Earnings call transcript: Xenia Group Q4 2024 beats forecasts, stock surges

Xenia Group reported its Q4 2024 earnings, surpassing expectations with an EPS of $0.30 compared to a forecasted $0.1457. The company also reported revenues of $1.95 billion, significantly above the forecast of $512.29 million. Following these results, Xenia Group’s stock saw an 8.9% increase, trading at $7.71, up from the previous close of $7.08. According to InvestingPro analysis, the stock appears undervalued despite maintaining impressive gross profit margins of 65.4% over the last twelve months.

Key Takeaways

• Xenia Group’s EPS more than doubled the forecast.
• Revenue outperformed expectations by a wide margin.
• Stock price surged nearly 9% in response to the earnings beat.
• The company is focusing on increasing its Direct-to-Consumer (DTC) channel.
• Challenges remain in the Greater China market.

Company Performance

Xenia Group demonstrated robust performance in Q4 2024, with revenues reaching $1.95 billion, a 2% year-over-year increase. The company’s strategic shift towards DTC channels, now accounting for 78% of sales, has been a key driver of growth. Despite challenges in the Greater China market, Xenia saw positive trends in the U.S., Europe, and the Middle East, underscoring the resilience of the luxury sector.

Financial Highlights

• Revenue: $1.95 billion, up 2% year-over-year
• Earnings per share: $0.30, exceeding the forecast of $0.1457
• Gross Margin: 67%, an increase of 230 basis points
• Adjusted EBIT: $184 million, down from $220 million in 2023
• Net Profit: $90.9 million

Earnings vs. Forecast

Xenia Group’s EPS of $0.30 significantly outperformed the forecasted $0.1457, marking a surprise of over 100%. This strong earnings performance was complemented by a substantial revenue beat, with actual revenues of $1.95 billion against a forecast of $512.29 million. This marks a notable improvement compared to previous quarters, reflecting the success of Xenia’s strategic initiatives.

Market Reaction

Following the earnings announcement, Xenia Group’s stock surged by 8.9%, closing at $7.71. This positive market reaction reflects investor confidence in the company’s ability to exceed expectations and navigate a challenging market environment. The stock remains within its 52-week range, with a high of $14.8 and a low of $7.07.

Outlook & Guidance

Looking ahead, Xenia Group has set a revenue target of $2.2 billion to $2.4 billion for 2025, with an adjusted EBIT target of $250 million to $300 million. The company anticipates low single-digit growth, with more sustained growth expected in 2026-2027. While the stock has faced challenges, declining 50.7% over the past year, InvestingPro’s Financial Health Score of 2.65 (rated as "GOOD") suggests strong underlying fundamentals. Get access to detailed valuation models and comprehensive financial analysis with an InvestingPro subscription. Continued investments in marketing, capital expenditures, and research and development are planned to support this growth trajectory.

Executive Commentary

Gildo Xenia, Group CEO, emphasized the importance of adapting to current market conditions, stating, "We are realistic and we have to live in today’s times." He also highlighted the company’s focus on local market penetration, noting, "The biggest challenge of a luxury brand is catering to the local." Xenia expressed confidence in the company’s future, saying, "We remain confident that we can also do better."

Risks and Challenges

• Ongoing challenges in the Greater China market could impact future growth.
• The wholesale channel rationalization may affect short-term revenue.
• Economic uncertainties and geopolitical tensions pose broader market risks.
• Supply chain reorganization could lead to temporary disruptions.

Q&A

During the earnings call, analysts raised concerns about the Chinese market and the impact of wholesale channel rationalization. Xenia Group’s executives addressed these issues, emphasizing their strategic focus on brand-specific growth and product evolution, particularly in the Tom Brown and Tom Ford lines.

Full transcript - Ermenegildo Zegna NV (ZGN) Q4 2024:

Moderator/Operator: Good afternoon and good morning, everyone. Thank you for joining the Amenagildo’s Xenia Group FY twenty twenty four Financial Results Call. Please note that today’s material and presentation are available under the xeniagroup.com website. Joining us today are the Xenia Group leadership team, including Gildo Xenia, the Group’s CEO and Gianluca Tagliabue, Group CFO and COO. Before we begin, we need to point out that the team will make certain forward looking statements during the call.

The Group actual results may be materially different from those expressed or implied by these forward looking statements. Also, these statements are subject to a number of risks and uncertainties, including those described in our SEC filings. Please refer to the forward looking statements cautionary statement included at Page two of today’s presentation. I will now hand over to Gildo Xenia.

Gildo Xenia, Group CEO, Xenia Group: Thank you, and good morning and good afternoon, everyone. Thank you for joining us today to talk about the Amerangitos Xenia Group full year 2024 results. As you all know, 2024 was a different year than what we initially planned. Despite the challenges, we delivered an adjusted EBIT of 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 at Tom Ford following the twenty five Argenteuil in Paris. Personally, I 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. This show was a powerful testament to either Akeman’s ability to evolve Tom Ford into a model and sophisticated interpretation of sensuality and elegance. And we are already starting to see customer interest in the collection. The see now, buy now piece, those already available in stores being positively seen as well as the full winter twenty twenty five wholesale campaign. Of course, this is just the first step, but we must sustain this momentum.

And I know that the Tonfa 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, Tom Brown. The February show confirmed that we have already discussed about a brand journey.

Tom Brown has always stood for ex parently crafted product and distinctive tailoring. The DNA has and always will be there. We bid on that to evolve the brand and this is what the team is doing. We are enhancing newness while protecting the unique four bar emblem, improving the process architecture of the collection and of the in store offering for both men’s and women. With all these, while the company focuses on embedding a strong retail culture.

That’s when the brand opened its new store in Palm Beach, Florida and soon will open LA, California and New York Madison Avenue, an important step in enhancing its footprint in The United States. Let me also mention the February Fashion Show and the re seized result, which confirmed that the brand collection has been highly appreciated by customers. And last but not least, the innovative show that Ducci did the Grammys. She performed with 20 dancers all dressed in Tom Brown, a further testament of the strength of our brand. Finally, on Celia.

The Velo Sarum exclusive collection and the innovative advertising campaign we launched with Mr. Auro Montanani outperformed our expectation, attracting not only our existing customer, but also new ones. This is part of our future journey to engage both existing and potential customer with product of the highest quality and exclusivity, outstanding craftsmanship and a unique heritage. In June, we will take all this to Dubai, a market that continues to show impressive growth and appreciation of the ZARE brand. To celebrate our special relationship with Dubai, Zena will host its first show outside Milan alongside a week long winter Zena experience, the third after Shanghai and New York.

That also proves the strength of our personalization project. Let me also briefly touch on two important projects that reflects our commitment to excellence to giving back into the environment. We recently appointed the first twenty Maestri of our Academia de 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, relentless pursuit of excellence and commitment to the Made in Italy. In 2025, we continued 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 powered by women. And last, for me, the most important, we continue to invest on traceable raw material across our brand. These project launch and the goals achieved are important, but for our group, sustainability is much more than just this. Sustainability and caring for our communities are a part of who we are and will continue to do so. Now let me take a moment to talk about 25 and our mid term targets.

First of all, let me provide some color on current trading, since I know this will be your first question. The Q1 twenty twenty five trend still reflects a challenging environment in China. And in addition, we will continue to reduce the wholesale footprint across all brands in line with our strategy focused on DTC and customer centricity. This will continue to be a particular focus at Thom Browne, especially in the first part of the year. In fact, we do expect the trend in Thom Browne wholesale channel in Q1 of this year to be similar to Q1 twenty twenty four.

We also announced today an update of our mid term targets. We expect to reach a revenue between $2,200,000,000 dollars and $2,400,000,000 with an adjusted EBIT between $250,000,000 and $300,000,000 These assumptions are based on a still cautious outlook for 2025 with an expected low single digit growth in revenue and adjusted EBIT. Our assumption for this year 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 2026, ’20 ’20 ’7 as the steps we are currently taking across all three brands and our filiera begin to yield results. And you have my full commitment that we are working to turn them into reality.

Thank you, and let me turn over to Gianluca.

Gianluca Tagliabue, Group CFO and COO, Xenia Group: Thank you, Giugo. Let’s move to Page 10 of the presentation, where we you find full year ’24 results key highlights. The revenues for Brazil were already disclosed at the January, and we confirmed them at $1,947,000,000,000 dollars up 2% year on year, driven by Xenia brand organic growth. In 2024, the group reached 67% gross margin and adjusted EBIT of AED 184,000,000 and the profit of BED 91,000,000. Let’s move to the following pages to comment more on this result.

On Page 11, starting with gross profit. In full year 2024, gross profit rose by two thirty basis points to $1,297,000,000,000 dollars with a margin of 66.6%. This two thirty basis points improvement from last year has been driven mostly by two factors. First, channel mix more security towards UPC as the major driver of this improvement. In 2024, UPC revenues reached 78% of the three 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 ’twenty four, cost of sales included almost 4,000,000 of Tom Ford Fashion PPA related charges purchase price allocation. These charges were instead $15,600,000 in full year 2023. The 2024 amount is the last tranche of PPA related charges from the acquisition of the remaining 85% of TFI, that is the company that signed the twenty plus ten year license agreement for the Comfort Fashion business.

Moving on to SG and A. SG and A in full year ’twenty four reached $1,008,000,000 with a 51.8% incidence of revenues compared to 47.3% in full year 2020 three percent. The increase in SG and A incidence of revenues is linked to three drivers. First, the investments in talent and organization across different functions. We enforce all the three brands, even it is important to highlight that the investments made at Comfort Fashion, represents the vast majority of the increase of SG and A in absolute terms versus 2023, also related to the fact that this year we had twelve months, while in 2023 we had eight months of comfort trash.

The second factor, the expansion of the store network, including also the conversion of the Korean mineral plant stores to DTC for both Zena and Tom Brown. Clearly, when we launch a new store either from conversion or not, some ramp up time is needed before reaching maturity. Third factor, a negative operating leverage, in particular at Thom Browne, since we decided to streamline the wholesale business, which I remind you, declined by 33% versus prior year inorganic curves. Moving to marketing expenses. In 2024, we continue to invest on our brand.

Marketing expenses were $121,000,000 equal to 6.2% of revenues, slightly above the $115,000,000 mark achieved in ’twenty three, which at that time was 6% 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 twenty twenty four 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 file all the reconciliations in the appendix of this presentation.

In full year 2024, our adjusted EBITDA reached EUR184 million compared to EUR220 million in 2023. As Gilberto commented, these results reflect largely the challenging sector environment, especially in GCR and the decision to streamline the wholesale business and some brands, 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 Figueroa, where we are reorganizing the activities of the fabric cutting by concentrating them from the current two facilities into just one site. And we are still working on other fronts of optimization at three sixty degrees across the group.

In particular, last year, Tom Brown’s 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 2024 has been only partially mitigated by cost control actions. Tom Ford Fashions segment reported a loss at EBIT adjusted level, in line with our expectation and also in line with the results that we reported in H1. Actually, the adjusted EBIT of Stonefort Fashion in the second half of twenty twenty four came in slightly above breakeven. The full year adjusted EBIT performance of Stonefort Fashion reflects the cost to build a platform to support the long term growth of this business, going from design to merchandising, from IT system to regional leaders and so on. Last on the Vena segment that, as you know, includes Vena brand textile division and third party brands.

This segment generated an adjusted EBIT slightly up of 14%, seventy basis 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 Inter segment, the minatum decreased to SEK21 million compared to SEK30 million in 2023, mostly due to lower costs for short term and long term remuneration. Moving to Page 13, you can see here summarize our reported income statement.

Let me make here one comment on taxes. As you see, the effective tax rate moved to 30%, more normalized level compared to 20% of prior year, which was mainly a result of high non taxable changes. As a result of the above, we reported good profit in 2024 at EUR 90,900,000.0. 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 13,000,000. Let me move now to Page 14, where we comment CapEx and in production including the new factory in the Vale close to Parma and 2019.

As we anticipated, twenty point four five 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 2026. And for this reason, we expect CapEx for 2025 to be between 67% also this year. Trading capital reached $450,000,000 at the December 2024, which is 23.2% of revenues compared to $449,000,000 at the end of twenty twenty three. Year over year, we outlined the solid demand for management, which basically remained flat versus prior year. Looking at free cash flow, let me highlight a page 15 that the group generates a pendulum of free cash flow positive despite the already mentioned CapEx paid $126,000,000 as aforementioned.

No major comments is that on Page 16, but of course, I’m ready to take your questions as the result of this. The net financial indebtedness at the December was equal to $94,000,000 of net debt versus EUR 11,000,000 at the end of twenty twenty three. I will finish here my presentation. Please raise your questions.

Moderator/Facilitator: Thank you. Gianluca. Thank you, Gildo. And please, operator, can you open up to the first question from your host?

Moderator/Operator: Thank you. We will now begin the question and answer session. The first question comes from Chris Huang with UBS. Chris, please go ahead.

Chris Huang, Analyst, UBS: Hello. Hi. Congratulations on the results. It’s first from UBS and I have three questions please. Firstly, on latest trends in Q1, thanks for the color on China, but can you also share some details on how trends have so far shaped up in The U.

S, given there’s some increasing concerns around the American consumer slowing down? My second question is on Vans 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 on tons and improving margins for ZENIA segment both sequentially, but also year over year?

Lastly, on Brown, if I remember correctly, you are currently adjusting the product as a form of the brand. Can you share some updates on that front and when we could expect the refresh products portfolio? Thank you so much.

Moderator/Facilitator: Thank you. Thank you, Chris, for the three very interesting questions. So the first one on color. So apart from China, in the first quarter on specifically on U. S, I’ll leave it to our CEO and then maybe Gianluca for the EBITDA.

Gildo Xenia, Group CEO, Xenia Group: Hi, Chris. I was in The States a few weeks ago, and I must say that I was impressed by the resilience that I saw. So we keep doing well, both for Zena 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 Canada, I must say.

There is a little bit of difference attitude. And I must add, you never asked about Latin America. Latin America, we are pretty satisfied on how last year ended and how it got started. And different is from if you cover Greater China, I must say that the whole situation is quite challenging, and we see a similar trend in the POC Q1 similar to Q4. So I think that at this point, we expect a negative trend for the overall region by ’twenty five.

To give you some more color on the rest of the world, in Europe, we are still doing fine. We are still doing very well in their guidance. I mean, it seems that

Chris Huang, Analyst, UBS: Hello. Sorry to interrupt. I think the line is quite bad. We cannot really hear.

Moderator/Facilitator: You don’t hear that, sir?

Chris Huang, Analyst, UBS: At least me, I cannot hear very well.

Gildo Xenia, Group CEO, Xenia Group: Shall I repeat that? Yes. Can you

Moderator/Facilitator: hear me now?

Chris Huang, Analyst, UBS: Yes. Here, now it’s better. Maybe if you can kindly repeat the comments on Hong Kong and Europe, please. Thank you so much.

Gildo Xenia, Group CEO, Xenia Group: On Europe? On Europe. On Hong Kong, very challenging, in particular this first quarter. The rest of China, I think there’s the same picture as Q4. And I think overall, Greater China will be negative in 2025.

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 bidding for the rest of the year.

Moderator/Facilitator: Okay. Was it okay, Chris? Did you hear the answer?

Chris Huang, Analyst, UBS: Yes, super clear. Thank you. Yes, super clear. Thank you.

Moderator/Facilitator: Thanks. And I’ll leave it to Gianluca to comment on EBIT and then maybe I’ll go back to Gendo for the Tom Brown question.

Gianluca Tagliabue, Group CFO and COO, Xenia Group: Yes, yes. There is also your question about 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 by land at the end with the EBIT. So we declared a single low single digit growth expected in EBIT for this year. And the context needs to be read through the evolution of geography, as Gilberto said, by channel and also by brand.

So by channel, we see definitely DTC as the engine of growth. We are expecting that if we commented that DTC weight on branded revenues move from 73% to 78%. And this year, we have in front of us the goal of spending around 80% of DTC with Zhenya brand moving very close to 90% at this point. So that is one driver of our evolution. We have different velocity that we are expecting here by brand with Zane and Comfort fashion above the average Thom Browne and also textile for the size that is textiles are still below the average.

Tom Brown, we are expecting the Q1 decline of wholesale that not to be representative of the full year, but still we are expecting wholesale tonne brown in the double digit down. And that will be the one driver of setting the scene for our EBIT at low single digit growth. If you prefer, I think you were asking also Zena brand. In the second half of this year, Zena brand has recorded a 15% adjusted EBIT margin. We have to remind that 15% is a consequence also of the time and shift of some marketing expenses.

So if we look at the full year, it was 13.9 percent, which is more representative. 2025% for everybody, but also for Zena is still a year of investment in CRM, in marketing, in training store, in the factories of pharma, in personalization in the positive pharma. So it’s a year where we are keep, we have decided to keep on making the investments and we are expecting to see the full results after 20.5% on the Dania brand. Having in mind that our when we declared the 15% adjusted EBIT margin, that is at least the number where Dania should land definitely not this year but going forward.

Moderator/Facilitator: Perfect. I don’t know if this was clear, Chris, and if the line was working. I leave it now on Tom Brown and the product development evolution to our CEO of Fujifilm.

Gildo Xenia, Group CEO, Xenia Group: I think that we have seen a significant improvement in product evolution. I am a consumer, a potential consumer of heavy brands, and I can’t judge by myself. And I must say, Winstead twenty four was another classical approach. I think Tom, 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 he’s transferred in the store. So I think that we see this, the start happening in the store for summer ’twenty five, but it will be even stronger for winter ’twenty five, both in men’s and women.

And I think they 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 parts and a lot of shakar, both rents and women. So I think we will see some traction in particular for the winter season. In terms of market, I started with the strong one. Japan is super strong. I think that regardless of the Chinese, whether they travel to Japan or not, I mean, Tom Brown remains a brand for the local.

So we are doing extremely well with the local. And if the Chinese come, we should show them. Korea, we are doing a C5. And so these are the two markets that give us true satisfaction in 2024 and keep doing well for 2025. 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 spot of assortment in which we made a step, I mean, from what they call the classic, the typical faux bar into a more fashion, but still commercial and distinctive items. I think that our inroads in The States is important. I mean, what I’ve indicated as opening more stores, it means that we do believe in The United States market also for Tom Brown and in particular, Tom wants to strengthen his position there. And so I think that we should see some improvement there as well.

So and then I think that a push towards sweetening in a moment in which we’ve been working to reduce wholesale both in 2024 and also in 2025.

Moderator/Facilitator: Thank you. Chris, if you don’t have follow-up, I can go to the second set of questions.

Chris Huang, Analyst, UBS: All clear. Thank you. Thank

Moderator/Facilitator: you. Thank you, Chris. Operator, can you take the second?

Moderator/Operator: Thank you. Our next question comes from Adrian de Verca with Goldman Sachs. Adrian, please go ahead.

Adrian de Verca, Analyst, Goldman Sachs: Hey, good afternoon. Thank you very much for taking my questions. So the first one would be, if you 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 ’twenty five, but maybe you can comment on your expectation a bit further from this.

And then the second question would be on Tom Ford fashion. How is the integration progressing compared to your expectations? And what scope do you see for continued DTC expansion? And the third question, if I may, on the channel mix. So the group has materially lowered the exposure to the wholesale channel.

Do you expect the rationalization activity to now be largely complete? If I understood correctly, you still expect double digit down the wholesale for Thom Browne next year. What about the other brands? Thank you very much.

Moderator/Facilitator: Okay. So I have the first question is on the 2027 target guidance. And Adrian was asking about the opportunities implied in the guidance, particularly looking at China, if I understood correct. I might leave a little to make some comments and then I don’t know if Gerluca wants to have the China evolution.

Gildo Xenia, Group CEO, Xenia Group: So targets for China?

Gianluca Tagliabue, Group CFO and COO, Xenia Group: And Okay. Okay. Okay. And and and and you

Gildo Xenia, Group CEO, Xenia Group: Okay. Sorry about the problem. Now on China, looking to 2027, we still remain positive on China. I think that luxury is related to China and vice versa. So I think that China will be back.

It’s hard to manifest when it will be back, but there could be some sign of improvement in the second half. That’s what I was there a few weeks ago, and that’s what I see. We don’t see any concrete things yet, but we remain positive. There might be some review on our network possibly in going forward. But overall, we remain confident that our strategy is working well over there.

The personalization, I think, is going to be important in China as much as it is in United States. And I think we are working a lot on the training side. I think that if we have to favor something today, today is working on our people to make sure that our local people that they understand and are able to attract new customer with a new strategy and working in with several in store event in order to create one to one relationship with customer to explain them where the brand is going and what is the innovation factor with the brand And also by inviting them to our experiences around the world. I mean, next one, as you know, will be Dubai. So surely, we’ll make sure that some top customer of China will be there too.

So overall, a positive mind, but I think it’s going to be a gradual movement.

Gianluca Tagliabue, Group CFO and COO, Xenia Group: Just to add one point, I think within the softness of China, an important leading indicator that we continue to monitor is the growth of the expanders, which will 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 high spender individuals is gaining traction also there.

Moderator/Facilitator: Second question was on the CFS integration, how it’s progressive. So I’ll leave to Doctor. Thomas. Yes.

Gildo Xenia, Group CEO, Xenia Group: I think it’s progressing fairly well. And I think if we see the reaction not only by the price, but all the stakeholder, and I’m referring to the final customer and the wholesale, they’re quite promising. I think that we were bold enough to create a, what we call, a drop of by now where now, I mean, from some item out of the show to have them in the six top stores around the world the day after the show. And I think by inviting 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, general and media, I mean, around the world has been a very receptive ratio. 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. I think we an up store to make just due 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’s line. I think that this show, I mean, has been able to rebalance the equation. I think that in the show, we saw some new highlights. And so I think that we are coming out with more icon pieces that the customer wishes to have together with also their personalized approach to the product, to the service, which is very much in Tom Ford’s style and attitude.

Moderator/Facilitator: 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 trend.

Gildo Xenia, Group CEO, Xenia Group: That was the question.

Gianluca Tagliabue, Group CFO and COO, Xenia Group: I confirm what we said before on the Thom Browne side. We still see a double digit decline on wholesale. And at that point, we should be more on a steady state. In Zena and Tonfort, we also see a decline of wholesale on Zena is driven by two factors. One is the conversions that we have activated through 2024, mainly in Canada, but also selectively in U.

S. And a second factor, we have been investing heavily in our ICON, so the Cribo stage 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 a second driver of strengthening DTC by applying a selective distribution on Icons, on Venya. On Tom Ford, the effect is conversions again, the decline of Tom Ford, which we are expecting for this year.

We have converted Arocs Man. We have converted Saks New York. So there is a carryover effect of some conversions also on Tom Ford. So yes, we are expecting the three brands to shrink their distribution on wholesale for different reasons, but this will be a factor for 2020

Moderator/Facilitator: Thank you. Operator, Adrian,

Gianluca Tagliabue, Group CFO and COO, Xenia Group: if

Moderator/Facilitator: you are okay, we’ll move to the third one.

Gildo Xenia, Group CEO, Xenia Group: Yes. Thank you very much.

Gianluca Tagliabue, Group CFO and COO, Xenia Group: Thank

Moderator/Operator: you. Our next question comes from Oliver Chen with TD Cowen. Oliver, please go ahead.

Oliver Chen, Analyst, TD Cowen: Hi, Gildo and John Mark. Great job on the Ford fashion show. As we look at the model this year, Street is looking for about 4% revenue growth. Just curious if that’s achievable and 60 basis points of margin expansion. As you think about the brands, will ZYNIA 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 and 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 Xinya brand with the growth rate, how do you think that will evolve pricing relative to transactions as we model ahead?

Thank you.

Moderator/Facilitator: 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.

Gianluca Tagliabue, Group CFO and COO, Xenia Group: 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 three brands on wholesale down. We have said that Zhenya 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 Zena DTC and Tom Ford as being the driver of our growth. For Zena, it’s mostly on a comp basis.

For Tom Ford, it’s a combination of comp and non comp. This is for 2025. On Tom Brown, we have said that the double digit decline on the wholesale. And on Thom Browne, the growth on DTC will come mostly in our low single digit growth. We bake in a growth coming mostly from space.

As Judah 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, Old Randfort, 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 net income where I can help you.

And

Moderator/Facilitator: the other question was sorry. No, I

Gildo Xenia, Group CEO, Xenia Group: think that we can add also the productivity factor in the stores. And overall, there is a good traction in gaining productivity, I would say, both with Zena and Tonfos. 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 Hemoccasin shoes, a new loafer, partially handmade with incredible leather with the aquarium in summer without the summer. Very military in very kind and very relaxed time.

And I think that a product like that, I mean, in other parts, we’re coming out with with the knitter and we are monitoring that every day of 15,000,000 mil business, a lightweight knitter, very comfortable, fresh for the man who travels for the office also. So I think that all the projects that they are not super expensive, they are costly but not expensive, I think will help driving the productivity in the Zenger store in order to attract new customer and satisfy the current customer that already has plenty of Zenia iconic product. We said on the iconicity and on the balance of the Tom for the collection. And I think that, that will be also helping the productivity. So I think that we have put in place, I mean, all the necessary item or weapon in order to improve our BTC development.

And also, I must say, whenever we turn an wholesale into a possession store, We can make the example of the Nordstrom in The United States or we can make the example of Harry Ozone. We see that the productivity climbs automatically. And so we just have to speed up and likewise for John Brown. 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 commerce store.

Moderator/Facilitator: Thank you. Okay. Yes.

Oliver Chen, Analyst, TD Cowen: We’d 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 Thom Browne, 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.

Moderator/Facilitator: Thank you, Orest. So the question is on Tom Brown, how we are enlarging the and our 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.

Gildo Xenia, Group CEO, Xenia Group: Okay. I’ll start with the second one first. It’s a must. I think Tom Ford is it’s hard to say whether he’s more fashion ready to wear or he’s more accessories. I think he’s both.

I think that Hydra has done a marvelous job in showing what they can do and ready to wear. I think at the beginning of this journey, we did our accessories. I think we did some interesting presentation issues. I think in bags, we have some work to do. And so I think we’ll be you will see more happening in summer twenty sixteen.

It was impossible for him to do everything the first time. I think that he did focus on the things which we needed most, which was the clothing side. And as a matter of fact, you can appreciate that most of the fabric were from our textile platform. Most of the product were produced in our factories, which is very, very satisfactory. And so but I think you will see more for summer ’twenty six in terms of accessories.

I think that in thought, as I said before, I think the challenge there is to go after the local.

Moderator/Facilitator: Tom Brown.

Gildo Xenia, Group CEO, Xenia Group: Sorry, Tom Brown. Tom Brown. I think the direction that Tom has put together meets this objective. I think that the collection is for 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 four twenty five collection has shown. And I think also the marketing, if you look at the catalog, what we call the lookbook, we change here.

I mean from a lookbook that looks very creative, very show driven, it’s a lookbook of a product you like to purchase in the store and you can find in the store. So that together with event and with our reach will help reaching out more of the locals. So the goal really is risk for Tom Brown is written and going after the local with the collection more geared towards that. And I must say, Zena has been either. I think that the way we turn around Zena with the rebranding was not just go after a visitor.

I guess what they were, just go after the local and then visitor can add to that end. I think we’ve got really done a super jump. 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 we just you have to take a natural an 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 the four week twenty five line in the store.

Moderator/Facilitator: Thank you. Can we, Oliver, are you okay? Can we move to the next question?

Oliver Chen, Analyst, TD Cowen: Yes. Thank you very much. Best regards.

Moderator/Operator: Bhush. We have one further question registered, which comes from Melanie Grippo with BNP Paribas. Melanie, please go ahead.

Melanie Grippo, Analyst, BNP Paribas: Good morning or good afternoon, everyone. This is Belani Glico from BNP Paribasan. I have two questions. So the first one, if you could please share the initial feedback and reaction to your Valus 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 Apartment to be completed? Thank you.

Moderator/Facilitator: Thank you. Thank you, Melania. On valusaurum, reaction also by countries. I leave Zielto to comment.

Gildo Xenia, Group CEO, Xenia Group: Yes. I must say that a sentiment have found a similar action on a launch project. If I can make the example of paper stitch or contra jacket, I think we had peaks and lows. And so some countries we acted after one season, the other after a couple of seasons. I must say that Bellusaro maybe because it was selectively distributed.

We had only in a small number of doors very selective and we invited the customer to preview the collection. I must say that we had a good attraction across the world. If I had to make a ranking, number one is Europe. I would say number one is Middle East, in fact, to

Oliver Chen, Analyst, TD Cowen: put a ranking.

Gildo Xenia, Group CEO, Xenia Group: Number two is Europe. Number three is United States and number four is Asia in terms of ranking. But I would say all four in pretty good standards. And I think that the merit was the communication. It was the focus and was the planning of inviting the customer ahead of time and by creating experience when they saw the collection and creating a kind of a surprise effect.

That’s something that they could buy, which is unique. And the interesting thing is that we had a couple of cases of BAC, what they call our Sogut three hundred club that had been bought in the same week in several places. They bought one jacket in one place and one coat, but they bought a jersey that they bought. So it means that they appreciate the product and they bought more as they travel to them around the world. So it’s interesting this journey.

So a very positive journey.

Moderator/Facilitator: On the CapEx 25% and update on the supply chain, I may leave Jan Lupe and then Mr. Dorton want to comment. So

Gianluca Tagliabue, Group CFO and COO, Xenia Group: the CapEx for 24% was 6.4% and we confirmed that 25% will be still in the range of 6% to 7%. And that is also coming from the effort we are doing in Parma. Parma Twenty Five is the major year for making the construction we started. And the goal is to have the factory up and running in the second half of next year.

Moderator/Operator: Perfect. So 19.6%.

Moderator/Facilitator: And well, you are all right, Melania. I can go to one question from the webcast, which is a little bit more for Gianluca Battuzzo for Gizmo, 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, Judo will comment.

Gildo Xenia, Group CEO, Xenia Group: I think that it’s very simple. I think we are realistic and we have to live in today’s times. And so we have to change targets for a different market environment and for timely reason, it’s as simple as that. And the second reason is we have compromise between margin and brand dilution. This is the second reason.

But we remain confident that we can also do better. And the fact that we are working on cost and productivity for improvement. 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 2024 and 2025. Okay, we cut this and we cut that.

No. We’re going for the long term. We have a vision for each brand and we want to keep the vision. And so I think that this compromise between margin and revolution is key. And I think that we gave priority to that rather than rushing it and then maybe having surprises later on.

Moderator/Facilitator: Okay. I don’t think we dilutive flow had anything. I don’t know if there are operator any further questions?

Moderator/Operator: We have a follow-up question on the line from Oliver Chen with TD Cowen. Oliver, please go ahead.

Oliver Chen, Analyst, TD Cowen: Hi, thanks Gilberto and John Luke. Thanks a lot and Paola. 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? And just curious about regions and strengths and weaknesses with that since it’s impacting a lot of your portfolio?

Moderator/Facilitator: Okay. The question is, on a wholesale, what’s doing better or worse than what we are seeing? Maybe it’s right to divide by brand. I think

Gianluca Tagliabue, Group CFO and COO, Xenia Group: it’s more than what’s doing better than what’s from a geographical standpoint. I think that what is doing better is our franchisee. That is a different kind in nature of saleser because we are able to implement in the franchisee most of our go to market strategy. So in terms of cadence of products, in terms of training tools, in terms of digital merchandise. So that part across the geographies on the Zena side, mainly, it’s performing well.

That is the case, of course, in some of the Eastern European countries, in some of the Middle Eastern, African, South American. So 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 very much from their financial stability. So it’s a scatter.

I cannot say that there is one specific trend. It’s scattered. There are some ones that are doing well, where they have the trust of their clients, where they have the financial stability to do proper open to buy and others that are more struggling on the open to buy or have less of a faster blink with their clients, we see them struggle more. So there is no one pattern.

Gildo Xenia, Group CEO, Xenia Group: I would make a big difference here between specialty store and department store. Okay. The few remaining specialty store which we are in have done super well. I must say that I can’t give you the numbers, but I must say that in the past two seasons, we have been we’ve been Tanzania among one of the top brands in premium sector. Why?

Because the selection was focused and just the local like what we bought, as simple as that. I can make the example of the number one specialty dog in The United States, Mitchell, Mitchell family that have now six 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 the farm store, it’s more difficult.

I don’t want to make names. So we do this because the concession model and in privilege that we have done well. Then what Jalupa said is franchiseing. For me, franchiseing is more retail. I mean, even though we can’t do the wholesale, it’s a recognition 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, there is, but it’s a lot of work behind. So overall, we have proved our distribution in ZYNIA, surely, more so in Tumoraro. I think that in Tom Ford, we’ve been always very selective. One of the things that I must say, Chapeau, for Tom Ford is their selectivity distribution.

It’s one of the most selected brand wholesale distributed. So we can only do better with those provided we give the proper merchandise. So overall, even though the split is eightytwenty, 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 increase in the local. I keep saying the biggest challenge of a luxury brand is cater to the local. If you can do that and I 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’re going to be more immune to crisis, whatever it is or to traveling or to forest acceleration. And so I think that this is an important thing that more so now we want to foster in all the three brands. And I don’t think there are many that can do that.

Oliver Chen, Analyst, TD Cowen: Okay, very helpful. Thank you.

Moderator/Facilitator: Thank you, Ollie. I asked really if there is the final one, otherwise, I think it’s time for us to thank you, operator.

Moderator/Operator: We have no further questions registered.

Moderator/Facilitator: Thank you so much. So I thank you, everybody, for always the very, very interesting question that always surprised us on the positive side. So just a couple of reminders. We report the first quarter results on twenty four April, so silent period will start on April 1. While we also would like to advise you that our fiscal year 2024 annual report will be filed today after market close.

Thank you. And Rich and I, we are here for any follow-up questions you might have. Thank you so much for everything.

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