Italy's Zegna Group sees profit drop in H1 amid strategic investments

The group's total revenues rose by 6.3 per cent year over year (YoY), reaching €960.1 million (~$1,068.87 million), driven largely by the ZEGNA brand, which achieved €566.1 million in sales, reflecting a 5.9 per cent organic growth. However, the performance of Thom Browne was a concern, with revenues falling by 19.4 per cent YoY, amid a challenging retail environment. In contrast, Tom Ford Fashion showed significant growth, recording €148.5 million in revenue—a remarkable 132 per cent increase compared to H1 2023, albeit with operating losses due to substantial investments, the company said in a press release.

Zegna's gross profit increased to €637.4 million, benefitting from improved inventory management and a growing direct-to-consumer sales channel. Despite these gains, the group's operating profit declined to €73.1 million, and its profit margin shrank from 5.8 per cent to 3.3 per cent.

The luxury industry continues to face uncertainties, yet Zegna expressed confidence in the group's strategy, affirming that ongoing investments in marketing, talent acquisition, and store expansions are essential to unlocking the full potential of its brands.

Looking ahead, Zegna stressed the importance of balancing cost controls with cautious operations as the Group navigates an increasingly complex global landscape.

Ermenegildo “Gildo” Zegna, Group chairman and CEO, said: “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. 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 organisation 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.

“I believe these steps are what is needed for our group as the luxury industry goes through an important normalisation phase and continues to face macroeconomic and geopolitical uncertainties around the world. Our first half operating results – with Adjusted EBIT Margin at 8.4 per cent vs. 13.3 per cent in H1 2023 – were also affected by our decision to continue investing in key projects, some of which were concentrated in the first six months of the year. Along with these investments, we have also implemented cost controls while continuing to operate with appropriate caution. 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.”

Fibre2Fashion News Desk (KD)