Dive Brief:
- Ermenegildo Zegna profit was down about 40% to 31.3 million euros in the first half of fiscal 2024, or approximately $34.8 million, compared to 52.1 million euros during the same period last year, according to a Wednesday earnings report.
- Revenue was up 6% to 960.1 million euros for the period, with 2.5% revenue growth from the Zegna brand and a 19.7% revenue decline for Thom Browne, per the report. Tom Ford Fashion, which was consolidated in April 2023 following its acquisition by Estée Lauder Companies and subsequent license to Zegna, saw a 131.9% year-over-year revenue increase, taking into account the shorter reporting period last year.
- The Zegna Group’s adjusted earnings before interest and tax, or EBIT, which the company said is its main performance metric, fell 33% to 80.9 million euros, down from 119.9 million euros in the first half of fiscal 2023.
Dive Insight:
Selling, general and administrative expenses and event-related marketing costs impacted the Zegna Group’s revenue more in the first half of fiscal 2024 than in the previous year, per the release.
In particular, the company said it made increased SG&A investments in “talents to support the future growth of all the Group’s brands, as well as to develop the store network, and the consolidation of Tom Ford Fashion segment results” for an entire six-month period in 2024, versus a shorter two-month period in 2023.
“The first half of 2024 was marked by important investments in all three of our brands to further strengthen and foster ongoing value creation for each of them,” Ermenegildo Zegna, group chairman and CEO, said in a statement. “We continued to double down on the successful Zegna One Brand Strategy, recently exemplified by the Villa Zegna event in New York. We have taken decisive actions to reinforce the Thom Browne organization both at HQ and in key regions. And, at Tom Ford Fashion, we recently announced Haider Ackermann as the new Tom Ford Creative Director — a pairing that we are confident will take the brand to new heights.”
By segment, H1 adjusted EBIT for the Zegna brand dropped 15% to 85 million euros year over year, while adjusted EBIT for Thom Browne fell 36% to 20.2 million euros.
Meanwhile, H1 adjusted EBIT for the Tom Ford Fashion segment fell more than 375% to a negative 11.9 million euros from a positive 4.3 million in H1 2023, although the company cautioned that the year-over-year comparison “is not meaningful since H1 2023 consists of approximately just two months” of results.
Zegna’s CEO said the luxury industry was going through “an important normalization phase and continues to face macroeconomic and geopolitical uncertainties around the world.”
He added that the first-half operating results were also impacted by the company’s decision “to continue investing in key projects,” some of which were concentrated in H1.
In addition, the company has “implemented cost controls while continuing to operate with appropriate caution,” he said. “Even though the overall environment is expected to remain even more challenging, I am confident that our projects and actions are the right ones to unleash the untapped long-term potential of all three of our brands.”
