Zegna Executives Talk About Chinese Consumers: The Luxury Business Was Representing Roughly 15% of  Zenga in Greater China

2月 19, 2024

Italian luxury goods group Ermenegildo Zegna announced its preliminary results for 2023: the group’s annual sales revenue rose by 27.6% year-on-year to €1,905 million, thanks to strong demand for its ZEGNA and Thom Browne brands.

Revenues in Greater China rose 20.5% year-on-year to €596 million in 2023, including a 35% jump to €176 million in the fourth quarter, reinforcing its position as the largest single market.

In the conference call that followed, Gildo Zegna, Chairman and CEO of Ermenegildo Zegna Group, Gianluca Ambrogio Tagliabue, Group COO and CFO, and Rodrigo Bazan, CEO of the Thom Browne brand, spoke with analysts from BNP Paribas, UBS, Goldman Sachs and others.

Several of the questions were related to the Chinese market/Chinese consumers, and the latest changes in the Chinese market remained the focus.

According to The Gorgeous Journal, Ermenegildo Zegna Group’s sales revenue trajectory in Greater China is as follows:

  • 165, 142, 112 and 176 million euros in the four quarters of 2023, rebounding strongly in the fourth quarter after a mid-year decline;
  • 438, 589, 494 and 596 million euros for the full years 2020-2023, with 2023 setting a post-listing high for the company.

Gildo Zegna said, compared to the third quarter, we are more satisfied with the performance of the fourth quarter, especially in December. He also shared his three latest observations on the Chinese market:

  • Iconic products are highly sought after and are key to attracting new customers as well as repeat business from loyal customers;
  • Store traffic continues to improve, with further increases in unit volume and store efficiency in the future;
  • The rebranding journey previously undertaken in the U.S. is happening in China.

In terms of sales revenue in Greater China, 2023 is essentially the same as 2021, although Gildo Zegna says that behind the same numbers there are two different concepts – the 2023 results were achieved by taking the Chinese consumer to a higher price point for luxury goods. It’s like saying that the luxury business of Zenga has grown more than 15% because Zenga was representing roughly 15% of  Zenga business in Greater China. 

In terms of Chinese consumers spending outside of China, Gildo Zegna said that we didn’t see any particular growth in the fourth quarter, and that we do see more and more Chinese customers traveling to Japan and Southeast Asia, but not to Europe and the United States. So, (travel retail) is maybe a key point where we can improve this year, especially in the second half, but overall we are cautious about the flow of Chinese tourists this year.

In addition, Gianluca Ambrogio Tagliabue added that currently more than 90% of Chinese customers’ spending occurs in Greater China and more than 80% in mainland China. As a result, we are not like other French luxury groups (where travel retail takes an important part), where consumers prefer to buy products in their home country.

In addition, Gildo Zegna further elaborated on the decline in sales in the wholesale channel of the ZEGNA brand in the fourth quarter of 2023, “We are strengthening our luxury retail business model and we are adopting a new marketing strategy based on a Drop approach. We are abandoning our standard seasonal delivery model and replacing it with a more decentralized delivery cadence, approximately once a month, to ensure that stores are always properly restocked.”

“As a result of this decision, a portion of the spring/summer 2024 deliveries were shifted from the fourth quarter of 2023 to the first quarter of this year, which also impacted the wholesale revenues of the ZEGNA brand in that quarter,” Gildo Zegna added.

“Drop” launches, where the brand opens new products in limited quantities in a shorter cycle than traditional, are often sold out in a very short period of time.

| Image Credit: Ermenegildo Zegna

丨Reporter:Wang Jiaqi

| Editor: LeZhi