Before the opening of the market on October 24th, Ermenegildo Zegna, the Italian luxury fashion group, released its unaudited key financial data for the third quarter and first nine months of the fiscal year 2023, ending on September 30th.
Thanks to the strong performance of Zegna brand products, especially in the direct sales channels, the group’s third-quarter revenue increased by 20.8% year-over-year (25% at fixed exchange rates) to 431 million euros, with an organic growth rate of 11.3%. Furthermore, revenue for the first nine months increased by 22.9% year-over-year (24.8% at fixed exchange rates) to 1.33 billion euros, with an organic growth rate of 19.2%.
During the earnings call after the financial report, Ermenegildo “Gildo” Zegna, the Chairman and CEO of Zegna Group, disclosed that the group has achieved a compound annual growth rate of nearly 25% over the past two years. He mentioned, “We are now in full rollout mode also in China, which remains a key growth market for the luxury industry. And after 2 years during which we could not visit and therefore, could not follow and support the debrand transformation elevation efforts over the quarter have finally been able to travel with the team 3 times this year to China. Training, events, store allocation and revamping are a key focus for all our brands and much like we have been doing in the U.S. and Europe over the past couple of years. This is why we remain confident that China remains such a big opportunity for us with the 3 brands, Zegna, Thom Browne and Tom Ford.“
Gianluca Ambrogio Tagliabue, the group’s Chief Operating Officer and Chief Financial Officer, added, “We have seen an increase of Chinese buying in Asia recently. I was just — I’m just back from Japan and Korea, and particularly in Japan. Part of the increase in Japan is thanks to Chinese shopping high end Zegna, particularly in our Ginza Osaka shop. Not to mention the super high double-digit increase in onco. We cannot give you the specific on the number, but we surely are very happy on Hong Kong bouncing back and also Macau.” He pointed out that despite more Chinese people shopping while traveling abroad, domestic consumption in China remains dominant for the Zegna Group.
*Note: The revenue for the first nine months of 2023 reflects the consolidation of Tom Ford International LLC since April 29, 2023, and Pelletteria Tizeta S.r.l. since the same date.
In terms of regions, the U.S. market led the growth, with third-quarter revenue increasing by 47.8% year-over-year. The group achieved double-digit organic growth in the EMEA (Europe, Middle East, and Africa) and North American regions. In the Asia-Pacific region, Japan’s revenue recorded a significant increase of 31.8%, while the Greater China region saw a 3.4% decrease (5.2% growth at fixed exchange rates). Furthermore, Europe, the Middle East, and the United States continue to be strong markets for the group’s business, with U.S. customers experiencing more than a doubling in growth since 2021.
Ermenegildo “Gildo” Zegna, Chairman and CEO of Zegna Group, stated, “Our results this quarter continue to showcase the broad-based strength of our three brands and the successful execution of our strategy. I am particularly pleased that we are performing well across a diverse set of regions, as the balance of our geographic mix provides resilience in a highly dynamic environment.”
“Gildo” Zegna also expressed confidence in future developments, saying, “I am confident that the continued progress of the ZEGNA rebranding, including the full implementation of the One Brand strategy in China, the expansion opportunities for Thom Browne, and the integration and evolution of TOM FORD FASHION all provide valuable tailwinds despite the current global operating environment.”
Following the release of the financial report, as of the close of October 24th, Ermenegildo Zegna Group’s stock price fell by 5.88% to $11.53 compared to the previous trading day. However, the stock price has risen by more than 10% year-to-date, with a current market value of approximately $2.886 billion.
In the third quarter of 2023, revenues in APAC reached €158 million for the quarter, up 3.5% year-over-year and up 11.7% year-over-year on a constant currency basis, with an organic growth rate of 5.4%. Revenues for the first nine months of 2023 in APAC were €547 million, up 16.0% year-over-year and up 20.9% year-over-year on a constant currency basis, with an organic growth rate of 20.4%.
In the APAC region, growth was remarkable in Japan, where Group revenues reached €19 million, up 31.8% year-over-year and up 44.8% year-over-year on a constant currency basis, with an organic growth rate of 30.9% for the quarter. The region also benefited from the conversion of 17 stores in South Korea after the acquisition of the Thom Browne business there. In the third quarter of 2023, the Greater China Region saw revenues to €112 million, a 3.4% decrease year-over-year and up 5.2% year-over-year on a constant currency basis, with an organic growth rate of 3.5%. Revenues for the first nine months of 2023 in the Greater China Region were €419 million, up 15.3% year-over-year and up 20.6% year-over-year on a constant currency basis, with an organic growth rate of 19.8%.
| Source: Official Financial Report; Earnings Call
| Image Credit: Official Financial Report
| Editor: Wang Jiaqi