Ermenegildo Zegna N.V. (ZGN) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to the Zegna Group Second Capital Markets Day broadcasted live from the New York Stock Exchange. I am Francesca Di Pasquantonio, Director of Investor Relations of the Zegna Group. Before we begin some boring stuff, I need to point out that in the course of today's presentation, we may make certain forward-looking statements. Our actual results may be materially different from those expressed or implied by those forward-looking statements. All such statements are subject to a number of risks and uncertainties, including those discussed in our SEC filings. I refer you to the safe harbor statement which is included on Page 2 of today's presentation. And of course, this session will be governed by that language. With this, I will hand over to Gildo Zegna, Chairman and CEO of Zegna Group. But before doing that, I will invite you to immerse yourself in the world of Zegna Group through a short video. Thank you. [Presentation]

Well after this exciting video, I hope you enjoyed it. Good morning and buongiorno to everyone. Thank you so much for joining us today, whether you are here in person or you are with us listening around the world. As Chairman and CEO of Zegna, it's my pleasure you to welcome at the New York Stock Exchange for our second ever Capital Markets Day. We have a full day at least the morning ahead of us. And I think that we will be sharing a substantial amount of information. Before that, I would like to introduce our leadership team of the Zegna Group. Gianluca Tagliabue on my left, Group CEO and CFO, will talk about our financial ambitions today and the key sales and profit growth drivers in the medium and long term. Rodrigo Bazan, CEO of Thom Browne will talk about our continued growth plans for this brand as it turns 20 years old this year. Nilly Foster, Head of North America region, for Zegna will talk about our success in the region and our ongoing growth plans. On my right is Lelio Gavazza, newly elected CEO of Tom Ford Fashion and I'm sure you are extremely eager to find out more about Tom Ford and will surely go over the vision of the brand and how to move forward. And last but not least, Edoardo Zegna my son, Chief Marketing and Sustainability Officer, will update you on the Zegna One brand strategy and the rollout from the team. I want to share with you where we stand as a group today, discuss on certain strategic decisions and finally, share with you details of medium- and long-term strategy. Before we begin, I just want to take you this and my son here. It was back in the 80s. And it was interesting because this friend of mine very smart of Zegna. Then maybe the follow-up has not been what we expected in terms of storytelling. And I think I must thank Edoardo that when we decided to go public 2 years ago, thought we have an incredible story to scream and let's go back. And what reminds me is that in America, you have to be bold. And you have to tell not so much who you are, but what you are doing. And I think that American are there for results and for execution. So I brought this picture up because I had one dream. I mean, you see the last sentence, and they say, my dream was the Zegna success in America. And I must say that a dream has come true today in what we accomplished in America. Since the listing of the group, at the New York Stock Exchange, I think it was a tribute to our centenary history and legacy in the world that my ancestors starting from my grandfather, father and uncle did. And in particular, the founder had a division to transform the company from a mono brand to a multi-brand luxury group, which I have brought into effect by creating complementary brands that are unique, and they can really take us to a different level. Also thanks to the strong machine that we have in terms of supply chain, in terms of Textile Luxury platform fully sustainable and fully traceable. And I think that the fact that we added after Thom Browne, Tom Ford, it shows that this dream is becoming bigger and bigger and will help us create more balanced across geographies and across different product. However, next slide, you see that we have an incredible territory in Italy called Oasi Zegna and I think that the road that used to be called Panoramica Zegna started in the 30, even though the group was born 113 years ago, and it showed our capacity of being resilient of being transformative of capacity to give back and transform us into an excellent execution in whatever we think what we do. I think that the fact that Zegna is one of the oldest luxury fashion brand in Italy speaks by itself. And it shows that we are already quite balanced in being in 85 countries and with other -- with about 386 stores. And as per this year, Zegna shows penetration of almost 60% of the total revenue Thom Browne 21% and Tom Ford fashion 10% because we take into account the part of the 9 months period since we acquired Thom Ford fashion in April of this year and so is from April to September only. And then we have another percent. And here, we are looking at the year-to-date to September in our numbers, 10% in the what we call the luxury platform. Move in the complementarity of this brand, I think that Zegna shows an immense capacity to stand a strong message in the quite luxury field. Today, Quite Luxury is very popular and very fashionable in the world of luxury. And we are fortunate to be one of the very few to confront ourselves with this opportunity. So I think that what we have executed in the past 2 years is really marvelous if you ask me, would you have expected to be where you are in quite luxury, 2 years ago, I wouldn't say that I would have expected to be where we are because I think we came out at the right time with the right things with the right people, and we just executed in a marvelous way across the world. Maybe there are some territory like the United States, they are more ahead of the pack of others, but I see the execution mode is getting really very, very strong. And another dream I had is one day, if our business school wrote a case about Zegna, in fact, they did. Because of this brand transformation and this capacity to execute what you promised. So alongside Zegna, I must say Thom Browne did a marvelous job, as iconic modern tailoring. Rodrigo will tell you more about it, but I think that the discipline and the dream of Thom Browne in that regard with the unique vision as an iconic brand. I mean, it's very interesting, and I think it will continue evolving. I mean, I would say, representing the best of luxury glamour, I think, adds an interesting piece to the equation and I think that it will create a strong value to our brand portfolio and to the value of our group. And we think that we could deliver an IRR in excess of 20% over the length of our contract certain that we will execute accordingly to the long-term plan of Tom Ford fashion. I think that the good thing about this trend, complementarity and supported by a verticalized supply chain that is unique for the made in Italy and for the luxury world. Now, if you see these slides are interesting. I think that this slide shows the weight of different product category by brand and you see the opportunities that really we have. Let's start with menswear that is the category best represented right now by the 3 brands. I think that men's were ready to wear. I mean, surely, for Zegna [indiscernible], but this represents from Thom Browne and represent a good chunk, about half of the total Tom Ford fashion business. You go to womenswear and you see that they represent a smaller portion compared to men's, both in Thom Browne and Tom Ford fashion, but this lies the opportunity. And that's one of the big reasons why we decided to acquire Tom Ford Fashion and signed a license 30 years license with Estee Lauder was to take advantage of this incredible opportunity in women wear and in leather accessories that you see as the third category, where Zegna is doing pretty well. The triple-stage winter version that I'm wearing today to keep my feet warm is an incredible success. And I think we are at the beginning of the journey to make Zegna stronger in the [CES awards] So that's Thom Browne. I think the Thom Browne is the beginning of a journey we take accessory and Rodrigo will tell more about it and Tom Ford fashion, of course. Lelio will show how much we can do. Not so -- not only on product category, also geography we have an incredible opportunity. And I don't want to give you the impression that we diminish the force of Zegna in America. You see that this is the ranking of market as per '23 per brand. For Zegna, APAC, Asia is #1; EMEA, is #2, considering that EMEA takes into account the Middle East area, which is extremely strong in terms of growth, in terms of profitability and third, North America. So I don't want to diminish the importance of North America. That's why we invited Nilly to do a presentation on the reality. So I think America is gaining strong market share and is growing up, thanks to the quiet luxury. Similar Thom Browne. Thom Browne Asia very, very important, EMEA quite important, North America, still room to develop. Now we go to Tom Ford, it's exactly the opposite. North America is #1, EMEA is still #2, and APAC is a big opportunity. So I think that what I'm trying to show you that, I mean, this aggregate of luxury brand will bring us lots of opportunity to be in the midterm, a better group in terms of balancing geography and imbalance of product category. However, the addition to those 2 brands puts us in a different scale. Scale is very important. I remember when we had the IPO, the first word I said, we are here because of scale. Because if you don't build scale, you are not meaningful, and you cannot make it regardless of what you do. So here, we're talking about scale. Look at the market, you can see that the total soft luxury market. This is a Altagamma Bain study shows that the market potential is EUR 185 billion, okay? With Zegna, we only had -- we could only fish in a market of EUR 65 billion men's soft luxury. With the addition of the other, the Browne and the Ford, we can add another EUR 120 billion market. So that shows, I mean what this new group will be able to confront itself with and the opportunity that we can gain in a market that is 3x what we had from EUR 60 billion to EUR 185 billion. Then I think an interesting thing is to talk about our integration capability and the integration challenge that we have among the 3 brands. I think that I must say that there are 4 ingredients here that makes a difference by being an integrated group. I start from manufacturing supplies. There is no fashion if there is no industry behind. And so I'm very proud to say that Italy represents, if not the best, one of the best industry of fashion because a good part of the product are created, produced and delivered by us, made in Italy, textile and manufacturing platform. This will be put at the disposal of the other 3 brands. As a matter of fact, take made-to-measure. Made-to-measure is our Formula 1, okay, unique. We are leader, leader and leader of this project. We put this as advantage of Tom Ford for the beginning. And therefore, there's an important made-to-measure business. We put this at our advantage of Tom Ford. But not only men's, we can create made-to-measure reality also on the women part. Last but not least, the textile luxury platform. Fabrics, what I call material in Italian is key. Without material, you cannot go into fashion. You cannot go into luxury. So the capacity to innovate the material to come out with new fiber with new finishing with new looking fabrics. Look at what we did with traceable linen and cash is unbelievable knowing the goat and knowing the sheep where the material comes from and having this guarantee of quality. I mean, it's unique. So all this is available, not only to Zegna but to every other brand. The other thing, share cost. I think that when we talk about scale, I think there are certain cost shared services, which we can take advantage of and can make our life easy, if you want, not more difficult among the 3 brands. The third one is talent. Talent and we've seen. I mean, we have 2 talent here. I'm not sure from Lelio and from Nilly that joined the part recently. I don't know if we had joined unless we were at the group we are and more will come on that. So we have become a more attractive entity, forget about compensation because our strategy and our energy and our passion to go forward and the possibility to give them freedom to create their own personality and create the value within the group. Last but not least, distribution. Distribution is a fundamental ingredient in the success of luxury brand. If you're not well located, if you're not in the right environment, forget about it, you can make it. Traffic, interest and all that, I think the fact to go to real estate lender, whether it's China or America, I mean, I had a couple of big meeting this week and presenting ourselves with 3 brands, okay, you're talking to 3, not to one. Let's join forces. So this is a very important part of us going forward. Now where we are -- I think that in looking practically on result, I think we can proudly say that we are one year ahead of our IPO plan. And I think that on the left part of the chart, we are practically. We have achieved the EUR 1.5 billion in sales we promise beyond fiscal year '23 that was achieved 1 year before in '22. And also, I can say that we are also ahead of the midterm financial ambitions that we share in the last Capital Market Day in May 22 in Oasi Zegna. I think that the strategic priorities of the group are clear and I want to show you, in a nutshell, the 3 ingredients that will be then brought forward by Gianluca Tagliabue in details. We are aiming to achieve compound revenue growth in the medium term of over 10% with an adjusted EBIT growing at compounded average growth rate of 20%. This is executed properly, which we will do, will generate a significant amount of cash. Even taking into account the considerable investment because to bring where we need the 3 brands, we need to consider invest both in marketing and CapEx, which we will. Now in terms of next slide. In terms of more specific about each brand we expect sustained market share gains for Zegna on the back of a successful Zegna One brand strategy. And I remember, by a gentleman present in this room, which I will not mention, I ask him what is the most important question to ask yourself going forward, store productivity. You were then right, and we are well ahead of our goal that we put forward and that makes us very proud because that forced us to do everything super well, okay? That's surely one thing. And we have reviewed the goal by saying that we want to improve store productivity at the 10% per year on top of the 50% increase, which we did record in '23 and that was anticipated, as I said, ahead of time. Thom Browne. Thom Browne, we have an ambitious goal, too. We want to -- we wish to double the revenue over the medium term compared to 2021. And I think that I would mention this as a controlled phase of growth to say the least. And I think that we have possibility to gain market share and retail growth will surely will be one important part of it. Rodrigo will tell you more about it. Finally, Tom Ford Fashion, the new -- our new child that makes us very proud and we want to grow its revenue by over 10% compound in the midterm through its launch. Now the brand is significant bigger than the business. This is the incredible part. And there are ample opportunities to leverage the group's synergies to fuel its growth and make it I'd like to be bold. Make it one of the 10 largest luxury brand in fashion in the long term. Long term, don't ask me how many years. But we have the possibility because the brand is so powerful. Just a matter to add pieces to it and to execute in a fantastic way as we approve with Zegna. We have the proof. 2 years ago, it stood up and say, guys, this is a dream. Give us a chance. Now the dream has come true. We are ahead of the pack. Now the game is do a similar thing for Tom Ford and keep doing a good job with Thom Browne, aggregate of luxury. This is the power of this group. Okay. I want to close what -- with a couple of slides in what makes us unique, and I don't want to look presumptuous. I just want to talk facts okay? The number one thing is that we are in a questionable unique and authentic group represented by a family, which I think that has done a lot for our territory and for the best of the made-in-Italy across fourth generation because I'm proud to say that the fourth generation is where I presented here today. And I think the sustainable and traceable and traceability Oasi Zegna derived from the founder's very own value of environmentalist and social responsibility. That explain its authenticity. So I think that sustainability is something natural. We didn't buy it. It came natural. It has been part of our blood and so I mean, we transfer it. From generation to generation, we transfer from brand to brand. This I think what makes it, I mean, very, very important. The second point, what makes us unique is the Italian industry rules, which we said, what I like to call if you see to shop is a very powerful strong saying. Nobody else can say it. I don't care whether we are French, America, or Italy, from ship to shop, from farm in Australia down to ultimate bespoke service wherever utilizing our made-to-measure platform. The third thing is the fact of we are complementary with the 3 brands. And so we have an opportunity in women wear and in a textile accessories throughout the 3 brands. And the other advantage is that we can really complement each other also with the synergetic effect as we have showed it. So last but not least, the fact that we are an independent Italian company can make us more attractive to talent, to come and create your own story within the family that is very, very important. So in a nutshell, all this uniqueness, I think that comes back to our values. The quality that our clients expect from Zegna Thom Browne and Tom Ford fashion can be achieved only by using the textile and the best hands and it means the capacity to create the best product. And I think that you can get these values only if you care for the natural award and the communities you operate in. And last but not least, I would say that my grandfather knew all this 100 years ago, and this value are the backdrop of our success today. Thank you very much. And I hope that you will enjoy the presentation of the next speaker and I'd like to introduce Lelio Gavazza, an old friend of mine that I'm very proud him that represent the best of Italy and the best of luxury experience and we'll do, I'm surely a super job in launching the Tom Ford brand at its best. Thank you, Lelio. I welcome you.

So good evening, everybody. Good morning, everybody. Sorry, good evening for the one that are not here. First of all, Gildo, thank you very much for your warm welcome that he was for me, a kind of return back to this amazing group and this amazing family. I know Gildo since more than 14 years when in 2007, 2009, I was working for him. And then I decided to step in [fashion] Group, where I worked for 14 years and in these 14 years, of course, I lead the expansion of Bulgari brand in China first, Europe, Middle East and Africa to step up in the last 6 years and expanded the brand a worldwide level as in charge of retail and sales for the group. Of course, I believe that going back after 14 years, will be an added value to bring into for fashion in a way that, that can just leverage my knowledge and the competitors that develop and to make sure that Tom Ford fashion will be, of course, one of our fast growing brand. I would like to start making a first statement since the beginning. We have the aim to have back on second -- with the aim to leave -- to bring this brand to be one of the top luxury brand in the world. This is something that has to be clear. This is a long-term vision, but this is the way we are working here together to make it happen. And of course, to do that, we need to do the things step by step because luxury brands need to be nurtured and developing a sustainable and healthy way. And in particular, the brand desirability needs to be nurtured on a daily basis. So we don't have to rush but we need to be very straightforward in what we want to achieve in the next year. So let's talk about our ambition. Ambition is our mantra is the way we're going to use to bring the brand in the next few years. And our ambition is to create a global luxury lifestyle house, the blend innovation with artisan craftsmanship, delivery and alluringly model aesthetic across diverse yet unified offering, the priority luxury. Product excellence and impeccable fit. So this will guide us in the next future. And of course, with this ambition, we're going to move in what are the Tom Ford fashion position. And as Gildo mentioned before, the brand is bigger than the business today. We have a solid brand position provided also about what has been done in the past year since the formation of the brand and that is spread in all key media. We have an absolute product excellence at high price position that will allow us to play in the luxury playground without any doubt. We have an opportunity to develop regional brand presence in different markets mainly in EMEA and Asia Pacific. Today, the brand is strong in America, minority in the other marketing. Last but not least, we have an opportunity for expansion in the women ready-to-wear business in particular when we talk about shoes and accessory where today, we have a lot of room to go. One point that has to be clear, 2024, is a transition year. So it's a year where we make significant investment to set the foundation to the solid growth path projected to the strategic plan for Tom Ford fashion. So of course, as I mentioned before, step by step, it's important to achieve what we would like to achieve. Today, we're going to talk about a little bit company overview about the post deal structure. We're going to talk about Tom fashion position and product portfolio, growth & strategy plan and medium-term outlook. Let's go into the presentation to discover a little bit more about the strategy. Talking about the Tom Ford fashion through the year, I have to say that looking at the story of Tom Ford, the legacy of the brand is particularly incredible, given the fact that it's only 18 years, it was founded in 2005. Tom Ford started with the visionary idea. Mr. Tom Ford and Domenico De Sole. And the launch of menswear in 2007, bring Zegna into the pictures in the beginning. And from the time Zegna was already making the success of this brand because they were manufacture and the licensing of the product. Then, of course, in 2010, there was the launch on the womenswear with the famous show in the New York store. It was a show that was unbelievable because everybody talked about it. It was closed door show with only one on the guest invited. And that set up what will be what it was and what will be the base for the future of Tom Ford, exclusivity and high-end positioning of the brand. And we will continue to maintain this, of course, this position. And in 2022, Tom Ford decided to step back as a creative designer and Zegna to cover Tom Ford fashion. And of course, you move from what it was a license to manage Tom Ford. So what we would like to do since 28 April 2023, is to continue the success of the brand. Continue means to manage the growth of our Tom Ford fashion [industry] just recalling what has been done in the future and amplify the brand as much as possible. Let's talk a little bit about Tom Ford today, an overview where we are today. The first thing that I will recall from this slide is of course a tremendous opportunity for Tom fashion. That is an undeveloped business while the brand perception is much higher than what is in reality, the number that we are providing. If you see some of the number we did in 5 months from the end of April to the end of September, EUR 139 million revenue. Of course, what we can understand from these numbers that the brand is over EUR 300 million revenue in 2023. We have 680 employees. We have boutique only 51 boutique directly managed and we have basically only 9 countries with our boutique directly managed. Last but not least, the business is today 70% men and 30% women. Then, of course, what is the essence of Tom Ford. The essence of Tom Ford is what will guide us in the future. We mentioned already what is our ambition. We're going to focalize in the DNA and the code of the Tom Ford. The DNA is representing confidence, representing fashion visionary and represent iconic profession while the code that we're going to use in the next year will be glamour, refined elegance and mysterious allure. This is something that is important to recall and to manage for the next step of the development of the brand. I will launch now a video of 2 minutes that you recall the best part of the fashion show that we held in September in Milano, and it was the first fashion show managed and designed by Peter Hawkings, the new creative director. You can launch the video. Thank you. [Presentation]

So 2 minutes of video, but it was very intense to show you what is Tom Ford and of course, seeing the closure there was on the cut where you can immediately understand the tone of the brand and how the brand would like to stand in the luxury world. Of course, here, I reported, I want to go through, but we report the comments of some of the media. There was [HECO] by a lot of comment of our consumer in the next few days in the showroom. The show was fantastic. The show was in Milano, the city where Tom made his first success in Gucci at the beginning. And it was, of course, a good beginning of this new way of Tom Ford fashion. Let's see now a little bit more detail on the -- the deal. What was the deal before and what has been the deal post acquisition of Tom Ford fashion by Zegna. First, before the deal, you can see in this graphic -- you can see in this graphic that represent how Tom Ford fashion business was structured before the acquisition. In simple term, Tom Ford managed the design of everything, while Zegna [two] licenses at the time was managing menswear product from the development through the distribution. Of course, from April 28 of this year, situation changed. Since that time, Zegna has been in charge of the hand-to-hand Tom Ford fashion business from the collection creation and development to merchandise, to production and as well retail and wholesale distribution. What does it mean? Does it mean that since April 28, Zegna got a license for 30 years. And in this 30 years of manager of the license, we have the exclusive right on core fashion product for both men and women, that is menswear and womenswear, Leather Goods and accessory, fine jewelry, underwear, sportwear and denim. And of course, you have the possibility to make an expansion, and expansion can go in the children clothing and accessory in home design product, peter hawkings, tom ford and Gavazza. But as well, when we talk about jewelry, we can expand for what we have today, that is a kind of bigotry in fine jewelry, really with gold and diamond. And that is something that, given my experience might be on the pipeline in the next future. So the brand today is basically coordinated with 3 main actors. So we have, of course, the CEO of Tom Ford, Guillaume Jesel. We have the Creative Director, Peter Hawkings. And of course, we have my position, the CEO Tom Ford position that we, of course, ensure a congruence and coordinating the activity among the 3 product category. And of course, what I would like to stress that we work very well together with the only ambition to make this brand flying and to make it stronger and stronger into the market. Let's see a little bit of Tom Ford fashion positioning and, of course, a product portfolio. First of all, in terms of positioning, we are at the top of the luxury permitting. We are positioning the segment that we call in the absolute luxury where we are already well established in that category. Our aim is to further elevate towards the brand, making Tom Ford fashion, a fusion of attribute that refine the shape of luxury, glamour as well the brand ability to anticipate desire of all our consumer. All these, for sure, will give longevity to the brand, and we'll assist in the -- in our strategic plan to develop it. We have a unique position as well because when I look at the timeless segment, we mainly have specialists in leather good and ready-to-wear. While the position where Tom Ford is, is a position where we can easily extend our way of work into the ready-to-wear and leather good accessory but as well into the fashion business. And this is the basic of our strategy we implement in the next few years. Yes. I report some of the iconic product of the brand. Of course, when we talk about men, we have formal suit, tuxedo, leather ready-to-wear. Let me say that today, the suit of Tom Ford is the only one that can be recognized from the distance. You see the Beagle Lapel and it's totally different from the other brands. So this is an incredible recognition from all the consumer. But as well in the woman business, we have what was a success, is still a success The Padlock Shoes, the sandal, but as well the Velvet Tuxedo of course, recall the man design and the Evening dress that will bring -- has bring comfort in all the red carpet in the last 15 years of the company. And these are the [icon] where we're going to build the future expansion of the brand. Gildo mention that before, the brand is bigger than the reality. If I look at where we are positioned in terms of medium presence globally, you see that in comparison to one of our big competitors that are in the top 10 positioning in the world. We already have the Tom Ford fashion at the same level. And all the same part will follow in other social media. So we're going to leverage a lot on this credibility of the brand and position of the brand in the world to make things happen in our strategic plan. And just to mention, in terms of product mix, Today, we have roughly 70% men and 30% women. Of course, the business is -- the objective is to rebalance this 30% to arrive in a much more percentage close to the men. But when we look inside of this 30%, only 10% to 50% is made by accessory for women, 10%, 50% of this 30% is made by accessory and this is a tremendous opportunity to exploit. Our competitor most of the time are 6 to 7x bigger than us in this segment. And this is our point of development in the future. Let's talk about growth strategy and plan right now and give a little bit more detail on where we are going to work in the next future. First of all, we have a strategic plan with over 10% in medium term of CAGR. This is something that we will fix and will push in the next year. We're going to leverage on geographic expansion because we need to grow the penetration in market that we are not yet developed, mainly Asia Pacific, Europe Middle East to mention the 2 bigger one. In the last couple of months, I basically traveled the world with the brand. I was in Korea, Japan, China, Middle East and America now wherever I go and you talk with lender or stakeholder in the business, they all are open to welcome Tom Ford. They are happy to see Tom Ford fashion getting stronger, and they're happy to welcome them in the shopping mall with expansion plan that we have in place. We're going to match the retail experience and clientele because we're going to put a significant investment in our direct ownership store, and we're going to align the channel mix between wholesales and DOS. To be a little bit more balanced to control much more our client and of course, most important, we're going to implement CRM. Today, CRM is -- we don't have any platform we don't have yet a process that is formalized in this activity and is something that is already in the working process to make it up. Marketing communication is important. We're going to strain the brand identity and story telling of our product to get more information on what we are selling. And most important, brand amplification. I mean, this brand has to be amplified. We already have a strong backbone base where we can build up on that while we strengthen this position. In terms of product merchandise, we're going to rebalance the product mix, we're going to push more on women accessory and shoes, as I mentioned before. But we're going to make the basis of retail. We're going to put essential product in the store to ensure that all the best seller will be automatically replenishment, and we can avoid to lose sales. Last but not least, supply chain optimization. We're going to leverage Zegna Group, best practice to improve Tom Ford fashion and supply chain. Gildo mentioned before, we have a fantastic supply chain in the Zegna Group that we can leverage it. We have to leverage because it was leveraged since 2007 when the brand was launched by Tom Ford brand itself. In terms of enabling factor, I will be very straightforward at this point. When we talk about products, we talk about Peter Hawkings and what we stated in the fashion show in September and what we will reinforce in the fashion show in February. When we talk about accessory development, it's a new creative person that has been taken from one of our major competitors. He is already on board in the accretive studio since middle of November to design a new collection. When you talk about retail networks, the expansion. I put here a number. Today, we plan to almost double the number of stores in our network to go in the range of 90 to 100 store in midterm. And as you can see, we're going to focalize a lot in Asia Pacific, EMEA between 18 to 22, 12 to 16 in Asia Pacific, but as well, we need to strengthen better our presence in America, while there is some location where we are not yet present, and we need to be much more stronger in that. [Reforce] our company structure, of course, in addition of my appointment made by Zegna Group in July and I joined on the 18th of September, we already strengthened the organization. We're going to have a new President for America soon on board coming from one top brand and top group. We employed already [indiscernible] product and development and production that is already on board he is joining in September as well. And of course, we appointed president for EMEA market. We need to have in the market the right people to make things happen. Synergy for Zegna, production, negotiation power business with discussion with Lendo mainly in Asia, going there as a Tom Ford or going there as a Tom Ford, Thom Browne at Zegna together, make the different internal space and negotiation. Demonstration that these things has been already started despite only 2 months of work. We already got confirmation for new flagship store in Beijing, China World Trade Center in the ground floor top luxury branch. We already got a confirmation of Paragon of Singapore flagship store and as well free standing store in Roma, free standing store in St. Moritz and we are going to move some of our wholesales point of sales in concession in 2024 to directly control the brand in a better way. Midterm outlook, of course, top line is expected to increase over 10% compounded annual growth in the medium term. And of course, a significant contribution will be given by the footprint expansion. New stores we're going to open. We're going to have margin improve and best practices and store productivity enhancement. And when we talk about store productivity, of course we plan a high single-digit growth in the middle chart. In terms of how we fuel the brand, we need to sustain the medium-term growth trajectory for this Tom Ford fashion. We're going to have CapEx investment in 2024, 2025. We're going to move as well in the year ahead to sustain the foundation of the top line growth and when we talk, for example, about retail networks or CapEx for retail, 40% of the CapEx will be for store renovation. We talked, for example, Milano, London, New York and Los Angeles we need to retouch the store, make then more fresh, but 60% will be the expansion, new stores we're going to open. And of course, investment has been foreseen as well to strength the corporate structure. In terms of OpEx, we expect to continue investing in brand equity, brand amplification to secure the positioning and of course, taking consideration that in the office, we have as well the royalty that we have to pay for the management of the bank. I would like just to conclude simply saying that in 20 minute we passed you a lot of information. Of course, there was a big jump on a job that we did on the back of this few information. But what we come out from this message that the excitement, the excitement that we have as a team and as a group to make things happen. We have, in our hands, gem in the rough that we need to expand, and we need to make it up. Our ambition as I said before and I restate again is to become one of the top 10 player in the luxury reward in the next year. And this is where we start from. And I'm really happy to be able today to share that with you and to probably share the next few year to come the progress of this brand thank you very much. Okay. I'll leave the stage to Rodrigo.

Good morning, good afternoon, or good evening if you have a chance to have some following us from Asia. I would like to take you into the world of Thom Browne in this next 20 minutes. The message I would like to share with you is a confirmation of actions towards what we declared not only 18 months ago in the capital markets that we did in May 2022 at Oasi Zegna, but also what we said about 24, 30 months prior when we did the whole road show of the IPO of Zegna. If I was any of you, I'll be looking for actions from what we said, if I was any of you will go looking for some images that communicate what we said that we're going to do. So we will share with you many images in this presentation -- so this is part of the Vogue article recently published on the 20th of Thom Browne. You have 20 years, you see key images that represent specific moments and individuals have done a significant difference in the visibility of what Tom had envisioned 20 years ago to finish with a book that Fan published recently that we took around the world. You'll see the first 10 years are largely focused on men's. The brand was all about men's. And the following 10 years is a combination of men's and women's. The brand of women's was launched 10 years ago. Next image is a very important show for Thom Browne. The first time the Tom took a show internationally. Fashion show internationally was to Pitti Uomo in 2009. This is why Thom Browne was a very iconic show and this is why Thom Browne became very popular with key retailers, journalists and people understand the world of fashion in Europe as well as in key markets in Asia, mainly Japan, Korea at that time. The next image is a 2006 shot by any Annie Leibovitz on Thom Browne. And if you take a look at this, today, I think you're rather used to this, but at that time, it was rather revolutionary, the pants were very short. The jacket was very short, and you will get your attention, you will never get just a client. And today is actually very reasonable. And Thom has influenced the world of men's from the silhouettes, shorter pants, shorter jackets and a different silhouette, which progresses in museums around the world. This is a very intelligent article that Vanessa Friedman wrote in 2017, highlighting eastern Brown the most underestimated design in New York. I actually reread the article previous to this presentation, and I quoted myself that we're going to grow 3x the revenue. We had the potential to be 3x bigger. We were not publicly traded. There was not so many sensitivities that we have today, what we say we don't say, but that's actually what's happened. And with this, I would like to highlight some background to this. In fact, in the past 5 years, we've gone 3x and most importantly, we have balanced our business with a DTC, which is equally important or higher than our wholesale business. Remember, 8 years ago when it started, this was largely a wholesale business company. We have developed a very successful women's business, not only an image, not only shows but a business. Most importantly, we have a uniquely elevated client behind all this growth, is an extremely liberated client. And in natural is 2 pillars or 2 types of clients. It's a VAC, a highly committed client of absolute luxury of clothing that he or she buys clothing in a very classic creative or qualitative way for Thom Browne. That's one pillar and it's very significant for us. The other key pillar is this potentially younger client that consumes fashion that buys the fashionable items of the key luxury brands of fashion and luxury brands around the world. That client buys more of the branding side of the company. And however, that client is also highly committed, multi items purchased in the first time. On both ends, we're looking clothing mostly. On both ends, we're talking about clients that consume bags or shoes or wear or come to the stores wearing bags or shoes with top 5 luxury group brands around the planet and we can convert them actually to be clients of the brands I believe that's going to be the first step to most growth of bags or shoes. Women's gives us a unique opportunity to significantly expand in key markets, namely the United States, North America. I couldn't be saying this 3 years or 5 years ago, we didn't have such a strength in the women's business. I believe this brand has endless opportunities. This brand is actually a good thing is to build the brand. It took the brand into a global business of men's and women's around the world. We have this opportunity to stand from the point of view that we have a successful business in women's clothing, in men's clothing and in eyewear. [indiscernible] category because obviously, Thom Browne is very unique as you may recognize and know and that's often one of the comments that we get from analysts about the fit, potentially being a challenge to grow in several key markets in the world. So this -- the eyewear category has been successful last 10 years. We took it fully in houses and will explain you later. We can convert this into a successful business in accessories, in footwear in kids as well as beauty. We embark in a key moment where product communication is key to convert the brand awareness into client connection. I usually wake up and go to bed and work with our teams dealing with 4 key questions. What is Thom Browne? We are not that well known around the world or we were not that well known around the world and I need to start from that point of view that we're not that well know. So we work hard on making ourselves very well known. Working on Thom Browne brand? The second point is more distribution because we're not everywhere in the planet. We are very selective in distribution wholesale as well as our stores. We do have 100 stores today, but very selective. But then people look at us and says, "I can know where I need to be into it. I had to do it". We do have so much more product than you think, but we need to make sure that we explain to larger audiences, the type of product that we have. And the last question is, can I afford Thom Browne? The perception is absolutely extremely expensive. It's actually starts with a very high quality of product. That's why is actually not that expensive. So the key of our work is to answer those 4 questions extremely well, so we can do an intelligent path of growth for this company. And with this, I would like to show you an image of Mr. Thom Browne, the one on the left is actually Thom's specific personal outset. This is [indiscernible] article that was written. And what Thom written was something very simple. It took jackets, pants, shirts, and he took the highest quality of raw materials, 97% is natural. So the sustainability concept is more than proven or what Thom does. And he decided to do with the highest quality potential of production. So it could be in a vintage during 20 years' time. His big twist was proportions. He shortened the jacket, he did this unique proportion. Now traditionally, everybody says, well, it's actually not that easy to wear because of the unique proportions. On the right-hand side, I would like to show you a comparison that was run by GQ of a very important individual that has for Thom Browne for a number of years, the client of ours. If you have to pick of the name, Mr. LeBron James. So it's actually proportion of Mr. Lebron James. We dress Mr. Lebron James in Cavaliers in 2018 for 18 different games. This is an organic project. There was no contract. It's actually an idea that was -- came as a bit of a joke we would like to wear this for all your teams. We're actually dressing once at a time. So we dress the team. We -- this is actually one of the [indiscernible] he started with a long pant actually chopped it off and making short just like the boss So this actually destroys the myth that Thom Browne only for certain body types and for smaller people. The next point is how do we do women's. Thom had potentially not the best business idea to launch women's exactly the same way as he did men's. What do you mean? Well, he said the same product categories, tailoring, shirting, network and everything that makes the sportswear attitude and bags and shoes. It's not the easiest way to build the business. We do have dresses. We do have centrality. And we have a larger audience in this than purely a great tailoring. We're actually selling these outfits and the team at our stores wear it and the clients want to buy it actually. So what are we saying here? Let's go back to business. I don't want to talk about [film] or images also. We reaffirmed the strategic goals that we set in May 2022, and our ambition is to double revenues from 2021. To double this, I'd like to talk about clients. And it's easy to grow. The most important is to grow and taking this substantial amount of clients that we have that we serve on a yearly basis, added ourselves, our key wholesale accounts and to double that by taking care of that first pool of clients even in a better way. We also are adding the commitment, which is the way we work to increase the brand equity for the long term and to deliver high-quality sustainable growth. I'd like to show you an important film. [Presentation]

So hopefully, this can show the attractiveness of Thom Browne. So going back to business. The key pillars that will drive our plan are certainly product, distribution, marketing and client value management. What do we say with client value management. We don't refer CRM. Is the client obsessed department that we created overseeing all areas of the business to define the voice of our clients and to strengthen the global client relationships include the client data, clienteling tooling that we use training, client services and client profiling. Clienteling is usually no use. It was referred to [loyal] doesn't exist, is the art of servicing clients, which is very important. This has been a brand that was built on made-to-measure from the beginning. The key pillars to drive our growth is an expansion of reach to new communities to convert our brand awareness into product awareness into clients connections. As you can see, our growth is -- we're moving from a clear intent to move into, I know Thom Browne to I know what I can wear of Thom Browne. And this is the way we build our growth on a client-centric approach towards growth. We're looking for a strategic and balanced path of growth. We continue to strategically drive growth through direct-to-consumer in a very selective wholesale business. We actually use wholesale business for visibility vis-a-vis clients around the world. We don't use it for volume. We aim to have the best representation of multicategory, men's and women's. And in most cases, you would have seen the product of brand through wholesale distribution. That's why we continue to do it, but not driving volume there. We want to achieve an even greater balance of distribution in direct-to-consumer and wholesale. East and the West, men and women. When I refer to East and the West, the absolute values are still that we have a very important business, particularly through DTC in the East. If you look at the quality of transaction, the quality of client behind what we're doing in the West and the growth particularly in women's is truly amazing and does give me the confidence that we can build a very significant business, both in the West and both in women's. These are some images that represent what we do in terms of women's, men's, accessories, we want to continue to develop and improve in our network of stores. We continue to purposely drive growth through direct-to-consumer in a very selective wholesale business. As you can see in the graphic, we are exceeding right now our business DTC compared to wholesale. If you put it back 8 years ago when I started the company, wholesale made 90% plus of our business and all our stores are profitable and successful. We're aiming for a strong and healthy expansion of the brand and business. We confirm the product strategic plans and actions that we're driving to achieve the 40% penetration of women's business. For both men's and women's, our focus will be on balancing seasonal and seasonless product. Just to put a parenthesis there, we have a very significant business in seasonal product. I love that. We love that, that drives on the way that Thom has created a product extremely consistently. The class is designed, no change, but evolution. If we didn't have that, it's very difficult to build a, retail business; b, a client connection. [indiscernible] is already an important business, it could be a much larger share of our business. We always continue to balancing the tailoring and luxury sports or the east to the brand. We are doing this both in men's and women's. Made-to-measure is the business we are making in men's, we had made-to-order women's very successfully over a year ago. We have over 6 figures transactions with clients on made-to-measure, we also are custom. We do very spectacular shows. Those garments get asked, are asked by specific clients to be converting to customer orders or what we dress celebrities with, accessories and footwear. Penetration of women's is aiming to at least achieve 40% in the medium term and some of the images that we represent our outer wear, what we represent, what we sell, both down in wovens. Other key categories for us are knit work in shirting and Jersey. These alternative continues to complement what we do in our strong tailoring business. Made-to-measure and made-to-order again 6-figure transactions on specific custom orders, a number of them on a global scale, not only it's actually more in the West than in the East to be precise. Made-to-order on a global scale, both in North America as well as in Asia and in Europe, very committed female clients that want to buy, not this is more emotional. It's focalization what we can do in terms of made-to-order women's and made-to-measure men's. I think in difference to other very successful made-to-measure businesses, the client wants to wear these. They don't come and try to cheer people to change [the set], want to wear this. And in women's is a completely different scale of opportunity. Continue to focus on accessories. Some images represent that both genders and continue to focus on footwear and kids. This license is a product that we've developed in-house very successfully. And this is one of the great ways for us to clientele with very significant families. We may not be dressing all of you, but we can connect with your kids and that's the entry into their world, is totally timeliness. It's the same direction, and it's all managed by us and most is on in direct-to-consumer. We further reaffirmed the very successful transition of eyewear. We did what people think is a bit crazy or difficult to do to bring total eyewear business in-house. We created Thom Browne eyewear is a successful, profitable business, 2 new collections already developed in the last 15 months, and we have 120 classic stars that are some of the ones that you may know the brand for. We continue to develop a range of products for our DTC business. This is with the aim of making it more special for you to come to our store and connect with clients. This is some of our home accessories. It was recently presented in collaboration with [indiscernible] as well as fragrances and beauty. And these are the images of some of our stores, the retail expansion that has included the Milan women's via Sant'Andrea, Qingdao, Kobe [indiscernible] as well as Boston stores around the world. We continue to expand our retail in North America, [recalibrated] obviously, China, Japan, and we took over July first Korea business in a very successful way. Those are 18 stores fully owned by Thom Browne with a very excellent share of women's and men's business. We continue to expand our directly operated store network in Europe and the Middle East as well as franchising opportunities in specific markets in Southeast Asia and we'll be exceeding 100 mono-brand stores at the end of this year, out of which at least 85 are directly operated with a very strong business complement. We continue the conversion of franchises or whole linked to directly rated stores, concessions or hybrid models with concessions path of growth of our stores in the next year the same path. And we quote again here the client value management. Our passion is not only opening stores is to grow with the current clients that we have in the stores and to grow with additional clients. So this is one of the biggest tools that the stores have marketing, positioning what we have in the store, marketing to promote the store, but once the store is operating client value management is a fantastic tool to really focus how we grow in a healthy way in our business. Marketing. This is a commitment that the board support in 2020 in the middle of the COVID crisis, we are bouncing back really quickly. They allow us to get a few more percentage points into these and we committed to in the last capital markets to grow at least 10x the visibility with an equally important share of shows, VIP celebrities and events, social media, influencers, digital marketing and at least 1/3 on client local activations, which we're doing. These key partnerships will allow us to get marketing, which could be with wholesalers or retailers, such as Harrods, brands or creatives. What do we say in terms of marketing, marketing for us is communicated with a product or client intent. In 2024 is the year of intent. Everything we do has to have an intent. Produce product-focused content with broader appeal and complement with local content. All this is to make sure that not only you know of Thom Browne, you know where the Thom Browne stories is, but you know what you can wear of Thom Browne. Some images of the 2023 Met Gala in the key fronts of the brands. And let me just clarify, there's no contracts. These are not so-called brand ambassadors. These are friends of the brand, clients of the brand, people, individuals really respect of the creativity, the product and what Thom does and decide to be worn Thom Browne for specific locations. So we work organically with all of them, other teams, and many of them do buy also Thom Browne. Some of the celebrities I quoted in the previous video, and these are images of our Victoria and Albert museum event launching [fedun] book in October -- early October, early this year and images of our -- actually did 3 consecutive collaborations with Samsung designing the phone. These images that represent that. Images of Serena Williams when she was awarded the fashion icon award, the CFDA dress white and Brown and Thom having a fun moment with Nakata, the footballer in our event in Tokyo. This is -- because we're doing this in North America, it's very important to highlight, I think it's a 10-page profile that was written in Thom Browne in September 2023 and client value management, just to specifically go into the sector, which is very important, how we successfully completed the rollout of our clientele up in all jurisdictions we operate directly, but Korea, which we're launching this quarter, a channel which we launched in next quarter. So this will allow us to have a global client, single client view with reliable and holistic data. We're on track to develop deeper client in sites, seeing common threats across all clients and regions, and the TV clients have an appetite for something unique. We established Thom brand taking Thom Browne to locations where we don't have a store, and we engage with clients that host us all with specific individuals, and we take the brand for them. We committed to do this 4 times a year in all 3 regions. We are scaling also our global run rate Resee. Resee stands for come to see what we had in the runway and potentially order that. We did something quite unique. Thom did a couture show on July 3, and we had a crazy idea to do couture appointments a day after. This was a few weeks before. We had a very successful experience, which showed us that we can have a client, a brand moment or event in this case, in a client moment and the clients stay for hours. They flew from all 3 regions in the world and come and spend several hours in the showroom purchasing and selecting looks from that couture show. Rolling our clientele foundations. And most importantly, we continue to hire private client advisers. They are not sitting in a store. These are incredible sales associate to pick up on your interest. It could be through an app, could be through a chat in the website, could be through a purchase you did of an accessory online, connect with you, acknowledge you and run very significant transactions with them. So we're running them globally. We are very focused to increase the repeat business from our onetime customers. This is one of the key steps for us to grow retail. So to summarize our business. We are looking for a healthy and very committed path of growth, as Gildo mentioned, is a controlled growth phase, growing is relatively easy, growing in the control and with brand equity ahead of it is the most important. We continue with very selective distribution. We capitalize both on our very committed luxury client as well as a more aspirational fashion and branding influence client. Images of our 20th anniversary event in London and Jackson. And these are images of our event in Seoul were the first Korean Academy Award winning actress interviewed [indiscernible] Museum on the book. Images of our 20th anniversary in New York, [indiscernible] for example was dressed and attending as a front of the brand. Just to summarize for the 20th anniversary [men] , 20th anniversary was the book, and we decided to make the book a moment and take that around the world. We touched 6 cities we did London, Tokyo, Seoul, Shanghai, New York and Milan. We did 19 events. We presented 24 archival looks. We had well over 1,700 attendees. We had well over 200 top brands that we host for specific moments. We had over 300 articles at the time, we have over 200 celebrities or influencers attending these well over 0.5 million likes. Over [ 750 ] books sold, most people tell you the fashion book does not sell. It has sold and Thom signed most of them. Most importantly, we generated 3x of revenue of the investment. And it was a committed investment. It wasn't -- we troubled the planet to do this. Over 500 social media posts of our sales and a large audience of [wastage] 67 out-of-home placements across 4 countries. So with this, I would like to move into the specific summary of what we're doing. We promised both the IPO and the road and the client value management that something we have delivered that. We have a successful and growing fashion and clothing business in a unique, very elevated price point based on quality, price and creativity sector. We can absolutely transform into an accessories and footwear business. We're seeing our brand awareness grow very significantly in the West and particularly in North America. We have this credit opportunity not only in the East, but also in the West to convert the brand awareness into product awareness into client connection. We represent timeless ultra luxury, or luxury with ultra luxury. We have -- we want to protect this. So the path of process has to be very specific and we need to make sure that we set up the terms and we do the right growth in order for sustainable long-term growth, putting the brand equity first and managing our growth mostly through to direct-to-consumer. Our written network can easily be expanding in [indiscernible]. We've proven that over the past years. This is a client-centric path of growth trajectory, where not only we want to grow our elevated client base but we also want to expand to a complementary clients around the world. One wise person once told me that your brand is worth the quality of your clients. And this client is very elevated, which we want to respect, preserve and nurture. Thank you so much.

Good morning. please start with the video. So today, I'm Edoardo Zegna, and I will speak to you about a magical brand that was born in Oasi. Everything started 113 years ago with a dream of a founder and a fabric, the best fabrics in the world. There was a time where every single businessman, including probably yourself, we're wearing a tie and a suit and the time suit probably was also Zegna. Zegna was the most famous tailor in the world. It expanded in China and America, across the globe. But time change, and we have changed with our customers, always remaining true to ourselves. With one single goal to be always in consumers' lives. Two years ago, at Capital Markets Day in Oasi Zegna, we asked, are we the best [indiscernible] in luxury. We think we still are. In 2 years, we did the kind of the impossible evolving a brand from tailoring to leisure work. We've been working and creating and protecting the magic, the intangible quiet and timeless brand, strengthening our positioning as the men's luxury leader in the industry. And our strength starts from our difference. Our difference is Oasi Zegna. This is what sets us apart. We exist because we have a unique and replicable story to tell. We are born in Oasi Zegna because ultimately, Oasi Zegna is luxury. It's luxury in its purest form. So let's switch to the presentation. But this story, this beautiful story doesn't turn into a legacy if it remains untold. So we I wanted to expand this legacy globally. And what you see here is our first Oasi in the world. And the first Oasi in the world had to be in the most iconic square in Italy Castello di Ama. We have taken over for the next 3 years, this amazing gardens, where we are bringing a piece of Oasi Zegna in it, both physically and digitally, you will be able to see live what Oasi Zegna is as a whole. This is the Zegna story, and this is clearly just the beginning. Our road is 113 years old, but in many ways, it just started and what we really felt it was important is to make sure that we put a sign, a brand mark that you see on the right-hand side here of the slide, that there is, in many ways, the full expression of the magic that it is in the brand. This brand mark is present across our clothing. And as I like to say, is the window into our work. But how did we get here? And also kind of how did we do it so quickly. So we consolidated the 3 lines. We showed that at Capital Markets Day, we repositioned the brand way higher and position as a whole. But the extraordinary thing is that clearly, our revolution was to move from tailoring to leisure wear. So we grew tremendously the leather accessory business. We grew tremendously the luxury leisure business at all while keeping tailoring absolute terms at the same level and pre-COVID and so forth. So again, we grew in our business. We grew it in the transition one to do from tailoring to leisure wear, but at the same time, keeping us to be the leaders in tailoring is something they want to clearly want to keep holding. The obsession we had in the past 2 years was focus. Without focus, you cannot figure out who you're actually going to be in direct-to-consumers. Here, you see full winter '20 to full winter '23 we cut by 70% SKUs. We consolidated from 11 lines into online shoe business as a whole, and that's also extraordinary as a whole. And we had one single goal to become a luxury retailer. And how do you become actually. You become a luxury retailer by finding and creating iconic products that is still the essence of who you are. And then you build and start having some very strong mantra's so it's a no markdown mantra. That is about starting to put exclusive products just in our retail business to strengthen even further into business. But clearly, also on the distribution level, we control the distribution we reduced the wholesale and we repurposed a lot of the wholesale as a whole. So this is becoming luxury retailers. Clearly, in this transition [and become] actually there, this is the best sort of pie chart that we can look at. And this is a real pie chart. It's not a fake pie chart. In 2019, we were 80-20 direct-to-consumer wholesale. In the medium term, we are very committed and convinced we're going to get to an 90-10 as a whole this is what being a luxury retailer be is. And most important, the consequence of all of this work is what Gildo said at the beginning, store productivity. We're happy to announce that we have achieved our target. We announced in Capital Markets Day of 50% already in 2023. And our ambition is to keep growing 10% year-on-year. So we are on our road because marketing is ultimately working. This is compared to 2019. Our new customers are spending almost 60% more in our stores compared to 2019. And as you well know, triple stage has been our home run. More than 30% of our new customers are triple stitch and are spending more than 60% than the other customers that look in and buy other products. But where are in triple stitch. We launched at the end of 2020, our main shoe, the triple stitch, what I'm wearing, I'm behind the podium. So you can't see it but I'm happy to show it. I'm wearing the same shoe that Gildo and Gianluca are wearing. There is our new high top vetta. Vetta in Italian means peak. This shoe has launch a month ago and is extremely successful. Our next evolution will be in Q1, where we're launching second skin our most elevated lightweight and sophisticated triple stitch yet. You will need to try it to believe it. From then on, we'll move into the summer, where we're launching an evolution of what our [indiscernible] triple stitch is. And then the family will keep going. For winter '24, we launch a new one and so forth. This is the triple stitch family, and this is just the beginning. But -- what else -- we believe that a modern luxury brand is built in Lego blocks. A brand is defined by iconic products to distill who you are that make the brand. These are working advertising campaign. So what are our Lego blocks. So you see here, we put 2023 with an index of one, and we have an ambition. And these are the four, five Lego blocks. Triple pitch. We still think triple stitch is just started. We can still 3x triple stitch. Oasi Cashmere and Linen, we are proudly the custodian of placability in the luxury segment. And Oasi Cashmere for winter and Oasi Linen, where we're committed for both of them starting 2024 to be fully traceable. Again, we are just at the exception of this. Made-to-measure. Made-to-Measure, we intend to remain the leaders in Made-to-Measure and the opportunity here is still enormous. For Uber Luxury, what is Uber Luxury? Uber Luxury is about the most high-end natural fibers on the planet and creating higher valued products with amazing handful and amazing properties. And last, licensing. Licensing is an amazing opportunity to export and expand the brand mark that I showed at the beginning of the presentation, brand mark that represent the road and a window into our world. So iconic is not just a product, but I iconic is also started -- look, a way of dressing a leisure look. This is our new look. It's a quiet look that speaks -- that allows the quality of the product to speak by itself. So this is the new way of dressing and a lot of you guys to come in our store to witness that. But the most proud thing, I think, is about our customer, who is our customer today, four pillars. They are younger, they spend more, they come back more often and they come back sooner compared to 2019. So let's go pillar by pillar. The new ZEGNA customer in 2023 year-to-date, it's 7 years younger then 2019. These new customer spend, as we said before, almost 60% more than they used in 2019. The repurchase rate has increased by 25%, and they come back 2.5 last time compared to 2019. So we are proud of this customer. And we're proud of this customer because we've also figured out a journey, a bespoke journey for this customer that we tried to exemplify here. The new customer comes in, attracted by triple stitch. And then we bring him up with delighting because we believe that luxury is not about transaction, but luxury is about interaction. So -- and when we bring him in, we delight him, we serve him in a bespoke way and then we bring him on the top of the pyramid that is Made-to-Measure. And when we conquer as a Made-to-Measure customer, we retain him for life. Now Made-to-Measure. This is our formula one. Retention of our loyal Made-to-Measure customer is an unheard of 70%, close to 70%. And you could ask us, hold on a second. Who are these Made-to-Measure customers? Are they still the old customers who used to buy tailoring as a whole? No. 50% of Made-to-Measure customer buys luxury leisurewear in our collection. We have the best service in luxury and the service is here to stay. Top of the funnel. We love top of the funnel. So -- and that's where we're going. We're just looking up. We're now looking down. Our top customer that spent more [ $50,000 ] or more than [ $50,000 ] yearly have grown 63% compared to last year. And today, 5% of our customers generate 40% of our revenue. And even more proud data of this segment on top of the funnel, the retention is 90%. So we hug them and they are with us forever. So how big is this funnel? How big is this pie? How big is this top of the funnel as a whole? This top of the funnel is huge. We still just tapped a tiny sort of like piece of it. So we're very confident and committed that we know how to hug our customer. Now I haven't finished in the sense that our success of putting service first is exemplified in this slide. We have master -- we give to all our sales staff, CRM, omnichannel stock availability and AI. And this tool enables all of our store associates to be able to communicate one-to-one with the consumers because ultimately, the goal of modern marketing is to be in consumers' lives. So we need to adapt on how they want to shop or how they want to speak and how they want to interact with the brand as a whole. I am happy to report, and this is what we committed at Capital Markets Day in Oasi is that today, more than 50% of our revenue is generated by outreach. And the best part about outreach is that whoever is contacted and communicated with this digital tool they all spend 2x compared to a customer that works inside the store. This is really what, in our mind, becoming a luxury retailer means and what means putting service first. And this is the difference between retailing and clienteling because retailing in mind is about selling a product to a customer. Clienteling is another animal. Clienteling is how you make a human being feel. This is different, and this is how we hug our customer. So we have recruited the best customer, but we are now also recruiting the best talent. I would like to pass on the microphone for this section of my presentation to Nilly Foster, President of America-Italian that comes from the LVMH Group, and she will speak about the U.S. case study, a very successful case study. Please.

Thank you, Edoardo for the wonderful introduction. I'm very, very happy to be here today and to give you a bit of some key strategies that really drove the business here over the last few years for the U.S. So the first focus that we're going to talk about is retail. Huge success in retail. Just in brick-and-mortar alone, we over doubled our business. A big part of that came from the success of moving wholesale into concession and into whole-cession. E-comm also over doubled its business over the last 2 years. Mostly coming out of zegna.com, so direct-to-consumer, but also developing wholesale to retail. But how did we do that? Key strategies, 5 in total, really focusing on developing the luxury client. So no mark downs anymore, and our retail boutiques was a big part of it. The next one was really moving wholesale to retail, as I mentioned earlier. After that network expansion. So obviously, continuing to develop the network in the U.S., key doors, including Saks New York, Palm Beach, East Hampton, also looking at luxury leisurewear, which was a huge development in the business overall over the last few years and the one vision that Zegna brought and then a strategic client outreach, which I'll talk about further. So Made-to-Measure and actually elevated luxury in total, as you see here, Made-to-Measure has been fully developed in the U.S. huge increases over last year, a big part of that coming from the Sleeve Units and Made-to-Measure and footwear over doubled in made-to-order business over the last few years. Bespoke is by far sitting at the top end of our luxury and it's something that our clients really hold dear. We've over doubled the business from just last year, and it really is developing something that no other brand can do today. And then we have our Uber luxury segment as well. You're really looking at our top of the pyramid in terms of 12MILMIL that continues to be developed and really, really developing the top of our client base and it's also Couture. You see that mostly in our tailoring and that's also showing huge increases and really developing the tailoring business in a completely more elevated way. And our clients really, really enjoy that part of the business. How do we do that? So as you see here in the graph, everything you see from 2019 through year-to-date 2023, so that doesn't even include December yet. You can see the growth year-over-year of our clients that spend $50,000 and more with us. So that development has been huge and how have we done that? We've rolled out a new clienteling app over the last 2 years. So our sales associates can redevelop an elite client program really, really dedicated communication, experiences delighting not just locally and domestically but internationally for our top client. We've aligned our boutique KPIs so our sales associates really knows what's expected of them and we also have defined expectations by sales associate by day, by week, by month, so they know what that outreach really needs to look like. And as you see, it's been hugely successful for the U.S. business. Hyper-localization, so this is something that Edoardo had definitely touched on and we'll continue to. We're really going after markets with high net worth individuals. As you see, that includes Aspen, Palm Beach, Hamptons and we're opening Santa Barbara next year. And this is really going after that client and really defining who we are as brand. We're also capitalizing on localized experience in those markets so that those clients know who we're and define us as a differentiation and in those markets where we're building out our stores, we're differentiating ourselves. It won't look like stores that any other Zegna boutique has or any other brand has. And finally, and obviously, most importantly, we can't do this without our top talent, and it's all about people. First and foremost, our productivity is very important to us. As you see, we've reduced our personnel cost as a percent of sales in the last 2 years. You can also see that we've increased our productivity per head count. Made-to-Measure we already talked about, but that was a huge defining moment in terms of increasing our sales, and we've increased our teams as well, certified specialized in our stores as well as managers in our key doors. And then also enhancing our made-to-measure development in the corporate offices as well to support that, and that will continue over the next years and then recruitment, focusing on business driving sales associates, but most importantly, a huge, huge emphasis on only hiring talent with proven success. And with that, I'll hand it back to Edoardo.

Thank you. So America has been an amazing success. But where are we on the road to communicate this new Zegna across the world. China, we use triple stitch are Oasi thermometer to see how far long are we on this transformation. And what you see here is the penetration of triple stitch revenue in total revenue. You see here an index. So index America to 100, and you see two graphs. It's 2023 Q1 and 2023 Q3. And what you see is that the thermometer of triple stitch in China is getting pretty hot in the sense that we have gone from 1/3 to half. And that is extremely positive in showing us where this entire new onboarding and this new capitalization on bringing in new customers through our funnel is going. Secondly, WeChat, we thank BNP Pariba for this graph. This is brand heat in highest engagement brands across the entire sector in Q3 of 2023. And what is extraordinary, and we're very happy about reporting this is that we have the highest engagement between all luxury brands in Q3. So again, this is a great stride on the fact that the heat is happening how we are getting to the top of the funnel, and we are getting very closely to the top of the funnel is that we measured here Uber Luxury penetrating with the highest ticket and brand value as a whole. So here, we're happy to report that in the top five stores around the world, with the highest penetration on Uber Luxury too are Chinese. Again, an element to show you how this heat is happening. Last is to show you how the retail China reposition is holding. The retail China machine is improving greatly. Here, you see NPS that we track across the Board. Clearly, we do not want to release what is our current numbers as a whole. But what we're happy to report is that we have improved since 2021 of 22 percentage basis points. Again, proof of the retail China machine is working and is really moving. So my last two slides, our transformation is working. But we're still very much at the beginning, 4 real key elements of this new Zegna customer journey that we're very proud that we've communicated to you and to deliver on the floor. One is iconic products as a recruiter, two is service, three is personalization and four is retention. We talked about triple stitch being our top recruiter and bringing in amazing customers, this new customer that we love and then spends more with us. Then we hug them. We bring them in and we have these amazing tools that we're able to give ourselves stuff to be able to serve in a super bespoke and luxury way all of our consumer. Then we bring them up the funnel and we sell them the dream of Made-to-Measure. And when they get into Made-to-Measure they are hooked for life, being able -- as I said, to be able to keep growing the top of the funnel. Last but not least, this is our secret sauce. This is really is our super power at our new sport that we're so proud to deliver across regions as a whole. We are -- we stopped doing events, we start doing experiences. We don't try and create transactions. We try to create interactions. We don't advertise to influencers. We try to dress people of influence. And we are not in fashion. We are in the world of timelessness. Thank you. Our road just started. Thank you very much for your attention.

So good morning everyone. So now that we have heard from Gildo, Lelio, Edoardo, and Rodrigo the strategies and the direction of the brand. Now I recap everything closing the round of presentations, translating all this into numbers, which is my job and explaining the underlying assumptions behind this, trying to anticipate some of your typical questions. So we are confident in the outlook of our group, and that's why we have set ambitious goals for our future. This is motivated by the strength and the momentum of our brands as well as the blank space that we see, especially into the two to TOM brands. And so this is all translated into the numbers. However, rest assured that we are also mindful about the challenges that are around. So we would label our goals as on one side, ambitious, but also well grounded in reality. First, let's start from the top line. How do you -- do we see our top line looking forward? First, let's define where we expect to land in 2023. We were coming at September with a growth rate of 23% compared to last year. We expect to grow at the end of the year higher than 25%, which brings us in mathematical terms, close to the EUR 1.9 billion. From then onwards, we are expecting to grow revenues in excess of 10% growth rate per year to the medium term. This target of compounded medium growth rate of over 10% is in line with our guidance of EUR 2 billion in 2025, excluding TOM FORD, and this is the guidance that we shared in April of this year, which puts us ahead of what we had originally shared at our Capital Market Day in Oasi Zegna in May of 2022, when we had qualified our medium-term target as the horizon in or before '26. So we are higher of those targets, and this is a great positive step for us. Given that the current market environment and this is a solid proof of our execution and of the strengths of our brand. So let's enter now opening the revenues growth by product, by channel, by geography. As you can see, we expect the whole pie to grow and all its component to grow at a healthy pace. Zegna in 2022 was 62%. In the 9 months, closed in September was 59% because we incorporated also the inclusion of TOM FORD fashion. And looking forward, Zegna still the anchor, but the growth to decrease across the three brands, Zegna, Thom Browne and TOM FORD. Moving to the incidence by channel. As you have heard by all the speakers, we are shifting more and more to take control of our last mile in terms of DTC growth. This is reflected into the evolution of our channel mix. As for Zegna, we are well ahead of the curve because we are at 85% and 15%, as Edoardo was mentioning, adding towards 90% of brand revenues in the medium term, driven by store openings driven by store productivity by the conversions of wholesale into concession and from the buyback of the South Korea business that was declared to happen at the beginning of 2024. Within this context, we are moving the network of DTC stores of Zegna to around 300 stores in the next years. It is important to note that this evolution also reflects the fact that we are going to close outlets. This is consistent with the Zegna one brand strategy and the elevation ongoing of the brand. As for Thom Browne, as Rodrigo has shown, we expect to flip the current ratio, which is 60-40, 60 -- close to 60 wholesale vice versa to a 60-40 retail. This will happen as the brand streamlines its wholesale presence to focus on quality distribution, along with the fact that the store network that will be 85 doors at the end of this year will land over 100 directly operated stores in the medium term. As for TOM FORD fashion, we are aiming at a 70-30 retail wholesale mix, thanks to both the increase in store productivity that Gildo was mentioning before, high single digit and the expansion of the DTC network from the current 50 to 90, 100 doors. So let's deep dive at this point into the DTC drivers of growth. One typical question is, is it volume? Is it price? Is it mix? So this page, which is filled with content, but I will try to make it simple. It gives a snapshot by brand, whether we are expecting DTC growth coming from volume from price or form mix. And the ingredients are different. If we look backwards vis-a-vis if we look forward. In the last years, we have seen the biggest driver of growth coming from the volume for Thom Browne because of the expansion of the network. And the big growth in e-commerce. And for Zegna from the elevation of the brand, we had enjoyed growth from price increases and from mix elevation. If we move forward, at this point, we see a different mix ingredient. We are expecting volume to be the major driver for the three brands because Zegna is taking over Korea. Zegna is opening 30 net -- net 30 openings. We are expecting through a new merchandise cadence and 360 degrees styling approach to increase UPT. This is one of our next area of focus. UPT unit per transaction, we are roughly around 2. We have possibility to lift it above the 2 units per transaction, and this will be an expected driver of our growth. And of course, as Edoardo was mentioning, our widening client base is bringing increasing volumes. For Thom Browne, definitely, the new store openings will be a driver together with the market investment that is inviting new clients into the brand. For TOM FORD, definitely doubling the network from 50 to 90, 100. And the fact that we are putting lots of CapEx in existing stores are both drivers to increase the volumes. Price and mix are expected to be drivers of growth to a more muted level compared to the last years. Prices are expected to increase at a level to absorb inflation effect. We still have some price increases on spring '24 for Zegna, but then we expect this is the assumption behind our numbers to go into smaller touch ups. And in terms of mix, this will be an important addition for Thom Browne and TOM FORD on women and leather for Thom Browne also Made-to-Measure, which is still an untapped opportunity. And for Zegna, I think that we have elevated the mix, we still have some opportunities in some categories to further elevate for instance, the example of the second skin in leather accessories one of those to elevate further the price -- the product quality and, therefore, the price. This is the recap of the number that I mentioned so we are today lightly south of 384 -- 390 doors directly operated. Zegna is adding 50, partially from Korea, 15 doors. The rest being new openings. Thom Browne going north of 100 and TOM FORD almost doubling the network. Store productivity, I think this was already explained, but we reinforced the fact that we said we want to increase productivity by 50% in -- from 2021 into the medium term last year and that medium term already happened in 2023. So we're well ahead of the curve of our improvement of store productivity and from now onward we want to continue increasing store productivity at double digit per year. Moving to the breakdown by geography. We are moving to a more balanced landscape. Europe is going to enjoy growth on the DTC side of the business, while we are expecting more moderate growth and increase on the part that is important for Europe of the B2B for instance textile or wholesale. So we're -- it's a mix that we should slightly reduce the incidence of EMEA. North America, we are expecting further growth, not just for all the reasons that Nilly was mentioning, but also for the addition of TOM FORD which is over indexed in U.S. In Asia we're expecting a lower incidents, especially on GCR because of the accelerated expansion in the other markets and I remember that in terms of Zegna, the network of stores directly operated in GCR will be not expanded. We are going to invest more in renewals and relocations rather than further increase of the number of stores. We believe we have a pretty good coverage we need to reinforce the coverage with the right locations and the right refresh of the stores. Moving to the EBIT. First, we want to confirm that we are on track to meet the objectives stated earlier this year of at least 15% adjusted EBIT margin in 2025, excluding TOM FORD fashion. Our new outlook which takes at this point into the equation also. TOM FORD is an adjusted EBIT growth of about 20% compounded from 2023 to the medium term. As a reminder, 2023 profitability will be impacted by the addition of TOM FORD fashion for 8 months as well in those 8 months will be impacted by the so-called purchase price allocation.which is something that we already anticipated and now we quantify will mean around EUR 15 million, EUR 16 million charge to the adjusted EBIT, it's not below adjusted EBIT impacts -- adjusted EBIT. This EUR 15 million, EUR 16 million one-off purchase price allocation charges are related almost entirely to the part of the price that has been allocated to inventory that we inherited at time of deal closing. This charge were already disclosed in our semiannual financial figures, of course, on a pro rata basis because it was just 2 months. Here, we see the building blocks of our -- where we see our 20% per year coming from. The pillars for our EBIT margin growth are linked to: First, solid gross margin improvement, which will benefit from definitely a very favorable channel mix, thanks to the overperformance of DTC, they will benefit from price strength and price discipline. Will benefit from a relevant part of the business coming from the so-called essentials or classic. Our iconic products that are carried over season over season, and they enjoy a lower burden of leftover accrual at the end of the season. And finally, the scale being vertically integrated, all this journey of growth will define positive cost leverage impact on the absorption of the mix cost of our supply chain. The benefits from the gross margin growth and the productivity will be partially reinvested to sustain the long-term desirability, growth and awareness of our brands. So marketing incidents, which as we anticipated, stepped up between '21 and '23. And at this point, the level of incidence of 2023 becomes our new normal. We are not reducing the level. We are expecting to maintain this higher percentage of revenues going forward. On the SG&A side, increased CapEx, which I will talk in a moment, increased CapEx-driven depreciation will be more than compensated by positive cost leverage due to scale of central costs and store productivity on -- which generate positive cost leverage into the store costs. Of course, then we need to remind to take into the equation that our EBIT margin will then be affected by royalties and the amortization of the license agreement related to the TOM FORD fashion. And here, we give a sense of that -- of the order of magnitude. I think we never gave this indication, the royalties are expected to impact one percentage point on the group's adjusted EBIT margin. And then we have a EUR 3 million amortization of the license agreement, which is an intangible asset of EUR 90 million to be amortized over the 30 years of the contract horizon. So one could say, why did you purchase TOM FORD if it's bringing the margin down. So in order to make it -- because someone will get this question. So because it's financially accretive. Apart from all the strategic arguments of having TOM FORD into our -- TOM FORD fashion into the picture, which helps in terms of commercial synergies in terms of industrial synergies. But from a pure financial standpoint, it is financial accretive because, of course, we have a lower EBIT and lower EBIT margin. But if you go into a typical M&A transaction, you have a bigger cash out upfront, and then you enjoy an EBIT that is not impacted by royalties. Of course, we have an EBIT impacted by royalties, but we did pay a more muted amount of money at the time of the closing. If we look holistically, our business plan over the horizon of the contract gives us a return in IRR net of taxes higher than 20%, which gives us comfort in terms of the soundness of this investment. Finally, moving to CapEx. Of course, all this growth comes with some price and some price tag attached. We are expecting 2 years above the normal rate. Normal rate for us is roughly around 5% CapEx over revenues. So we are expecting to be south of 10%, but north of 5% for a couple of years because we have to invest in the distribution. We are going -- and I think it's important also to remind our vertical integration means also investing in the supply chain. We are going to reinforce more and more the made in Italy platform by investing in outerwear, shoes, sleeve units, cutting facilities in made in Italy, and this will determine a further advantage for our product differentiation. So this is the reason why we are seeing [indiscernible] a couple of years of investment, investment in CapEx, as I said before, investment in marketing. But at the end of the day, if the question is, do you think this will absorb cash at the end of the day, our outlook is to finish with a solid cash surplus generation in the midterm. So we will pay ourself, finishing with cash positive compared to the end of this year. Thank you all, and I look forward to receiving your questions and hand it over to Gildo for remarks.

Okay. I think it has been an exciting presentation. Maybe a little bit too long, but we were more or less to stay in the time allocated. And I think we heard from our management team about the strategy about our ambitions for each of the brands to execute this excellent and exciting journey of the road tomorrow. I think that we have focused well enough on what makes us unique. And what makes this moment very, very important for our group, in term of timing, in terms of what we are and what we can achieve. I think we are a luxury leader with our center of attending internal rate focused on the Italian industrial tradition, which I think that is a very, very important sound point. We are moving beyond just being the undisputed #1 player in luxury managements to tap into new opportunities in other soft luxury category. We believe our total addressable market, as we said, is now roughly 3x of what it used to be when we were a mono brand group. Our brand complement each other well, fostering and enormous plant across geographies, categories and gender. And as successful as they are, our brands also have untapped potential offering several opportunities in various markets according to the times. And according to customer segment, according to flow of customer. I mean, we have seen an incredible migration of people moving from one seat to another of people moving from one [indiscernible] to another. So I think that the opportunity we have by applying our CRM, our clienteling sophisticated system to all the 3 brands in men's, and we can take advantage of all that. So I'm proud of how we have executed our plan so far. Thanks to our strong management team, I think we have ahead of the objective we have outlined since our IPO Capital Market Day and we have delivered at the end well beyond our promises. And this is our culture midst to raise the bar and not to over promise and to accomplish what we promise. As a result, we have set forth and update the financial outlook, which now includes TOM FORD fashion, and we share the detail with you throughout the morning. But in summary, again, I want to repeat it one more time. Our goal is to achieve #1, over 10% revenue compounded average growth rate, 23% to medium term, #2, adjusted EBIT over 20% compounded average growth rate to medium term and end up with a strong cash surplus. The final thought on '24, I'm sure that you have some questions in the minutes to come on the Q&A session. We are finishing the year on a good note, I must say, and we enter the '24 at least with the same mindset. And I say this with the smiles beside the geopolitical circumstances, which we have to face. I think we have spent 2 hours telling you what we are doing, and we keep a positive mind -- since regardless of what '24 will bring us, we continue to execute on our road, believing in what we are doing. Thank you very much. And now we open up for question and answer. What we have about a hour?

We now open the session for Q&A. We will have, I think, approximately 30 minutes, 40 minutes depending on how many questions we will have.

Luca Solca from Bernstein. I have 3 questions, if I may. The first one relates to how you reconcile the brand elevation efforts that you have provided and the very important success that they have produced with the need to maintain presence in the enterprise section of the business, both in your core categories and in other product categories that could include, for example, eyewear, the situation of your license and so on. You were pointing to licenses potentially providing more. And I wonder how you see the entry price position of the group, that is products that cost less than $1,000, let's say. Then I was wondering from a financial viewpoint, you have very diverse businesses because you have businesses that have developed organically like the Zegna brand, you have businesses that you have acquired. You have, as Gianluca was sharing businesses that you have now acquired but without significant cash outflow. And then you have all of the industrial business. So I wonder if you have a return on invested capital number for these 4 divisions that should continue to track and where you expect that the most important improvement in return on invested capital could come from. And then maybe thirdly, just to confirm the health of the development, which I'm sure is great. But if you could give us more detail on the off-price business is and how factory outlet activity is going to be reduced, that could also help.

Now the first question is about product innovation and how we keep up with that, if I understood correctly, and the repercussion on the pricing of that. Is that the question?

Yes. And especially in the entry price segment.

Listen, it's a nice problem to have. For the time being, we are not having that issue. As we expand our customer base, we have to think of product below $1,000 or EUR 1,000, which I think that the textile accessories are a good opportunity and not only for us, but for everybody, I think that we are not very strong in any brand of that. I think the licensing business will help. Zegna is very small on that. TOM FORD is better. And Thom Browne -- TOM FORD is very strong and Thom Browne can improve. And so I think that part in particular with eyewear and also with the launch of a new fragrance will probably happen in a couple of years will help. And then also in the leather accessories. I think in the leather accessories, we have award that can surely be developed better. So to cut a long story short, we are studying the way to provide the new customer with a more accessible project and product without going away from this luxury pyramid that we have in mind. The second question is on..

The return on capital employed.

No, no, no. There was a second question before the capital employed. You asked the third question, no? Or that's it?

We'll like the Gianluca.

But if you want to, you can answer the question on outlets and how you can...

Sorry, outlet, that's it. No. The question of outlet is that we need the less outlet than we used to use. Surely, for Zegna and I don't think that TOM FORD, Thom Browne have too many outlets. I think that what I have is enough. And we have a plan to reduce outlet as a matter of fact, this year we reduced a few, next year more to come. But the interesting things on the outset is that we are selling better merchandise because we are seeing that there is a customer that visit the outlet and visit the normal store. And so we want to offer better merchandise. And surely, our policy is not to make for outlet. That's very important. But to sell the leftover of regular-priced merchandise sold in store because don't forget that since '22, Zegna does not put on sale anything longer. And the goal is to apply the similar load also to the other two brands. So overall, regular price point, less outset and be in the outlet where the quality of the merchandise and on the service goes up. As a matter of fact, we are testing because this is public information, some outlet to sell regular priced merchandise with good results, starting from the [ economy ] prestige because the customer is in many instances similar to the customer in the shops at Borne Street, the shop at 57 and the shops of [indiscernible]. So we are experimenting a couple of stores in order and then to increase the productivity, also the outlet that is lower than the regular stores and to be offering the leftover of 1 year before of the regular. So overall, I think it's a sound policy.

If I may add on this. If you remember, we had the three collections, many more SKUs, stores that were in average bigger. So now at the end of the season, also thanks to the essentials that take a big portion of space inventory and sales. At the end of the season, we have a lower amount to be cleared. So this gives us the opportunity in the next few years to reduce sensibly the number of outlets. And as Gildo was mentioning also, we are seeing also a reduction of the discount percentage in those outlets. Going to the return on capital employed, I give you a qualitative answer because we are not reporting specific numbers, but I give you the quality, the direction. Of course, there are a couple of businesses like textile or third-party brands, which are, let's call it, typical cash cow businesses. You don't inject a lot you enjoy a fixed structure that is already there. So those businesses, we see them with a moderate growth that is not where we are. Those are solid low single-digit cash cow businesses. Of course, we have the two Toms, especially TOM FORD, which will be one area of big investments in the next couple of years. And that's why Gildo was saying for a couple of years for 1 year, especially next year will be a transition. So if we measure the return on investment into the short term for those businesses, we're -- will that business, especially will be a business that will absorb a lot of cash. And that's why we are looking at the venture of TOM FORD fashion over the 30 years. We want to invest in marketing, in people, in stores. And so it will be one area of cash absorption for the years to come and saying for different reasons for Thom Browne, Thom Browne has gone through a journey of growth that has been more into its niche, if you wish, and now it's becoming bigger and broader moving word of mouth marketing to more louder marketing from stores at this point become a network that is tangible over the 100 stores. So it's also an area where we want to invest. Zegna, it's a new phase. I think that we are enjoying cash results, EBIT results that we have never seen for Zegna, and that's the reason why we are, at this point, confident that it's time to inject some money. First, to take over Korea which is business important and from the amplification of the brand in Asia very important. And we are injecting also to take presence in locations that before Zegna, it didn't belong. So Santa Barbara, we never thought about opening a store in Santa Barbara a few years ago. Now it's a place where we are perfectly citizen where our clients are and where we follow them. And the same will happen in Monte Carlo in the next first half of the year and so on and so forth. So it's a phase where we are seeing a tailwind on the brands, and that's why we are as I presented at the end of the presentation, we are -- it's a phase where we are going to invest CapEx and marketing in the three brands.

First, yes, Chris or the gentleman there.

Oliver Chen TD Cowen, been a big friend at Thom Browne for a decade. As you think about triple stitch and recruiter product, what do you think will be recruiter products potentially at Thom Browne and your other brands? Also, with women's and handbags, what are your thoughts in terms of accelerating credibility there? Second question is about loyalty and personalization. What will be your core competencies, whether that be on data or specifics around that at the group level? And third and final question is about magic and logic. Logic being artificial intelligence as well as e-commerce and digital. Just some thoughts on key priority, opportunities especially as your customers are getting younger?

All Thom Browne, correct? So to the first question, I think it's a very intelligent question. Shirting, knit works, elevated jersey are typically -- in tailoring on the typical entry. If you talk to a new client, they've always been touched a brand because of that. Moving to your second question, those are timeless product, the season-less product that we're very proud that we have. Moving to your second question, which is accesses and footwear. If you take a look of what Thom has defined as the pebble grain signature in multicolor right now, there's the use of [indiscernible] grain, which is a fantastic trade point use and recognition. There's a type of ZIP and details to the toe. There is no question mark that our footwear and accessories can be recognizable, number one, can have a cohesive expression of Thom Browne. To be totally fair, the client that wears clothing in a significant way, most likely wear Hermes accessories, female in this case and footwear as well. So it's quite camp for the client, they do vary. And we're very clear with the families of product. Today, we are sitting on 5 years of developing different families of accesses and footwear. We're very clear where we can get mileage where we are unique. And where we continue to grow. We -- most likely the growth will come from our current clients. So I think your question is very intelligent is anchored on that is how to convert the client into those pro categories. The third part of the question is related to AI?

Digital I think for the group at large.

I can start answering that. We've been working with data scientists for the last 5 years. We enjoy working with data because it's not I think, you think it's the client can tell us and we can read though the data. So client value management is largely work and it's been 4, 5 years of creating the assets, data warehouses, working through COVID. Even my on curiosity, we can analyze classics through data and curate classics. . What is a classic product? Is anything being -- so this is a data scientist point of view. It's something being sold daily. We keep for more than 52 weeks regardless if it's blue, white, gray, different shades of gray. So we really sit on that and analyzed, and we have whole teams that are working on products to evaluate that to hopefully match supply chain to that. So we sit in the right amount of product, and we have the right product in the right place. Which is always a challenge where you became a retailer to be totally fair. And when you look into clienteling, it's an fascinating with analyzing the client behavior data, but it's not only the data. We have a whole team then that engages and create the qualitative aspect of clienteling. We have a very committed, very active client that we have to really appreciate having.

Maybe Edoardo, if you want to.

Nice to meet you. So we talked about CRM and the tool that we're now giving to all of our sales associates as a whole. Clearly, there is a operational side of it, so stock availability and so forth. But clearly, there is also any high component out of all of this. We have launched Zegna X that is, for us, is the digital ecosystem on a bespoke servicing standpoint, partnering with Microsoft and OpenAI in figuring out a way of serving and helping our sales associates with the best information that we can provide. So yes, I think it's not a question of whether we're going to use AI. It's how and how much. Our position as a group is clear that I will never replace a human touch, human quality, AI is here to exponentially improve the way that they can personalize and cater the information as a whole. And this is on a customer standpoint. But clearly, AI will also be instrumental potentially on product on predicting sizes, leathers, colors and so forth across the board. So yes, it's part of our journey.

And to close with the TOM FORD, of course, when we talk about antiproduct price, we described in the presentation that our business is 70% man 30% of women. And clearly, in the women, there is a bunch of product that we need category that we need to develop. Accessory is only 10% -- between 10% and 50%. So these part of assessor will cover the enterprise product in the women mainly, but as well in the man business, we have to develop much more this product category to boost it with the business. In terms of loyalty personalization, my experience in the last couple of months is that I never see such a loyal client like the one for TOM FORD. I met, in particular after the fashion show clients that have over 1,000 suit of TOM FORD and they collect like a piece of art because they believe this is something that they need to have within their wardrobe. And I met man they will buy product -- female product just to put on the frame in the their offices as well because the game is part of art. And this is, I think, is a strong base were to start in terms of loyalty for our clients. We just need to exploit this number of clients and make sure that the one that we already have, they are more and more keen to be with us. And personalization of course, I think, is the next step because this client, they need to have a kind of personalization. We're already thinking to launch a canton in-house club where we can put together all these top clients and give them possibility to make personalization, customization, not only Made-to-Measure. And of course, then we use all the tools that the group will exploit to make the necessary need of intelligence -- artificial intelligence and other platform that will allow us to make it happen.

On personalization, let me just add something for Zegna because it's interesting, I think we really have traveled the world in the past 3 months. In particular, we led you to get to better understand the TOM FORD then and how to gain inroads in the luxury field. One other things we have realized is importance of creating separate environment for personalization and for exclusive product. And so one of the thoughts we have is to create kind of lounges on top of the store on the side of the store, to be able to reach our top customer all man and women by appointment. And I think this is something that people of a certain stature will going to enjoy more and more around the world. And so we are on the process of that. The other trend we see happening is the cafe and restaurant type of the lighting, which I can say probably at least we are studying the matter, but we see it's happening. So I think the whole lifestyle world around the luxury client, I mean, is getting more articulated and having three brands that we can share experience that again, it will be very helpful to decide what to do, what to do it and how to do it. But surely, it's part of the exclusivity and personalized world of the high net worth individuals that require special attention on that.

Next question.

Congratulations on the start of the new chapter of the company. Chris Huang from UBS, and I have four questions for the group and for each of the three brands. So firstly, starting on the overall group portfolio. It seems to me that group portfolio is quite comprehensive with TOM FORD joining the company. So can you provide some color on the consumer profile you see for the three brands on metrics such as age, gender and spending power just to understand the key audience for the three. The second question is on TOM FORD, the growth drivers you provided for the 10% top line CAGR going forward. I think if we look at the space growth by DOS count, we can imply roughly low teens space growth on an annual basis. So if we compare these two numbers, it will be very helpful to understand what kind of assumptions you're baking in for like-for-like and wholesale. That's my second question. Thirdly, on Thom Browne. So we understand that volumes will be now the key drivers going forward. Do you plan to do achieve this through mostly existing consumers buying more or recruiting new consumers and what is the strategy around that? Lastly, on Zegna maybe a more high-level question on the trends you have seen so far this year. We see a very -- I would say rather diverging trends for the brand and versus the peers in the sector. On the one hand, you have American and European consumers who have been doing very, very well for the brand. But at the same time, the Chinese consumer seems to be flattish on a 2-year stack, mainly due to the more gradual rollout of their rebranding progress. So what do you think is the driver behind this and especially the relative strength of the Western consumers for the brand? And how should we think about it going forward into 2024 as we enter a more normalized sector environment.

So maybe you should take the question about the portfolio plans and each will describe -- I mean, maybe I can introduce the portfolio brands as you've had the opportunity to see is very complementary. And I will give the word to each to describe quickly what the type of customer is, and we can start from here. Maybe Rodrigo, you want to take this first.

In terms of cost planning profile for Thom Browne, you're looking at to one with a high committed, we call them VACs on the route of VACs to which are in the [ $50,000 ] plus a year easily. Here, she buys clothing in a very committed way. Here she buys [indiscernible] for those top three brands in the planet. It's a highly consistent, it's highly global and not only in the East where we have bigger amount of stores today, but also in the West. And this is a fantastic path in the last couple of years. On the other side, you have potentially these so-called younger, but doesn't have to be. We never go by age. We love clients of all ages of all parts of the planet. This is a potentially younger. It's fashion influence or more fashionista. Here, she selects the key items of the brands. And that person can go through more tougher periods of consumer confidence, like we've perhaps seen in recent times, and it's part of life. But you'll see he or she with sure Thom Browne and that famous brand, French were in sneakers and the other one with the small bags. So that's top of mixing and matching. We like them both. And the path of growth, we obviously want to enlarge the community people that many of you like not Thom Browne or want to wear Thom Browne and -- but we want to engage even more with the current client. I give you three simple statistics. If we capture 95% of the data of the client that doesn't mean squeezing your data, just acknowledging your, understanding you. If we convert to closer to 40%, the repeat rate because this new client that has to be a client for life with us. And if you target that the $10,000 plus, $10,000 plus means 2 transactions with us. That means if you came and bought $5,000 in the second time we don't even acknowledge you, shame on us, we did something wrong. So the $10,000 can easily be 8 percentage point of the overall population that on its own doubles the business. On top of that, you're gaining new clients, and that's where our passion is on both ends.

Thank you. I'll move to Edoardo.

So let me start with the concept that, in our mind, age is a state of mind in the sense that we see 20 years old wanted to address like 60 years old and you see 60 years old wearing like 20 years old. So we are very focused in creating iconic products that is still the essence of who we are. You saw from the data we shared, we cannot share more data than that. We are 7 years younger than our new customers, 7 years younger than 2019. And we are very happy with that, and we're enjoying that customer that is on top of the funnel and is new and likes our new range of products. So please.

First of all, as I mentioned, the presentation is difficult for TOM FORD to define the profile of our client because we don't have yet a CRM system to collect all the information, of course, is on the pipeline are going to implement very soon to get more data and to push us ourselves. But if I can define the profile of our consumer, of course, we are talking about in terms of woman and we're talking of woman that are in the range to basically 30 to 45, 50 years old. And in terms of men, we're talking about 35 to 55, both of them a very strong character. They are bold. They prefer craftmanship and they are just prioritizing quality in the way they are addressing up. Both of them, they are frequent travel and they like to enjoy the luxuries element of our product. And this is basically what we have now, of course, expanding a new category. We're going to have the objective to go down a little bit with the age because we have accessory that can tackle much more the younger consumer. That is top important for TOM FORD. But again, it's an uplift in to what we have now or we define now because it's a completely new consumer that we're going to tackle.

And I will let Gianluca answer the more finance-related question on TOM FORD growth drivers in China.

Triangulating number. The answer is easy if you have higher than 10% growth of TOM FORD compared to 2023. And on that number, we have prorated on a 12-month pace. We grow the DTC stores, we grow the productivity. The last piece of the equation is that wholesale is expected to be low single digit. That is the equation -- that is the assumption that is behind the numbers. We are not into our numbers projecting growth of TOM FORD on the wholesale business or very limited very limited growth.

And do you want to take the question on China too Gianluca?

Well, I think we have always disclosed the fact as you were saying that we were going at different speed on the Western world, as we have disclosed compared to a few years ago, we have doubled business with U.S. consumers on Zegna, with Middle Easterns with South Americans. We have grown substantially with Europeans, and we have always disclosed up to September that on a 2 years stack, we were flattish. Let's remind that we have removed business that was Zegna in China was quite important, was mid-teens in terms of size. So flattish is an optical illusion because we have given back part of the business, the famous entry price, we decided to. So we stayed flattish by carving out a big part of that business. And the fact that Edoardo was mentioning that the retraction on the Uber Luxury, the retraction on triple stitch. It gives us comfort that there is legitimacy of the new journey of the brand also in China. And giving you some flavor of current training, we have enjoyed a fantastic November also in China. So we are very confident that there is no limit to the success of the brand also in China. Of course, as we have said, we are putting the money now. We have done events now, and we are putting more and more money in China, not expanding the network, as I said, but keeping the brand high as it is through renewals, relocation and so on and so forth. But we are confident that all the ingredients of our executions are and will work in China as well.

You -- and is there -- are there any more questions? Just maybe a final one, otherwise we will call it a day.

Zach from Invesco. It's -- I mean, obviously, it's a lovely story of supporters. What are the thoughts on liquidity in the shares.

What are the thoughts on liquidity, of liquidity, [Foreign Language].

Listen, the family stays with the shares, I mean, doesn't want to sell any more shares. So I think there is certain liquidity in the market and there is there to be used. But if the question is, if the family wants to dilute the share, the answer is no. the family is very united, is very pleased on the route to tomorrow. And expects to create value on a good story that the management execution is bringing about. So that is where we are. Is that the answer to your question.

So a quick question for Lelio. This is Pilar Rocafort from UBS. So you move from LV to Zegna, which were your main reasons to moving to Zegna.

Well, I think it's a good question. First of all, look at this room and this table. I mean I think in the last couple of hours, we've been able to show not only a very comprehensive plan to develop each brand of the group. But as well, I believe we showed a united team that enjoying doing with passion what we want to do. And we have in front of us a wise entrepreneurs and CEO of the group that leave delegation and empower the manage to make it happen. So this is the best of the best that the manager of our age would like to do. And I think going back in Senior Group after 14 years, they will just recall him what we used to do with Gildo a long time ago and what I'm sure I can do in the next few years to make this brand growing, flying and to make this group even more stronger with all the knowledge and competent that I developed in the last 20 years in my experience luxury. I don't know if that answer your question. Thank you.

I think there is one more from Oliver.

Oliver Chen, TD Cowen. I had a question about supply chain and speed. Like what are some initiatives or thoughts you have and the opportunity for speed as I can always help match supply and demand and reduce overages as well? And also with markdowns now or a product that doesn't sell, what happens to it?

Gianluca.

So having an integrated supply chain, we can use speed as a factor of commercial differentiation. We do it in two ways. One, that is visible to the consumer and the second is less visible to the consumer. When it's visible to the consumer is Made-to-Measure and ultrafast Made-to-Measure in selected stores, we deliver in 2 or 3 weeks, any single category. I come back to your question about personalization. Now our range of personalized products is not just tailoring but all the luxury leisure collection. We deliver normally in 3 to 4 weeks. In ultrafast -- in ultrafast service we deliver in 2 weeks in Europe, 2 weeks in New York, any single product with the exception of outerwear, which requires a longer time frame for building. So we use our back of the house to be quick to enjoy -- to meet the consumer demand. Same thing visible to the consumer, the essential program or classic program for Thom Browne having the back -- in the back, the supply chain allows us to do quickly in-season replenishment. This is one factor in the ready-to-wear where we easily lose sales in the middle of the season if you break sizes. So adding internal supply chain allows us to be quick when we see some sizes that are broken to replenish quickly and not lose sales in the second part of the season. That is typically one missed opportunity for ready-to-wear players. Internally, one area that we are putting more and more effort is to be quick in the prototyping phase. Which allows us our designers to have quick response, quicker response when they are building the collection. These are, I think, the areas where we are putting effort in terms of being speed -- being quick.

I would add another important fact that we are decided to create a shoe factory very forward in terms of culture, a factory that communicates and that can be visited by our customer, we want to transfer our know-how, not only in textiles, not only knitwear, not only in clothing, but also in the leather field. And so it's a big investment we are going to face with the fact we'll be ready in a couple of years. We're going to employ a few hundreds of skill Italians. We're going to host a Zegna Academy as part of the leather process. We're going to have our archives in the leather history. And so I think it's going to be a game changer to establish Zegna as a integrated supply chain, not only in the textile or in the leather work -- also in leather. And to be honest with you, it can help the purposes also of Thom Browne and TOM FORD. So another further consolidation in integrating verticalized supply chain made in Italy, very strong statement at it because the is there. And I think that most of the shoe are produced not in our factories, we want to produce more shoes and providing what's local will see the service also made to order shoe service, a quicker replenishment service. And probably in the shoes in the accessory is even more important than in the ready-to-wear. So I think it's going to be a common effort. At least for the men shoe, I'm talking about men sure, women shoe it's a different chapter altogether.

But the question on unsold product. I think it goes through outlets as we said during the presentation.

But the challenge there is to reduce unsold product. I cannot give you inform that because it's not private information. But I can tell you, we're working hard in order to get the productivity as high as we got, it means our sell-through at regular price point in the story is better. And so I think it's all this very complicated mechanism of supply chain of merchandising of drops of the assortment that if you are able to run it properly, it can increase the sell-through and it can diminish the number of goods sold to the outlet. And so you can cut the number of outlets. So it's like a spiral. And so we are testing the program and the project at Zegna, and we are ready to share this information with the FORD and the Browne also. So when we're talking about share services, I would tell you more about share experiences. I remember when we introduced the essential as Gianluca, was talking about. We learned from Thom Browne and from the classic that's very important, but from Thom Browne learned from us in terms of Made-to-Measure. What about Icon, I think that we can learn in terms of icon by TOM FORD. TOM FORD is the icon of leather outwear, it's the icon of evening wear. And so I think it's fun to work together around the same table, exchanging experiences. And I think this is much easier if you do being an aggregate group, not being conglomerate. Conglomerate, we do respect, they work in silos. I don't think they have the integration as we have. And so I think that we are really representing an interesting new model also in our own way. And just you have to have the culture, you have to have the people believing that, but it can be done. So each learning by the experience of the other. And it's -- I think it's fun. Cross fertilization, factor across culture, these are things, it's the new model of aggregation and luxury bearing the strength of supply chain because if you have an industry -- if you don't have an industry, as my friend [indiscernible] says you don't go very far, fashion is about having concept of industry, relaying on our own forces, create R&D. If I talk to you about R&D, it's a big part of our time and investment in R&D. But you can invest in R&D if you have a supply chain. If you have an industry, otherwise, what R&D, okay, you can invest in R&D on the retail side on the digital side, but that's not good enough. So it's -- these are the fun part of our business of each one bringing it's own part in working together for the common goal, increasing the value, increasing the customer satisfaction at every bit of each brand. That's...

Any more questions? No. I think we can wrap it up here. There are refreshments in the room next door. And thank you very much, everyone attending and also to the viewers of our live webcast online and see you to the next one.