Ermenegildo Zegna N.V. (NYSE:ZGN) (the “Company” and, together with its consolidated subsidiaries, the “Ermenegildo Zegna Group” or “the Group”) today announced profit of €135.7 million for FY 2023, up 107.8% from €65.3 million in FY 2022, and a profit margin of 7.1% compared to 4.4% in FY 2022.

Adjusted EBIT rose to €220.2 million with an Adjusted EBIT Margin of 11.6%. Adjusted EBIT for both the Zegna and Thom Browne segments improved significantly compared to FY 2022. In FY 2023, Adjusted EBIT for the Zegna segment reached €193.5 million, up 36.7% compared to FY 2022, while Adjusted EBIT for the Thom Browne segment rose to €59.0 million, +22.7% compared to FY 2022.

Ermenegildo “Gildo” Zegna, the Group’s Chairman and CEO, said: “2023 has been a milestone year for our Group. We delivered outstanding results, including more than doubling our profit from 2022 to reach €136 million. We have also fulfilled our 2023 sustainability commitments including those focused on traceability, diversity and inclusion, and in renewable energy adoption. We are on track with the integration of the TOM FORD FASHION business, which is enriching our unique proposition in luxury glamour.

2023 was also an important year for the Thom Browne and ZEGNA brands. Thom Browne celebrated its twentieth anniversary reaffirming the brand as a symbol of modern luxury tailoring. ZEGNA continued a well-defined journey to ensuring its place as one of the strongest brands in absolute luxury menswear. As a Group, we continued to invest in our Filiera, our in-house supply chain, which includes some of the finest and most important Italian high-end textile producers fully integrated with our unique luxury manufacturing capabilities. We recently announced the latest addition to the Filiera, a new state-of-the-art footwear and leather goods production facility in Parma, Italy, expected to be completed by the end of 2026.

Looking ahead, I see a clear and defined path forward for our Group. In the volatile world we live in, we must continue to be increasingly responsive, flexible and authentic to who we are. The Ermenegildo Zegna Group is a guardian of brands, and while short-term results are important, our top priority must always be their overall trajectory. What we should do is well defined; there will be challenges, but we know how to tackle them and how important it is to plan for the long term.”

1 Revenues an organic growth basis (Organic Growth), revenues on a constant currency basis (Constant Currency), Adjusted EBIT, Adjusted EBIT Margin, Trade Working Capital, Net Financial Indebtedness/(Cash Surplus) and Free Cash Flow are Non-IFRS Financial Measures. See the Non-IFRS Financial Measures section starting on page 14 of this press release for the definition and reconciliation of Non-IFRS Financial Measures.

Note on Group Financials Starting FY 2023

Starting from the year ended December 31, 2023, the Group presents its consolidated statement of profit and loss by function (previously presented by nature), which is the most representative of the way management views the business and is consistent with international practice. To conform to this new presentation format, the information for FY 2022 and 2021 has been reclassified compared to what was previously presented by the Group. The table below sets forth our consolidated statement of profit and loss for FY 2023, 2022 and 2021 (as reclassified for FY 2022 and 2021 to conform to the new presentation by function).

 

For the years ended December 31,

(€ thousands, except percentages)

2023

 

 

Percentage of revenues

 

2022

 

 

Percentage of revenues

 

2021

 

 

Percentage of revenues

Revenues

1,904,549

 

 

100.0

%

 

1,492,840

 

 

100.0

%

 

1,292,402

 

 

100.0

%

Cost of sales

(680,235

)

 

(35.7

%)

 

(564,832

)

 

(37.8

%)

 

(495,702

)

 

(38.4

%)

Gross profit

1,224,314

 

 

64.3

%

 

928,008

 

 

62.2

%

 

796,700

 

 

61.6

%

Selling, general and administrative

(901,364

)

 

(47.3

%)

 

(695,084

)

 

(46.6

%)

 

(822,897

)

 

(63.7

%)

Marketing expenses

(114,802

)

 

(6.0

%)

 

(85,147

)

 

(5.7

%)

 

(67,831

)

 

(5.2

%)

Operating profit/(loss)

208,148

 

 

10.9

%

 

147,777

 

 

9.9

%

 

(94,028

)

 

(7.3

%)

Financial income

37,282

 

 

2.0

%

 

13,320

 

 

0.9

%

 

45,889

 

 

3.6

%

Financial expenses

(68,121

)

 

(3.6

%)

 

(54,346

)

 

(3.6

%)

 

(43,823

)

 

(3.4

%)

Foreign exchange losses

(5,262

)

 

(0.3

%)

 

(7,869

)

 

(0.5

%)

 

(7,791

)

 

(0.6

%)

Result from investments accounted for using the equity method

(2,953

)

 

(0.2

%)

 

2,199

 

 

0.1

%

 

2,794

 

 

0.2

%

Profit/(Loss) before taxes

169,094

 

 

8.9

%

 

101,081

 

 

6.8

%

 

(96,959

)

 

(7.5

%)

Income taxes

(33,433

)

 

(1.8

%)

 

(35,802

)

 

(2.4

%)

 

(30,702

)

 

(2.4

%)

Profit/(Loss)

135,661

 

 

7.1

%

 

65,279

 

 

4.4

%

 

(127,661

)

 

(9.9

%)

Fiscal Year 2023 Key Financial Highlights

Revenues

In FY 2023 the Group recorded revenues of €1,904.5 million, + 27.6% YoY, or +19.3% organic growth, driven by excellent results in the Zegna segment (+12.4% YoY, +19.5% organic growth) and Thom Browne segment (+14.9% YoY, +17.8% organic growth). FY 2023 revenues include €235.5 million contributed by the Tom Ford Fashion segment following the acquisition of Tom Ford International (“TFI”) completed on April 28, 2023 (the “TFI Acquisition”).

Full details of the Group’s revenues are included in the Annual Report on Form 20-F for the year ended December 31, 2023, which will be published today.

Gross Profit, Operating Profit and Profit

Gross profit in FY 2023 reached €1,224.3 million compared to €928.0 million in FY 2022 (gross profit margin of 64.3% compared to 62.2% in the prior year). This improvement was driven by three main factors: a) channel mix, given the increasing proportion of direct-to-consumer (“DTC”) revenues, b) lower incidence of end-of season sales, in particular for the ZEGNA brand, as part of both the One Brand Strategy and the increasing penetration of Essentials (continuative products) and c) the higher absorption of industrial fixed costs. Gross profit in FY 2023 also includes the negative impact of €15.6 million on cost of sales, from the purchase price allocation (“PPA”) related to the TFI Acquisition.

Selling, general, and administrative expenses in FY 2023 were €901.4 million (47.3% of revenues) compared to €695.1 million (46.6% of revenues) in FY 2022. The higher incidence on revenues also reflects the royalty costs in connection with the license related to the TOM FORD FASHION business, which was partially offset by improved retail store productivity.

Marketing expenses in FY2023 were €114.8 million (6.0% of revenues) compared to €85.1 million (5.7% of revenues) in FY 2022, +34.8% YoY, in line with the Group’s strategy to invest in its brands to enhance equity value.

As a result of the above, the Group reported an operating profit of €208.1 million, +40.9% YoY.

Group’s profit in FY 2023 was €135.7 million, up 107.8% YoY from €65.3 million in FY 2022. The Group recorded a profit margin of 7.1% in FY 2023 compared to 4.4% in 2022.

Adjusted EBIT and Adjusted EBIT Margin

The table below shows the reconciliation of Profit/(Loss) to Adjusted EBIT and the calculation of the Profit/(Loss) Margin and the Adjusted EBIT Margin in FY 2023, 2022 and 2021. Adjusted EBIT is the main performance metric used by the Group’s management at the consolidated and reporting segment level.

 

For the year ended December 31,

(€ thousands, except percentages)

2023

 

 

2022

 

 

2021

 

Profit/(Loss)

135,661

 

 

65,279

 

 

(127,661

)

Income taxes

33,433

 

 

35,802

 

 

30,702

 

Financial income

(37,282

)

 

(13,320

)

 

(45,889

)

Financial expenses

68,121

 

 

54,346

 

 

43,823

 

Foreign exchange losses

5,262

 

 

7,869

 

 

7,791

 

Result from investments accounted for using the equity method

2,953

 

 

(2,199

)

 

(2,794

)

 

 

 

 

 

 

Transaction costs related to acquisitions

6,001

 

 

2,289

 

 

—

 

Severance indemnities and provisions for severance expenses

4,002

 

 

2,199

 

 

8,996

 

Legal costs for trademark dispute

2,168

 

 

7,532

 

 

—

 

Costs related to the Business Combination

2,140

 

 

2,137

 

 

205,059

 

Net impairment of leased and owned stores

1,782

 

 

1,639

 

 

8,692

 

Special donations for social responsibility

100

 

 

1,000

 

 

—

 

Net (income)/costs related to lease agreements

(4,129

)

 

(6,844

)

 

15,512

 

Other

—

 

 

—

 

 

4,884

 

Adjusted EBIT

220,212

 

 

157,729

 

 

149,115

 

 

 

 

 

 

 

Revenues

1,904,549

 

 

1,492,840

 

 

1,292,402

 

Profit/(Loss) Margin (Profit/(Loss) / Revenues)

7.1

%

 

4.4

%

 

(9.9

%)

Adjusted EBIT Margin (Adjusted EBIT / Revenues)

11.6

%

 

10.6

%

 

11.5

%

Adjusted EBIT in FY 2023 was €220.2 million compared to €157.7 million in FY 2022 (Adjusted EBIT Margin of 11.6% compared to 10.6% in the prior year). The increase in Adjusted EBIT was largely driven by an improved gross profit margin which more than offset the higher incidence on revenues of marketing costs, the investments made to strengthen the organization and the integration cost of the TOM FORD FASHION business.

Analysis by Segment

 

For the years ended December 31,

 

Increase/(Decrease)

(€ thousands, except percentages)

2023

 

 

2022

 

 

2021

 

 

2023 vs 2022

 

%

 

2022 vs 2021

 

%

Revenues by segment

 

 

 

 

 

 

 

 

 

 

 

 

 

Zegna

1,322,045

 

 

1,176,706

 

 

1,035,175

 

 

145,339

 

 

12.4

%

 

141,531

 

 

13.7

%

Thom Browne

380,287

 

 

330,891

 

 

264,066

 

 

49,396

 

 

14.9

%

 

66,825

 

 

25.3

%

Tom Ford Fashion

235,544

 

 

—

 

 

—

 

 

235,544

 

 

n.m.

 

n.m.

 

n.m.

Eliminations

(33,327

)

 

(14,757

)

 

(6,839

)

 

(18,570

)

 

n.m.

 

(7,918

)

 

n.m.

Total Revenues

1,904,549

 

 

1,492,840

 

 

1,292,402

 

 

411,709

 

 

27.6

%

 

200,438

 

 

15.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBIT and Adjusted EBIT Margin by segment

 

 

 

Zegna

193,466

 

 

141,513

 

 

131,929

 

 

51,953

 

 

36.7

%

 

9,584

 

 

7.3

%

14.6

%

 

12.0

%

 

12.7

%

 

 

 

 

 

 

 

 

Thom Browne

58,969

 

 

48,077

 

 

38,097

 

 

10,892

 

 

22.7

%

 

9,980

 

 

26.2

%

15.5

%

 

14.5

%

 

14.4

%

 

 

 

 

 

 

 

 

Tom Ford Fashion

(1,741

)

 

—

 

 

—

 

 

(1,741

)

 

—

%

 

n.m.

 

n.m.

(0.7

)%

 

n.m.

 

n.m.

 

 

 

 

 

 

 

 

Corporate

(30,423

)

 

(31,861

)

 

(20,911

)

 

1,438

 

 

(4.5

%)

 

(10,950

)

 

52.4

%

Eliminations

(59

)

 

—

 

 

—

 

 

(59

)

 

n.m.

 

n.m.

 

n.m.

Total Adjusted EBIT

220,212

 

 

157,729

 

 

149,115

 

 

62,483

 

 

39.6

%

 

8,614.00

 

 

5.8

%

Zegna segment

In FY 2023, the Zegna segment (which includes ZEGNA branded products, Textile and Third Party Brands) generated revenues of €1,322.0 million2, +12.4% YoY (+19.5% organic growth).

2 Before inter-segment eliminations.

Adjusted EBIT for the Zegna segment was €193.5 million in FY 2023, +36.7% YoY, with an Adjusted EBIT Margin of 14.6% compared to 12.0% in FY 2022. This significant improvement was primarily driven by improved productivity of the ZEGNA DTC stores and higher absorption of industrial fixed costs, partially offset by a planned increase in marketing expenses to continue to boost the brand’s equity value.

Thom Browne segment

In FY 2023, the Thom Browne segment generated revenues of €380.3 million, +14.9% YoY (+17.8% organic growth).

Adjusted EBIT for the Thom Browne segment was €59.0 million in FY 2023, with an Adjusted EBIT Margin of 15.5% compared to 14.5% in FY 2022, largely driven by improved gross profit margin.

Tom Ford Fashion segment

In FY 2023, the Tom Ford Fashion segment generated revenues of €235.5 million and a negative Adjusted EBIT of €1.7 million, which is primarily attributable to the €15.6 million one-off charges related to the PPA, classified within cost of sales. Adjusted EBIT for the Tom Ford Fashion segment was also impacted by the PPA-related amortization of the TFI license agreement with the Estée Lauder Company Inc. (ELC) (approximately €3 million on a yearly basis) and the impact of royalty costs.

Corporate costs

Corporate costs amounted to €30.4 million in FY 2023 compared to €31.9 million in FY 2022.

Capital Expenditure, Trade Working Capital, Net Financial Indebtedness/(Cash Surplus) and Free Cash Flow

Capital expenditure

 

For the years ended December 31,

(€ thousands, except percentages)

2023

 

 

2022

 

 

2021

 

Payments for property, plant and equipment

57,034

 

 

49,114

 

 

79,699

 

Payments for intangible assets

20,843

 

 

24,185

 

 

14,627

 

Capital expenditure

77,877

 

 

73,299

 

 

94,326

 

 

 

 

 

 

 

Revenues

1,904,549

 

 

1,492,840

 

 

1,292,402

 

As a percentage of revenues

4.1

%

 

4.9

%

 

7.3

%

Capital expenditure in FY 2023 rose to €77.9 million with an incidence on revenues of 4.1% compared to 4.9% in FY 2022. Capital expenditure in FY 2023 was mainly related to the expansion of the DTC stores’ network for all brands and, in particular, for the ZEGNA brand.

Trade Working Capital

 

At December 31,

 

 

(€ thousands, except percentages)

2023

 

 

2022

 

 

Change

Trade Working Capital

448,909

 

 

317,128

 

 

131,781

 

of which trade receivables

240,457

 

 

177,213

 

 

63,244

 

of which inventories

522,589

 

 

410,851

 

 

111,738

 

of which trade payables and customer advances

(314,137

)

 

(270,936

)

 

(43,201

)

 

 

 

 

 

 

Revenues

1,904,549

 

 

1,492,840

 

 

 

As a percentage of revenues

23.6

%

 

21.2

%

 

 

Trade Working Capital was €448.9 million at December 31, 2023, compared to €317.1 million at December 31, 2022, with a 23.6% incidence on revenues in FY 2023 (from 21.2% in the prior year). This increase is the result of higher inventories to support business growth and incorporates the effects of the newly acquired TOM FORD FASHION business, which contributed to revenues for eight months of 2023 only starting from the completion of the TFI Acquisition on April 28, 2023.

Net Financial Indebtedness/(Cash Surplus)

 

At December 31,

 

 

(€ thousands)

2023

 

2022

 

 

Change

Net Financial Indebtedness/(Cash Surplus)

10,810

 

(122,153

)

 

132,963

Net Financial Indebtedness was €10.8 million at December 31, 2023, compared to a Cash Surplus of €122.2 million at December 31, 2022, reflecting the net cash outflows from the investments in subsidiaries and associates (mainly related to the TFI Acquisition) and the dividend distribution, partially offset by positive Free Cash Flow generation.

Free Cash Flow

 

For the year ended December 31,

(€ thousands)

2023

 

 

2022

 

 

2021

 

Net cash flows from operating activities

275,382

 

 

146,398

 

 

281,155

 

Payments for property, plant and equipment

(57,034

)

 

(49,114

)

 

(79,699

)

Proceeds from disposals of property, plant and equipment

—

 

 

—

 

 

3,791

 

Payments for intangible assets

(20,843

)

 

(24,185

)

 

(14,627

)

Payments of lease liabilities

(125,732

)

 

(121,633

)

 

(100,611

)

Free Cash Flow

71,773

 

 

(48,534

)

 

90,009

 

In FY 2023 the Group generated positive Free Cash Flow of €71.8 million compared to a negative Free Cash Flow of €48.5 million in the prior year, primarily driven by an increase in operating profit excluding non-cash items.

***

Conference Call

As previously announced, today, at 8a.m. ET (2p.m. CET), the Group will host a live webcast and conference call. To access the webcast please visit our website (https://ir.zegnagroup.com/events-and-presentations/events). To participate in the call, please dial:

United States (Local): +1 646 787 9445
United Kingdom (Local): +44 20 39362999
Italy (Local): +39 06 94501060

Access Code: 807709

An online archive of the broadcast will be available on the website shortly after the live call and will be available for twelve months.

Upcoming Announcements

The Ermenegildo Zegna Group’s next scheduled announcements are:

  • April 23, 2024 Q1 2024 Revenues (*)
  • July 25, 2024 H1 2024 Preliminary Revenues (*)
  • September 18, 2024 H1 2024 Financial Results (*)
  • October 22, 2024 Q3 2024 Revenues (*)

______________________________________

(*) Unaudited figures

To receive email alerts of the timing of future financial news releases, as well as future announcements, please register at https://ir.zegnagroup.com.

***

About Ermenegildo Zegna Group

Founded in 1910 in Trivero, Italy, the Ermenegildo Zegna Group (NYSE:ZGN) is a global luxury company with a leading position in the high-end menswear business. Through its three complementary brands, the Group reaches a wide range of communities and market segments across the high-end fashion industry, from ZEGNA’s timeless luxury to the modern tailoring of Thom Browne, to luxury glamour with TOM FORD FASHION. The Ermenegildo Zegna Group is internationally recognized for its unique Filiera, owned and controlled by the Group, which is made up of the finest Italian textile producers fully integrated with unique luxury manufacturing capabilities, to ensure superior excellence, quality and innovation capacity. The Ermenegildo Zegna Group has more than 7,000 employees and recorded revenues of €1.9 billion in 2023.

***

Forward Looking Statements

This communication contains forward-looking statements that are based on beliefs and assumptions and on information currently available to the Company. In particular, statements regarding future financial performance and the Group’s expectations as to the achievement of certain targeted metrics at any future date or for any future period are forward-looking statements. In some cases, you can identify forward-looking statements by the following words: “may,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue,” “ongoing,” “target,” “seek”, “aspire,” “goal,” “outlook,” “guidance,” “forecast,” “prospect” or the negative or plural of these words, or other similar expressions that are predictions or indicate future events or prospects, although not all forward-looking statements contain these words. Any statements that refer to expectations, projections or other characterizations of future events or circumstances, including strategies or plans, are also forward-looking statements. These statements involve risks, uncertainties and other factors that may cause actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements, and, as such, undue reliance should not be placed on them. Actual results may differ materially from those expressed in forward-looking statements as a result of a variety of factors, including: the recognition, integrity and reputation of our brands; our ability to anticipate trends and to identify and respond to new and changing consumer preference; the COVID-19 pandemic or similar public health crises; international business, regulatory, social and political risks; the conflict in Ukraine and sanctions imposed onto Russia; the occurrence of acts of terrorism or similar events, conflicts, civil unrest or situations of political instability; developments in Greater China and other growth and emerging markets; our ability to implement our strategy; recent and potential future acquisitions; disruption to our manufacturing and logistics facilities; risks related to the sale of our products through our direct-to-consumer channel, as well as through points of sale operated by third parties; our dependence on our local partners to sell our products in certain markets; fluctuations in the price or quality of, or disruptions in the availability of, raw materials; our ability to negotiate, maintain or renew our license or co-branding agreements with high end third party brands; tourist traffic and demand; our dependence on certain key senior personnel as well as skilled personnel; our ability to protect our intellectual property rights; disruption in our information technology, including as a result of cybercrime; the theft or unauthorized use of personal information of our customers, employees or other parties; fluctuations in currency exchange rates or interest rates; the level of competition in the industry in which we operate; global economic conditions and macro events, including inflation; failures to comply with applicable laws and regulations; climate change and other environmental impacts and our ability to meet our customers’ and other stakeholders’ expectations on environment, social and governance matters; the enactment of tax reforms or other changes in tax laws and regulations; and other risks and uncertainties, including those described in our filings with the SEC.

Most of these factors are outside the Company’s control and are difficult to predict. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by the Company and its directors, officers or employees or any other person that the Company will achieve its objectives and plans in any specified time frame, or at all. The forward-looking statements in this communication represent the views of the Company as of the date of this communication. Subsequent events and developments may cause that view to change. However, while the Company may elect to update these forward-looking statements at some point in the future, the Company disclaims any obligation to update or revise publicly forward-looking statements. You should, therefore, not rely on these forward-looking statements as representing the views of the Company as of any date subsequent to the date of this communication.

***

FY 2023 - Group Revenues Tables

Revenues by Segment

 

For the years ended December 31,

 

Increase/(Decrease)

(€ thousands, except percentages)

2023

 

 

2022

 

 

2021

 

 

2023 vs 2022

 

Reported Revenues

 

Constant

Currency

 

Organic

Growth

 

2022 vs

2021

 

Reported Revenues

 

Constant

Currency

 

Organic

Growth

Zegna

1,322,045

 

 

1,176,706

 

 

1,035,175

 

 

145,339

 

 

12.4

%

 

13.8

%

 

19.5

%

 

141,531

 

 

13.7

%

 

9.3

%

 

8.4

%

Thom Browne

380,287

 

 

330,891

 

 

264,066

 

 

49,396

 

 

14.9

%

 

18.3

%

 

17.8

%

 

66,825

 

 

25.3

%

 

20.6

%

 

20.6

%

Tom Ford Fashion

235,544

 

 

—

 

 

—

 

 

235,544

 

 

n.m.(*)

 

n.m.

 

n.m.

 

—

 

 

n.m.

 

n.m.

 

n.m.

Eliminations

(33,327

)

 

(14,757

)

 

(6,839

)

 

(18,570

)

 

n.m.

 

n.m.

 

n.m.

 

(7,918

)

 

n.m.

 

n.m.

 

n.m.

Total revenues

1,904,549

 

 

1,492,840

 

 

1,292,402

 

 

411,709

 

 

27.6

%

 

29.7

%

 

19.3

%

 

200,438

 

 

15.5

%

 

11.0

%

 

10.4

%

______________________________________

(*) Throughout this section “n.m.” means not meaningful

Revenues by Product Line

 

For the years ended December 31,

 

Increase/(Decrease)

(€ thousands, except percentages)

2023

 

2022

 

2021

 

2023 vs

2022

 

Reported Revenues

 

Constant

Currency

 

Organic

Growth

 

2022 vs

2021

 

Reported Revenues

 

Constant

Currency

 

Organic

Growth

ZEGNA branded products

1,109,491

 

923,942

 

847,311

 

185,549

 

 

20.1

%

 

22.3

%

 

22.3

%

 

76,631

 

 

9.0

%

 

4.1

%

 

4.1

%

Thom Browne

378,410

 

330,014

 

263,397

 

48,396

 

 

14.7

%

 

18.0

%

 

17.5

%

 

66,617

 

 

25.3

%

 

20.6

%

 

20.6

%

TOM FORD FASHION

235,531

 

—

 

—

 

235,531

 

 

n.m.(*)

 

n.m.

 

n.m.

 

—

 

 

—

%

 

—

%

 

—

%

Textile

150,986

 

136,769

 

102,244

 

14,217

 

 

10.4

%

 

9.4

%

 

9.5

%

 

34,525

 

 

33.8

%

 

35.4

%

 

32.7

%

Third Party Brands

25,343

 

97,792

 

74,957

 

(72,449

)

 

(74.1

%)

 

(74.2

%)

 

(17.4

%)

 

22,835

 

 

30.5

%

 

27.9

%

 

86.1

%

Other

4,788

 

4,323

 

4,493

 

465

 

 

10.8

%

 

11.6

%

 

15.4

%

 

(170

)

 

(3.8

%)

 

(7.5

%)

 

(7.5

%)

Total revenues

1,904,549

 

1,492,840

 

1,292,402

 

411,709

 

 

27.6

%

 

29.7

%

 

19.3

%

 

200,438

 

 

15.5

%

 

11.0

%

 

10.4

%

Revenues by Distribution Channel

 

For the years ended December 31,

 

Increase/(Decrease)

(€ thousands, except percentages)

2023

 

2022

 

2021

 

2023 vs

2022

 

Reported Revenues

 

Constant

Currency

 

Organic

Growth

 

2022 vs

2021

 

Reported Revenues

 

Constant

Currency

 

Organic

Growth

Direct to Consumer (DTC)

ZEGNA branded products

945,313

 

772,505

 

712,862

 

172,808

 

 

22.4

%

 

25.4

%

 

25.4

%

 

59,643

 

 

8.4

%

 

2.9

%

 

2.9

%

Thom Browne

183,422

 

145,702

 

138,567

 

37,720

 

 

25.9

%

 

34.1

%

 

19.7

%

 

7,135

 

 

5.1

%

 

(1.5

%)

 

(1.5

%)

TOM FORD FASHION

136,291

 

—

 

—

 

136,291

 

 

n.m.

 

n.m.

 

n.m.

 

n.m.

 

—

%

 

—

%

 

—

%

Total Direct to Consumer (DTC)

1,265,026

 

918,207

 

851,429

 

346,819

 

 

37.8

%

 

42.1

%

 

24.5

%

 

66,778

 

 

7.8

%

 

2.2

%

 

2.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wholesale

ZEGNA branded products

164,178

 

151,437

 

134,449

 

12,741

 

 

8.4

%

 

7.0

%

 

7.0

%

 

16,988

 

 

12.6

%

 

10.6

%

 

10.6

%

Thom Browne

194,988

 

184,312

 

124,830

 

10,676

 

 

5.8

%

 

6.0

%

 

15.7

%

 

59,482

 

 

47.7

%

 

46.6

%

 

46.6

%

TOM FORD FASHION

99,240

 

—

 

—

 

99,240

 

 

n.m.

 

n.m.

 

n.m.

 

—

 

 

—

%

 

—

%

 

—

%

Third Party Brands and Textile

176,329

 

234,561

 

177,201

 

(58,232

)

 

(24.8

%)

 

(25.5

%)

 

5.8

%

 

57,360

 

 

32.4

%

 

32.2

%

 

38.6

%

Total Wholesale

634,735

 

570,310

 

436,480

 

64,425

 

 

11.3

%

 

10.7

%

 

9.6

%

 

133,830

 

 

30.7

%

 

29.4

%

 

30.8

%

Other

4,788

 

4,323

 

4,493

 

465

 

 

n.m.

 

n.m.

 

n.m.

 

(170

)

 

(3.8

%)

 

(7.5

%)

 

—

%

Total revenues

1,904,549

 

1,492,840

 

1,292,402

 

411,709

 

 

27.6

%

 

29.7

%

 

19.3

%

 

200,438

 

 

15.5

%

 

11.0

%

 

10.4

%

Revenues by Geographical Area

 

For the years ended December 31,

 

Increase/(Decrease)

(€ thousands, except percentages)

2023

 

2022

 

2021

 

2023 vs

2022

 

Reported Revenues

 

Constant

Currency

 

Organic

Growth

 

2022 vs

2021

 

Reported Revenues

 

Constant

Currency

 

Organic

Growth

EMEA (1)

658,694

 

520,226

 

380,325

 

138,468

 

 

26.6

%

 

27.7

%

 

18.8

%

 

139,901

 

 

36.8

%

 

36.2

%

 

39.3

%

of which Italy

281,793

 

224,342

 

158,722

 

57,451

 

 

25.6

%

 

25.6

%

 

18.4

%

 

65,620

 

 

41.3

%

 

41.8

%

 

42.1

%

of which UK

70,191

 

53,970

 

37,682

 

16,221

 

 

30.1

%

 

31.7

%

 

14.7

%

 

16,288

 

 

43.2

%

 

42.2

%

 

51.6

%

of which UAE

68,729

 

50,926

 

32,944

 

17,803

 

 

35.0

%

 

38.2

%

 

30.9

%

 

17,982

 

 

54.6

%

 

38.4

%

 

39.6

%

North America (2)

417,352

 

294,686

 

191,283

 

122,666

 

 

41.6

%

 

40.4

%

 

11.4

%

 

103,403

 

 

54.1

%

 

43.2

%

 

41.4

%

of which United States

384,544

 

270,312

 

176,059

 

114,232

 

 

42.3

%

 

40.9

%

 

10.4

%

 

94,253

 

 

53.5

%

 

42.1

%

 

39.9

%

Latin America (3)

37,538

 

29,889

 

19,971

 

7,649

 

 

25.6

%

 

16.2

%

 

16.2

%

 

9,918

 

 

49.7

%

 

33.4

%

 

33.4

%

APAC (4)

788,007

 

644,802

 

696,344

 

143,205

 

 

22.2

%

 

27.3

%

 

23.7

%

 

(51,542

)

 

(7.4

%)

 

(11.6

%)

 

(11.8

%)

of which Greater

China Region

595,515

 

494,110

 

588,876

 

101,405

 

 

20.5

%

 

25.7

%

 

24.2

%

 

(94,766

)

 

(16.1

%)

 

(20.6

%)

 

(20.6

%)

of which Japan

84,990

 

65,445

 

55,479

 

19,545

 

 

29.9

%

 

39.8

%

 

28.3

%

 

9,966

 

 

18.0

%

 

23.7

%

 

24.3

%

Other (5)

2,958

 

3,237

 

4,479

 

(279

)

 

(8.6

%)

 

(8.3

%)

 

(25.6

%)

 

(1,242

)

 

(27.7

%)

 

(29.6

%)

 

(29.6

%)

Total revenues

1,904,549

 

1,492,840

 

1,292,402

 

411,709

 

 

27.6

%

 

29.7

%

 

19.3

%

 

200,438

 

 

15.5

%

 

11.0

%

 

10.4

%

________________________________________

(1) EMEA includes Europe, the Middle East and Africa.

(2) North America includes the United States of America and Canada.

(3) Latin America includes Mexico, Brazil and other Central and South American countries.

(4) APAC includes the Greater China Region, Japan, South Korea, Thailand, Malaysia, Vietnam, Indonesia, Philippines, Australia, New Zealand, India and other Southeast Asian countries.

(5) Other revenues mainly include royalties.

***

Group monobrand(1) store network at December 31, 2023 and 2022

 

At December 31,

 

2023

 

2022

# Stores

ZEGNA

 

Thom Browne

 

TOM FORD FASHION

 

Group

 

ZEGNA

 

Thom Browne

 

Group

EMEA

71

 

9

 

4

 

84

 

65

 

10

 

75

Americas

59

 

7

 

12

 

78

 

53

 

7

 

60

APAC

123

 

70

 

35

 

228

 

121

 

46

 

167

Total Direct to Customer (DTC)

253

 

86

 

51

 

390

 

239

 

63

 

302

EMEA (2)

55

 

7

 

14

 

76

 

57

 

6

 

63

Americas (3)

63

 

3

 

50

 

116

 

64

 

4

 

68

APAC

33

 

15

 

6

 

54

 

35

 

32

 

67

Total Wholesale

151

 

25

 

70

 

246

 

156

 

42

 

198

Total

404

 

111

 

121

 

636

 

395

 

105

 

500

________________________________________

(1) Monobrand store count includes our DOSs (which are divided into boutiques and outlets) and our Wholesale monobrand stores (including also monobrand franchisees).

(2) Does not include any stores in Russia at December 31, 2023 or at December 31, 2022. Although some stores may still be operating at December 31, 2023, they have not been supplied by the Group since February 2022 and have therefore been excluded from the Group’s store count.

(3) Americas include North America and Latin America.

***

Ermenegildo Zegna N.V.

CONSOLIDATED STATEMENT OF PROFIT AND LOSS

for the years ended December 31, 2023, 2022 and 2021

 

For the years ended December 31,

(€ thousands, except per share data)

2023

 

 

2022(*)

 

2021(*)

Revenues

1,904,549

 

 

1,492,840

 

 

1,292,402

 

Cost of sales

(680,235

)

 

(564,832

)

 

(495,702

)

Gross profit

1,224,314

 

 

928,008

 

 

796,700

 

Selling, general and administrative expenses

(901,364

)

 

(695,084

)

 

(822,897

)

Marketing expenses

(114,802

)

 

(85,147

)

 

(67,831

)

Operating profit/(loss)

208,148

 

 

147,777

 

 

(94,028

)

Financial income

37,282

 

 

13,320

 

 

45,889

 

Financial expenses

(68,121

)

 

(54,346

)

 

(43,823

)

Foreign exchange losses

(5,262

)

 

(7,869

)

 

(7,791

)

Result from investments accounted for using the equity method

(2,953

)

 

2,199

 

 

2,794

 

Profit/(Loss) before taxes

169,094

 

 

101,081

 

 

(96,959

)

Income taxes

(33,433

)

 

(35,802

)

 

(30,702

)

Profit/(Loss)

135,661

 

 

65,279

 

 

(127,661

)

Attributable to:

 

 

 

 

 

Shareholders of the Parent Company

121,529

 

 

51,482

 

 

(136,001

)

Non-controlling interests

14,132

 

 

13,797

 

 

8,340

 

 

 

 

 

 

 

Basic earnings per share in €

0.49

 

 

0.22

 

 

(0.67

)

Diluted earnings per share in €

0.48

 

 

0.21

 

 

(0.67

)

_________________

(*) Starting with the year ended December 31, 2023, the Group presents the consolidated statement of profit and loss by function, which is most representative of the way the Chief Operating Decision Maker and management view the business, and therefore it provides reliable and more relevant information and is consistent with international practice. In order to conform to this new presentation, the information for the year ended December 31, 2022 and 2021 have been reclassified compared to what was previously presented by the Group.

Ermenegildo Zegna N.V.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

at December 31, 2023 and 2022

 

At December 31,

(€ thousands)

2023

 

2022

Assets

 

 

 

Non-current assets

 

 

 

Intangible assets

572,274

 

455,908

Property, plant and equipment

159,608

 

126,139

Right-of-use assets

533,952

 

375,508

Investments accounted for using the equity method

18,765

 

22,648

Deferred tax assets

160,878

 

124,627

Other non-current financial assets

33,898

 

36,240

Total non-current assets

1,479,375

 

1,141,070

Current assets

 

 

 

Inventories

522,589

 

410,851

Trade receivables

240,457

 

177,213

Derivative financial instruments

11,110

 

22,454

Tax receivables

31,024

 

15,350

Other current financial assets

90,917

 

320,894

Other current assets

95,260

 

84,574

Cash and cash equivalents

296,279

 

254,321

Total current assets

1,287,636

 

1,285,657

Total assets

2,767,011

 

2,426,727

Liabilities and Equity

 

 

 

Equity attributable to shareholders of the Parent Company

840,294

 

678,949

Equity attributable to non-controlling interests

60,602

 

53,372

Total equity

900,896

 

732,321

Non-current liabilities

 

 

 

Non-current borrowings

113,285

 

184,880

Other non-current financial liabilities

136,556

 

178,793

Non-current lease liabilities

471,083

 

332,050

Non-current provisions for risks and charges

19,849

 

19,581

Employee benefits

29,645

 

51,584

Deferred tax liabilities

73,885

 

60,534

Other non-current liabilities

9,689

 

—

Total non-current liabilities

853,992

 

827,422

Current liabilities

 

 

 

Current borrowings

289,337

 

286,175

Other current financial liabilities

22,102

 

37,258

Current lease liabilities

122,642

 

111,457

Derivative financial instruments

897

 

2,362

Current provisions for risks and charges

16,019

 

13,969

Trade payables and customer advances

314,137

 

270,936

Tax liabilities

41,976

 

25,999

Other current liabilities

205,013

 

118,828

Total current liabilities

1,012,123

 

866,984

Total equity and liabilities

2,767,011

 

2,426,727

Ermenegildo Zegna N.V.

CONSOLIDATED CASH FLOW STATEMENT

for the years ended December 31, 2023, 2022 and 2021

 

For the years ended December 31,

(€ thousands)

2023

 

 

2022

 

 

2021

 

Operating activities

 

 

 

 

 

Profit/(Loss)

135,661

 

 

65,279

 

 

(127,661

)

Income taxes

33,433

 

 

35,802

 

 

30,702

 

Depreciation, amortization and impairment of assets

194,952

 

 

173,521

 

 

163,367

 

Financial income

(37,282

)

 

(13,320

)

 

(45,889

)

Financial expenses

68,121

 

 

54,346

 

 

43,823

 

Foreign exchange losses

5,262

 

 

7,869

 

 

7,791

 

Write downs and other provisions

(1,168

)

 

14

 

 

19,487

 

Write downs of the provision for obsolete inventory

31,850

 

 

28,561

 

 

29,600

 

Result from investments accounted for using the equity method

2,953

 

 

(2,199

)

 

(2,794

)

(Gains)/Losses arising from the disposal of fixed assets

—

 

 

(1,124

)

 

1,153

 

Other non-cash expenses, net

66,641

 

 

23,063

 

 

230,812

 

Change in inventories

(72,770

)

 

(103,112

)

 

(27,554

)

Change in trade receivables

(51,022

)

 

(15,623

)

 

(12,294

)

Change in trade payables including customer advances

11,670

 

 

43,511

 

 

31,426

 

Change in current and non-current provisions for risks and charges

(6,720

)

 

(29,102

)

 

(5,498

)

Change in employee benefits

(2,566

)

 

(8,676

)

 

(13,456

)

Change in other operating assets and liabilities

(20,479

)

 

(38,216

)

 

38,927

 

Interest paid

(29,166

)

 

(24,938

)

 

(17,487

)

Income taxes paid

(53,988

)

 

(49,258

)

 

(63,300

)

Net cash flows from operating activities

275,382

 

 

146,398

 

 

281,155

 

Investing activities

 

 

 

 

 

Payments for property, plant and equipment

(57,034

)

 

(49,114

)

 

(79,699

)

Proceeds from disposals of property, plant and equipment

—

 

 

—

 

 

3,791

 

Payments for intangible assets

(20,843

)

 

(24,185

)

 

(14,627

)

Proceeds from disposals of non-current financial assets

2,345

 

 

2,585

 

 

1,536

 

Payments for purchases of non-current financial assets

(2,623

)

 

(111

)

 

(4,431

)

Proceeds from disposals of current financial assets and derivative instruments

270,317

 

 

46,487

 

 

92,021

 

Payments for acquisitions of current financial assets and derivative instruments

(36,956

)

 

(32,412

)

 

(76,058

)

Business combinations, net of cash acquired

(117,686

)

 

(585

)

 

(4,224

)

Acquisition of investments accounted for using the equity method

(15,734

)

 

—

 

 

(313

)

Net cash flows from/(used in) investing activities

21,786

 

 

(57,335

)

 

(82,004

)

Financing activities

 

 

 

 

 

Proceeds from borrowings

204,424

 

 

—

 

 

123,570

 

Repayments of borrowings

(306,150

)

 

(159,719

)

 

(160,210

)

Repayments of other non-current financial liabilities

—

 

 

(3,919

)

 

(4,287

)

Payments of lease liabilities

(125,732

)

 

(121,633

)

 

(100,611

)

Proceeds from the exercise of warrants

4,409

 

 

—

 

 

—

 

Proceeds from capital contribution from Monterubello

—

 

 

10,923

 

 

—

 

Sales of shares held in treasury

3,654

 

 

3,390

 

 

6,343

 

Purchase of own shares

—

 

 

—

 

 

(384

)

Dividends to owners of the parent

(25,031

)

 

(21,852

)

 

(102

)

Dividends paid to non-controlling interests

(6,068

)

 

(4,187

)

 

(548

)

Purchase of own shares from Monterubello

—

 

 

—

 

 

(455,000

)

Proceeds from issuance of ordinary shares upon Business Combination

—

 

 

—

 

 

310,739

 

Proceeds from issuance of ordinary shares to PIPE Investors

—

 

 

—

 

 

331,385

 

Payments of transaction costs related to the Business Combination

—

 

 

—

 

 

(48,475

)

Cash distributed as part of the Disposition

—

 

 

—

 

 

(26,272

)

Payments for acquisition of non-controlling interests

—

 

 

—

 

 

(40,253

)

Net cash flows used in financing activities

(250,494

)

 

(296,997

)

 

(64,105

)

Effects of exchange rate changes on cash and cash equivalents

(4,716

)

 

2,464

 

 

7,454

 

Net increase/(decrease) in cash and cash equivalents

41,958

 

 

(205,470

)

 

142,500

 

Cash and cash equivalents at the beginning of the year

254,321

 

 

459,791

 

 

317,291

 

Cash and cash equivalents at the end of the year

296,279

 

 

254,321

 

 

459,791

 

Non-IFRS Financial Measures

The Group’s management monitors and evaluates operating and financial performance using several non-IFRS financial measures including: adjusted earnings before interest and taxes (“Adjusted EBIT”), Adjusted EBIT Margin, Net Financial Indebtedness/(Cash Surplus), Trade Working Capital, Free Cash Flow, revenues on a constant currency basis (Constant Currency) and revenues on an organic growth basis (Organic Growth). The Group’s management believes that these non-IFRS financial measures provide useful and relevant information regarding the Group’s financial performance and financial condition, and improve the ability of management and investors to assess and compare the financial performance and financial position of the Group with those of other companies. They also provide comparable measures that facilitate management’s ability to identify operational trends, as well as make decisions regarding future spending, resource allocations and other strategic and operational decisions. While similar measures are widely used in the industry in which the Group operates, the financial measures that the Group uses may not be comparable to other similarly named measures used by other companies nor are they intended to be substitutes for measures of financial performance or financial position as prepared in accordance with IFRS. A definition, explanation of relevance and a reconciliation of each non-IFRS financial measure to the most directly comparable measure calculated and presented in accordance with IFRS are set out below.

Adjusted EBIT and Adjusted EBIT Margin

Adjusted EBIT is defined as profit or loss before income taxes plus financial income, financial expenses, foreign exchange losses and the result from investments accounted for using the equity method, adjusted for income and costs which are significant in nature and that management considers not reflective of underlying operating activities, including, for one or all of the periods presented and as further described below, transaction costs related to acquisitions, severance indemnities and provisions for severance expenses, legal costs for trademark dispute, costs related to the Business Combination, net impairment of leased and owned stores, special donations for social responsibility, net (income)/costs related to lease agreements and certain other items.

Adjusted EBIT Margin is defined as Adjusted EBIT divided by revenues of the applicable period.

The Group’s management uses Adjusted EBIT and Adjusted EBIT Margin for internal reporting to assess performance and as part of the forecasting, budgeting and decision-making processes as they provide additional transparency regarding the Group’s underlying operating performance. The Group’s management believes these non-IFRS financial measures are useful because they exclude items that management believes are not indicative of the Group’s underlying operating performance and allow management to view operating trends, perform analytical comparisons and benchmark performance between periods and among segments. The Group’s management also believes that Adjusted EBIT and Adjusted EBIT Margin are useful for investors and analysts to better understand how management assesses the Group’s underlying operating performance on a consistent basis and to compare the Group’s performance with that of other companies. Accordingly, management believes that Adjusted EBIT and Adjusted EBIT Margin provide useful information to third party stakeholders in understanding and evaluating the Group’s operating results.

The following table presents a reconciliation of Profit/(Loss) to Adjusted EBIT and the calculation of the Profit/(Loss) Margin and the Adjusted EBIT Margin for the years ended December 31, 2023, 2022 and 2021.

 

For the year ended December 31,

(€ thousands, except percentages)

2023

 

 

2022

 

 

2021

 

Profit/(Loss)

135,661

 

 

65,279

 

 

(127,661

)

Income taxes

33,433

 

 

35,802

 

 

30,702

 

Financial income

(37,282

)

 

(13,320

)

 

(45,889

)

Financial expenses

68,121

 

 

54,346

 

 

43,823

 

Foreign exchange losses

5,262

 

 

7,869

 

 

7,791

 

Result from investments accounted for using the equity method

2,953

 

 

(2,199

)

 

(2,794

)

 

 

 

 

 

 

Transaction costs related to acquisitions (1)

6,001

 

 

2,289

 

 

—

 

Severance indemnities and provisions for severance expenses (2)

4,002

 

 

2,199

 

 

8,996

 

Legal costs for trademark dispute (3)

2,168

 

 

7,532

 

 

—

 

Costs related to the Business Combination (4)

2,140

 

 

2,137

 

 

205,059

 

Net impairment of leased and owned stores (5)

1,782

 

 

1,639

 

 

8,692

 

Special donations for social responsibility (6)

100

 

 

1,000

 

 

—

 

Net (income)/costs related to lease agreements (7)

(4,129

)

 

(6,844

)

 

15,512

 

Other (8)

—

 

 

—

 

 

4,884

 

Adjusted EBIT

220,212

 

 

157,729

 

 

149,115

 

 

 

 

 

 

 

Revenues

1,904,549

 

 

1,492,840

 

 

1,292,402

 

Profit/(Loss) Margin (Profit/(Loss) / Revenues)

7.1

%

 

4.4

%

 

(9.9

%)

Adjusted EBIT Margin (Adjusted EBIT / Revenues)

11.6

%

 

10.6

%

 

11.5

%

__________________

(1) Relates to transaction costs of €6,001 thousand and €2,289 thousand in 2023 and 2022, respectively, primarily for consultancy and legal fees related to the TFI Acquisition and, for 2023 only, also to the acquisition of the Thom Browne business in South Korea and the acquisition of a 25% interest in Norda. These amounts are recorded within “selling, general and administrative expenses” in the consolidated statement of profit and loss.

(2) Relates to severance indemnities of €4,002 thousand, €2,199 thousand and €8,996 thousand in 2023, 2022 and 2021, respectively. These amounts are recorded within “selling, general and administrative expenses” in the consolidated statement of profit and loss.

(3) Relates to legal costs of €2,168 thousand and €7,532 thousand in 2023 and 2022, respectively, in connection with a legal dispute between adidas and Thom Browne, primarily in relation to the use of trademarks. These amounts are recorded within “selling, general and administrative expenses” in the consolidated statement of profit and loss.

(4) Costs related to the Business Combination of €2,140 thousand and €2,137 thousand in 2023 and 2022, respectively, relate to the grant of equity awards to management in 2021 with vesting subject to the public listing of the Company’s shares and certain other performance and/or service conditions. Costs related to the Business Combination in 2021 include:

(a) €114,963 thousand relating to share-based payments for listing services recognized as the excess of the fair value of the Company ordinary shares issued as part of the Business Combination and the fair value of IIAC’s identifiable net assets acquired.

(b) €37,906 thousand for the issuance of 5,031,250 the Company ordinary shares to the holders of IIAC class B shares to be held in escrow. The release of these shares from escrow is subject to achievement of certain targets within a seven-year period.

(c) €34,092 thousand for transaction costs related to the Business Combination incurred by the Group, including costs for bank services, legal advisors and other consultancy fees.

(d) €10,916 thousand for the Zegna family’s grant of a one-time €1,500 gift to each employee of the Group as result of the Company’s listing on NYSE completed on December 20, 2021.

(e) €5,380 thousand relating to grant of performance share units, which each represent the right to receive one ordinary share of the Company, to the Group’s Chief Executive Officer, other directors of the Group, key executives with strategic responsibilities and other employees of the Group, all subject to certain vesting conditions.

(f) €1,236 thousand related to the fair value of private warrants issued, pursuant to the Business Combination, to certain non-executive directors of the Group.

(g) €566 thousand related to the write-off of non-refundable prepaid premiums for directors’ and officers’ insurance.

These amounts are recorded within (i) “selling, general and administrative expenses” for €2,034 thousand, €2,099 thousand and €200,961 thousand in 2023, 2022 and 2021, respectively, (ii) “cost of sales” for €106 thousand, €38 thousand and €4,086 thousand in 2023, 2022 and 2021, respectively, and (iii) “marketing expenses” for €12 thousand in 2021.

(5) Net impairment of leased and owned stores for 2023, 2022, 2021 includes (i) impairment of €832 thousand, €2,369 thousand and €6,486 thousand related to right-of-use assets, respectively, (ii) impairment of €915 thousand, reversals of impairment of €756 thousand and impairment of €2,167 thousand related to property, plant and equipment, respectively, and (iii) impairment of €35 thousand, €26 thousand and €39 thousand related to intangible assets, respectively. These amounts are recorded within “selling, general and administrative expenses” in the consolidated statement of profit and loss.

(6) Relates to donations to support initiatives related to humanitarian emergencies in Turkey in 2023 (€100 thousand) and in Ukraine in 2022 (€1,000 thousand). These amounts are recorded within “selling, general and administrative expenses” in the consolidated statement of profit and loss.

(7) Net (income)/costs related to lease agreements include:

(a) in 2023: €4,129 thousand for the derecognition of lease liabilities following a change in terms of a lease agreement in Hong Kong;

(b) in 2022: (i) proceeds of €6,500 thousand received from new tenants in order for the Group to withdraw from existing lease agreements of commercial properties and (ii) €950 thousand for reversals of previously recognized provisions in respect of a legal claim related to a lease agreement in the US, partially offset by (ii) €606 thousand for losses related to a sublease agreement in the US;

(c) in 2021: (i) €12,192 thousand of provisions relating to a lease agreement in the US following an unfavorable legal claim judgment against the Group, (ii) €1,492 thousand of legal expenses related to a lease agreement in Italy and (iii) €1,829 thousand in accrued property taxes related to a lease agreement in the UK.

These amounts are recorded within “selling, general and administrative expenses” in the consolidated statement of profit and loss.

(8) Other adjustments in 2021 include €6,006 thousand related to losses incurred by Agnona subsequent to the Group’s sale of a majority stake in Agnona in January 2021, for which the Group was required to compensate the company in accordance with the terms of the related sale agreement, as well as €144 thousand relating to the write down of the Group’s remaining 30% stake in Agnona, partially offset by other income of €1,266 thousand relating to the sale of rights to build or develop airspace above a building in the United States. These amounts are recorded within “selling, general and administrative expenses” in the consolidated statement of profit and loss.

Net Financial Indebtedness/(Cash Surplus)

Net Financial Indebtedness/(Cash Surplus) is defined as the sum of financial borrowings (current and non-current), and derivative financial instrument liabilities, net of cash and cash equivalents, derivative financial instrument assets, securities and financial receivables (recorded within other current financial assets in the consolidated statement of financial position).

The Group’s management believes that Net Financial Indebtedness/(Cash Surplus) is useful to monitor the level of net liquidity and financial resources available to the Group. The Group’s management believes this non-IFRS financial measure aids management, investors and analysts to analyze the Group’s financial position and financial resources available, and to compare the Group’s financial position and financial resources available with that of other companies.

The following table sets forth the calculation of Net Financial Indebtedness/(Cash Surplus) at December 31, 2023 and 2022.

 

At December 31,

(€ thousands)

2023

 

 

2022

 

Non-current borrowings

113,285

 

 

184,880

 

Current borrowings

289,337

 

 

286,175

 

Derivative financial instruments — Liabilities

897

 

 

2,362

 

Total borrowings, other financial liabilities and derivatives

403,519

 

 

473,417

 

Cash and cash equivalents

(296,279

)

 

(254,321

)

Derivative financial instruments — Assets

(11,110

)

 

(22,454

)

Other current financial assets(1)

(85,320

)

 

(318,795

)

Total cash and cash equivalents, other current financial assets and derivatives

(392,709

)

 

(595,570

)

Net Financial Indebtedness/(Cash Surplus)

10,810

 

 

(122,153

)

________________________________________

(1) Includes (i) the Group’s investments in securities amounting to €85,320 thousand and €316,595 thousand at December 31, 2023 and 2022, respectively, and (ii) a financial receivable from Filati Biagioli Modesto S.p.A., an associated company of the Group, of €2,200 thousand at December 31, 2022. In July 2023, the receivable was converted to equity as a capital contribution.

Trade Working Capital

Trade Working Capital is defined as current assets less current liabilities adjusted for derivative assets and liabilities, tax receivables and liabilities, cash and cash equivalents, borrowings, lease liabilities, and certain other current assets and liabilities.

The Group’s management uses Trade Working Capital to understand and evaluate the Group’s liquidity generation/absorption. The Group’s management believes this non-IFRS financial measure is important supplemental information for investors in evaluating liquidity in that it provides insight into the availability of net current resources to fund our ongoing operations. Trade Working Capital is a measure used by management in internal evaluations of cash availability and operational performance.

The following table sets forth the calculation of Trade Working Capital at December 31, 2023 and 2022.

 

At December 31,

(€ thousands)

2023

 

 

2022

 

Current assets

1,287,636

 

 

1,285,657

 

Current liabilities

(1,012,123

)

 

(866,984

)

Working capital

275,513

 

 

418,673

 

Less:

 

 

 

Derivative financial instruments - Assets

11,110

 

 

22,454

 

Tax receivables

31,024

 

 

15,350

 

Other current financial assets

90,917

 

 

320,894

 

Other current assets

95,260

 

 

84,574

 

Cash and cash equivalents

296,279

 

 

254,321

 

Current borrowings

(289,337

)

 

(286,175

)

Current lease liabilities

(122,642

)

 

(111,457

)

Derivative financial instruments - Liabilities

(897

)

 

(2,362

)

Other current financial liabilities

(22,102

)

 

(37,258

)

Current provisions for risks and charges

(16,019

)

 

(13,969

)

Tax liabilities

(41,976

)

 

(25,999

)

Other current liabilities

(205,013

)

 

(118,828

)

Trade Working Capital

448,909

 

 

317,128

 

of which trade receivables

240,457

 

 

177,213

 

of which inventories

522,589

 

 

410,851

 

of which trade payables and customer advances

(314,137

)

 

(270,936

)

Free Cash Flow

Free Cash Flow is defined as net cash flows from operating activities less payments for property, plant and equipment (net of proceeds from disposals), intangible assets and lease liabilities.

The Group’s management believes that Free Cash Flow is a useful metric for management, investors and analysts to evaluate and monitor the Group’s ability to generate cash, including in comparison to other companies. Free Cash Flow is not representative of residual cash flows available for discretionary purposes.

The following table sets forth the Free Cash Flow for the years ended December 31, 2023, 2022 and 2021:

 

For the year ended December 31,

(€ thousands)

2023

 

 

2022

 

 

2021

 

Net cash flows from operating activities

275,382

 

 

146,398

 

 

281,155

 

Payments for property, plant and equipment

(57,034

)

 

(49,114

)

 

(79,699

)

Proceeds from disposals of property plant and equipment

—

 

 

—

 

 

3,791

 

Payments for intangible assets

(20,843

)

 

(24,185

)

 

(14,627

)

Payments of lease liabilities

(125,732

)

 

(121,633

)

 

(100,611

)

Free Cash Flow

71,773

 

 

(48,534

)

 

90,009

 

Revenues on a constant currency basis (Constant Currency)

In addition to presenting our revenues on a current currency basis, we also present certain revenue information on a constant currency basis (Constant Currency), which excludes the effects of foreign currency translation from our subsidiaries with functional currencies different from the Euro.

We calculate Constant Currency revenues by applying the current period average foreign currency exchange rates to translate prior period revenues of foreign subsidiaries expressed in local functional currencies different than the Euro.

We use revenues on a Constant Currency basis to analyze how our underlying revenues have changed between periods independent of the effects of foreign currency translation.

Revenues on a Constant Currency basis are not a substitute for revenues on a current currency basis or any IFRS-related measures, however we believe that revenues excluding the impact of foreign currency translation provide additional useful information to management and to investors in analyzing and evaluating our revenues and operating performance.

Revenues on an organic growth basis (Organic Growth)

In addition to presenting our revenues on a current currency basis, we also present certain revenue information on an organic growth basis (Organic Growth). Organic Growth is calculated as the change in revenues from period to period, excluding the effects of (a) foreign exchange, (b) acquisitions and disposals and (c) changes in license agreements where the Group operates as a licensee.

In calculating Organic Growth, the following adjustments are made to revenues:

(1) Foreign exchange – Current period average foreign currency exchange rates are used to translate prior period revenues of foreign subsidiaries expressed in local functional currencies different than the Euro.

(2) Acquisitions and disposals – Revenues generated by businesses and operations acquired or disposed in the current year or prior year are excluded from both periods. Additionally, where a business or operation was a customer prior to an acquisition, the related pre-acquisition revenues are excluded from the current and prior periods.

(3) Changes in license agreements where the Group operates as a licensee – Revenues generated from license agreements where the Group operates as a licensee that are new or terminated in the current year or prior year are excluded from both periods (except if the effects are already included in acquisitions and disposals). Additionally, revenues generated from license agreements where the Group operates as a licensee that experienced a structural change in the scope or perimeter in the current year or prior year are excluded from both periods, including changes to product categories, distribution channels or geographies of the underlying license agreements.

We believe the presentation of Organic Growth is useful to better understand and analyze the underlying change in the Group’s revenues from period to period on a consistent perimeter and constant currency basis.

Revenues on an Organic Growth basis are not a substitute for revenues on a current currency basis or any IFRS-related measures, however we believe that revenues excluding the effects of (a) foreign exchange, (b) acquisitions and disposals and (c) changes in license agreements where the Group operates as a licensee provide additional useful information to management and to investors in analyzing and evaluating our revenues and operating performance.

The tables below show a reconciliation of revenue growth to organic growth, excluding the effects of foreign exchange, acquisitions and disposals and changes in license agreements where the Group operates as a licensee, by segment, by product line, by distribution channel and by geography for the year ended December 31, 2023 compared to the year ended December 31, 2022 (FY 2023 vs FY 2022).

Segment

 

FY 2023 vs FY 2022

 

Revenues growth

 

less

Foreign exchange

 

less

Acquisitions and disposals

 

less

Changes in license agreements where the Group operates as a licensee

 

Organic Growth

Zegna

12.4

%

 

(1.4

%)

 

—

%

 

(5.7

%)

 

19.5

%

Thom Browne

14.9

%

 

(3.4

%)

 

0.5

%

 

—

%

 

17.8

%

Tom Ford Fashion(*)

n.m.

 

n.m.

 

n.m.

 

n.m.

 

n.m.

Total for the Group

27.6

%

 

(2.1

%)

 

16.2

%

 

(5.8

%)

 

19.3

%

________________________________________

(*) Throughout this section considered not meaningful (n.m.) as the Group began operating the Tom Ford Fashion segment following the TFI Acquisition, which was completed on April 28, 2023, therefore there is no comparison figure for the period.

Product line

 

FY 2023 vs FY 2022

 

Revenues growth

 

less

Foreign exchange

 

less

Acquisitions and disposals

 

less

Changes in license agreements where the Group operates as a licensee

 

Organic Growth

ZEGNA branded products

20.1

%

 

(2.2

%)

 

—

%

 

—

%

 

22.3

%

Thom Browne

14.7

%

 

(3.3

%)

 

0.5

%

 

—

%

 

17.5

%

TOM FORD FASHION

n.m.

 

n.m.

 

n.m.

 

n.m.

 

n.m.

Textile

10.4

%

 

1.0

%

 

(0.1

%)

 

—

%

 

9.5

%

Third Party Brands

(74.1

%)

 

0.1

%

 

—

%

 

(56.8

%)

 

(17.4

%)

Other

10.8

%

 

(0.8

%)

 

(3.8

%)

 

—

%

 

15.4

%

Total for the Group

27.6

%

 

(2.1

%)

 

16.2

%

 

(5.8

%)

 

19.3

%

Distribution channel

 

FY 2023 vs FY 2022

 

Revenues growth

 

less

Foreign exchange

 

less

Acquisitions and disposals

 

less

Changes in license agreements where the Group operates as a licensee

 

Organic Growth

Direct to Consumer (DTC)

 

 

 

 

 

 

 

 

 

ZEGNA branded products

22.4

%

 

(3.0

%)

 

—

%

 

—

%

 

25.4

%

Thom Browne

25.9

%

 

(8.2

%)

 

14.4

%

 

—

%

 

19.7

%

TOM FORD FASHION

n.m.

 

n.m.

 

n.m.

 

n.m.

 

n.m.

Total Direct to Consumer (DTC)

37.8

%

 

(4.3

%)

 

17.6

%

 

—

%

 

24.5

%

Wholesale

 

 

 

 

 

 

 

 

 

ZEGNA branded products

8.4

%

 

1.4

%

 

—

%

 

—

%

 

7.0

%

Thom Browne

5.8

%

 

(0.2

%)

 

(9.7

%)

 

—

%

 

15.7

%

TOM FORD FASHION

n.m.

 

n.m.

 

n.m.

 

n.m.

 

n.m.

Third Party Brands and Textile

(24.8

%)

 

0.7

%

 

(0.1

%)

 

(31.2

%)

 

5.8

%

Total Wholesale

11.3

%

 

0.6

%

 

14.9

%

 

(13.8

%)

 

9.6

%

Other

n.m.

 

n.m.

 

n.m.

 

n.m.

 

n.m.

Total for the Group

27.6

%

 

(2.1

%)

 

16.2

%

 

(5.8

%)

 

19.3

%

Geographical area

 

FY 2023 vs FY 2022

 

Revenues growth

 

less

Foreign exchange

 

less

Acquisitions and disposals

 

less

Changes in license agreements where the Group operates as a licensee

 

Organic Growth

 

 

 

 

 

EMEA (1)

26.6

%

 

(1.1

%)

 

15.4

%

 

(6.5

%)

 

18.8

%

of which Italy

25.6

%

 

—

%

 

13.0

%

 

(5.8

%)

 

18.4

%

of which UK

30.1

%

 

(1.6

%)

 

30.7

%

 

(13.7

%)

 

14.7

%

of which UAE

35.0

%

 

(3.2

%)

 

7.3

%

 

—

%

 

30.9

%

North America (2)

41.6

%

 

1.2

%

 

41.3

%

 

(12.3

%)

 

11.4

%

of which United States

42.3

%

 

1.4

%

 

42.6

%

 

(12.1

%)

 

10.4

%

Latin America (3)

25.6

%

 

9.4

%

 

—

%

 

—

%

 

16.2

%

APAC (4)

22.2

%

 

(5.1

%)

 

5.5

%

 

(1.9

%)

 

23.7

%

of which Greater China Region

20.5

%

 

(5.2

%)

 

2.1

%

 

(0.6

%)

 

24.2

%

of which Japan

29.9

%

 

(9.9

%)

 

15.9

%

 

(4.4

%)

 

28.3

%

Other (5)

(8.6

%)

 

(0.3

%)

 

17.3

%

 

—

%

 

(25.6

%)

Total for the Group

27.6

%

 

(2.1

%)

 

16.2

%

 

(5.8

%)

 

19.3

%

________________________________________

(1) EMEA includes Europe, the Middle East and Africa.

(2) North America includes the United States of America and Canada.

(3) Latin America includes Mexico, Brazil and other Central and South American countries.

(4) APAC includes the Greater China Region, Japan, South Korea, Thailand, Malaysia, Vietnam, Indonesia, Philippines, Australia, New Zealand, India and other Southeast Asian countries.

(5) Other revenues mainly include royalties.

***

Capital expenditure

Capital expenditure is defined as the sum of cash outflows that result in additions to property, plant and equipment and intangible assets.

The following table shows a breakdown of capital expenditure by category for the years ended December 31, 2023, 2022 and 2021:

 

For the years ended December 31,

(€ thousands)

2023

 

2022

 

2021

Payments for property, plant and equipment

57,034

 

49,114

 

79,699

Payments for intangible assets

20,843

 

24,185

 

14,627

Capital expenditure

77,877

 

73,299

 

94,326

***