MILAN–(BUSINESS WIRE)–$ZGN #Zegna–Ermenegildo Zegna N.V. (NYSE:ZGN) (Zegna Group, the Group, or the Company), owner of the Zegna and Thom Browne brands, today announced preliminary and unaudited revenues of 1,493 million for the full year 2022, an increase of 15.5% year-over-year. Revenues for the fourth quarter of the year were 407 million, down 0.5% year-over-year. Revenues at constant currency (cFX)4 grew 11.0% and declined 2.9% in FY 2022 and 4Q 2022, respectively. Excluding the Greater China Region (GCR), which was affected by COVID-related restrictions throughout 2022, particularly from mid-March to the end of May and then again in the fourth quarter, revenues were up 42.0% year-over-year for FY 2022 and up 24.7% year-over-year for 4Q 2022 (up 38.6% and up 21.1% at cFX in FY 2022 and 4Q 2022, respectively).
Ermenegildo Gildo Zegna, Chairman and CEO of the Zegna Group, said: I am very pleased with how we performed during 2022, in spite of the continued global economic and geopolitical challenges of the year, as well as how we continued to stand by our commitments to the environment, our employees, and our communities. Despite China continuing to be affected by COVID-related restrictions throughout 2022, our growth for the year shows the soundness and success of our strategy, global reach, and flawless execution, with ongoing success in the Middle East, U.S., and Europe. After my recent trip to Greater China, I am optimistic about Chinas reopening as we are witnessing a rebound in our business and the industry at large. We will remain flexible to proactively face external challenges while continuing to strengthen our brands, execute on Our Road strategy, and deliver on our mid-term targets.
He added: 2022 was another year of important milestones for the Group. In May, we shared our financial ambitions and sustainability strategy at our very first Capital Markets Day, hosted at Oasi Zegna. In August, we launched a unique partnership with Real Madrid, bringing together our two storied brands to become the clubs Official Luxury Travelwear Partner. And as a company built on caring for the environment, we were extremely proud that in September, thanks to our own production and integrated supply chain, we were able to launch Oasi Cashmere, a significant step on Our Road toward traceability and meeting our sustainability goals. Finally, in November, we announced the TOM FORD fashion business transaction alongside The Estée Lauder Companies. Subject to and following the completion of that transaction we will operate the TOM FORD fashion business under a long-term license from The Estée Lauder Companies and acquire the related fashion operations. All of these are strong steps towards realizing our long-term vision for the Group.
Select Highlights from the Fourth Quarter of 2022
Review of Fourth Quarter and Full Year 2022 Preliminary and Unaudited Revenues5
In 4Q 2022, Zegna Group generated revenues of 407 million, a 0.5% year-over-year decrease, bringing total revenues for FY 2022 to 1,493 million, up 15.5% year-over-year. At cFX, revenues grew 11.0% and declined 2.9% year-over-year in FY 2022 and 4Q 2022, respectively. Excluding the GCR, which was affected by COVID-related restrictions throughout 2022, particularly from mid-March to the end of May and then again in the fourth quarter, revenues were up 42.0% year-over-year for FY 2022, and up 24.7% year-over-year for 4Q 2022 (up 38.6% and up 21.1% year-over-year at cFX in FY 2022 and 4Q 2022, respectively). Growth in the fourth quarter was also affected by the end of the Tom Ford International distribution license agreement with the Fall/Winter 2022 season deliveries, which had a negative impact on consolidated revenues for 4Q 2022 of 2.0% year-over-year.
Revenues by Segment
Zegna: Revenues for the Zegna segment, which includes Zegna-branded products as well as the Textile and Third-Party Brands product lines, reached 334 million in 4Q 2022, a decrease of 2.2% year-over-year, with the drop in GCR direct-to-consumer (DTC) revenues and the end of the Tom Ford International distribution license agreement more than offsetting solid performance in other markets. Zegna segment revenues for FY 2022 were 1,177 million, a 13.7% year-over-year increase.
Thom Browne: The Thom Browne segment continues to be a significant growth driver for the Group, with 4Q 2022 revenues of 76 million, up 11.5% year-over-year. In FY 2022, the Thom Browne segment posted revenues of 331 million, up 25.3% year-over-year. Thom Browne saw womens products growing slightly faster than mens, while childrens almost doubled. Despite COVID-related restrictions and closures affecting the DTC channel, positive performance was sustained by strong wholesale demand, e-commerce through T-Mall in China, and the contribution of 11 net store openings in 2022, bringing the total number of directly operated stores to 63 at the end of 2022.
Revenues by Product Line
Zegna-Branded Products: Zegna-branded products revenues were 274 million for 4Q 2022, down 2.7% year-over-year, but up double-digit year-over-year excluding GCR, benefitting from the rollout of the One Brand collection since July 2022. Revenues for FY 2022 were 924 million, up 9.0% year-over-year. Shoes showed exceptional performance throughout the year, while growth in the luxury leisurewear segment remained steady. Tailoring and Made-to-Measure both saw a strong rebound in 2022, especially in the U.S. and EMEA.
Thom Browne: Thom Browne continues to be a growth pillar for the Group, with revenues of 76 million in 4Q 2022, up 11.4% year-over-year, bringing FY 2022 revenues to 330 million, up 25.3% year-over-year. The growth was largely driven by wholesale demand.
Textile: Textile revenues were up 7.1% year-over-year for 4Q 2022, reaching 38 million. Revenues for the year were up 33.8% to 137 million, with all the key subsidiaries experiencing healthy double-digit growth.
Third-Party Brands: Third-Party Brands revenues reached 18 million in 4Q 2022, down 18.8% year-over-year, impacted by the termination of the Tom Ford International distribution license which ended with deliveries of the FW 2022 collection, replaced by a supply agreement. Excluding this impact, Third-Party Brand revenues were up by strong double-digits in 4Q 2022. We expect the negative impact to be more than offset by the consolidation of the TOM FORD fashion business subject to and upon closing of the transaction with The Estée Lauder Companies, expected later this year. For FY 2022, Third-Party Brands revenues were up 30.5% year-over-year to reach 98 million, driven by higher Gucci orders and Tom Ford deliveries for SS22/FW22.
Revenues by Geography
The Group saw significant growth across geographies, excluding the GCR due to the rapidly changing nature of the COVID-19 policies in the region. Excluding the GCR, the Group saw a 42.0% increase in revenues in FY 2022 driven by performance in Europe, the Middle East, and the U.S. Revenue growth was 24.7% in 4Q 2022, excluding the GCR.
Activities in Europe, the Middle East, and the U.S. demonstrated the strongest growth in 4Q 2022. EMEA revenues in 4Q 2022 were 140 million, a 22.8% year-over-year increase, of which the Middle East and Africa (MEA6) region represented 24 million, a 34.9% year-over-year growth, building on the regions robust performance in the earlier quarters of the year. For FY 2022, EMEA revenues reached 520 million, up 36.8% year-over-year. Revenues from the Middle East and Africa (MEA5) region constituted 69 million for the year, a 56.1% year-over-year growth.
North America 4Q 2022 revenues increased 26.7% year-over-year and amounted to 82 million, of which the U.S. made up 77 million, up 26.1% year-over-year. The U.S. continues to be an area of focus for the Group as we execute our strategic growth plan. Revenues in North America reached 295 million in FY 2022, up 54.1% year-over-year, with the U.S. up 53.5% to 270 million.
Group revenues in the GCR were down 30.3% year-over-year for 4Q 2022, reaching 131 million. The decrease was 16.1% for FY 2022, with revenues of 494 million for the year. The drop in revenues was a result of COVID-19 disruptions throughout the year, especially severe during the fourth quarter. After restrictions were eased in early December, we also experienced temporary store closures due to staff shortages. Operations have since normalized, returning to more predictable activities.
Revenues by Channel
In FY 2022, DTC revenues for Zegna-branded products saw an 8.4% year-over-year increase, reaching 773 million. DTC revenues for Thom Browne increased 5.1% year-over-year to 146 million in FY 2022, pushed by high-double-digit performance in the U.S., EMEA, and Japan. The FY 2022 increases in DTC revenues come despite decreases of 6.2% and 10.0% for Zegna-branded products and Thom Browne, respectively, in 4Q 2022, as a result of the COVID-19 disruption in the GCR.
For FY 2022, wholesale revenues reached 570 million, up 30.7% year-over-year, with Thom Browne wholesale revenues growing 47.7% for the year to 184 and Zegna-branded product wholesale revenues growing 12.6% for the year to 151 million. In 4Q 2022, the Group saw growth across the wholesale channel, with revenues totaling 132 million, a 16.1% year-over-year increase. This is attributed to exceptional wholesale growth for Thom Browne of 62.4% year-over-year during the quarter and consistent growth of 20.7% year-over-year for Zegna-branded products during the quarter. At the end of FY 2022, DTC revenues represented 62% of total sales, down from 66% in FY 2021, as a result of the disruptions affecting the GCR, which is mainly a retail market.
Outlook
The Group expects a moderate improvement in Adjusted EBIT3 and a substantial improvement in Profit for FY 2022 compared to 2021 despite significant headwinds in the GCR. The Group also continues to expect a Cash Surplus increase in the second half of the year, in line with guidance. Medium-term targets remain unchanged as Zegna continues to focus on executing its strategy, targeting 2 billion in revenues and 15% Adjusted EBIT Margin3 in the medium term, excluding the TOM FORD fashion business. This outlook assumes no further future escalation of the war in Ukraine, no significant macroeconomic deterioration, no further disruption linked to the COVID-19 pandemic in the GCR or elsewhere, and no other unforeseen events.
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1 Throughout this press release, FY 2022 and 4Q 2022 revenues are preliminary and unaudited.
2 Throughout this press release, revenue growth refers to year-over-year growth.
3 Adjusted EBIT, Adjusted EBIT Margin, and Net Financial Indebtedness/(Cash Surplus) are non-IFRS financial measures. See the Non-IFRS Financial Measures section starting on page 4 of this press release for the definition of such non-IFRS measures.
4 This press release includes information about our revenues measured on a constant currency basis, which is a non-IFRS financial measure. See the Non-IFRS Financial Measures section starting on page 4 of this press release for a definition of such non-IFRS measure.
5 All % changes are calculated on an actual currency exchange rate basis, unless otherwise specified.
6 MEA includes Middle East and African countries and Turkey.
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Conference Call
As previously announced, today at 8:30 a.m. ET (2:30 p.m. CET), the Company will host a webcast and conference call to discuss its preliminary revenues for 4Q 2022 and FY 2022. A live webcast of the conference call will also be available on the Companys website at ir.zegnagroup.com. To participate in the call, please dial:
Italy (Local): 06 9450 1060
United Kingdom (Local): 020 3936 2999
United States (Local): 1 646 664 1960
All other locations: +44 20 3936 2999
Participant Access code: 064376
An online archive of the broadcast will be available on the website shortly after the live call and will be available for twelve months.
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Next Scheduled Announcement
The next scheduled announcement will be the full-year 2022 earnings on April 6, 2023. To receive email alerts of the timing of future financial news releases, as well as future announcements, please register at https://ir.zegnagroup.com.
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Non-IFRS Financial Measures
Zegnas management monitors and evaluates operating and financial performance using several non-IFRS financial measures including: adjusted earnings before interest and taxes (Adjusted EBIT), Adjusted EBIT Margin, Net Financial Indebtedness/(Cash Surplus) and revenues on a constant currency basis. Zegnas management believes that these non-IFRS financial measures provide useful and relevant information regarding Zegnas financial performance and financial condition, and improve the ability of management and investors to assess and compare the financial performance and financial position of Zegna with those of other companies. They also provide comparable measures that facilitate managements ability to identify operational trends, as well as make decisions regarding future spending, resource allocations and other strategic and operational decisions. While similar measures are widely used in the industry in which Zegna operates, the financial measures that Zegna uses may not be comparable to other similarly named measures used by other companies nor are they intended to be substitutes for measures of financial performance or financial position as prepared in accordance with IFRS.
Adjusted EBIT and Adjusted EBIT Margin
Adjusted EBIT is defined as profit or loss before income taxes plus financial income, financial expenses, exchange losses and the result from investments accounted for using the equity method, adjusted for income and costs which are significant in nature and that management considers not reflective of underlying operating activities. Adjusted EBIT Margin is defined as Adjusted EBIT divided by revenues of the applicable period.
Zegnas management uses Adjusted EBIT and Adjusted EBIT Margin for internal reporting to assess performance and as part of the forecasting, budgeting and decision-making processes as they provide additional transparency regarding Zegnas underlying operating performance. Zegnas management believes these non-IFRS measures are useful because they exclude items that management believes are not indicative of Zegnas underlying operating performance and allow management to view operating trends, perform analytical comparisons and benchmark performance between periods and among segments. Zegnas management also believes that Adjusted EBIT and Adjusted EBIT Margin are useful for investors and analysts to better understand how management assesses Zegnas underlying operating performance on a consistent basis and to compare Zegnas performance with that of other companies. Accordingly, management believes that Adjusted EBIT and Adjusted EBIT Margin provide useful information to third-party stakeholders in understanding and evaluating Zegnas operating results.
Net Financial Indebtedness/(Cash Surplus)
Net Financial Indebtedness/(Cash Surplus) is defined as the sum of financial borrowings (current and non-current), derivative financial instruments, loans, and certain other financial liabilities (recorded within other non-current financial liabilities in the consolidated statement of financial position), net of cash and cash equivalents, derivative financial instruments and certain other current financial assets.
Zegnas management believes that Net Financial Indebtedness/(Cash Surplus) is useful to monitor the level of net liquidity and financial resources available to Zegna. Zegnas management believes this non-IFRS measure aids management, investors and analysts to analyze Zegnas financial position and financial resources available, and to compare Zegnas financial position and financial resources available with that of other companies.
Constant Currency Information
In addition to presenting our revenues on a current currency basis, we also present certain revenue information on a constant currency basis, which excludes the effects of foreign currency translation from our subsidiaries with functional currencies different from the Euro. We use revenues on a constant currency basis to analyze how our underlying revenues have changed between periods independent of the effects of foreign currency translation.
We calculate constant currency revenues by applying the current period average foreign currency exchange rates to translate prior period revenues of foreign subsidiaries expressed in local functional currencies different than the Euro.
Revenues on a constant currency basis are not a substitute for revenues on a current currency basis or any GAAP-related measures, however, we believe that revenues excluding the impact of foreign currency translation provide additional useful information to management and to investors in analyzing and evaluating our revenues trend.
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About Ermenegildo Zegna Group
Founded in 1910 in Trivero, Italy by Ermenegildo Zegna, the Zegna Group designs, creates and distributes luxury menswear and accessories under the Zegna brand, as well as womenswear, menswear, and accessories under the Thom Browne brand. Through its Luxury Textile Laboratory Platform which works to preserve artisanal mills producing the finest Italian fabrics the Zegna Group manufactures and distributes the highest quality fabrics and textiles. Group products are sold through 500 stores in about 80 countries around the world, of which 302 are directly operated by the Group as of December 31, 2022 (239 Zegna stores and 63 Thom Browne stores). Over the decades, Zegna Group has charted Our Road: a unique path that winds itself through era-defining milestones that have seen the Group grow from a producer of superior wool fabric to a global luxury group. Our Road has led us to New York, where the Group has been listed on the New York Stock Exchange since December 20, 2021. And while we continue to progress on Our Road to tomorrow, we remain committed to upholding our founders legacy one that is based upon the principle that a businesss activities should help the environment. Today, the Zegna Group is creating a lifestyle that marches to the rhythm of modern times while continuing to nurture bonds with the natural world and with our communities that create a better present and future.
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Forward-Looking Statements
This communication, including the section Outlook, contains forward-looking statements that are based on beliefs and assumptions and on information currently available to the Company. In some cases, you can identify forward-looking statements by the following words: may, will, could, would, should, expect, intend, plan, anticipate, believe, estimate, predict, project, potential, continue, ongoing, target, seek or the negative or plural of these words or other similar expressions that are predictions or indicate future events or prospects, although not all forward-looking statements contain these words. Any statements that refer to expectations, projections, or other characterizations of future events or circumstances, including strategies or plans, are also forward-looking statements. These statements involve risks, uncertainties, and other factors that may cause actual results, levels of activity, performance, or achievements to be materially different from the information expressed or implied by these forward-looking statements.
Contacts
Investor Relations/Group Communications
Francesca Di Pasquantonio
francesca.dipasquantonio@zegna.com
+39 335 5837669
Clementina Tito
clementina.tito@zegna.com
Media
Brunswick Group
Brendan Riley / Daria Danelli / Marie Jensen
briley@brunswickgroup.com / ddanelli@brunswickgroup.com / mjensen@brunswickgroup.com
+1 (917) 755-1454 / +39 348 635 1149 / +33 (0) 6 49 09 39 54
Marco Rubino
Community
+39 335 6509552
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