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

Good afternoon, and good morning, everyone. Thank you for joining the Ermenegildo Zegna Group FY 2024 Financial Results Call. Please note that today's material and presentation are available under the zegnagroup.com website. Joining us today is the Zegna Group leadership team, including Gildo Zegna, the Group CEO; and Gianluca Tagliabue, Group CFO and COO. Before we begin, we need to point out that the team will make certain forward-looking statements during the call. The group's actual results may be materially different from those expressed or implied by these forward-looking statements. Also, these statements are subject to a number of risks and uncertainties, including those described in our SEC filings. Please refer to the forward-looking statements' cautionary statement included at Page 2 of today's presentation. I will now hand over to Jo Gildo Zegna.

Thank you, and good morning and good afternoon, everyone. Thank you for joining us today to talk about Ermenegildo Zegna Group full year '24 results. As you all know, '24 was a different year than what we initially planned. Despite the challenges, we delivered an adjusted EBIT of EUR 184 million. And although I cannot be fully satisfied with the numbers we present today, I'm absolutely assured by the proven strength of our teams in navigating challenging moments with discipline and determinations. I would like to start this call by sharing some reflections on last year as well as our outlook going forward. First, let me start by commenting on the most recent event the TOM FORD for Winter '25 Fashion Show in Paris. I personally cannot recall such an anonymous acclaim from the press and key opinion leaders. The show has been celebrated as one of the best of the season, recognized for its innovative collection and presentation. Also, we generated double the media impact of the brand's latest show. But it's not just about recognition, the show was a powerful testament to either [ acclaim ] ability to evolve TOM FORD into a modern and sophisticated interpretation of sensuality and elegance. And we are already starting to see customer interest in the collection. They see now, buy now piece, those already available in stores being positively received as well as the Fall/Winter '25 wholesale campaign. Of course, this is just the first step, but we must sustain this momentum, and they know that the TOM FORD fashion team is fully focused on doing exactly that. It is also important to recognize that this show would not have been possible, at least, not with such success without the contribution of our unique Filiera, our integrated supply chain with artisan working tirelessly day and night in the lead up to the show to achieve such perfection in every piece. So bravo to all of them. Second, Thom Browne. The February show confirmed that we have already discussed about the brand journey. Thom Browne has always stood for expertly crafted product and distinctive tailoring. This DNA has and always will be there. We built on that to evolve the brand, and this is what the team is doing. We are enhancing newness while protecting the unique for [indiscernible], improving the price architecture of the collection and of the in-store offering for both men and women, all these while the company focuses on embedding a strong retail culture. Last week, the brand opened its new store in Palm Beach, Florida and soon we'll open L.A., California and New York Madison Avenue, an important step in enhancing its footprint in the United States. Let me also mention the February fashion show and their results, which confirmed that the brand collection has been highly appreciated by customers. And last but not least, the innovative show that Doechii did at the Grammy's. She performed with 20 dancer all dressed in Thom Browne, a further testament of the strength of our brand. Finally, on Zegna. The Vellus Aureum exclusive collection and the innovative advertising campaign we launched with Mr. Auro Montanari outperformed our expectation, attracting not only our existing customers, but also new ones. This is part of our future journey to engage both existing and potential customers with product of the highest quality and exclusivity, outstanding craftsmanship and the unique heritage. In June, we will take all this to Dubai, a market that continues to show impressive growth and appreciation of the Zegna brand. To celebrate our special relationship with Dubai, Zegna will launch its first show outside Milan alongside a weeklong Villa Zegna experience, the third after Shanghai and New York. That also proves the strength of our personalization project. Let me also briefly touch on 2 important projects that reflects our commitment to excellence, to giving back and to the environment. We recently appointed the first 20 Maestri of our Accademia dei Maestri, an internal school dedicated to preserving the unique know-how we have developed across the entire luxury value chain. It is a significant project inspired by our founder's relentless pursuit of excellence and commitment to the Made in Italy. In '25, we continue to work to make our group a more inclusive and diverse workplace. I'm particularly satisfied to say that some 50% of our managerial position are now covered by women. And last, for me, the most important, we continue to invest on traceable raw material across our brand. This project launched and the goals achieved are important, but for our group, sustainability is much more than just this. Sustainability and caring for our communities are a part of who we are and will continue to be so. Now let me take a moment to talk about '25 and our midterm targets. First of all, let me provide some color on current trading since I know this will be your first question. The Q1 '25 trend still reflects a challenging environment in China. And in addition, we will continue to reduce the wholesale footprint across our brands in line with our strategy focused on DTC and customer centricity. This will continue to be a particular focus at Thom Browne, especially in the first part of the year. In fact, we do expect the trend in Thom Browne wholesale channel in Q1 of this year to be similar to Q1 '24. We also announced today an update of our mid-term targets. We expect to reach a revenue between EUR 2.2 billion and EUR 2.4 billion with an adjusted EBIT between EUR 250 million and EUR 300 million. These assumptions are based on a still cautious outlook for '25, with an expected low single-digit growth in revenue and adjusted EBIT. Our assumption for this year factor in the expectation that the current challenging environment in Greater China will persist, in particular in the first semester, also due to the negative trend in Hong Kong. We anticipate more sustained growth in '26. '27 as the steps we are currently taking across all 3 brands and our Filiera begin to yield results. And you have my full commitment that we are working to turn them into reality. Thank you, and let me turn over to Gianluca.

Thank you, Gildo. Let's move to Page 10 of the presentation, where we -- you find full year '24 results key highlights. The revenues for this year were already disclosed at the end of January, and we confirm them at EUR 1.947 billion, up 2% year-on-year driven by Zegna brand organic growth. In '24, the group reached 67% gross margin and adjusted EBIT of EUR 184 million and the profit of EUR 91 million. Let's move to the following page to comment more on these results. On Page 11, starting with gross profit. In full year '24, gross profit rose by 230 basis points to EUR 1.297 billion, with a margin of 66.6%. This 230 basis points improvement from last year has been driven mostly by 2 factors. First, channel mix more skewed towards DTC as the major driver of this improvement. In '24, DTC revenues reached 78% of the 3 combined brand revenues versus 73% last year. And as you know, DTC gross margin carries a higher margin than the wholesale one. Second factor, a better inventory management, which we will see also in the trade working capital base. Let me also remind you that in full year '24, cost of sales still included almost EUR 4 million of TOM FORD fashion PPA-related charges, purchase price allocation. These charges were instead EUR 15.6 million in full year '23. The 2024 amount is the last tranche of PPA-related charges from the acquisition of the remaining 85% of TFI, that is the company that signed a 20-plus 10-year license agreement for the TOM FORD fashion business. Moving to SG&A. SG&A in full year '24 reached EUR 1.008 billion with a 51.8% incidence on revenue as compared to 47.3% in full year 2023. The increase in SG&A incidence on revenues is linked to 3 drivers. First, the investments in talent and organization across different functions. We reinforced all the 3 brands, even it is important to highlight that the investments made at TOM FORD fashion represents the vast majority of the increase of SG&A in absolute terms versus 2023. Also related to the fact that this year, we had 12 months, while in '23, we had 8 months of TOM FORD fashion. The second factor. The expansion of the store network, including also the conversion of the Korean mono brand stores to DTC for both Zegna and Thom Browne. Clearly, when we launch a new store either from conversion or not, some ramp-up time is needed before reaching maturity. Third factor, a negative operating leverage, in particular at Thom Browne since we decided to streamline the wholesale business, which I remind, declined by 33% versus prior year in organic terms. Moving to marketing expenses. In 2024, we continued to invest on our brands. Marketing expenses were EUR 121 million, equal to 6.2% of revenues, slightly above the EUR 115 million mark achieved in '23, which at the time was 6.0% of revenues. And this is in line with our indication of a fair midterm marketing revenues incidence of around 6%. As already anticipated in the call related to H1 results, in 2024, we experienced a different timing of spending in marketing, fully related to the different concentration of events across the year, which has been more intense in H1 '24 compared to H2. Let's now move to Page 12 of the presentation, where we report the adjusted EBIT for the group and by segment. As always, this is the main performance metric used by the management to analyze the performance of the business at group and segment level, and you can find all the reconciliations in the appendix of this presentation. In full year '24, our adjusted EBITDA reached EUR 184 million compared to EUR 220 million in 2023. As Gildo commented, these results reflect largely the challenging sector environment, especially in GCR and the decision to streamline the wholesale business at some brand, but reflects also the efforts that have been made to improve costs and postpone some projects that are -- that have not been considered a priority. This effort is continuing also in 2025. Recently, we have taken, for instance, some important decisions as it regards to our Filiera, where we are reorganizing the activities of the fabric crafting by concentrating them from the current 2 facilities into just 1 site. And we are still working on other fronts of optimization at 360 degrees across the group. In particular, last year, Thom Browne segment has been the most penalized in terms of adjusted EBIT performance, having recorded the strongest reduction in revenues, minus 21% organic versus 2023, which in '24 has been only partially mitigated by cost control actions. TOM FORD fashion segment reported a loss at EBIT adjusted level, in line with our expectations and also in line with the results that we reported in H1. Actually, the adjusted EBIT of TOM FORD fashion in the second half of 2024 came in slightly above breakeven. The full year adjusted EBIT performance of TOM FORD fashion reflects the cost to build the platform to support the long-term growth of this business going from design to merchandising, from IT systems to regional leaders and so on. Last, on Zegna segment that, as you know, includes Zegna brand, Textile division and third-party brands. This segment generated an adjusted EBIT slightly south of 14%, 70 bps below 2023. This performance reflects our decision to keep on pursuing strategic projects that are important for the long term of the brand in a market that over the year has become more challenging, especially in GCR. I have to say that on the other side, the team has been responsive on working on cost control and containment actions. On the positive side, corporate costs, including the Intersegment elimination decrease to EUR 21 million compared to EUR 30 million in 2023, mostly due to lower cost for short-term and long-term [ renewals. ] Moving to Page 13. You can see here summarize our reported income statement. Let me make here one comment on taxes. As you see, the effective tax rate moved to 30%, a more normalized level compared to 20% of prior year, which was mainly a result of high nontaxable income. As a result of the above, we reported group profit in 2024 at EUR 90.9 million. I can also here anticipate that based on the 2024 results and acknowledging that in any year, the dividend per share should be at least equal to that of the prior year. The Board of Directors proposed a dividend distribution of EUR 0.12 per ordinary share which equals to a total dividend distribution of roughly EUR 30 million. Let me move now to Page 14, where we comment CapEx and trade working capital. [Technical Difficulty] is going to be another important year in terms of CapEx, not only on the distribution side, but still also in production where we aim at completing the new factory by '26. And for this reason, we expect CapEx for 2025 to be between 6% and 7% also this year. Trade working capital reached EUR 460 million at the end of December '24, which is 23.6% of revenues compared to EUR 449 million at the end of 2023. Here, we outlined the solid inventory management, [Technical Difficulty] versus prior year. Looking at free cash flow, let me highlight at Page 15 that the group generated EUR 10 million of free cash flow positive despite the already mentioned [Technical Difficulty] CapEx paid EUR 126 million. No major comments is set on Page 16. [Technical Difficulty] EUR 11 million at the end of 2023. I will finish here my presentation to leave space to your question.

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

[Operator Instructions] The first question comes from Chris Huang with UBS.

Congratulations on the results. It's Chris from UBS, and I have 3 questions, please. Firstly, on latest trends in Q1. Thanks for the color on China. But can you also share some details on how trends have so far shaped up in the U.S., given there's some increasing concerns around the American consumers slowing down? My second question is on Zegna's EBIT margin, which is very nice to see coming ahead of expectations. I presume this is reflected of the accelerating DTC growth into the second half of the year. But can you share some thoughts on margins going forward? And how much confidence do you have in delivering and constantly improving margin for Zegna segment, both sequentially but also year-over-year? Lastly, on Thom Browne, if I remember correctly, you are currently adjusting the product assortment of the brand. Can you share some updates on that front and when we could expect the refresh product portfolio?

Thank you, Chris, for the 3 very interesting questions. So the first one on colors apart from China in the first quarter on -- specifically on U.S., I leave it to our CEO and then maybe Gianluca for the EBIT.

Thank you, Chris. I was in the States a few weeks ago, and I must say that I was impressed by the resilient that I saw. So we keep doing well, both for Zegna and Tom Ford. It means we have a good traction. And so we are uncertain what the tariff might bring, but we are prepared to face the challenges. And I think that our customer base is overall resilient for whatever it happened. And I think it's across the country. I mean it's quite interesting. So we still have a positive mind on the United States market, slightly different in Canada, I must say. There is a little bit different attitude. And I must add, you never asked about Latin America. Latin America, we are pretty satisfied on how -- and last year ended and how it got started. And different is from -- if you cover Greater China, I must say that the Hong Kong situation is quite challenging. And we see a similar trend in [Technical Difficulty] I think at this point, we expect a negative trend for the overall region by '25. To give you some more color on the rest of the world, in Europe, we are still doing better. And we are still doing very well in [Technical Difficulty]

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

You don't hear right now?

At least for me, I cannot very well.

Shall I repeat...

Yes. Can you hear now?

Yes. Yes. Now it's better. Maybe if you can kindly repeat the comments on Hong Kong and Europe, please?

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

Okay. Was it okay? Chris, did you hear the answer?

Yes. Super clear.

And I'll leave it to Gianluca to comment on EBIT and then maybe I'll go back to Gildo for the Thom Browne question.

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

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

I think that we have seen a significant improvement in product evolution. I am a consumer -- a potential consumer of every brand, and I can tell by myself. And I must say Winter '24 was a rather classical approach. I think [ Thom, ] I mean, has moved ahead and taken a bolder but still commercial approach to how he wants his product to look sure in the showroom and now it's transferred in the store. So I think that we see this -- the start happening in the assortment in the store for summer '25, but it will be even stronger for following the '25, both in men's and women, and I think the show really did highlight this transformation for a more theatrical, very creative show to a more realistic shows that you like to see what has shown in the store, a lot of [indiscernible], both men's and women's. So I think we will see some traction, in particular for the winter season. In terms of market, I start with the strong one. Japan is super strong. I think that regardless of the Chinese, whether they travel to Japan or not, I mean, Thom Browne remains a brand for the local. So we are doing extremely well with the local. And if the Chinese come, we will surely serve them. Korea, we are doing [ extremely ] fine. And so these are the 2 markets that give us satisfaction in '24 and keep doing well for '25. China, some small signs, positive sign. I think we touched probably the bottom last year, and I think we see some positive traction. I think that it has to do also with the product assortment in which we made a step, I mean, from what they call the classic typical bar into a more fashion, but still commercial and distinctive items. I think that our inroads in the States is important. I mean what I've indicated is opening more stores. It means that we do believe in the United States market also for Thom Browne and in particular, Thom wants to strengthen his position there. And so I think that we should see some improvement there as well. So -- and then I think that a push towards retaining in a moment in which we've been working to reduce wholesale, both in '24 and also in '25.

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

Our next question comes from Adrien Duverger with Goldman Sachs.

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

Okay. So I have the first question is on the 2027 target guidance. And Gildo was talking about the opportunities implied in the guidance, particularly when looking at China, if I understood correct. I [Technical Difficulty] Gildo to make some comments and then I don't know if Gianluca wants to [Technical Difficulty] China evolution.

[Technical Difficulty]

Apologies for interrupting. This is the operator here. We are experiencing some audio issues from the management team's line. Please stand by while we attempt to resolve the issue.

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

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

Second question was on the TFF integration. How it's progressive? So I'll leave it to Gildo to comment.

No, I think it's progressing fairly well. And I think we see the reaction not only by the price, by all the stakeholders, and I'm referring to the final customer and the wholesale. They are quite promising. I think that we were bold enough to create what we call a drop of -- by now we're now, I mean, from some item out of the show to help them in the 6 top stores around the world the day after the show. And I think by inviting VAC, a top spender, I think they really appreciate what they could pick ahead of time. Then we had -- the week after the show, we had the collections in the showroom, and we had a good reaction by the wholesaler. And I must say that our wholesale number are higher than the one of the previous season. Social media in general and media, I mean, around the world has been very receptive to the show. So I can only tell positive. So we are working on the next show and to make sure that we have the right item in the stores because we have not completed our distribution expansion, but I think [Audio Gap] store to make justice to the validity of the line that has met the expectation, both in men's and women. This is important things. Until now, TOM FORD fashion has been more a men's line than a women line. I think that this show, I mean, has been able to rebalance the equation. I think that in the shoe, we saw some new highlights. And so I think that we are coming out with more icon pieces at the customer wishes to have together with also there a personalized approach to the product, to the service, which is very much in Tom Ford style and attitude.

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

I confirm what we said before on the Thom Browne side, we still see double-digit decline on net sale. And at that point, we should be more on a steady state. In Zegna and Tom Ford, we also see a decline of wholesale. On Zegna, it's driven by 2 factors. One is the conversions that we have activated through 2024, namely in Canada, but also selectively in U.S. And the second factor, we have been investing heavily in our icons, the Triple Stitch is the most visible, but there are others. And we are starting to activate a more selective -- more and more selective distribution of our icons within action icon protection program in our wholesale. So that is the second driver of strengthening DTC by applying a selective distribution on icons on Zegna. On Tom Ford, the effect is conversions, again, the decline of Tom Ford, which we are expecting for this year. We have converted [ Arts ] men. We have converted Saks New York. So there is a carryover effect of some conversions also on Tom Ford. So yes, we are expecting the 3 brands to shrink their distribution on wholesale for different reasons, but this will be a factor for 2025.

Operator, I don't know if you are okay, we'll move to the third one now. Operator?

Our next question comes from Oliver Chen with TD Cowen.

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

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

I tried to put together some content that can help you model, but we cannot be too specific. So we -- on one side, we have the 3 brands on wholesale down. We have said that Zegna and Tom Ford, despite the decline of wholesale as a brand overall, they are growing more than the average. So we expect to have both Zegna DTC and Tom Ford as being the driver of our growth. For Zegna, it's mostly on a comp basis. For Tom Ford, it's a combination of comp and noncomp. This is for 2025. On Thom Browne, we have said the double-digit decline on the wholesale. And on Thom Browne, the growth on DTC will come mostly -- in our low single-digit growth, we bake in a growth coming mostly from space. As Gildo was mentioning, there are several openings coming this year. We have the anniversary of openings that took place last year, also the takeover of some locations in Canada, all trends, for instance. So the driver of growth is coming from DTC. And we said DTC is expected to land overall at 80%. I think these are the connecting dots where I can help you. And...

And the other question was -- sorry...

No, I think that we can add also the productivity factor in the stores. Overall, there is a good traction in gaining productivity. I would say, both with Zegna and Tom Ford. And I think that this product evolution not only on the upper side, but also on broadening the offer. For instance, we are coming out with this beautiful new collection of [indiscernible] partially handmade with incredible leather with occurring summer with the [indiscernible] very lifestyle. And I think that a product like that, I mean, the other products are coming out with [indiscernible] day of 15 meal. This is lightweight knitwear, very comfortable fresh for the men who travels, for the office also. So I think that all the products that they're not super expensive. They are costly but not expensive, I think, will help driving the productivity in the Zegna store in order to attract a new customer and satisfy the current customer that already has plenty of Zegna iconic product. We said on the chronicity and on the balance of the -- some for the collection. And I think that, that will be also helping the productivity. So I think that we have put in place, I mean, all the necessary item or weapon in order to improve our DTC development. And also, I must say, whenever we turn an wholesale into a concession store, we can make this sample of the Nordstrom in the United States, so we can make the example of [indiscernible]. We see that the productivity climbs automatically. And so we just have to speed up and likewise for Thom Browne. So I think that is something that we own, and it's just a matter of executing properly and speed up the execution in wherever we open store or we convert store.

Yes. I would love thoughts on the complexion of growth multiyear, but another one is regarding product at Thom Browne, what are your thoughts on recruitment tools there? And applying the right amount of simplify to amplify in terms of growing awareness of Thom Browne in a commercial way. And on Tom Ford, more specifically, what's the game plan for women's and accessories in terms of timing and impact? And what we should watch as you continue to push forward with a new powerful creative vision?

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

Okay. I'll start with the second one first. It's a must. I think Tom Ford, it's hard to say whether it's more fashion ready-to-wear or is more accessories. I think it's both. I think that [indiscernible] has done a marvelous job in showing what they can do in ready-to-wear. I think we are at the beginning of the journey with that session. I think we did some interesting presentation in the shoes. I think in bags, we have some work to do. And so I think you will see more happening in summer '26. It was impossible for him to do everything in the first time. I think that he did focus on the things which we needed most, which was the closing side. And as a matter of fact, you can appreciate that most of the fabric go from our textile platform. Most of the products were produced in our factories, which is very, very satisfactory. And so -- but I think you will see more for summer '26 in terms of accessories. I think that in -- to what, as I said before, I think the challenge there is to go after the local -- sorry, Thom Browne. I think the election that Thom has put together meets this objective. I think that the collection is spot on for Asia. But I think that more selection -- a different selection was needed for both North America and Europe, which I think that the '25 collections has shown. And I think also the market and the marketing, if you look at the catalog, what we call the look book, we change gear. I mean, from a look book that has looked very creative, very short driven, it's a look book of a product you'd like to purchase in the store, and you can find in the stores. So that, together with event and with outreach will help reaching out more of the local. So the goal really is risk for Thom Browne is retail and going after the local with a collection more geared towards that. And I must say Zegna has been leader. I think that the way we turn around Zegna with our branding was not just go after a visitor regardless of where they were, just go after the local. And then visitor can add to that. And I think we have really done a super job. So the same will apply. And I think it will be -- I think that you asked me, when it will happen? It will happen. But you have to take a natural and organic growth, we just can't push it to the limit. But I think the direction is there. The vision is there. It's just a matter to execute it properly, but I see some positiveness on both brands for fall/winter '25 line in the store.

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

We have one further question registered, which comes from Melania Grippo with BNP Paribas.

This is Melania Grippo from BNP Paribas Exane. I have 2 questions. So the first one, if you could please share the initial feedback and reaction to your Vellus Aureum launch. Have you seen any difference by country? If you could please give more granularity around it. And also my second question is on the CapEx for '25. I think you mentioned them during the presentation, but I couldn't hear very well. And also an update on your supply chain. When should we expect the factory in Parma to be completed?

Thank you, Melania. On Vellus Aureum, reaction also by countries, I'll leave it to Gildo to comment.

Yes. I must say that I [ said them ] I have found a similar action on a launch project. If I can make the example of Triple Stitch or [indiscernible], I think we had peaks and lows. And so some country reacted after one season, the other after a couple of seasons. I must say that Vellus Aureum maybe because it was selectively distributed. We had only in a small number of doors, very selective, and we invited the customer to preview the collection. I must say that we had a good traction across the world. If I had to make a ranking, #1 is Europe. I would say, #1 is Middle East, if I have to put a ranking, #2 is Europe, #3 is United States and #4 is Asia in terms of ranking. But I would say all 4 in pretty good standards. And I think that the merit was the communication, it was the focus and it was the planning of inviting the customer ahead of time and by creating experience when they saw the collection and creating a kind of a surprise effect there's something that they could buy, which is unique. And the interesting thing is we had a couple of cases of VAC, what they call [indiscernible] 300 club have been bought in the same week in several places or they bought one jacket in one place, [indiscernible] they bought a Jersey and they bought -- so it means that they appreciate the product and they bought more as the travel took them around the world. So it's interesting this journey. So a very positive journey.

On the CapEx '25 and update on the supply chain, I may leave to Gianluca [indiscernible] to comment.

Melania, so the CapEx for '24 was 6.4%, and we confirm that '25 will be still in the range of 6% to 7%. And that is also coming from the efforts we are doing in Parma. Parma '25 is the major year for making the construction started. And the goal is to have the factory up and running in the second half of next year, so '26.

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

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

Okay. I don't think we -- Gianluca needs to add anything [indiscernible] I don't know if there are, operator, any further questions?

We have a follow-up question on the line from Oliver Chen with TD Cowen.

The question is on wholesale. Wholesale has been a tough channel throughout. And it's -- we see some risks this year in wholesale in different regions as well. What's doing better versus worse in wholesale? And how much volatility has wholesale gotten worse since you last reported? I'm just curious about regions and strengths and weaknesses with that since it's impacting a lot of your portfolio?

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

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

I would make a big difference here between specialty store and department store. Okay, the few remaining specialty stores, which we are in have done super well. I must say that -- I can't give you the numbers. But I must say that in the past 2 seasons, we've been the Zegna among one of the top brand in [indiscernible]. Why? Because the selection was focused and to just a local like what we bought. As simple as that. I can make the example of the #1 specialty doors in the United States, [ Mitchell. Mitchell family ] that have now 6 doors. They've done -- we are the major supplier of them. We have done extremely well. So whenever you have a store that caters to the local with a good offer and a good service and a good customer base well. With department store, it's more difficult, and I don't want to make names. So we do this because the concession model and in [ prevailing ] that, we have done well. Then what Gianluca said is franchising. For me, franchising is more retail. I mean even though we [ can't do ] in the wholesale, it's a declination of the DTC in countries where we don't feel going direct yet or maybe going tomorrow. And so I think that is controlled by us in a way the open to buy, the selection, the visual, the personalization that is at their risk, but it's a lot of [indiscernible]. So overall, we have proved our distribution in Zegna, surely, more so in Thom Browne. I think that in Tom Ford, we've been always very selective. One of the things that I must say, [indiscernible] for Tom Ford is their selectivity and distribution is one of the most selected brand wholesale distributor. So we can only do better with those, provided we give the proper merchandise. So overall, even though the split is 80-20, I think that I personally do care a lot about the 20% of wholesaler because we can really do well with them and is a way to help us increasing the local. I keep saying the biggest challenge of a luxury brand is catered to the local. If you can do that and I can make -- I don't want to make a couple of examples. There are a couple of examples. The one that they're able to do that, they are going to be more immune to crisis, whatever it is or to traveling or too far [ fluctuation. ] And so I think that this is an important thing that more so now we want to foster in all the 3 brands. And I don't think there are many that can do that.

Thank you, [ Olly ]. I ask, really if that is the final one. Otherwise, I think it's time for us to thank you. Operator?

We have no other questions registered.

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