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01/11 10:51
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call summary indicates challenges such as declining wholesale revenues, operational difficulties, and a negative trend in China. Despite some positive aspects like DTC growth and increased gross margins, the Q&A session highlights concerns about the U.S. market and unclear management responses. The market cap suggests moderate volatility, leading to a predicted stock price movement in the negative range (-2% to -8%).
Revenue $1,947,000,000, up 2% year-on-year, driven by Xenia brand organic growth.
Gross Margin 67%, reflecting a 230 basis points improvement year-on-year, driven by a better channel mix towards DTC and improved inventory management.
Gross Profit $1,297,000,000, with a margin of 66.6%, up 230 basis points year-on-year, primarily due to a shift towards DTC sales.
Adjusted EBIT €184,000,000, down from €220,000,000 in 2023, largely due to a challenging sector environment and a decision to streamline the wholesale business.
Profit €90,900,000, reflecting a normalized effective tax rate of 30%, compared to 20% in the prior year.
SG&A Expenses $1,008,000,000, with an incidence of 51.8% of revenues, up from 47.3% in 2023, due to investments in talent and store network expansion.
Marketing Expenses $121,000,000, or 6.2% of revenues, slightly up from $115,000,000 in 2023, reflecting a different timing of spending.
Net Financial Indebtedness $94,000,000, compared to €11,000,000 at the end of 2023.
Free Cash Flow Positive free cash flow generated despite CapEx of $126,000,000.
CapEx Expected to be between 6% to 7% of revenues for 2025, with significant investments in production and distribution.
Trade Working Capital $450,000,000, representing 23.2% of revenues, remaining flat compared to $449,000,000 at the end of 2023.
Tom Ford Collection: The recent Tom Ford show in Paris received significant acclaim, showcasing an innovative collection that has already generated customer interest.
Tom Browne Product Evolution: Tom Browne is enhancing its product offerings while maintaining its distinctive tailoring, with a focus on newness and a strong retail culture.
Celia Velo Sarum Collection: The exclusive collection and advertising campaign outperformed expectations, attracting both existing and new customers.
Valus Aureum Launch: The Valus Aureum collection received positive feedback globally, with Europe and the Middle East performing particularly well.
Market Expansion in the U.S.: Tom Browne opened new stores in Palm Beach, Florida, and plans to open in Los Angeles and New York, enhancing its U.S. footprint.
Dubai Market Engagement: Zena will host its first show outside Milan in Dubai, reflecting the brand's growth and appreciation in the region.
Focus on DTC Strategy: The company is reducing its wholesale footprint across all brands, focusing on direct-to-consumer (DTC) sales.
Operational Efficiencies: Improvements in inventory management and a shift towards DTC sales have positively impacted gross margins.
Sustainability Initiatives: The company is investing in traceable raw materials and has appointed 20 Maestri to preserve unique craftsmanship.
Cost Control Measures: The company is streamlining operations, including consolidating fabric cutting activities to enhance efficiency.
Mid-Term Revenue Targets: The company expects revenue between $2.2 billion and $2.4 billion with an adjusted EBIT of $250 million to $300 million for 2025.
Focus on High-Spender Customers: The company is targeting high-spender individuals in China, aiming for gradual growth despite current challenges.
Brand Positioning Strategy: The company is committed to maintaining brand integrity while balancing margin improvements and avoiding brand dilution.
Forward Looking Statements: The company's actual results may differ materially from forward-looking statements due to various risks and uncertainties.
Challenging Environment in China: The company expects a negative trend in Greater China for 2025, particularly in Hong Kong, impacting overall revenue growth.
Wholesale Channel Decline: The company anticipates a continued decline in the wholesale channel, particularly for Thom Browne, which is expected to see a double-digit decrease.
Economic Factors: Concerns about the American consumer slowing down may impact sales in the U.S. market.
Supply Chain Challenges: The company is undergoing a reorganization of its supply chain, concentrating activities to improve efficiency.
Investment in Marketing and CapEx: Despite challenging market conditions, the company is committed to maintaining investments in marketing and capital expenditures to support long-term growth.
Regulatory Issues: The company acknowledges potential risks related to tariffs and regulatory changes that could impact operations.
Operational Challenges: The company is facing operational challenges due to the need for a ramp-up time for new stores and the impact of streamlining the wholesale business.
Revenue Expectations: Expect to reach revenue between $2,200,000,000 and $2,400,000,000 for 2025.
Adjusted EBIT Expectations: Expect adjusted EBIT between $250,000,000 and $300,000,000 for 2025.
Growth Outlook: Expect low single-digit growth in revenue and adjusted EBIT for 2025.
CapEx Plans: CapEx for 2025 expected to be between 6% to 7% of revenues, focusing on production and distribution.
Sustainability Initiatives: Continuing investments in traceable raw materials and sustainability projects.
Market Expansion: Plans to enhance retail presence in the U.S. with new store openings in key locations.
China Market Outlook: Expect a challenging environment in Greater China to persist, particularly in the first half of 2025.
Wholesale Channel Strategy: Continuing to reduce wholesale footprint across all brands, focusing on DTC and customer-centric strategies.
Mid-Term Targets: Anticipate more sustained growth in 2026 and 2027 as current initiatives yield results.
DTC Growth: DTC expected to account for 80% of branded revenues, with a focus on enhancing customer engagement.
Profitability Goals: Aim for a 15% adjusted EBIT margin for Zena brand in the second half of 2025.
Dividend per share: The Board of Directors proposed a dividend distribution of EUR 0.12 per ordinary share, totaling approximately EUR 13,000,000.
Share Repurchase Program: None
Despite strong net profit growth and improved margins in the Zegna segment, the company faces challenges such as declining EBIT in Thom Browne and Tom Ford segments, and higher cash absorption. The cautious outlook on China and flat EBIT guidance temper optimism. The Q&A highlighted risks, particularly in China, and management's reluctance to provide detailed guidance. Given these mixed signals and the company's market cap, a neutral stock price movement is expected.
The earnings call highlights a mix of positive and negative elements. While there is growth in the U.S. and EMEA DTC channels, significant declines in Greater China and wholesale revenue, along with economic uncertainties and tariff impacts, weigh heavily. The lack of a share buyback program and management's unclear responses further contribute to a negative sentiment. Despite some optimistic guidance, the overall market reaction is likely to be negative due to these challenges, especially given the company's market cap.
The earnings call summary indicates challenges such as declining wholesale revenues, operational difficulties, and a negative trend in China. Despite some positive aspects like DTC growth and increased gross margins, the Q&A session highlights concerns about the U.S. market and unclear management responses. The market cap suggests moderate volatility, leading to a predicted stock price movement in the negative range (-2% to -8%).
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