MILAN — The Ermenegildo Zegna Group is back in the black, after the impact of the COVID-19 pandemic last year.
In the six months ended June 30, the Italian group reported a profit of 32.2 million euros, which compares with a loss of 87.8 million euros in the same period last year.
Boosted by a strong performance in Greater China, revenues rose 49.9 percent to 603.3 million euros, compared to 402.4 million euros the first half of 2020, with a slightly negative currency impact and an acceleration of revenues in the second quarter compared with the first quarter.
In the first half, sales at the Ermenegildo Zegna brand were up 36.1 percent to 465.9 million euros, compared with 342.3 million euros in the first half of 2020, despite traffic being still below pre-COVID-19 levels. The performance was lifted by the direct-to-consumer channel mainly in the United Arab Emirates, the U.S. and Greater China, as well as by the wholesale channel.
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Zegna acquired a majority stake in Thom Browne in August 2018 and sales at the label more than doubled to 142.6 million euros, compared with 63.2 million euros in the first half of 2020.
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The growth was both organic and driven by an expansion of the brand’s retail footprint through the opening in the first half of seven new directly operated stores, of which six are in the Asia Pacific region and one in the Europe, Middle East and Africa area. These were in addition to 10 store openings in 2020. The wholesale channel experienced a robust growth, including the benefit of a partial shift of the spring 2021 pre-collection deliveries from the fourth quarter of 2020 to the first quarter of 2021.
“In the last 18 months, we have lived through an unprecedented situation,” said Gildo Zegna, chief executive officer of the group. “I am grateful and proud of the resiliency, adaptability and motivation that the Zegna Group and all of our people have demonstrated, embracing challenges and turning them into opportunities. Our enhanced focus on our legacy brand, the strengthening of our luxury textile platform and the dynamic pace of Thom Browne have supported a strong recovery during the first half of this year, which has accelerated over the summer. While the public health situation remains uncertain globally, we are ready to face the coming months with enthusiasm, focusing on the implementation of the Zegna One Brand strategy. We will continue to invest in creativity, innovation, talent and technology in order to sustain the Zegna Group’s leadership position in the global luxury market.”
In the first six months of the year, adjusted operating profit amounted to 66.8 million euros, compared to an operating loss of 52 million euros in the first half of 2020.
Adjusted operating profit at the Zegna brand totaled 39 million euros. This compares with a loss of 52.7 million euros in the first half of 2020, which was affected by severe disruptions caused by the pandemic.
“The normalization in the business with a return to sales growth in the first semester is the main driver of the improvement, despite higher purchases, restored marketing expenses, higher variable lease payments, normalized personnel charges as well as lower rent relief compared to the same period of last year,” said the company in a statement Thursday.
At Thom Browne, adjusted operating profit also returned to normal, to 27.8 million euros, or 19.5 percent of the segment’s revenues, and despite the costs associated with the expansion of the direct-to-consumer network and the structure of the headquarters, as well as a rise in marketing expenses.
In the Asia Pacific region, which is the group’s largest market, revenues increased 63.2 percent to 340.8 million euros. Greater China drove the gains, as sales climbed 81.1 percent to 288.5 million euros, thanks to the group’s strong positioning in the area coupled with local demand.
Other markets in the region were impacted by lower tourism and COVID-19 restrictions, including Japan, where sales declined by 9.1 percent to 24.5 million euros.
In the EMEA region, which continued to be affected by the limited flows of tourists due to the pandemic, Zegna saw an increase in revenues of 37.9 percent to 182.5 million euros compared to 132.3 million euros as domestic traffic resumed, especially in the second quarter thanks to the loosening of COVID-19-related restrictions.
In particular, Italy outperformed the regional average with a growth of 65.2 percent to 84.6 million euros.
North America, which includes Canada, recorded a revenue increase of 26.8 percent to 70.7 million euros, with an acceleration in the second quarter. Performance was driven by the U.S., which grew by 28.9 percent to 65 million euros in the six months, compared to the same period in 2020.
In the first half, sales in Latin America almost doubled to 7.1 million euros.
The group provided an outlook, stating that the months of July, August and September “have continued to show a solid growth in revenues compared to the same period in 2020” and that the worldwide performance of the group is close to pre-COVID-19 levels at the end of September.
As of June 30, net debt stood at 73.3 million euros, which compares to 6.7 million euros at the end of December last year.
Financial expenses amounted to 16.7 million euros, down from 24.1 million euros in the first half of 2020. In 2020, the group made donations of almost 4.5 million euros to charitable organizations in Italy and abroad to support initiatives related to the COVID-19 pandemic.
In July, the Ermenegildo Zegna Group said it expects to publicly list on the New York Stock Exchange by the end of the year in a deal that is expected to give the fashion group a market capitalization of $2.5 billion. To this end, the Italian men’s wear giant has entered into a business agreement with Investindustrial Acquisition Corp., a Special Purpose Acquisition Corporation, or SPAC, sponsored by investment subsidiaries of Investindustrial VII LP.
The deal will allow Zegna to further expand globally and continue to build its manufacturing pipeline through acquisitions.
In June, in a sign of an increased effort to protect the country’s unique supply chain, Zegna and Prada joined forces to acquire a majority stake in Filati Biagioli Modesto SpA, specialized in the production of cashmere and other precious yarns. Zegna has been steadily building its own textile supply chain, most recently by buying 60 percent of Tessitura Ubertino, a leading manufacturer of high-quality women’s fabrics, based in Prativero, near Biella. In addition to its own Lanificio Zegna, the group’s textile supply chain includes Lanerie Agnona, Tessitura di Novara, Bonotto and Dondi, all acquired over the years, helping to raise its position in the country in terms of variety and size. In 2018, the family-owned group also finalized the acquisition of a controlling stake in Pelle Tessuta, which specializes in the weaving of leather, and bought a majority stake in Cappellificio Cervo, a historic men’s hat brand based in Biella.
Following the IPO, the Zegna family will continue to control the company with a stake of about 62 percent. Investindustrial will have an 11 percent stake and 27 percent would be free floating. Based on the transaction value, the merged entity will have an anticipated initial enterprise value of $3.2 billion.