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

Good afternoon, and good morning, everyone. Thank you for joining us on Full Year 2024 Preliminary Revenues. Please note that today's material and presentation are available under our zegnagroup.com website. Joining us today is the Ermenegildo Zegna Group leadership team, including the CEO, Gildo Zegna and CFO, Gianluca Tagliabue. Before we begin, I need to point out that we will 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. Also, statements are subject to a number of risks and uncertainties, including those described in our SEC filings. Please refer to the forward-looking statements' cautionary statement included at Page 2 of today's presentation. I'll now hand over to Gildo Zegna.

Good morning and good afternoon. Thank you for joining today's call. After three challenging quarters, I'm pleased to be here today to talk about the quarter that showed some important progresses, even if we all know the sector still facing uncertainties. Let me start with a few highlights. Q4 '24 revenue grew by 3%, both organic and reported, thanks to 3 main contributors. The Zegna brand, which grew 7% organic, the direct-to-consumer channel, which grew 8% organically at a group level. In the quarter, in particular, Zegna and also TOM FORD fashion reported solid results, plus 9% organic in acceleration in all regions. North America, which delivered 15% organic growth. And the region success was driven by sequential acceleration. Growth in Zegna's performance was significantly better than the group average. Also, the Middle East performed exceptionally well, in particular for Zegna brand. These results are the outcome of long-term strategies implemented over recent years as well as some important lessons learned in '24. In '24, we reinforce our talent and organization at a brand level. We strengthened the business division at TOM FORD fashion. We invested in CRM and made-to-measure visualization at Zegna and enhance merchandising and retail operation across regions at Thom Browne. We achieved a more balanced geographic presence by increasing focus on core market like the U.S. and the Middle East, the latter in particular at Zegna. And last, we improved integration across the group. We strengthened strategic communities of our brands and move towards a more integrated model across corporate functions to drive efficiency and condition. Most importantly, the challenge of '24 have led us to be more selective about key projects, while deciding to continue to invest in those that are priorities for us. Let me start by showing what the key priorities for Zegna brand are. '24 was the year of bringing Vellus Aureum Zegna to the world. further cementing their unique legacy in timeless luxury. The recent '25 winter season, fashion show is another testament to this. At Milano Fashion Week, we unveiled Zegna Vellus Aureum project, the crown jewel of wool textile, created by our Filiera. Vellus Aureum is the finest wool in the world. This amazingly light, warm and breathable cloth has been created, thanks to the [indiscernible] awards, our family established in Australia since 1963. The collection presented show mostly made by Vellus Aureum was also inspired by some of my grandfather own cloths, giving it the typical Italian, I would say, truly is taste of our founder and myself. The show has been a claim as one of the best of the men's for Fashion Week and one of the best ever for our brand. Looking ahead, the Zegna brand part '25 is clear. Our product put is strong, not just Vellus Aureum, but much more. Legacy made in Italian customer experience will continue to drive our 360-degree brand strategy. From the way we think about our collections, to the way we communicate our brand and how we serve our customers or better our guest. And our tech innovation capabilities, we continue to keep at Zegna at the forefront of the industry. Something highlighted by Vellus Aureum at our most recent show due Men's Fashion week. We want to grow and strengthen further our community of Zegna brands and further consolidate Zegna leadership in timeless luxury. Let's move now on a few comments on Thom Browne. In '24, Thom Browne, we started to evolve our marketing approach, to emphasize not only the sense of our brand, but also the depth of product offering able to cover different tastes, needs and body shapes. Customer centricity and personalization are also increasingly important to Thom Browne, which can also draw on a remarkable number of influential friends of the brand to raise awareness of the brand and office product. We have further reinforced the team both the headquarter and the regional level, including recently new commercial director in the U.S. and EMEA. Looking ahead, we know that the evolution of Thom Browne into a more DTC company, it's not that complete, and we are seeing some early encouraging signs. Full price sales in our stores are driving retail performance, and the brand is doing well in market where the team is strong and well established, like Japan and Korea. However, we remain vigilant, and we'll continue to invest in a few selected projects where the brand has already started to build. DTC, Women accessories that I mention of the classic collection and some important new opening particularly in the United States. Let's now move to TOM FORD fashion. TOM FORD fashion in '24 was the year we focused on building a strong organization laying the foundation for future growth. As you know, along with the state of their company, we also decided to appoint a new Creative Director. We have chosen Haider Ackermann for a number of reasons, not only for the clear connection to the TOM FORD legacy, but more importantly because it's able to create collections that are consistent between men and women, supported by strong leader accessories collections. The positive trend in DTC in Q4, driven by healthy comp growth, especially in the U.S. and EMEA is an early initial sign that our actions are starting to pay off. Obviously, the high the fashion show will be an important stage to reinforces. Looking ahead for TOM FORD fashion, '25 will continue to be a year of investment. We will invest with two priorities in mind, brand value in the U.S. market. Let me finally comment on our important Filiera. We continue to invest in our Filiera, our fully integrated Italian supply chain, which sets us apart and gives a unique competitive advantage, allowing to be at the forefront of excellence, innovation and traceability. In '24, we also initiated a plan for a new shoe factory, which should be ready by 2026. Before we get into the financial detail, let me make a few additional remarks in anticipation of some of the questions I know you will ask. Regarding profitability, we will talk in March when we release our full P&L results, today's call is indeed on revenue. But let me make a brief comment. We all know that '24 profitability is expected to be impacted by the challenging environment. You also know that in '24, we decided to confirm some strategic initiatives that are key to strengthening our brands. I believe it is important for me in this call to reinforce the message and the decision to bear some short-term base was not easy. But today, we are even more convinced that this decision were crucial to strengthening our brand's value and drive long-term results. As far as '25 is concerned, the year has just begun, so it is premature to the conclusion about market trends. However, I can anticipate that we are seeing regional trends similar to the end of last year. America remains strong, Europe is doing well with both local customers and tourists. The Middle East continues to do very, very good. In the GCR current trend is largely influenced by the timing of the Chinese New Year, and it is today still too early to comment on China. With that, I'll leave it to Gianluca for his comments on the numbers. Thank you.

Thank you, Gildo. Good morning, good afternoon, everybody. Let's start from Page 9 of the presentation where we break down our consolidated revenues by segment. Before going into the numbers, I remind you that I will primarily focus on organic growth, which neutralizes changes in the consolidation perimeter and on ForEx. The changes in the perimeter that are neutralized by the organic growth our first TOM FORD fashion business, which is consolidated since April 29, 2023. Second, the acquisition of the Korean business for Thom Browne, which occurred on July 1, 23; and third, the acquisition of the Zegna Korean business, which occurred on January 1 of this year. Important to underline that only the last one, so Zegna Korea business impacted Q4 organic performance. And I can also anticipate that starting from Q1 of 2025, organic growth will only neutralize ForEx movements. I also anticipate that in the rest of my presentation, I will focus mainly on Q4 performance, our so-called exit speed. In Q4, the Zegna segment, which includes both Zegna brand as well as textile and the minor third-party brand revenue recorded plus 4% organic driven by the Zegna brand, while the textile product line continued to be impacted by a decline in B2B demand. Thom Browne segment revenues declined minus 4%, with an improving trajectory compared to the first 9 months of the year, while TOM FORD fashion segment recorded a good plus 4 revenue growth. So let's now move to Page 10, where we detail revenue performance by brand. Let me allow at this point to make only a few general comments, while we will go more in detail on the dedicated by brand stages. Notwithstanding the factors, uncertainties, Zegna brand continued to show a very solid performance, supported by a clear brand vision, which has been further reinforced in '24. Luxury leisurewear and shoes contributed to the growth. Thom Browne revenue, although negative shows some improvement even if we know that the journey to evolve the brand's culture to become a DTC driven company is still in the making. Tom FORD fashion recorded a nice acceleration in the quarter, in particular driven by the DTC channel, also thanks to the work that has been done in creating a stronger commercial organization. Talking about textile performance was negative at minus 13% organic, substantially in line with Q3, largely due to a decrease in demand from luxury good brands outside the group, which purchased from our platform. Finally, the other revenue lines have been now considered marginal after the acquisition of the Tom Ford International Group and the change in the accounting of the TOM FORD products. Moving to Page 11. We see revenues by geographic area, starting from Europe, Middle East and Africa, which represents now 35% of total revenues in full year '24. In Q4, EMEA recorded a plus 5% organic growth, which is the result of a double-digit growth at Zegna brand and TOM FORD fashion and the negative performance at Thom Browne, mainly due to the wholesale channel. Americas, which represents 27% of full year revenues, recorded a strong sequential acceleration in Q4 compared to the prior quarter with plus 15% organic growth in Q4. All three brands reported positive performances. Zegna brand, in particular, recorded an outstanding double-digit growth led by the DTC. Americas and U.S. in particular, are doing very well for Zegna also looking at the performance by nationality. Zegna brand saw a strong sequential acceleration of the U.S. nationality in Q4, both for clients buying domestically and those buying abroad. Moving to Greater China region. Let me highlight that in full year '24, GCR accounted for 26% of total revenues significantly lowering the incidence of group revenues from the 46% that we have seen in full year '21 when we landed into the public market. In Q4, GCR revenues declined by 11%. This represents a sequential improvement compared to Q3 when it was minus 22%, although we recon that visibility on that market remains limited. In the quarter, Zegna, Thom Browne showed a similar performance, while for TOM FORD fashion, GCR is less relevant. Looking at the results by nationality in Q4 revenues from GCR clients were down low teens, slightly improving compared to Q3. I remind you that according to our CRM data in the Zegna brand, around 90% of GCR clients are buying domestically. I finished with the rest of Asia Pacific, 12% of full year '24 revenues, which reported a plus 8% organic in Q4, with Japan and Korea driving the growth, in particular Zegna and Thom Browne. Let me now move to Page 12, the revenues by distribution channel. Just a very quick comment since we will comment on the following slides, the detail of revenue by channel for each brand. In Q4, DTC grew plus 8% organic with positive growth at all the brands. Wholesale brand performed in Q4 at minus 7 driven by a decrease in own brands, partially impacted by the conversions of some wholesale stores in concession in retail. Let's move to Page 13, where we deep dive on the Zegna brand revenues by distribution channel. In Q4, Zegna DTC revenues grew by a healthy 9% organic. The channel now accounts for 86% of the Zegna brand revenues on a full year basis. Americas, Europe and Middle East continued to report very solid double-digit growth rates, while as already commented, GCR was low double-digit negative, thus with a sequential slight improvement versus Q3. In the quarter, the brand closed 4 net stores, including two openings in Monaco and Wuhan and offset by closure of small stores and of one outlet. Moving to wholesale. Zegna recorded a minus 4% organic in Q4, mostly as a result of conversions that we have already mentioned and that occurred before Q4. Excluding the impact of the conversion, the performance of the channel for the Zegna brand would have been flattish in the quarter. Let's move to Page 14, Thom Browne revenues by distribution channel. In Q4, DTC for Thom Browne was plus 4% organic, driven by store openings. Japan, Korea and Americas reported double-digit growth in the quarter, while GCR continued to be negative. In the quarter, we opened 10 net directly operating stores, including the opening of Beijing Taikoo Li and some conversion of small shopping shops in Canada from wholesale into retail. In Q4 '24, wholesale was down minus 13%, impacted by the well-known decision to streamline parts of the business. The improvement in trend compared to price quarters is also related to early spring collection deliveries compared to prior spring summer, given that good part of spring/summer '25 products were already available to be shipped. As also Gildo commented Thom Browne evolution in the DTC led organization is ongoing and will continue also in '25 with an impact on the brand's wholesale performance. Based on the orders in our hands, I can anticipate that we expect H1 '25 wholesale revenues for Thom Browne to be still down significant double digits, with Q1 more impacted given the above-mentioned early delivery of spring, which have been falling into Q4 of '24. Let's now move to Page 15, TOM FORD fashion revenues by channel. In Q4, TOM FORD fashion reported a nice plus 9% organic growth in the DTC channel with a strong double-digit growth in EMEA and the solid performance in the U.S. During the quarter, TOM FORD opened 2 DOS, including Singapore Paragon. You also saw a picture at the beginning of the presentation and Madrid in Americas. Wholesale reported minus 4% organic in the quarter, reflecting also the impact of two main wholesale conversions into retail, Harrods Man and Saks Woman and the decision to further strengthen the DTC channel. I will now stop on the next slide, where you can see the facade of the Zegna store in Saint Moritz with the fall/winter' '24 collection. And I hand it over to Paola for the Q&A.

Yes. Thank you, Gianluca. Thank you, Gildo. Operator, can you open the Q&A session. Thank you so much.

[Operator Instructions] Our first question today comes from Anthony Charchafji with BNP Paribas.

It's Anthony from BNP. I have just two questions, and I will refrain from asking on EBIT. So the first one would be on TOM FORD in positive territory. How to think about 2025, as we know that [indiscernible] will present only this first collection in March, should we see 2025 as a transition year? My second question would be on the Zegna brand, very strong performance in -- also in DTC, knowing that the top 5% of your clientele is that -- in the high end is contributing to 40% of the brand sales. Could you maybe quantify their performance versus the rest, did they outperform? And maybe if you can give us some color of this performance of the high end by region.

Thank you, Anthony. I'll leave the first question to TOM FORD to our CEO.

Yes. Listen, the expectations are high, Anthony, on the fashion show. First of all, because I think we have the right designer right for the time, right, for the brand, the right for us. So the first thing is to work on the brand legacy and work on the collection to make sure that the store have the right mix of product that he will present in the fashion show. I think we need a strong consistency between the men's ready-to-wear and women the ready-to-wear, supported by strong leather accessories. I believe that there is not only some room in the retail. We have opened a few stores in '24. And I think that the new collection will help reaching productivity of the stores. We have a few more stores that we will open this year. And then I must say that the expectation of the wholesale also is positive. We are off for fall/winter '25 season, which we did what we had to do, even though we didn't have the collection. So overall, positive, in particular thinking about the U.S. market. You saw the number of Q4 of DTC on TOM FORD, I think we got the impact [indiscernible] thanks to U.S. even though in Europe, we did okay. So we expect both for Zegna, TOM FORD and Thom Browne some good trend continuing in U.S. And so we are ready to go with this new cycle of the brand, of the TOM FORD.

Anthony, I'll go to the second question. And if you have any follow-up, we are here. The second question is for Gianluca on the Top 5 of our clients, if I understood one.

Yes. So Anthony, so the top 5%, as we already represent, represents 40% of the revenues for the Zegna brand. And definitely in the top end part of our client pyramid is the one that is driving the most of the growth. The cluster of course, we have the cluster of doing a friend that are the ones that are above EUR 50,000 per year. It's not the 5% representing 40%. It's a subset of that. That is definitely growing on a very solid double digit, led by Americas and followed closely also by Europeans. Then we are seeing also nice growth on the segment that is slightly below that top threshold, that is the ones in the range of 20%, 25% per annum. And I think that the opportunity we see, of course, is continued performing well with the Zegna brand on one side, bringing more friends into the club. Focusing what we told the doors. The doors are the ones it's a segment that is spending less than 50% per year, but that's the potential to go above. And we see from the average ticket per transaction, but a relatively low frequency kind of 2, 3 times a year. The goal is to bring up the spending of the [indiscernible] and that is for us, I would say, not a low hanging fruit, but is intensifying the intimacy with customers that already trust Zegna and can have a higher spend. So for us, the high spending cluster in broad sense is the one that is driving growth so far and will continue to drive growth.

I just wanted to add one thing, Anthony, on the 4% top client, what we call our Zegna friend. We are continuing to foster the initiative on those customers, starting from our fashion show and from the [indiscernible] initiative. And we see that every time we create a personalized collection, or we provide something special to them. I mean, they respond to our request. So again, we had about 100 top customers that we're really excited about the collection, and they saw the pieces they can buy to be delivered later on. And this is the force of having a Filiera and is capable to deliver, not only showing a beautiful product and make them for you only. So I think it's a competitive advantage that we'd like to be able to transfer also more to the Thom Browne and TOM FORD brand, thanks to our integrated supply chain. So I think this is the direction to go, and we see a lot of benefit to that.

Thank you. Just for clarification, top 100 customers were the one invited at the show. I'm not sure I was clear. So just to clarify. And -- do you have a...

Maybe just if I may. So thanks a lot for the comprehensive answer. Maybe can you just give us the cluster for the Zegna brand in DTC out of the plus 9%. I understand that the Americans were significantly strong. Maybe if you can quantify.

Sorry, if we can quantify Anthony, lost the DTC, but I didn't get to what.

The clusters for the Zegna brand.

The cluster. No, we don't. I mean clearly, the cluster, when you talk about cluster, DCs, DTC because our CRM is based on that that comes from our retail network. So when we refer to CRM data, you should always think about our retail network, Zegna DTC, mainly.

Yes, we don't provide further details. The only number that we have provided so far is 5% customers representing 40% of revenue so...

And the first 5%, yes.

The only data point we have published, and we are not going further.

And this is something that we are seeing actually confirming and consistently be there. So it's a very good sign that -- of our strength in CRM and the activities we are doing now to -- towards our top of list.

Sorry, one other point on this is that we are seeing an increase of Zegna friend across the region. This is the important thing. And also in China, where the environment remains more volatile. So I think it's a global process. It's not only an American project, which we started from there. And we bid our -- must now is becoming really a global project, which I think is going to be bringing interesting results going forward.

Okay. Can we move the second question. Operator?

Our next question comes from Oliver Chen with TD Cowen.

At the Zegna brand, the Americas continues to impress, what are your thoughts on the continued growth of Americas, the U.S. consumer has been very strong. I would also love your comments on the Zegna brand as you think about products in the year ahead. What parts of the assortment do you think will show the most growth? And then the China news in terms of it's an evolution, the negative trends in China, how are you managing in terms of inventory trends there and that dynamic environment. And finally, with Tom Brown, what are your thoughts on awareness as you continue to grow it? It sounds like you're looking to have this brand be more relevant to a broader audience. What are the factors that are important for growing awareness there?

Thank you, Oliver. Thank you so much. So I think the first and the third one is for our CEO. So Zegna -- sort of the Zegna brand in Americas going forward in terms of also merchandising and Thom Browne, mainly inventory for Zegna after.

Listen, no, interesting question, Oliver. I think America is very much for Zegna, they just love what we have put together, and they just keep asking more of what we have. I think this rebranding of Zegna, this personalization of Zegna, this uniqueness of Zegna. Also by having a selective distribution and by raising the level of merchandising. Overall, I think that is bringing more excitement to the current Zegna friend in America and opening up to new customers. I think the phenomenon of the prestige that we expanded the family in an exclusive way, I think it's bringing a new customer. And I think that this Vellus Aureum project, surely, I think will be a must have for the top American customers. Our retail business is expanding. I think we see the productivity going up. We have a couple of new doors planned for this year. And plus, I think that we have a very strong leadership in -- with our wholesaler, in particular, the new form Saks group where Zegna is #1 in men's, I think will bring new results in terms of working together in a more focused way. We just had our top specialty store [ Mitchell ], which now has consulted about 6 stores, the best especially its in America, in which, again, there, we are #1, and we keep seeing growth factors. So I think that we are just doing the right things, that the American luxury customer likes and expect from us. So I remain positive, but focus raising the bar in terms of uniqueness. And I think the privilege our service. I think that the outreach, I think that these events that we create in the stores, mind you, with the Vellus Zegna project got started in America 6 months ago, and we had incredible traction and that has led us to think that this phenomenon could be brought around the world. As a matter of fact, it will be, we cannot share yet where next will be, but there are high interest around that part. So I just can tell you that also the last fashion show, we had many Zegna brand and wholesaler, and they liked our approach into textile. I think that today, our Filiera is a unique way to create unique textiles. And I think the best innovation in textile came from our show. And American has been also very clothing country. And so the way that story transform the clothing from a resi clothing to a soft clothing, really makes a difference -- just people want it. We just want to dress up differently. And so that's what I have to say.

On Thom Browne total on the brand awareness.

Thom Browne, brand awareness, I think that is different around the world. I think that one of the goals for this year with Rodrigo and Tom is to increase the brand awareness in America. I think that each brand has to focus on something, and I think that Thom Browne focus will be in having a merchandising that keeps being innovative give important -- more important to the women, I think he has some beautiful women pieces strengthen their accessories and go after an American market where, I would say, probably the brand awareness is stronger than the business we do. So I think that is -- and I think that is scattered around geographies. So I think that we need to raise the brand awareness across the country. And I think we have to increase our business with more doors. I must say that today, again, the Man and Saks Group has expressed interest to start working together. We have turned now our business with [indiscernible] to concession. So we have opened a few stores. So I think we are moving in that direction, Tom is strong in Japan and Korea, and we want to make sure to keep going at that speed. And we just need a stronger China altogether. And -- but I think that is clear that what our focus has to be also in terms of brand awareness for 2025.

Okay. And the last one was on GCR how we manage inventories Gianluca.

I would answer with two buzzwords. One is flexibility in planning both production planning and inventory planning. And the second is cautiousness on open to buy on '25. So flexibility is being vertically integrated allows us to take decisions later than the others. So we can decide to block some production. We can decide to divert some products that were meant to be directed to China to other markets. So we have been flexible along the year, navigating through the uncertainty of China. Looking forward, in 2025, we have been cautious on the open to buy, both on spring and fall/winter '25 being ready for a year that is soft. Of course, again, having the supply chain behind us, we have short time to react if we see the market picking up, we will be quick in taking actions and not to lose the opportunity.

Okay. Oliver, if you are fine, we can -- operator, can you move to the third question, then we have also a couple of questions from the web, but I will wait.

Our next question comes from Louise Singlehurst with Goldman Sachs.

Just a couple of follow-ups, if I could do, please. I wondered if you -- just going back to the U.S. and also China, but that scape, I mean, you've done a phenomenal a great improvement going to the back end of the year. Was that more traffic-driven, a bit more on ASP. I'm just obviously, the high-end consumer remains obviously in very good health as you've clearly demonstrated on this call. But I just wondered if it's more about traffic going right into the end of the year, particularly for the U.S. And then on China, you do give the comments with regards to expecting a little bit of volatility in 2025. I think that's very fair given the backdrop that we've seen in '24. But I wondered if you could just go a little bit deeper in that for us, and whether it's more about spending around particular events. I know we're on the cusp of the Chinese New Year, but do you think it's more about particular events and more event-driven in China?

Okay. So I'll live -- maybe -- Gianluca could comment on the DOS performance. If it was traffic ASP, we mentioned good comp, so what was driven. And I think Louise this was a question more general globally, and then I don't know if there was a specific. And then on China, I might ask Gildo to comment on the overall 2025 outlook for China.

So in terms of drivers for retail, the one major driver and ASPs. ASP has been up strong through the year, and this goes along with also the answer that we gave Anthony before. So we are elevating the focus of our action, elevating the clients and therefore, elevating the assortment. So AUR is up strong. Traffic, especially dragged down by GCR has been negative. We have seen an offset of traffic through conversion. So if you combine the two sales, the number of tickets at the end of the year, I would say that in the last period was flattish with traffic down conversion up, neutralizing basically the traffic. So the growth has been mostly driven by conversion and AUR, which were more than offsetting the traffic softness. I think that the rest was on Gildo?

Yes.

Well, the same comment applies to China.

Exactly.

Same comment applies to China, where we are not seeing -- if you neutralize from the different calendar of Chinese New Year, we should say that the traffic is sales of China. And so our improving trajectory comes from ASP. So it's not traffic. We are not seeing solid traffic inflection point.

Of course, China, not -- I mentioned, but clearly, everybody knows is today impacted by the difference of timing of the Chinese New Year. So reading China in the first weeks of 2025 is a little bit can be misleading because of the anticipated Chinese New Year. But I ask Gildo if he want to give us some more color on China overall for 2025.

Well, listen, China, we like to be conservative. We said that it's going to be volatile. So for sure, in particular, for the first half of the year. So far, we are positive. But as Paolo said, it's 2 weeks ahead at Chinese New Year compared to last one. We see some slight positive signs in that, we just had a drop 1. Drop 1 is the first delivery of our collection in the season. And part of that was Vellus Aureum -- I mean, we had a capsule collection already anticipated for spring. And we have seen that these two new delivery showed a good traction in particular, by affluent customer and also new customer that seems to be younger than the one we used to know in the past. So I think the traffic surely is nothing different than the traffic was in '24. But whenever you come with some nuances, they respond. And I think that the stress that we emphasized last year in which we have to go for a more one-to-one approach, less transactional and more personalized the way to go, and I think that in 1 year, we did a good -- move on that. We are going to continue with the suite project by which we come in, in the cities and we do special rent by focus on some particular project or some particular icon. We are -- we have on the pipeline, a couple of [ Saluto ] opening [ Saluto ], as you know, our private rooms into -- in very important cities, one in Shanghai with Plant 66 and one in Beijing, [indiscernible] Place. And I think there, we put all our strength of our innovation and personalization at the advantage of those customers that will be attracted. So we are doing everything possible to make it happen and we remain anxious to be ready that China would be what we used to be. In the meantime, we are strengthening other markets. So I think that overall, I think this rebalancing geographies I think has come out positive and same applies to the other two brands for that is surely less stronger or than Browne and Zegna in China. And so I think that it's a good exercise to this geographic rebalancing of the different brands. But we all leave this with a constructive eye and it's going to strengthen and be ready to go whenever China will come back strong. Is that clear?