Ermenegildo Zegna N.V. Ordinary Shares

Hello everyone and thank you for standing by. The Amenogildo Zegna Group FY2024 Financial Results Call will be beginning in just a few minutes time. We thank you for your patience and we will begin shortly. Thank you. Good afternoon, good morning everyone. Thank you for joining the Emeno Gildo Zania Group FY2024 Financial Results Call. Please note that today's material and presentation are available under the zaniagroup.com website. Joining us today is the Zania Group leadership team including Gildo Zania, the Group CEO, and Gianluca Tagliabue, Group CFO and COO. Before we begin, we need to point out that the team will make certain forward looking statements during the call. The group actual results may be materially different from those expressed or implied by these forward looking statements. Also, these statements are subject to a number of risks and uncertainties, including those described in our SEC filings. Please refer to the forward looking statements cautionary statement included at page two of today's presentation. I will now hand over to Jill Dozania.

Thank you and good morning and good afternoon everyone. And thank you for joining us today to talk about our manager group for year 24 results. As you all know, 24 was a different year than what we initially planned. Despite the challenges, we delivered an adjusted EBIT of 184 million euro. And although I cannot be fully satisfied with the numbers we present today, I'm absolutely assured by the proven strength of our teams in navigating challenging moments with discipline and determinations. I would like to start this call by sharing some reflections on last year as well as our outlook going forward. First, let me start my commenting on the most recent event, the Tom Ford Fall Winter 25 Fashion Show in Paris. The person I cannot recall such an An anonymous acclaim from the press and key opinion leaders. The show has been celebrated as one of the best of the season, recognized for its innovative collection and presentation. Also, we generated double the media impact of the brand's latest show. But it's not just about recognition. The show was a powerful testament to either Ackerman's ability to evolve from Ford into a modern and sophisticated interpretation of sensuality and elegance. And we are already starting to see customer interest in the collection. They see now, buy now piece, those already available in stores, being positively received as well as the fall-winter 25 wholesale sale campaign. Of course, this is just the first step. But we must sustain this momentum, and they know that the Tom Ford Fashion Team is fully focused on doing exactly that. It is also important to recognize that this show would not have been possible, at least not with such success, without the contribution of our unique filiera, our integrated supply chain, with artisans working childlessly, day and night, in the lead up to the show to achieve such perfection in every piece. So bravo to all of them. Second, Tom Brown. The February show confirmed that we have already discussed about the brand journey. Tom Brown has always stood for expertly crafted product and distinctive tailoring. The DNA has and always will be there. We built on that to evolve the brand, and this is what the team is doing. We are enhancing newness while protecting the unique Ford bar emblem, improving the brass architecture of the collection and of the in-store offering for both men and women. All this while the company focuses on embedding a strong retail culture. Last week, the brand opened its new store in Palm Beach, Florida, and soon will open LA, California, and New York Madison Avenue. An important step in enhancing its footprint in the United States. Let me also mention the February fashion show and the Reese's result, which confirmed that the brand collection has been highly appreciated by customers. And last but not least, the innovative show that Ducci did at the Grammys. She performed with 20 dancers all dressed in Tom Brown, a further testament of the strength of our brand. Finally, on Zegna, the Velu Sarum exclusive collection and the innovative advertising campaign we launched with Mr. Auro Montanari outperformed our expectations, attracting not only our existing customers, but also new ones. This is part of our future journey. to engage both existing and potential customers with products of the highest quality and exclusivity, outstanding craftsmanship and a unique heritage. In June, we will take all this to Dubai, a market that continues to show impressive growth and appreciation of the Xenia brand. To celebrate our special relationship with Dubai, Xenia will host its first show outside Milan alongside a week-long village experience, the third after Shanghai and New York. That also proves the strength of our personalization project. Let me also briefly touch on two important projects that reflect our commitment to excellence, to giving back, and to the environment. We recently appointed the first 20 maestri of our Academia dei Maestri, an internal school dedicated to preserving the unique know-how we have developed across the entire luxury value chain. It is a significant project inspired by our founder's relentless pursuit of excellence and commitment to the Made in Italy. In 2025, we continue to work to make our group a more inclusive and diverse workplace. I'm particularly satisfied to say that some 50% of our managerial position are now covered by women. And last, for me, the most important, we continue to invest on traceable raw material across our brand. This project launch and the goals achieved are important, but for our group, sustainability is much more than just this. Sustainability and caring for our communities are a part of who we are today. and will continue to be so. Now, let me take a moment to talk about 2025 and our mid-term targets. First of all, let me provide some color on current trading, since I know this will be your first question. The Q1 2025 trend still reflects a challenging environment in China. And in addition, we will continue to reduce the wholesale footprint across all brands in line with our strategy focused on DTC and customer centricity. This will continue to be a particular focus at Thom Browne, especially in the first part of the year. In fact, we do expect the trend in Thom Browne wholesale channel in Q1 of this year to be similar to Q1 24. We also announced today an update of our mid-term targets. We expect to reach a revenue between 2.2 billion and 2.4 billion, with an adjusted EBIT between 250 million and 300 million. These assumptions are based on a still cautious outlook for 2025, with an expected low single-digit growth in revenue and adjusted EBIT. Our assumption for this year factors in the expectation that the current challenging environment in Greater China will persist, in particular in the first semester, also due to the negative trend in Hong Kong. We anticipate more sustained growth in 2026-2027 as the steps we are currently taking across all three brands and our filiera begin to yield results. And you have my full commitment that we are working to turn them into reality. Thank you, and let me turn over to Gianluca.

Thank you, Gildo. Let's move to page 10 of the presentation where we do find full year 24 results key highlights. The revenues for this year were already disclosed at the end of January. and we confirmed them at 1,947,000,000, up 2% year-on-year driven by Zegna Brand organic growth. In 24, the group reached 67% gross margin and adjusted EBIT of 184 and the profit of 91 million. Let's move to the following pages to comment more on this result. On page 11, starting with gross profit, in full year 24, Gross profit rose by 230 basis points to 1,297,000,000 with a margin of 66.6%. The 230 basis points improvement from last year has been driven mostly by two factors. First, channel mix more skewed towards DTC as the major driver of this improvement. In 24, DTC revenues reached 78% of the three combined brand revenues versus 73% last year. And as you know, DTC growth margin carries a higher margin than the wholesale one. Second factor, a better inventory management, which we will see also in the trade working capital base. Let me also remind you that in full year 24, cost of sale still included almost 4 million of Tom Ford fashion PPA-related charges purchased by the location. These charges were instead $15.6 million in full year 23. The 2024 amount is the last tranche of PPA-related charges from the acquisition of the remaining 85% of TFI. That is the company that signed the 20 plus 10 year license agreement for the Tom Ford fashion business. Moving on to SG&A. SG&A in full year 24 reached 1,000,008 with a 51.8% incidence of revenues compared to 47.3 in full year 2023. The increasing SG&A incidence of revenues is linked to three drivers. First, the investment in talent and organization across different functions. We reinforced all the three brands Even it is important to highlight that the investment made at Tom Ford Fashion represents the vast majority of the increase of SG&A in absolute terms versus 2023. Also related to the fact that this year we had 12 months, while in 2023 we had eight months of Tom Ford Fashion. The second factor, the expansion of the store network, including also the conversion of the Korean monobrand stores to DCC for both Zegna and Tom Brown. Clearly, when we launch a new store, either from conversion or not, some ramp-up time is needed before reaching maturity. Third factor, a negative operating leverage, in particular at Tom Brown, since we decided to streamline the wholesale business, which I remind defined by 33% versus prior year inorganic terms. Moving to marketing expenses. In 2024, we continued to invest on our brand. Marketing expenses were $121 million, equal to 6.2% of revenues, slightly above the $115 million mark achieved in 2023, which at that time was 6.0% of revenues. And this is in line with our indication of a fair, mid-term marketing revenues incidence of around 6%. As already anticipated in the call related to H1 results, in 2024 we experienced a different timing of spending in marketing, fully related to the different concentration of events across the year, which has been more intense in H1-24 compared to H2. Let's now move to page 12 of the presentation where we report the adjusted EBIT for the group and bisector. As always, This is the main performance method used by the management to analyze the performance of the business at group and segment level, and you can find all the reconciliations in the appendix of this presentation. In full year 24, our adjusted EBITDA reached 184 million euros compared to 220 in 2023. As Gildo commented, these results reflect largely the challenging sector environment, especially in GCR. And the decision to streamline the wholesale business and some Brown, but reflects also the efforts that have been made to improve costs. And postpone some projects that are that have not been considered a priority. This effort is continuing also in 2025. Recently we have taken, for instance, some important decisions as it regards to our figure where we are reorganizing the activities of the fabric by concentrating them from the current two facilities into just one site. And we are still working on other forms of optimization at 360 degrees across the book. In particular, last year, Tom Brown's segment has been the most penalized in terms of adjustability performance, having recorded the strongest reduction in revenues, minus 21% organic versus 2023. which in 24 has been only partially mitigated by cost control actions. Tom Ford fashion segment reported a loss at EBIT adjusted level in line with our expectation and also in line with the results that we reported in H1. Actually, the adjusted EBIT of Tom Ford fashion in the second half of 2024 came in slightly above breakeven. The full-year adjusted EBIT performance of Tom Ford Fashion reflects the cost to build a platform to support the long-term growth of this business, going from design to merchandising, from IT system to regional leaders, and so on. Last on the segment that, as you know, includes Zegna Brands, Textile Division, and third-party brands. This segment generated an adjusted EBIT likely south of 14%. 70 bits below 2023. This performance reflects our decision to keep on pursuing strategic projects that are important for the long-term of the brand in a market that over the year has become more challenging, especially in GCR. I have to say that on the other side, the team has been responsive on working on cost control and containment actions. On the positive side, corporate costs including the intersegment elimination decrease to 21 million compared to 30 million in 2023, mostly lower cost for short-term and long-term remuneration. Moving to page 13, you can see here summarize our reported income statement. Let me make here one comment on taxes, as you see, In fact, the tax rate moved to 30%, a more normalized level compared to 20% of prior year, which was mainly a result of non-taxable income. As a result of the above, we reported group's profit in 2024 at 90.9 million euros. I can also here anticipate that based on the 2024 results, and acknowledging that in any year, the dividend per share should be at least equal to that of the prior year, the Board of Directors proposed a dividend distribution of 12 cents euro per ordinary share, which equals to a total dividend distribution of roughly 13 million euro. Let me move now to page 14, where we comment capitals and trade working capitals. In line with our indications, cash off capitals

It will be a year for which 120 communities will have 4% revenues, for which roughly 50% is related to the system network and the remaining investments in production, including the new factory to be built close to Parma and related to IT.

As we already anticipated, 2024-2025 is going to be another important year in terms of capital, not only on the distribution side, but still also in production where we aim at completing the new ship factory by 26. And for this reason, we expect capex for 2025 to be between 6 and 7% also this year. Travelling capital reached 450 million yen of December 24, which is 23.6% of revenues compared to 449 million yen of 2023. Here, we outlined the sole inventory management, which basically remains flat versus prior year. Looking at free cash flow, that being outlined at page 15, that the group generated $10 million of free cash flow, positive, despite the already mentioned spike in CapEx paid $126 million before March. No major comment is set on page 16, but of course, I'm ready to take questions as a result of this. The net financial debt at the end of December was equal to 94 million of net debt versus 11 million at the end of 2023. I will finish here my presentation to leave space to your questions.

Thank you. Thank you Gianluca. Thank you Gildo. And please operator, can you open up to the first question from the audience?

Thank you. We will now begin the question and answer session. As a reminder, if you would like to ask a question, please do so now by pressing star followed by the number one on your telephone keypad. The first question comes from Chris Huang with UBS. Chris, please go ahead.

Hello. Hi. Congratulations on the results. It's Chris from UBS, and I have three questions, please. Firstly, on latest trends in Q1, thanks for the color on China, but can you also share some details on how trends have so far shaped up in the U.S.? ? given there's some increasing concerns around the American consumer slowing down. My second question is on Zainab's EBIT margin, which is very nice to see coming ahead of expectations. I presume this is reflected of the accelerating DTC growth into the second half of the year. But can you share some thoughts on margins going forward and how much confidence do you have in delivering and constantly improving margins for Zainab segment, both sequentially, but also year over year. Lastly, on Tom Brown, if I remember correctly, you are currently adjusting the product assortment of the brand. Can you share some updates on that front and when we could expect a refreshed product portfolio? Thank you so much.

Thank you. Thank you, Chris, for the three very interesting questions. So the first one on color, so apart from China, in the first quarter, specifically in the US. I'll leave it to our CEO, and then maybe Gianluca for the edit.

Hi, Chris. I was in the States a few weeks ago, and I must say that I was impressed by the resilience that I saw. So we keep doing well, both for Xenia and Tom Ford. It means we have a good traction, and so, you know, We are uncertain what the tariff might bring, but we are prepared to face the challenges. And I think that our customer base is overall resilient for whatever is happening. And I think it's across the country. I mean, it's quite interesting. So we still have a positive mind on the United States market. Slightly different in Canada, I must say. There is a little bit different attitude. And I must add, you never asked about Latin America. In Latin America, we are pretty satisfied on how last year ended and how it got started. And different is from, you know, if you cover Greater China, I must say that the Hong Kong situation is quite challenging. And we see a similar trend in the PRC of Q1, similar to Q4. And so I think that at this point, we expect a negative trend for the overall region by 2025. To give you some more call on the rest of the world, in Europe, we are still doing fine.

We're still doing very well in the evidence. I mean, it seems that Hello, sorry to interrupt.

I think the line is quite bad. We cannot really hear.

You don't hear us?

At least me. I cannot hear very well.

Shall I repeat that? Yes. Oh, boy.

Can you hear now? Yes, here now is better. Maybe if you can finally repeat the comments on Hong Kong and Europe, please. Thank you so much.

On Europe?

On Europe.

Hong Kong and Europe. Hong Kong, very challenging, in particular this first quarter. The rest of China, I think the same picture as Q4. And the thing of China will be negative in 25. Europe, still good. Extremely well. The Emirates in particular, you know, Dubai. And so I think that if we put together Europe, United States, and the Emirates, there are no signs of deterioration and we remain on a positive trajectory. feeling for the rest of the year.

Okay. Was it okay, Chris?

Did you hear the answer? Yes, super clear.

Thank you. And I'll leave it to Gianluca to comment on EBIT and then maybe I'll go back to Gildo for the Tom Brown question.

Yeah, I heard also your question about EBIT also related to BTC growth. So I take it from, I start from the evolution of how we see channels through the year and I land at the end with EBIT. So we declared, low single digit growth expected in EBIT for this year. And the context needs to be read through the evolution of geography, as Gildo said, by channel and also by brand. So by channel, we see definitely DTC as the engine of growth. We are expecting, as we commented, that DTC weight on branded revenues moved from 73 to 78. And this year we have in front of us the goal of landing around 80% of DTC with Xenia brand moving very close to 90% at this point. So that is one driver of our evolution. We have a different velocity that we are expecting here by brand with Zania in comfort fashion above the average, Thom Browne, and also textile for the size that is, textiles are still below the average. Thom Browne, we are expecting the Q1 decline of wholesale that's not to be a representative of the full year, but still we are expecting wholesale Thom Browne in the double digit down. And that would be the one driver of setting the scene for our EBIT at low single digit growth. As it refers, I think you were asking also Zegna Brand. In the second half of this year, Zegna Brand recorded a 15% adjusted EBIT margin. We have to remind that that 15, it is F15. is a consequence also of the timeshift of some marketing expenses. So if we look at the full year, it was 13.9, which is more representative. 2025 for everybody, but also for Zegna is still a year of investment in CRM, in marketing, in training store, in the factories of Parma, in personalization, in the quality of product. So it's a year where we are keeping we have decided to keep on making the investments, and we are expecting to see the full results after 2025 on the Zegna brand, having in mind that when we declare the 15% adjusted unit margin, that is at least the number where Zegna should land, definitely not this year, but going forward.

Perfect. I don't know if this was clear, Chris, and if the line was working. I'll leave it now on Tom Brown and the product assortment evolution to our CEO.

I think that we have seen a significant improvement in product evolution. You know, I am a consumer, a potential consumer of every brand, and I can't judge by myself. And I must say, Winston 24 was a rather... classical approach i think tom i mean has has moved ahead and taken a bolder but still commercial approach to how uh he wants uh his product to look sure in the showroom and now he's transferred in the store so i think that we see this uh they start happening in the assortment in the store for summer 25 but it will be even stronger for following the 25 both in men's and women And I think the show really did highlight this transformation from a more theatrical, very creative show to a more realistic, you know, shows that you like to see what has shown in the store. A lot of Tarta, a lot of Jacquard, both men and women. I think we will see some traction in particular for the winter season. In terms of market, I started with the strong one. Japan is super strong. I think that regardless of the Chinese, whether they travel to Japan or not, Tom Brown remains a brand for the locals. We are doing extremely well with the locals. If the Chinese come, we will surely show them. Korea, we are doing still fine. And so these are the two markets that give us true satisfaction, 24, and keep doing well for 25. China, some small signs, positive signs. I think we touched probably the bottom last year, and I think we see some positive traction. I think that it has to do also with the spot of assortment. in which we made a step, I mean, from what they call the classic, the typical four bar into a more fashion, but still commercial and distinctive items. I think that our inroads in the States is important. I mean, what I've indicated as opening more stores, it means that we do believe in the United States market also for Tom Brown, and in particular, Tom wants to strengthen his position there. And so I think that we should see some improvement there as well. So at the end, I think that a push towards retaining in a moment in which we've been working to reduce both in 24 and also in 25.

Thank you. Chris, if you don't have follow-up, I can go to the second set of questions.

All clear. Thank you.

Thank you. Thank you, Chris. Operator, can you take the second?

Thank you. Our next question comes from Adrian Diverga with Goldman Sachs. Adrian, please go ahead.

Hey, good afternoon. Thank you very much for taking my questions. So the first one would be if you can comment a bit more on the guidance, maybe where do you see the growth opportunity in China? And if you can detail that for the different brands. I know you already commented that you expect negative trends for the region in 25, but maybe you can comment on your expectation a bit further from this. And then the second question would be on Tom Ford Fashion. How is the integration progressing compared to your expectations? And what scope do you see for continued DTC expansion? And the third question, if I may, on the channel mix. So the group has materially lowered the exposure to the wholesale channel. Do you expect the rationalization activity to now be largely complete? If I understood correctly, you still expect double digit down the wholesale for Thom Browne next year. What about the other brands? Thank you very much.

OK. So I have the first question is on the 2027 target guidance, and Adrian was asking about the opportunities implied in the guidance, particularly looking at China, if I understood correctly. I might leave Gisela to make some comments, and then I don't know if Luca wants to add that. Apologies for interrupting.

This is the operator here.

We are experiencing some audio issues from the management team's line. Please stand by while we attempt to resolve the issue.

Okay, sorry about the problem. Now, on China, looking to 27, we still remain positive on China. I think that luxury is related to China and vice versa. So I think that China will be back. It's hard to manifest when it will be back, but... There could be some sign of improvement in the second half. That's what I was there a few weeks ago, and that's what I see. We don't see any concrete things yet, but we remain positive. There might be some review on our network, possibly, in going forward. But overall, we remain confident that our strategy is working well over there. Depersonalization, I think, is going to be important in China as much as it is in the United States. And I think we are working a lot on the training side. I think that if we have to favor something today, today is... working on our people to make sure that our local people that they understand they are able to attract new customer with a new strategy and working in with several in-store event in order to create one-to-one relationship with customer to explain them where the brand is going and what is the innovation factor with the brand and And also by inviting them to our experiences around the world. I mean, next one, as you know, will be Dubai. So surely we make sure that some top customer of China will be there too. So overall, I pose it in mind, but I think it's going to be a gradual movement.

Just at one point, I think within the softness of China, an important leading indicator that we continuously monitor is the growth of the high spenders, which we cut, as you know, about 50,000 per year. I think on that part, on that cluster of clients, we are growing also in China. So, of course, China is suffering from traffic, but our focused efforts on the high-spender individuals is gaining traction also there.

The second question was on the TFF integration, how it's progressive. So I leave it to you, Dottu, to comment.

I think it's progressing fairly well. And I think we see the reaction not only by the price but all the stakeholders. And I'm referring to the final customer and the wholesale. They're quite promising. I think that we were bold enough to create what we call a drop of by now where now, I mean, from some item out of the show to have them in the six top stores around the world the day after the show. And I think by inviting VSC, a top spender, I think they really appreciate what they could pick ahead of time. Then the week after the show, we had the collections in the showroom and we had a good reaction by the wholesaler. I must say that our wholesale numbers are higher than the one of the previous season. Social media in general and media around the world has been very receptive to the show. So I can only tell positive. So we are working on the next show and to make sure that we have the right item in the stores because we have not completed our distribution expansion, but I think we have enough store to make justice to the validity of the line that has met the expectation both in men's and women's. These are important things. You know, until now, Tom Ford Fashion has been more a men's line than a women's line. I think that this is show has been able to rebalance the equation. I think that in the show we saw some new highlights. And so I think that we are coming out with more icon pieces that the customer wishes to have together with also there a personalized approach to the product, to the service, which is very much in Tom Ford's style. and attitudes.

Perfect. The third, if there is no follow-up, the third question is on the rationalization of the channel mix, asking if it is fairly completed overall and clearly by brand. That was the question.

I confirm what we said before on the Tom Brown side. We still see a double-digit decline on that still. And at that point, we should be more on a steady state. In Zing and Tom Ford, we also see a decline of wholesale. On Zing, it's driven by two factors. One is the conversions that we have activated through 2024, mainly in Canada, but also selectively in US. And a second factor, we have been investing heavily in our icons. The triple stitch is the most visible, but there are others. And we are starting to activate a more selective, more and more selective distribution of our icons within an icon protection program in our wholesale. So that is a second driver of strengthening DTC by Applying a selective distribution on icons on Zania. On Tom Ford, the effect is conversions again, the decline of Tom Ford, which we are expecting for this year. We have converted the Arab men. We have converted Saks, New York. So there is a carryover effect of some conversions also on Tom Ford. So yes, we are expecting the three brands to shrink their distribution on wholesale for different reasons. but this will be a factor for 2024. Thank you.

Thank you very much. Operator? Adrian, if you are okay, we'll move to the third one.

Yes, thank you very much.

Operator? Thank you. Our next question comes from Oliver Chen with TD Cohen. Oliver, please go ahead.

Hi, Gildo and John Luck. Great job on the Tom Ford Fashion Show. As we look at the model this year, Street's looking for about 4% revenue growth. I'm curious if that's achievable and 60 basis points of margin expansion. As you think about the brands, will Zinnia be in the 5% to 6% growth range, and will the other brands be slightly positive? Just would love any general thoughts parameters around growth rates by brand, acknowledging that there's a lot of volatility and China's been more challenging. And then as we model your 2027 guidance as well, longer term, what should the complexion be of the revenue growth rate in the years ahead? Just general parameters would be helpful as we think about that. Finally, diving into the Zinnia brand with the growth rate How do you think that will evolve pricing relative to transactions as we model ahead? Thank you.

Perfect. Thank you, Oliver. I think they're all questions for Gianluca. So the first one was a little bit of color on 2025 evolution. Clearly, we cannot be too precise, so it will be very high colors, and then I'll leave it to Gianluca.

I tried to put together some content that can help you model, but we cannot be too specific. On one side, we have the three brands on wholesale down. We have said that Zegna and Tom Ford, despite despite the decline of wholesale as a brand overall, they are growing more than the average. So we expect to have both Xenia DTC and Tom Ford as being the driver of our growth. For Xenia is mostly on a comp basis. For Tom Ford is a combination of comp and non-comp. This is for 2025. On Thom Browne, we have said that the double-digit decline on the wholesale and on Thom Browne, the growth on DTC will come mostly, in our low single-digit growth, we bake in a growth coming mostly from space. As Jill Gordon was mentioning, there are several opportunities of openings coming this year. We have the anniversary of openings that took place last year. Also, the takeover of some locations in Canada, Old Trent, for instance. So the driver of growth is coming from BTC. And we said BTC is expected to land overall at 80%. I think these are the connecting dots where I can help you. And the other question was, sorry.

No, I think that we can add also the productivity factor of the stores. I think overall there is a good traction in gaining productivity. I would say both with Zegna and Tom Ford. And I think that this product evolution, not only on the upper side, but also on broadening the offer. For instance, we are coming out with this beautiful new collection of a moccasin shoe. It's a new loafer, partially handmade with incredible leather, with the current summer without the snow, very Mediterranean, very Italian, very lifestyle. And I think that, you know, a product like that, I mean, another project we're coming out with a knitwear. I'm wearing that every day of 15,000 meals. It is a lightweight knitwear, very comfortable, fresh for the men who travel, so for the office also. So I think that all these projects that are not super expensive, they are costly but not expensive, I think will help driving the productivity in the Xenia store in order to attract new customers and satisfy the current customer that already has plenty of Xenia iconic products. We said on the iconicity and on the balance of the Tom for the collection. And I think that that will be also helping the productivity. So I think that we have put in place, I mean, all the necessary item or weapon in order to improve our DTC development. And also, I must say, whenever we turn an wholesaling into a concession store, We can make the example of the Nordstrom in the United States, or we can make the example of early ozone. We see that the productivity climbs automatically. And so we just have to speed up, and likewise for Tom Brown. So I think that is something that we own, and it's just a matter of executing properly and speed up the execution process. in wherever we open store or we convert store.

Thank you.

Okay.

Yeah, we'd love thoughts on the complexion of growth multi-year, but another one is regarding product at Tom Brown. What are your thoughts on recruitment tools there and applying the right amount of? Simplify to Amplify in terms of growing awareness of Tom Brown in a commercial way. And on Tom Ford more specifically, what's the game plan for women and accessories in terms of timing and impact and what we should watch as you continue to push forward with a new powerful creative vision? Thank you.

Thank you, Oliver. So the question is on Tom Brown, how we are enlarging, as you said, the target to enlarging our customer base to be more engaging and how this is progressing. And the second one on Tom Ford on the women and accessories plan of evolution.

OK, I'll start with the second one first. It's a must. I think from Ford, it's hard to say whether it's more fashion ready-to-wear or it's more accessories. I think it's both. I think that Hydra has done a marvelous job in showing what it can do in ready-to-wear. I think we are at the beginning of the journey with Hydra Accession. I think it did some interesting presentation issues. I think in bags, we have some work to do. And so I think that you will see more happening in summer at 26. It was impossible for him to do everything the first time. I think that he did focus on the things which we needed most, which was the clothing side. And as a matter of fact, you can appreciate that most of the fabric were from our textile platform. Most of the products were produced in our factory, which is very, very satisfactory. And so... But I think you will see more for summer 26 in terms of successors. I think that in Tom Ford, as I said before, I think the challenge there is to go after the local.

Tom Brown.

Sorry, Tom Brown. Tom Brown. I think that the collection that Tom has put together meets this objective. I think that the collection... was spot on for Asia, but I think that more selection, a different selection was needed for both North America and Europe, which I think that the 425 collection has shown. And I think also the marketing, if you look at the catalog, what we call the lookbook, we changed gear from a From a lookbook that looks very creative, very show-driven, it's a lookbook of a product you like to purchase in the store and you can find in the store. So that together with event and with outreach will help reaching out more of the locals. So the goal really is for Tom Brown is reaching and going after the local with a collection more geared towards that. And I must say Zegna has been leader. I think that the way we turn around Zegna with our branding was not just go after a visitor, regardless of where they were, just go after the local. And then visitor can add to that. And I think they really done a super job. So same will apply. And I think it will be, I think that you asked me when it will happen, it will happen. But, you know, you have to take a natural approach. In an organic world, you just can't push it to the limit, but I think the direction is there, the vision is there. It's just a matter to execute it properly, but I see some positiveness on both brands for the fall-winter 2025 line in the store.

Thank you. Oliver, are you okay? Can we move to the next question?

Yes, thank you very much. Best regards.

Thank you. We have one further question registered, which comes from Melanie Grippo with BNP Paribas. Melanie, please go ahead.

Good morning, or good afternoon, everyone. This is Melania Grippo from BNP, Paddy Bikestan. I have two questions. So the first one, if you could please share the initial feedback, client reaction to your Velusaurium launch. Have you seen any difference by country? If you could please give more granularity around it. And also, my second question is on the CAPEX for I think you mentioned them during the presentation, but I couldn't hear very well. And also an update on your supply chain. When should we expect the factory in Parma to be completed? Thank you.

Thank you. Thank you, Melania. On Velosaurium reaction also by countries, I leave Dildo to comment.

Yeah. I must say that I seldom have... and found a similar action on a launch project. If I can make the example of Deepestitch or Contrajac, I think we had peaks and lows. And so some countries reacted after one season, the other after a couple of seasons. I must say that Bellisaro, maybe because it was selectively distributed, we had only in a small number of doors, very selective, and we invited the customer to preview the collection. I must say that we had a good attraction across the world. If I had to make a ranking, number one is Europe. I would say number one is Middle East, to put a ranking. Number two is Europe, number three is United States, and number four is Asia, in terms of ranking. But I would say All four in pretty good standards. And I think that the merit was the communication. It was the focus and it was the planning of inviting the customer ahead of time and by creating experience when they saw the collection and creating a kind of a surprise effect. that's something that they could buy, which is unique. And the interesting thing is that we had a couple of cases of BAC, what they call our Circle 300 club, that had been bought in the same week in several places. So they bought one jacket in one place, one coat, then they bought the jersey, then they bought... So it means that they appreciate the product and they bought more as the travel took them around the world. So it's interesting. It is... this journey, so a very positive journey.

On CAPEX 25 and update on the supply chain, I'll leave it to Gianluca, and then it's to the one to comment.

Okay, so Melania, so the CAPEX for 24 was 6.4%, and we confirmed that 25 will be still in the range of 6% to 7%, and that is also coming from the efforts we are doing in Parma, Parma 25 is the major year for making the construction. We started and the goal is to have the factory up and running in the second half of next year.

Perfect. Well, you are right, Melania. I can go to one question from the webcast, which is a little more for Gianluca, but also for Gildo, for our CEO. The question says, what exactly has changed in 2027 outlook and why more conservative midterm view on China despite winning share with your best consumers? So then, yeah, Gildo will comment on that.

I think that it's very simple. I think we are realistic, and we have to live in today's times. And so we have to change targets for a different market environment and for time reasons. It's as simple as that. And the second reason is that we cannot compromise between margin and brand dilution. This is the second reason. But we remain confident that we can also do better. And the fact that we are working on cost and productivity for improvement is very important. The other thing is that we have taken, rightly so, a policy to defend our investment in marketing, in CapEx, in research and development, in a selective way, not just a... But, you know, it's easy when times get challenging as they got beside China in 24 and 25. Okay, no, we cut this and we cut that. No, we go in for the long term. We have a vision for each brand and we want to keep that vision. And so I think that this compromise between margin and brand dilution is key. And I think that we gave priority to that rather than rushing it and then maybe having surprises later on.

Okay. I don't think Gianluca needs to add anything. It's been done. I don't know if there are, operator, any further questions.

We have a follow-up question on the line from Oliver Chen with TD Cohen. Oliver, please go ahead.

Hi, thanks, Gilbell and John. Thanks a lot, Paola. The question is on wholesale. Wholesale has been a tough channel throughout, and we see some risk this year in wholesale in different regions as well. What's doing better versus worse in wholesale, and how much volatility? Has wholesale gotten worse? since you since you last reported and just curious about regions and strengths and weaknesses with that since it's impacting a lot of your portfolio.

Okay, the question is the wholesale what's doing better or worse and what we are seeing and maybe it's right to divide by brand. I think.

It's more than what's doing better than worse from a geographical standpoint. I think that what is doing better is our franchisee. That is a different kind in nature of Sailor because we are able to implement in the franchisee most of our market strategy. So in terms of cadence of products in terms of training tools, in terms of visual merchandise. So that part across the geographies on the Zegna side, mainly, it's performing well. That is the case, of course, in some of the Eastern European countries, in some of the Middle Eastern, African, South American. So in countries where we do not go direct and we have a trusted partner and we are able to make them be part of our DTC strategy, DTC-like strategy. I think that is the part. On the others, which are either department stores or specialty doors, it depends. It depends very much from their financial stability So it's scattered. I cannot say that there is one specific trend. It's scattered. There are some ones that are going well, where they have the trust of their clients, where they have the financial stability to do proper open-to-buy, and others that are more struggling on the open-to-buy or have less of a trusted link with their clients, we see them struggle more. So there is no one pattern.

I would make a big difference here. Between specialty store and department store, okay, the few remaining specialty stores which we are in have done super well. I must say that I can't give you the numbers, but I must say that in the past two seasons, we have been to Zegna among one of the top brands in terms of central. Why? Because the selection was focused into just a local like what we bought. It's as simple as that. I can make the example of the number one specialty doors in the United States, Mitchell, you know, Mitchell family that have now six doors. They've done, we are the major supplier of them. We've done extremely well. So whenever you have a store that caters to the local with a good offer and a good service and a good customer base, well, With department stores, it's more difficult, and they don't want to make names. So we privilege it because the concession model, and in privilege of that, we have done well. Then what Gianluca said is franchising. For me, franchising is more retail. I mean, even though we can't do the wholesale, it's the inclination of the DTC in countries where we don't, feel going direct yet or maybe go tomorrow and so i think that is is controlled by us in a way uh the the the open to buy the selection uh the visual uh the the personalization that is at their risk you know but it's it's a lot of work behind so overall we have proved our distribution uh in xenia surely more so in Tom Brown. I think that in Tom Ford, we've been always very selective. One of the things that I must say, Chapeau, for Tom Ford is their selectivity and distribution is one of the most selected brand wholesale distributed. So we can only do better with those, provided we give the proper merchandise. Overall, even though the split is 80-20, I think that I personally do care a lot about the 20% of wholesalers because we can really do well with them and is a way to help us increase in the local. I keep saying the biggest challenge of a luxury brand is cater to the local. If you can do that, and I don't want to make a couple of examples. There are a couple of examples. the ones that are able to do that, they're going to be more immune to crisis, whatever it is, or to traveling, or to forest fluctuation. And so I think that this is an important thing that more so now we want to foster in all the three brands. And I don't think there are many that can do that.

Okay, very helpful. Thank you.

Thank you, Ollie. I asked really if there is the final one, otherwise I think it's time for us to thank you. Operator?

We have no further questions registered.

Thank you so much. So I thank you everybody for always the very, very interesting question that always surprise us on the positive side. So just a couple of reminders. We report the first quarter results on the 24th of April. So silent video will start on April 1st. While we also would like to advise you that our fiscal year 2024 annual report will be filed today after market close. Thank you, and we are here for any follow-up questions you might have. Thank you so much for everything. Bye.

Bye. Thank you.

Thank you, everyone, for joining us today. This concludes our call, and you may now disconnect your lines.