Ermenegildo Zegna's Q4 2024: Contradictions Surface in China Performance, Thom Browne Strategy, and TOM FORD Marketing

These are the key contradictions discussed in Ermenegildo Zegna N.V.'s latest 2024Q4 earnings call, specifically including: China's performance expectations, Thom Browne's growth strategy, consumer behavior in China and Hong Kong, and marketing spend for TOM FORD:



Revenue and Gross Margin Trends:
- Ermenegildo Zegna Group reported revenues of EUR1,947 million for FY 2024, up 2% year-on-year, with a gross margin of 67%.
- The increase in gross margin was primarily driven by a more skewed channel mix towards DTC and better inventory management.
- The focus on DTC growth, particularly for the Zegna brand, contributed significantly to revenue stability despite challenging market conditions.

Segment Performance and Strategy:
- The Zegna segment generated an adjusted EBIT slightly below 14%, reflecting a challenging market, particularly in Greater China.
- The strategy involved focusing on embedding a strong retail culture and enhancing the brand's digital presence to drive growth.
- Thom Browne faced a 21% organic revenue decline, which was partially mitigated by cost control actions, while Tom Ford Fashion reported a loss at the adjusted EBIT level, though the brand showed improvement in the second half.

Cost Management and Investments:
- SG&A expenses reached EUR1,008 million, with an incidence of 51.8% on revenues, due to investments in talent and organization across various functions.
- Despite the increase in SG&A, the company emphasized cost control measures and optimized activities within its supply chain to improve efficiency.
- Investments in CRM, marketing, and store expansion were prioritized, with CapEx expected to be between 6% to 7% in 2025.

Midterm Targets and Market Outlook:
- The company outlined midterm targets with revenue expected between EUR2.2 billion to EUR2.4 billion and adjusted EBITDA between EUR250 million to EUR300 million.
- Growth is expected to be low-single-digit in revenue and adjusted EBIT for 2025, with challenges anticipated to continue in Greater China, particularly in Hong Kong.
- The outlook assumes a more sustained growth in 2026 and 2027 as steps taken across all brands and the Filiera begin to yield results.