular, to contribute to this new development of the new Zegna branding, as we did in the States.
Speaker Change: Surely do.
Speaker Change: Good.
Speaker Change: Good job to control the level of inventory.
Speaker Change: Probably the area.
Speaker Change: We are proving it out the potential.
Speaker Change: There's another effect.
Speaker Change: We will have our.
Speaker Change: Team.
Speaker Change: <unk> team traveling.
Speaker Change: So seven of the Cps.
Speaker Change: China too.
Speaker Change: Understand.
Speaker Change: The merchandising.
Speaker Change: Degree most cities.
Speaker Change: It has to be.
Speaker Change: The change, though what we can do to enhance the attraction of our brand and in particular to contribute too.
Speaker Change: There is a new development.
Speaker Change: But I mean as we did in the states.
Louise Susan Singlehurst: Thank you very much; that was very clear.
Speaker Change: Thank you very much.
Speaker Change: Okay I think we are.
Gianluca Ambrogio Tagliabue: Okay, I think we are. I don't know if there is any last question. Otherwise, I think we can close the call. Is there any follow-up question?
Speaker Change: We have I don't know if there is any last question otherwise I think we can close the call.
Speaker Change: So data is there any follow up question.
Speaker Change: And my follow up questions at the moment, but as a reminder, please press star followed by one if you'd like to join the queue.
Operator: No follow-up questions at the moment, but as a reminder, please press star followed by one if you'd like to join the queue.
Gianluca Ambrogio Tagliabue: Okay, in any case, I just get the opportunity to thank everybody. I'm sure that there will be a follow-up question for us. So, first of all, thank you for all the questions that, as usual, are very, very interesting for us. We are here, Luca, Alicio Poggioli, and myself. We are here for any follow-up questions if you need us. Just call us. And we will, together, convene on this call for the first half of 2034 preliminary revenues on July 25.
Speaker Change: Okay in any case I just didn't get the opportunity to thank everybody I am sure that there would be for that question for asthma. So first of all thank you for all the question that you all are very very interesting for us.
Speaker Change: We are here at <unk>.
Speaker Change: Our leadership of Julian that says we're here for any follow up questions. If you need that just call us and we really together reconvene in this call for their first assets entity before preliminary revenues that are net July 25.
Gianluca Ambrogio Tagliabue: Thank you to everybody, and I will speak to you soon. Thank you. This concludes today's call. Thank you.
Speaker Change: Thank you to everybody and so.
Speaker Change: Thank you.
Operator: This concludes today's call. Thank you for joining us. You may now disconnect your line.
Speaker Change: This concludes today's call. Thank you for joining you may now disconnect your line.
Operator: Thank you.
Thank you.
Operator: This concludes today's call. Thank you for joining us. You may now disconnect your line.
This concludes today's call. Thank you for joining you may now disconnect your lines.