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

Good morning or good afternoon. Welcome to the Ermenegildo Zegna Group 2023 Fiscal Year Preliminary Revenues Call. My name is Adam, and I'll be your operator for today. [Operator Instructions]. I will now hand the call over to Francesca Di Pasquantonio to begin. Ms. Francesca, please go ahead when you are ready.

Yes. Good afternoon or good morning, everyone and thank you for joining us as we discuss Zegna Group's preliminary and unaudited revenues for the fourth quarter of 2023 and for the full year. Please note that today's presentation materials and press release are available under the Investor page of the Zegna Group website. Joining us today are members of Zegna Group's leadership team, including Gildo Zegna, Chairman and CEO; Gianluca Tagliabue, COO and CFO; Rodrigo Bazan, CEO of Thom Browne; and Lelio Gavazza, CEO of Tom Ford Fashion. Before we begin, I need to point out that we may make certain forward-looking statements during today's call. Our actual results may be materially different from those expressed or implied by these 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 in Page 2 of today's presentation. And, of course, this call will be governed by that language. And I will now hand over to Gildo Zegna.

Thank you, Francesca. Hello to everybody. Let me start by giving you all a warm welcome and thank you for joining us today. Just a few weeks ago, we held our second ever Capital Market Day at the New York Stock Exchange, where on that day, we shared our updated medium-term financial ambitions and a very detailed look at our strategy for the group and our brands, which obviously remains the backbone of our execution. As we did highlight then, we are moving beyond just being the undisputed #1 player in luxury menswear to tap into the immense opportunity in other soft luxury category. As a multi-brand luxury group, our total addressable market is now 3x bigger than before. Our brands perfectly complement each other, fostering a harmonious blend across geographies, categories and gender. They have significant untapped potential and opportunities for growth in various markets, categories, customer segment and channels. As we said during our Capital Market Day, we are very happy with the momentum of our brand and are very happy to share that we recorded yet another strong quarter with organic growth of about 20% for both the quarter and the year and consolidated revenue just short of EUR 2 billion. As we continue to execute the group's strategy we saw growth across all geographies and the continued strength in U.S., in particular, despite a challenging environment, coupled with the rebound of Greater China region, has been quite encouraging. We are very pleased with the performance of our 3 brands in 2023. We are a stronger player today and thanks to our management team, we have been further sharpening our execution. The resonance our brands have with customers around the world, supported by our sophisticated campaigning and CRM capabilities, is driving market share gains. We are particularly proud of the progress that Zegna has made since rebranding. Our exposure to women's wear is actually through Thom Browne and now also with Tom Ford, is also contributing to this case. The growth in DTC revenue, in particular, reflects the success of our strategy to continue to increase the desirability for our brands and solidify the leadership position in the luxury market. As you have already heard, we say it many times, increasing productivity, particularly at Zegna been an area of focus. We saw the fruit of that in 2023 with a growth of over 50% compared to 2021, well ahead of the plans we had presented in May 2022. I will never be tired of repeating that remains a priority, supported by our successful merchandising and by the deployment of new technologies, including Zegna X to further enhance the simplification of our campaign. None of that is possible without the support and endorsement of the entire organization and our great sales force, who I had the pleasure of spending time with during an exciting global retail convention, which took place at our headquarter in Milan 2 weeks ago, which I will share more about shortly. Also, at our Capital Market Day, we shared our updated medium-term goals, namely to deliver over 10% compounded annual revenue growth and adjusted EBIT compounded average growth rate of over 20% and solid cash generation, all compared with 2023 as the base year. Our performance in '23 strengthened the foundation on which we are building to achieve these goals. This is possible, thanks to our strong management team as well as the tireless effort of our employees across the board. We are aware of the challenges facing our operating environment around the world and of the changes affecting our clients but we are stronger, more resilient player today set up with greater diversity in terms of brands and geographies and generating meaningful market share growth opportunity. We are starting the new year from a position of strength and look forward of the continued success of Zegna, Thom Browne and Tom Ford Fashion under the umbrella of our Made in Italy vertically integrated supply chain and the stewardship of our great team. We will remain flexible in digital with an eye on cost control and cash protection. But at the same time, we'll continue to invest in the desirability of our brands powered by our marketing as well as strengthening our network of directly operated stores for our sustainable long-term growth. Please turn to Page #4 for some key financial highlights from the fourth quarter and all of 2023. Revenue in the fourth quarter of 2023 came in at EUR 570 million, an impressive 40.1% increase from the fourth quarter of 2022. Organic growth for the period was at 19.6%, accelerating from 11.3% in the previous quarter. Total revenue for 2023 was EUR 1.9 billion, a 27.6% increase from 2022, 19.3% of that growth was organic. In terms of outlook, our revenue confirmed the group is on track to the medium-term financial goals we shared at our Capital Market Day in December, including over 10% compounded annual revenue growth and adjusted EBIT compounded average growth rate of around 20%. As a reminder, this growth should be driven by sustained -- by a number of factors. First, market share gains for Zegna and store productivity gains of over 10% per year on top of the 50% increase we did record in 2023. Second, by Thom Browne, doubling revenue over the medium term compared to 2021, starting days driven by retail growth. And finally, by Tom Ford Fashion, growing by over 10% compound in the medium term with the ambition of making it 1 of the 10 largest luxury fashion brand in long term. Gianluca will dive into the numbers shortly but allow me to share still a few highlights on Slide #5. The last quarter of last year and the beginning of this year have been busy for Zegna in particular. We recently renewed our eyewear partnership with Marcolin, which started in 2015 and -- but will now extend to 2030. We also kicked off a long-term license agreement with Give Back Beauty for the brand's fragrances and cosmetic. And as you may recall, during the Capital Market Day in New York, Edoardo, Head of Marketing, identified licensing as one of the building blocks for the future growth in the Zegna brand, expected to expand by 4x in the medium term. Second, as of the beginning of the year, Zegna took over operations of our business in South Korea, converting 16 stores into direct-to-consumer point of sales. The internalization of the South Korean business is in line with our strategy to increase direct control of our brand and mirrors what we did for Thom Browne last year. We also had our Zegna Global Retail Convention in Milan 2 weeks ago. This brought together about 500 people from all over the world to our headquarter, including our store managers and many staff advisers. It was the first time we've held an event like this on a global scale. And what a joy to see these colleagues gather together for this first time after many years of forced distance. It was exciting to see them fully dive into the totalizing [ same ] experience, from a visit to the snow-capped peaks in Oasi, the home of our values to Zegna workshop, focused on product, clientele, styling, technology and storytelling. I was particularly touched to witness the emotional power of our brand, of our product and of our industrial roots and Made in Italy platform. We also spend a lot of time setting the priorities and KPI for the next few years. Our focus is on UPT, units per transaction, where we see significant upside and room for expansion. Our technological tools, starting from Zegna X and our styling credentials and capabilities, thanks to our superior products, supply chain and service, present a fantastic opportunity for growth in newest type transaction in addition to our ongoing productivity improvement. Of course, this is all in service of our fashion and our product, which Alessandro Sartori showcased a spectator fashion show at Zegna 2024 Milan Men's Fashion Week Show. We fully transformed a large industrial space into a [indiscernible] fashion, highlighting this incredible fabric and raw material by creating elements our customer can use to reflect their own sense of styling the most luxurious material. And speaking of fashion show, both Thom Browne and Tom Ford Fashion will be holding their shows next month. With Thom Browne showing its native collection on February 14 in New York and Peter Hawkings showing a new Tom Ford Fashion collection in Milan on February 22. And with that, let me turn to Gianluca to talk about our performance in the last quarter and the year. Thank you.

Thank you, Gildo and I'll take it from Page 6 of the presentation, if you're following it and I will be discussing revenues for the fourth quarter and the full year in more detail. As Gildo anticipated, in the full year '23 total group revenues came in slightly north of EUR 1.9 billion, 27.6% increase from 2022 on a reported actual currency basis and an increase of 29.7% on a constant currency basis and an organic growth of 19.3%. I'll recall what organic growth means, is that revenue growth versus prior year in constant terms and neutralizing the effect of that is growth coming from M&A and changes in license agreements where [indiscernible] renewed licensees, which basically means it is neutralizing the growth that's coming from the Tom Ford Fashion deal and the South Korea acquisition by Thom Browne that occurred mid-'23. Fourth quarter revenues came in at EUR 570 million, plus 40% year-over-year with an increase of 42.9% in constant currency and 19.6% in organic terms. Zegna segment revenues for the fourth quarter came in at EUR 385 million, plus 15.2% reported growth, plus 18.2% organic increase compared to the same quarter of last year. Thom Browne segment revenues came in at EUR 99 million, plus 30% reported growth, plus 24% in organic terms compared to the fourth quarter of 2022. The new Tom Ford Fashion segment was officially consolidated as of April 29 of last year. In the fourth quarter alone, the revenues for Tom Ford Fashion came in at EUR 97 million. As I go through the analysis of the 2023 revenues by segment, products, geography and channel, I will mainly focus on organic growth as it more appropriately represent the business trends, given the significant impact of changed perimeter from the TFF consolidation and the acquisition of Thom Browne Korea business from July 1, which moved from wholesale to retail. But you can find all the data in actual and constant currency in the published documents. So moving to Page 8, jumping into the segment. Both Zegna and Thom Browne continue to show solid double-digit revenue growth for the quarter and for the full year. In '23, Zegna segment revenues reached over EUR 1.3 billion with a 19.5% organic growth versus full year '22. This was thanks to the execution of our Direct-to-Consumer strategy for the brand as well as the ongoing improvements to our technological stack, including our CRM systems that are the basis for our clientele unique approach. As Gildo noted, we continue to improve productivity for the brand. As a reminder, we disclosed in the Capital Market Day that sales per square meter has increased by over 50% since 2021. We pride ourselves on remaining close to the customers, knowing their needs sometimes even before they recognize them and providing them with the right products at the right time. We are using technology in addition to the experienced and incredible retail team to make that more true every day and the results that we show today reflect that. One thing to note here is that we are strengthening our luxury retail business model. We have implemented a new drop-based merchandising strategy. We are moving away from a standard seasonal deliveries model and replacing it with a more spread-out cadence of deliveries approximately on a monthly basis to make sure that the stores are always properly augmented. As a result of this decision, some spring/summer '24 deliveries were intentionally shifted from Q4 of '23 to the first quarter of this year. This affected some Zegna wholesale numbers for the last quarter of 2023, as I will explain later. As for Thom Browne segment, we saw '23 revenues reaching EUR 380 million, up 14.9% over the prior year with 17.8% organic growth on a full year basis. The growth of Thom Browne reflects the consistent demand from consumers as well as the ongoing DTC expansions that the team is carrying out. The internalization of Thom Browne South Korea store network, which kicked in on the 1st of July '23 is reflected in the shift of some revenues from wholesale to DTC. As for Tom Ford Fashion segment, the brand revenues since its acquisition on April 29 through the end of the year came in at EUR 236 million. We are in the process of setting up the full Tom Ford Fashion organization, taking full advantage of the synergies within the group. The integration of Tom Ford Fashion Made To Measure offering with the group has already contributed to enhanced services for the consumers and we are building on this momentum by focusing on more Made To Measure events, especially starting from Asia. Moving to Page 9 and 10, naturally, I will now comment by geography -- commenting together Pages 10 and 11. Throughout 2023, our performance has confirmed the benefit of a diversified geographical mix, which makes us more resilient through the dynamic global environment. Let's start from Asia. In the fourth quarter, revenues for Asia were EUR 241 million, plus 39% over the fourth quarter of 2022 and 32% organic growth. This led to total revenues for the year in the APAC region to EUR 788 million for an increase of 22% over 2022 and 23.7% organic growth. In the fourth quarter, organic sales growth was faster, thanks to the rebound in Greater China region, coupled with the strength also in Japan and in the rest of Asia. Our rebound in Greater China region led to revenues of EUR 176 million in the fourth quarter with an increase of 35% year-over-year on a reported basis and above 36% organic growth, with Zegna DTC revenues up almost 40% versus Q4 of last year, thanks to the Zegna One Brand strategy execution. And of course, up also by a low base of comparison last year, which was affected by COVID-19 closure and restrictions. Looking at Europe, Middle East and Africa, for all of 2023, revenues from EMEA region were up 26.6% over 2022 and about 19% in organic terms, reaching EUR 659 million with EUR 69 million coming from the United Arab Emirates that were up 35% on a yearly basis and about 31% organically. In the fourth quarter, revenues from total EMEA came in at EUR 184 million, growing 30.9% on a reported actual currency basis compared to the same period of last year and over 14% in organic terms. Organic growth was supported by the strong performance of the Zegna branded products in the DTC channel, slightly offset by more muted wholesale business, reflecting also the new merchandising strategy mentioned before. Activity in Europe remained dynamic throughout the year, reflecting strong activity for both domestic and for foreign consumers. In the fourth quarter, the Emirates continue to keep their strong momentum and outperforms the region with revenues of EUR 24 million, up 22% over the fourth quarter of last year and over 20% organic. Next, North America. In full year, revenues in North America reached over EUR 400 million, namely EUR 417 million with a 41.6% increase over 2022, supported, of course, also by the Tom Ford Fashion addition, which is strong in that region and plus 11.4% organic. Of this, EUR 417 million in North America, EUR 385 million comes from the United States. In North America, fourth quarter revenues came in at EUR 132 million, 60% over last year and plus 3.2% organic growth. The U.S. made up a significant portion of this revenues in the fourth quarter, namely EUR 125 million, with a robust 63% increase over the year and 4.4% organic growth. The organic performance in North America needs to be read, taking into account various factors. The organic growth rate was in the high teens for Zegna brand in the DTC channel. This remarkable performance of Zegna retail was partially offset by lower wholesale in Q4 2023 as a result of the impact of the shift in wholesale delivery of [indiscernible], which I have previously described and the conversion of wholesale into retail of the [ meaningful ] Saks Fifth store in New York. We continue to be encouraged by the growth in the U.S. despite the volatile consumer environment there and we believe that our unique luxury offering resonates with consumer base as seen in the strength we exhibited last year. Incidentally, we saw spending on Zegna almost doubling around U.S. consumers, around the world compared to prepandemic levels. Finally, revenues from Latin America grew 29.6% in the quarter and almost 21% in organic terms over the same period to reach EUR 13 million. This brought LATAM revenues to EUR 38 million in the full year with an increase of EUR 25 million over the year and 16% organic. Quickly going through Page 11. Here, all the comments have already been raised so far, I just remarked a few aspects. The well-balanced incidence at this point between different regions, for instance, GCR, representing 31% of group revenues in 2023 and also in Q4. And the fact that we have seen double-digit organic growth across all regions, both for the full year and for the last quarter, with the exception of Northern America for the reason already described, remarking the fact that Zegna retail in U.S. in Q4 has trailed in the high teens range of growth. Now going to Page 13. Product line. Zegna-branded products contributed 58% of group revenues with a total of EUR 1.1 billion for the full year. This was a plus 20% increase in actual currency and a remarkable 22% organic growth for the year. Revenue for Zegna-branded products for the fourth quarter came in at EUR 326 million, an 18.8% increase over the quarter, in organic terms about 21%, therefore, a pretty steady performance across the quarters along the year. Revenue was boosted by both luxury leisure wear and footwear, which, as you know, are 2 strategic product areas for the brand. Luxury leisure wear continues to gradually increase its contribution to the mix and now makes up about 50% of the revenues for the Zegna brand as we continue to focus on meeting our customers' desire for this product at the very highest level of quality. Shoes also continued to outperform, growing high double digits last year and now making up 13% of the Zegna product mix versus 8% last year. I would just like to recall that at our Capital Markets Day, we emphasized the significant opportunity that we still see in this category. As you can understand from this data, the growth of Zegna brand is not only linked to the Triple Stitch success but in absolute terms, it is mostly driven by the increase in sales from apparel, namely leisure -- luxury leisure. And in this regard, I call out within apparel also our made-to-measure offering, which has been very dynamic, both in formal as well as in casual categories such as, for instance, nightwear. In made-to-measure, we are investing to elevate customization through technologies such as Zegna X, positioning us even better to cater adolescent customers and their wardrobe needs. Thom Browne product line made up 20% of revenues in 2023 as an incidence to the group revenues, contributing EUR 378 million, plus 14.7% and 17.5% in organic terms. While the brand as a whole continues to grow womenswear in Thom Browne in particular, continues to outperform, making up 30% of the brand revenues, in line with our strategy to increase our offering there. Tom Ford Fashion, whose revenues are, remember, consolidated as of April, contributed to EUR 136 million with the same growth that I mentioned before when presenting the segment. Our textile products contributed 8% of revenues, EUR 151 million, a 10% increase over 2022 and 9.5% in organic terms. In the fourth quarter, the textile revenues came in at EUR 42 million, up 13% versus last year and 12% in organic terms. Textile business has continued to perform strongly and particularly thanks to strong deliveries from our Lanificio Ermenegildo Zegna. Finally, third-party brands were down 74% due to the end of the Tom Ford supply agreement and the integration of Tom Ford Fashion into the group. As we have previously noted, sales through the Tom Ford Fashion have been shifted to that segment and are reflected in the intercompany [ eliminations ]. Finally, we'll take a look at the cut of revenues by channel. Page 15, starting from the DTC channel. Our DTC channel saw dynamic organic growth increases across Zegna and Thom Browne. DTC revenues came in at EUR 1.265 billion for the year with a robust 37% increase over 2022 in actual currency, 24.5% organic growth. DTC make up at this point, 66% of revenues in 2023, up 4 percentage points from the 62% of last year. Zegna was again the leading contributor by revenue to our DTC channel with EUR 945 million in DTC revenues for the year, up 22% and a remarkable plus 25% in organic growth. This reflects strong double-digit growth across all markets, thanks to significant productivity gains and through 14 net openings from 239 directly operated stores at end '22 to 253 doors at end '23. Still with regard to Zegna DTC compared to 14% organic growth in the third quarter of '23, the fourth quarter organic growth at 26% represents an interesting acceleration with most geographies experiencing double-digit same-store sales growth including a nearly 40% uptick in the Greater China region, albeit against a low comparison base last year. Thom Browne DTC saw fourth quarter revenues of EUR 57 million, up 33% over the same period in 2022 with 13% organic growth. This brought DTC revenues for Thom Browne at EUR 183 million for the full year, up a total of 25.9% over 2022 with an organic growth of almost 20%. Thom Browne DTC revenues reflect the internalization of 17 stores in South Korea from July 1. This addition, I recall, is excluded from the organic growth metric and reflects also 6 net openings throughout the year, which brings the DTC network of Thom Browne to a number of 86 doors at the end of '23. Finally, Tom Ford fashion, DTC revenue came in at EUR 136 million since the consolidation at the end of April with EUR 59 million in the last quarter of the year. Moving to Page 16. Turning over to wholesale. As a reminder, revenues in this channel can be subject to some volatility, which depends on the delivery schedules and both on the pace of wholesale to retail conversions as per our strategy to increase brand control. This is in addition, of course, to how we look at this channel strategically for the 3 brands. Overall, we saw solid growth both for the quarter with revenues of EUR 169 million across all brands, up 27.6% in the quarter and about 9% in organic terms. And for the full year, with revenues of EUR 635 million, up 11% in actual currency and about 10% organic. This is despite the impact of shifted deliveries mentioned before and the conversion of all sale doors to DTC at both Zegna and Thom Browne. Zegna sales came in at EUR 42 million in the last quarter, down 5 points over the same period of last year and down 6% in organic terms due to the planned shift in deliveries and the conversion into DTC of the important Saks Fifth Avenue location. For the whole year, Zegna wholesale revenues were up 8% in actual currency to reach EUR 164 million and up 7% in organic growth. Thom contributed EUR 41 million in wholesale revenues for the last quarter, plus 25.8% increase over the year and about 40% organic from a low base of comparison in the fourth quarter of last year, which reflects a different cadence in the deliveries of 2023 compared to 2022. For the year, Thom Browne wholesale revenues landed at EUR 195 million, plus 5.8% increase in actual currency, plus 15.7% in organic terms. The lower growth in reported number vis-a-vis organic ones reflects the effect of the internalization of Thom Browne business in Korea from being a wholesale franchisee to being a DTC business. Tom Ford Fashion wholesale revenues came in at EUR 38 million in the last quarter, reaching a total of EUR 99 million in wholesale revenues since the consolidation as of April 29. Third-party brands and textile came in at EUR 48 million for the quarter, down 14% in reported numbers but up 4% organic when we take into consideration the internalization of the Tom Ford deal effect. Moving to Page 17, quickly, an update on our mono brand store network. As of December, Zegna brand has a total of 253 directly operated stores with 14 net openings during the year. And as of the end of the year, the brand has also 151 wholesale locations, which was reduced by 5 through 2023. Notable changes to the Zegna network include, already mentioned, Saks Fifth Avenue store shifted to retail from wholesale, openings in some key resort locations like recently St. Moritz and Courchevel, some other significant additions like [indiscernible] Kuwait City, Copenhagen, Jinan, Wuhan and several relocation or refurbishments. Notably, I would like to mention 3 outlet stores closures in line with our brand elevation strategy, which includes the streamlining, gradual streamlining of that channel and this trend will continue also in 2024. Thom Browne saw a significant change with the move of 17 doors from wholesale to the retail in Korea. And Ford -- on top of this, there has been also other 6 directly operated stores net openings, especially across the Asia Pacific region. There have been no notable changes to the Tom Ford Fashion store network, which stands at 121 mono brand stores with 51 directly operated and 17 wholesale mono brand locations. Finishing before your questions with Page 19. As for our outlook, the momentum we have seen across all quarters and the strong exit rate in 2023 underscore our trajectory to meet the medium term goals we outlined in New York at the Capital Markets Day at the beginning of December. Over the medium term and with 2023 as the base year, we expect to deliver over 10% compounded annual revenue growth and an adjusted EBIT to grow by approximately 20% compounded. We refer to the Capital Market Day presentation for a full analysis of the drivers of this expected top line and bottom-line growth. But as a summary, we expect revenue growth to be driven by the DTC channel, which is expected to land at 75% of group revenues in the medium term, partially driven by store openings with the gross network to reach about 500 stores in the midterm and partially through further productivity gains by over 10% on a compound basis. Then a further gradual rebalancing in the mix of geographies, which as I explained before, already quite balanced but we are expecting to have further increase for instance in North America. As for adjusted EBIT growth, we expect the growth to be driven by gross margin expansion, OpEx leverage, despite higher marketing and despite the royalties pertaining to the TFF, Tom Ford Fashion license agreement. In the long term, this agreement expected to add about a 1 percentage point negative impact on the group adjusted EBIT margin percentage. Over the same time frame, we are also expecting solid cash generation, even while taking into consideration higher investments in marketing and CapEx to enhance brand desirability and drive growth. As a reminder, at our Capital Market Day, we indicated a ratio of CapEx in average of 5% but with 2024 and 2025 to be slightly in excess of this rate. And now I turn to Francesca to end the session before the Q&A.

Thank you very much, Gianluca and Gildo. Operator, I think we are ready for the Q&A, you can give the instructions for the session and we can move [indiscernible] to that. Thank you.

[Operator Instructions]. The first question today comes from Chris Huang from UBS. It looks, Chris has disconnected. We will move onto the next question. And the next question comes from Anthony Charchafji from BNP Paribas.

It's Anthony. I have 3 questions, please. So the first one is on the organic growth, plus 20% in Q4. Could you share some details specifically for December? If you -- wondering if you have seen an acceleration throughout the quarter? My second question would be on Greater China, the region was up 40% for the Zegna-branded products in DTC. Now that you have full price policy with no discount, I think in the base you -- in Q4 '22 in China, you still have some promotions. So could you share with us, I would say, the new profile of your Chinese clientele in the Mainland, I mean, if you see maybe a consumer awareness here and if it has any impact on volume. Last question would be on Thom Browne in the wholesale. So you -- it's just a clarification. In the press release, it's mentioned, the strong wholesale deliveries due to a low base in Q4 '22, which was up 60%. So I am, yes -- it's -- just trying to understand if the Q4 '23 performance of plus 40% is a shift from Q3 to Q4 '23, or if it's early deliveries from Q1 '24.

Thank you, Anthony. So I'll let Gianluca to...

I'll take the first one, Anthony. Hi Gianluca, so organic, I think, of course, we don't report on a monthly basis, quarterly is enough. But to give you a sense, we were happy with our December finish. So to give you a flavor, December was better than October. October was slightly softer and November, December were good performance. So we finished on a positive note, the year in December. We were happy with our December ending.

Yes. Gildo. Hi Anthony, China, in particular, focusing in December or quarter 4, I think we were pleased with the performance compared to quarter 3. And I must say that we gained good traction, thanks to the iconic -- through the States. Because what happened in the States previously is now happening in China. We did anticipate that China was coming in a little bit slower on hitting record numbers in [indiscernible]. And we saw the flow improving, in particular in quarter 4. And I think that -- we think that it could happen again in the current year. And so I think this iconic product was at the helm of pulling new customer in and having loyal customer purchasing. And in -- I would say, the other thing that we saw is the outreach, I mean, we had a nice increase of outreach similar to what happened the year before in the United States. And I think that as the staff is getting more accustomed, the Chinese staff is getting more accustomed, I mean, to this acceleration of new means to reach out new customer and to increase their UPT and to increase the productivity of the store, I think that we remain very positive. We had a slight increase in traffic as well that helped and -- so I think that's what we realized in particular in the December in China. In terms of Thom Browne, I'll leave it to Rodrigo Bazan to explain the wholesale question.

Yes. Thank you for the question. In Q4 2022, we saw an impact of early spring 2023 deliveries from production. Remember, 2022 was extremely busy in factories across the board and we did see an impact there. So we shipped better in Q1 2023. What we had is a real good performance of production in 2024. Therefore, the product that we had already, we plan to have prepared and everything, we shipped in Q4, 2023. We are forecasting a similar percentage of deliveries of early spring 2025 going forward. So we expect the percentage shift of the early collection of the following year, always to be in that percentage, even though we are looking into a tightening up of wholesale across the board as we announced in the capital market.

If I may add a mathematical angle, Anthony, you can follow because these are all public data. If you look at the rate of Q4, for Thom Browne wholesale, in 2021, grew 16%; in 2022, it was 18% and now it's 21%. This is consistent with the fact that, as Rodrigo was mentioning, little by little, Q4 starting to have earlier deliveries on spring and this has been also part of the -- of the goods delivery from the supply side and the good appreciation of wholesale accounts that were reflected to the product. So -- but if you look, the incidence was very low in the prior years and now it's becoming more balanced between the different quarters.

Thank you. Next question, please.

The next question is from Chris Huang at UBS.