Zegna Aims to Open 50 Tom Ford Retail Stores, Double Group Margins Mid-Term

Zegna Group forecast common progress above 10 % per yr mid-term because the Italian menswear specialist pursues its newfound momentum as a multi-brand, listed trend firm. The group hopes to double its profitability from an adjusted EBITDA margin of 10 % final yr to twenty % inside the subsequent few years, Zegna added in an investor presentation in New York on Tuesday.

Zegna’s occasion marked the primary time the Italian luxurious firm had revealed plans for its Tom Ford unit after taking up trend operations for the label earlier this yr in a take care of cosmetics big Estée Lauder Firms, which bought Tom Ford for $2.8 billion in late 2022.

Zegna mentioned it could deal with boosting Tom Ford’s womenswear — which at the moment represents simply 30 % of the unit’s gross sales. Particularly, it needs to develop the model’s equipment supply, which at the moment solely makes up round 10 % of the womenswear commerce. Promoting extra footwear and equipment and fewer top-priced eveningwear would possible be a boon for the label’s margins — in addition to assist it broaden its relevance amongst customers who look to luxurious manufacturers for gadgets they will put on typically.

Chairman Gildo Zegna and Tom Ford CEO Lelio Gavazza repeated that their long-term imaginative and prescient was for the label to develop into “one of many 10 most necessary world trend manufacturers.” It’s a lofty, even grandiose, goal for a model which reported trend income of €139 million ($149.8 million) for the 12 months by way of September. That’s in comparison with €3.3 billion in annual gross sales at Saint Laurent or €10 billion at Gucci — each homes the place Ford designed earlier than launching his namesake label.

However Zegna sees excessive potential for taking Tom Ford’s slick model codes and new designer Peter Hawking’s well-received runway imaginative and prescient, and plugging them into Zegna’s built-in provide chain. The corporate controls manufacturing for its menswear enterprise from sheep farms to cloth mills and factories.

After embarking on a cautious model reinvention over the previous half-decade, now, Zegna is searching for to leverage its manufacturing savvy to develop its acquisitions with out compromising high quality.

“To be an aggregator of luxurious, that’s the energy of this group,” chairman Gildo Zegna mentioned.

A Firm Remodeled

Ermenegildo Zegna, a knitwear and tailoring specialist which was based in 1910, has remodeled its profile in recent times: going from a considerably stodgy, privately held, males’s formalwear home to a listed, multi-brand participant.

After buying Thom Browne at a $500 million valuation in 2018, Zegna set about rejuvenating its personal namesake line: phasing out the less-expensive “Z Zegna” sub-brand, dropping “Ermenegildo” from its branding, and remerchandising its shops with a deal with sneakers and elevated casualwear staples like chore jackets and five-pocket trousers.

The revamped technique has succeeded in attracting new, youthful customers: the Zegna model has seen its common buyer’s age decline by 7 years since 2019, the corporate mentioned Tuesday.

Different current developments at Zegna embody going public within the US in late 2021, adopted by the Tom Ford take care of Estée Lauder in April. Zegna had beforehand held the license to fabricate and distribute solely Tom Ford menswear earlier than forging a broader settlement with Estée Lauder amid the namesake designer’s retirement earlier this yr.

Retail Growth

Now that Zegna has revamped its namesake model and constructed up its group, it’s turning its consideration to progress. There, it sees loads of potential. Tom Ford, for instance, could have small gross sales in comparison with luxurious megabrands, the model’s consciousness is buoyed by its a lot bigger magnificence division: the Estée Lauder-owned unit is anticipated to achieve round $1 billion in gross sales of fragrance and make-up within the subsequent few years.

“This model is way greater than its enterprise,” Zegna mentioned. “It’s so highly effective. Now now we have so as to add items to it, and execute.”

Increasing the model’s geographic footprint is the primary order of enterprise, as Tom Ford at the moment has 51 directly-operated areas throughout simply 9 nations. Gavazza mentioned the group would roughly double that quantity over the subsequent few years to over 100 shops.

Zegna additionally plans to open further retail areas for the group’s flagship model — which is within the course of of shopping for again its South Korean enterprise from a neighborhood associate — and American designer label Thom Browne. With these storefronts, the group plans to extend total retailer depend to roughly 500 areas within the subsequent few years, up from 384 shops in the present day.

Thom Browne

Driving progress by way of directly-operating shops and limiting wholesale can also be a spotlight for Thom Browne. After utilizing its iconic suiting, striped-ribbon motifs and savvy trend week spectacles to drive broad model consciousness and recognisability, the 20-year-old model now must “convert the model consciousness to product consciousness,” CEO Roger Bazan mentioned.

“We have now every kind of merchandise; we have to higher clarify the sorts of merchandise now we have,” Bazan mentioned, laying out a plan to stability its sturdy commerce with high-spending model fanatics with constructing wider consciousness amongst youthful, extra aspirational clients.

“Folks consider us as extraordinarily costly, in all probability due to [the reputation for] high quality … It’s not that costly,” Bazan mentioned.

Thom Browne sells $3,300 greenback fits, $550 cotton sweaters and $175 greenback beanies. Eyeglasses begin at $470, whereas a swim goggle-inspired titanium pair from the model’s Paris couture present in July are priced at $3,000.

Zegna hopes to develop direct-to-consumer gross sales at Thom Browne by a high-teens proportion yearly within the coming years.

Forward of Targets

Zegna Group is forward of schedule on reaching earlier mid-term targets introduced in 2022, together with €2 billion in annual income and an EBITDA margin above 15 % (excluding Tom Ford), Zegna mentioned. That success inspired the transfer to announce new ambitions.

As many luxurious manufacturers struggled to navigate slowing demand this yr, Zegna forecast full-year income progress above 25 %.

Whereas forecasting slower progress within the coming years, Zegna mentioned he stays “assured” within the group’s skill to surf two parallel tendencies: continued casualisation within the luxurious market, alongside the return of extra dressed-up choices that suffered in the course of the pandemic.

“Casualisation in luxurious will hold gaining momentum no matter the place the world goes, even because the eveningwear strengthens. Folks exit and wish to take pleasure in themselves once more on social events. We have now the chance to work on each alternatives at every of our manufacturers,” chairman Gildo Zegna mentioned.

Alongside its plans for Tom Ford alternative, the group introduced that the Zegna model hoped to propel will increase in retailer site visitors (significantly amongst younger customers) by leveraging informal gadgets like its Triple S sneakers. The model can then encourage these new purchasers (who can afford it) to develop with the model, shifting as much as its conventional core merchandise like cashmere knitwear and fits.

After regularly trimming its wholesale publicity to 16 % of gross sales final yr, Zegna pledged to ratchet the channel to simply 10 % of gross sales mid-term. Many luxurious manufacturers have aimed to spice up margins and burnish their model notion by cracking down on third-retailers, whose discounting practices are laborious to observe and management.