In late April, the Italian luxury group Ermenegildo Zegna announced its financial performance for the first quarter of 2024: total revenue increased by 8.1% year-over-year to €463.2 million, but organically declined by 5.3%.
In the Greater China market, revenue fell 15.3% year-over-year to €139.4 million, with an organic decline of 13.1%, accounting for 30% of the group’s revenue. Specifically, the ZEGNA brand experienced a single-digit decline, while the Thom Browne brand performed poorly.
The Greater China region was the only market that experienced negative growth for Zegna Group this quarter.
During the earnings call, Gildo Zegna, Chairman and CEO of the Zegna Group, and Gianluca Ambrogio Tagliabue, the group’s COO and CFO, attended and shared their latest observations on the Chinese market/consumers and the key to future growth—increasing the brand’s desirability.
Their latest observations on the Chinese market/consumers include:
- The Chinese market is currently undergoing a post-pandemic normalization phase, which is a positive sign. For the ZEGNA brand, China is the last market to undergo a brand reshaping journey and is a place where luxury goods have a higher entry price than in other regions.
- We observe that Chinese consumers are more cautious, especially among aspiring customers.
- The ZEGNA brand performs excellently in China’s high-end market. The iconic footwear Triple Stitch made with SECONDSKIN is very popular in China. Our ultra-luxury new product show was more successful than expected, and the number of custom orders is steadily increasing.
- Over 90% of Chinese customers’ consumption occurs within the Greater China region. Therefore, the overall trends in the Greater China market and Chinese consumers are fundamentally not much different.
Gildo Zegna proposed two major measures to enhance the brand’s desirability during the earnings call:
- Deepening relationships with very important customers. 4% of ZEGNA’s customers contribute 40% of its revenue.
- Highlighting iconic products. In particular, the iconic Triple Stitch footwear has been a highlight of this season’s products. It attracted new customers, which will definitely bring additional business. Our next step is to bring these customers back, not just to purchase a product.
Specific to the Chinese market and consumers, Gildo Zegna believes the key lies in creating brand experiences.
Gildo Zegna revealed that an immersive exhibition called Oasi Zegna, held in early April at Milan Design Week, will land in Shanghai, China, in May. Shanghai will be the second global city to host the event after Milan, where ZEGNA will hold an important event for consumers.
“This will be the first fully customer-centric event held in China. It is by invitation only, including our very important customers, existing customers, and potential customers. Executive Director Alessandro Sartori and brand ambassador Leo Wu will attend, allowing invitees to immerse themselves in the legacy, essence, and authenticity of the ZEGNA brand.”
Gildo Zegna further stated, “I like to imagine the journey of reshaping the ZEGNA brand as building a house, and now we are laying the floor. I know this takes time, but we also know that ZEGNA is built on a unique foundation that other brands cannot replicate. This is a unique heritage of the brand that will continue to promote its success in China and around the world.”
“In fact, we will send our headquarters team to several cities in China to understand the sales situation between different cities, whether adjustments are needed, and how we can enhance brand appeal, especially how to contribute to the development of this brand, just like what we have done in the United States.”
Gianluca Ambrogio Tagliabue added, “Regarding China, we remain cautious, taking measures to control costs to improve profitability, while not harming the long-term development of the brand.”
“We will not completely change direction, but we can control some discretionary operational expenditures to offset the current sales weakness.”
| Source: Official Financial Report, Earnings Call
| Image Credit: Group Official Website
| Editor: LeZhi
