Ermenegildo Zegna N.V. Ordinary Shares

Good afternoon or good morning, everyone. Before we begin, I need to point out that management on the call will make certain forward-looking statements included at the beginning of today's presentation. Please note that today's material and presentation are available under zaniagroup.com's website. I will now hand over to Gildo Zania, Chairman and CEO of the group.

Good morning and good afternoon to everybody. Thank you for joining today's conference call on the Mergedo Zegna Grupo Q3 2024 Revenues. Since we just spoke a month ago to discuss our H1 results in details and provide an in-depth update on our strategy and the important action we are taking to navigate the challenges currently facing our sector, I will not take much of your time today. I want to give just a few comments on Q3 and talk a bit about some recent trends. As anticipated, Q3 DTC performance was impacted by an increasingly challenging environment, especially in the greater China region. The quarter also saw a softer wholesale performance, which was negatively impacted by the ongoing door rationalization at Thom Browne. By the conversion of SIS, which are all said, to concession, which are retailed, and by some different timing, deliveries for Zegna and Tom Ford Fashion. August was the most challenging month in the quarter. With September, we saw a slight improvement. Zegna brand recorded double-digit performance in Americas and EMEA, also thanks to the success of the second drop of deliveries of Ford Winter 24. During the past weeks, we had some important events, that I wish to talk about. Most recently, I'm very pleased to say that we finally inaugurated the Zegna Monte Carlo store, and we also opened Beijing Xinkong Place in October. This is in addition to other important stores we opened in Q3, including Honolulu, Ala Moana, and New York Meatpacking District. Toffold Fashion hosted a major event in the newly opened Beijing China World store, which resonate very well with customer also having important celebrities attending and the large young crowd. It was the first event to present a fashion collection run in China. Over the past weeks, Tom Brown also hosted some significant events. In Korea, the brand opened an experiential pop-up store in Seongsu, one of the most vibrant and young districts of Seoul, which has been very successful. In Hong Kong, The brand launched with also Tom Brown attending. The world of Tom Brown, a multi-category installation across George Pacific Place Landmark and Lane Crawford, that is our partner. But not only events, I'm proud to anticipate that Tom was honored by the CFDA of America with nomination for 24 menswear and 24 womenswear design of the year. And as you know, the award will take place on October 28 in New York. Let me finally comment on the Golden Week in China. Golden Week performance for the group was a bit ahead of our expectations and showed an improvement compared to the Q3 downtrend. However, as you can imagine, revenues in the week were still below last year's result. Xenia saw a higher quality traffic, which means that even if traffic was down, Conversion and average signal was up. This is coherent with the strategy we are pursuing for the brand. Thom Browne saw some small initial positive signs, but they continue to remain cautious on the overall outlook, knowing that uncertainties are still there. For top four fashion, Golden Week has a minor impact since the lower exposure of the brand to China. To conclude, I wish to leave you with a comment and a promise. 24 has turned out to be a different year for what I believe the whole sector initially planned. We faced this different outlook with a conviction that we must work for the long term. In this environment, as you know, we took some important decisions and actions to reinforce our brand for the long term, but that will have some short-term impacts on our results. Importantly, we streamlined the Tom Brown wholesale business and focus the brand on DTC, while also making some important investment in marketing, merchandising, and retail talents. At Thor Ford Fashion, we appointed Heider Ackermann as Creative Director in order to bring the brand to its full potential. Heider's new collection will be in store next year by June, July. Looking at 2025, I believe that we will start this year, then next year, in a much better shape, even though the outlook remains uncertain. Planning carefully, investing in our brands, both in terms of marketing and in some selected openings, and attracting the right talent is what we will continue to do moving forward. This is the only way we can continue to strengthen our group and deliver on our ambitions. Year 2025 could be unpredictable either way. So we are prepared. for both ways. But I know that we are facing it stronger by staying the course through this cycle. Thank you. Let me now hand over to Gianluca, please.

Thank you, Gildo. Good afternoon, everybody. Let's start from page seven of the presentation with our key highlights. Here we report the revenues for the first nine months equal €1,357,000,000, up 2% year-on-year on a reported basis, plus 3% in constant currency, minus 4% in organic terms. Let me remind you the changes in the perimeter that are utilized by the organic growth metric. First, the Tom Ford fashion business, which is consolidated since April the 29th of last year. Second, the acquisition of the Korean business from Brown occurred July the 1st of last year. Therefore, this business is included in the organic perimeter starting from Q3 of this year when we compare it to Q3 of last year. And third, effect on the organic growth metric is the position of ZENIA Korea business, which occurred on January the 1st of this year. When we refer to organic growth, we neutralize the year-on-year delta perimeter resulting from this reacquisition, and also we neutralize the forex impact. During this call, I will refer mainly to the organic performance, which better reflects the underlying performance of the business. In the nine months, the Xenia segment contributed $944 million, with the Xenia brand up 5% organic, Tom Brown segment at 220, Tom Ford fashion segment at 214. In the third quarter, the group reached 397 million euro in revenues, down 8% year-on-year reported, minus six in constant, minus seven in organic. Let's move to page eight of the presentation where we analyze our result of revenues by segment. Let's focus here on the third quarter Figures, as I commented, revenues were 397, down 7 on an organic basis. The Zinnia segment, which includes both Zinnia brand as well as textile and the minor third-party B2B business, recorded minus 1 in organic terms due to the deterioration of textile and the minor other third-party brands, while Zinnia brand continued to deliver a positive organic growth. Tom Brown and Tom Ford segment recorded respectively minus 27 and minus 11 in the quarter. I would comment specifically on their performances on the following pages that are specific by brand. Let's move to page 9, where you see the revenue by brand and product line, Zegna Brand, which represents 60% of groups' revenues in the nine months shows a solid performance, also in Q3, with a plus 3% organic growth driven by DTC channels at plus 4%. In particular, in EMEA, Europe and Middle East and Africa, Americas and Japan, where the brand recorded solid double-digit growth. Let me also add that in EMEA, we have seen both Europe as well as the Middle East is both performing very well. Moving to Tom Brown. In Q3, Tom Brown reported €53 million revenues, minus 27% organic, mainly due to the decision to streamline the wholesale business, as discussed thoroughly during the past calls. On top of this, Q3 revenues have been also more difficult in the greater China region, While on the positive side, Japan continued to show very strong double-digit positive growth, and Korea followed with a good positive performance. On Tom Ford Fashion, Q3 revenues reached €65 million minus 11 organic due to a negative contribution of the wholesale channel, also related to a change in the timeline of deliveries, while the DTC channel of Tom Ford Fashion recorded positive results at plus 3% organic, as I will describe later in the page detailing this trend performance. The textile performance was negative minus 15, sequentially deteriorating from the prior quarters. I remember that in the first half, the organic growth for textile was basically flat at minus 0.6%. And this Q3 has been affected by a decrease in B2B demand from luxury goods brands outside of the group which purchase from our textile platform. The other revenues line can now be considered marginal being at 4 million Euro in the quarter after the acquisition of the Tom Ford International and the change in the accounting of Tom Ford products. Moving to page 10, that is the revenue breakdown by geography. Starting with EMEA. In Q3, EMEA recorded minus two organic growth composed by a double-digit growth at Xenia brand, so a positive double-digit for Xenia retail, driven by Xenia retail, more than offset by the decline in wholesale Tom Brown and, to a lower extent, also wholesale Tom Ford fashion. Americas recorded minus 3% organic growth in Q3, showing a deceleration compared to the first six months entirely related to the wholesale channel performance. Indeed, compared to the first semester of 24, the DTC channel continued to perform very well by Xenia ongoing double digit growth. The wholesale channel showed negative performance in the region for all the three brands due to different timing deliveries and to some conversions from wholesale doors into directly operated stores, both for Zegna and Thom Browne. As an example, we call out the conversion of Harry Rosen stores in Canada for Zegna and Nordstrom for Thom Browne. Greater China region revenues declined by 22% in Q3. And as we commented broadly, this is due to a very subdued consumer confidence in the region, which got worse in the summer months, especially in August, as Gilda said. Among the three brands, Xenia outperformed the group average in the region. In the rest of Asia Pacific, Japan continued to show a solid double-digit performance, positive, both for Xenia and some brands. Looking at the results by nationality clusters, which I know you're always interested in, referring to Specifically to Xenia DTC, we saw US cluster that kept growing on a solid double digit also in Q3. And GCR residents were weaker in Q3 down in the meeting range. Moving to page 11, the revenue breakdown by distribution channel. Just two very quick comments since then we will comment more on a bright brand basis. Overall, BPC channel grew 1% organic with positive growth of Xenia and Tom Ford fashion brands counterbalanced by the decline of Tom Brown retail. Wholesale performance in Q3 was negative at minus 24. We already highlighted the reasons. Just a quick comment on the impact from conversions that in Q3 was significant, in particular for Xenia brand. Converting stores from wholesale to retail, as you know, creates a time difference in revenues since the conversion of wholesale determines an upfront slowdown of seasonal selling to the client while the associated retail revenues are generated afterwards. Let's move to page 12 of breakdown by distribution channel for specifically the Zegna brand. In Q3, Zegna DTC revenues grew by 4% organic accounting at this point 83% of the brand revenues. As I already mentioned, EMEA, Americas and Japan continue to report the solid double digit growth rates for the brand, while greater China region sequentially deteriorated and saw a double digit decrease in plastic, not offset by a health increase in the average ticket. In the quarter, the brand opened six next new stores, including New York McPacking, Honolulu, and some conversions from wholesale into retail, among which we call out, as I said, the Harry Rosen Store in Canada, and also one store in Riyadh, Saudi Arabia, that has been converted from wholesale to retail. Moving to wholesale, the Zegna brand recorded minus 5% organic, in Q3 as a result of the conversion we discussed before and some different timing in deliveries. I would confirm here what I already said during Q2 call. I expect Xenia wholesale to report flat dish on a year-on-year basis for full year 24 inorganic terms, which means that it will be single digit negative on reported basis. Let's move to page 13, that is the breakdown of Stone-Brown by channel. In Q3, BTC for Thom Browne was minus 13% organic. As I said at the beginning, the organic method for Thom Browne in Q3 at this point includes also the Korean market contribution since it had been acquired on July the 1st of last year. And the performance is composed of a double-digit growth of Thom Browne BTC in Japan, a positive Korea for Thom Browne retail, which was more than upset by the negative performance in greater China region. In the quarter, the brand opened four stores in Asia Pacific. In Q3, wholesale for Thom Browne declined 46%, similar to the Q1 numbers, for the same reasons you know and we already commented. I just added, we expect to have this channel at the end of the year down around one-third versus last year, so in the minus 35% area. We expect that the streamline of the wholesale business to focus on the DPC for Tom Brown will continue until spring 25 collection. Let's move to Tom Ford revenues split by distribution channel, page 14. Here, even more than before, I look at the organic performance that takes into consideration the performance starting from end of April. That was the deal closing date of last year. In Q3 of 24, Tom Ford Fashion reported plus 3% organic in the DTC channel with a strong performance in EMEA, a solid performance in U.S., counterbalanced by Asia Pacific. During the quarter, Tom Ford Fashion opened six net new stores including beijing china world which is the first flagship in the country and success avenue women wholesale reported 30 organic down in the quarter but was impacted by a different timing in deliveries both some anticipation into q2 and some delays that impacted the quarter performance as i think as always wholesale is better to look at on a year-to-date basis because it neutralizes the ups and downs by quarter, and you see that year-to-date, the number of wholesale for Tom Ford fashion is minus 11, and that is a much more insightful number to see the performance of Tom Ford fashion on this channel. I will stop now on the next slide where you can see the facade of the Recently opened me back in District New York Zania store and I will end it over to follow for the Q&A session.