Gildo Zegna: No plans to go public, as profit leaps for 2017
Few Italian luxury brands have weathered the long global slowdown as well as Ermenegildo Zegna, which has just posted excellent results for 2017, despite a period of growing competition in high-end menswear.
Ermenegildo Zegna just announced a 64% leap in net profits to 32.8 million as savvy customers immediately reacted warmly to the hip, gentlemanly style of creative director Alessandro Sartori, who rejoined Zegna in June 2016.
Growth was more modest last year, as revenues advanced 2.3 percent to 1.18 billion euros in 2017. Nonetheless, Zegna remains one of Italy’s flagship marques, an almost seamless company; from its uniquely innovative fabric department to state-of-the-art manufacturing in Piedmont to a network of over 500 well-located flagships and boutiques. No wonder its website declares: “Ermenegildo Zegna is a completely vertically integrated company, meaning we can oversee each stage of preparing the fabric: from sheep to shop.”
However, don’t expect the house 107-year-old house to follow the path of many Italian luxury clans and seek a public flotation. That’s the last thing on the mind of clan leader Gildo Zegna, whom we caught up with for a freewheeling discussion that included digital challenges, managing a global brand, dealing with a rapidly changing market and harnessing the power of the house’s critically acclaimed designer Sartori.
“We are still fully family owned. 100 percent private. Of course, we would never sell. Why sell? No way! We stick to our roots, to our passion. No reason to do anything else,” insists Gildo, over coffee in his office in south Milan.
“For sure, we have to stay alert and on our feet, it’s challenging market with lots of pressure and lots of risks. The big boys are getting bigger, they are becoming very good in menswear. Plus the French are getting very strong and aggressive,” said Gildo, refusing to name specific brands, but clearly referring to the likes of Dior Homme, Berluti or Brioni.
What is Zegna up to in digital?
“People talk about a digital disruption but the most abrupt change has been the competition. A few years ago, our competition were the clothing specialists. Not anymore. Today, customers want a different service, product and experience – more emotional and more exciting. Easy to wear and fun to wear and travel in,” argues Gildo, dressed himself in a Ermenegildo Zegna three-stitch couture flannel, single breasted suit; cashmere and silk turtleneck and Chelsea boots. On his wrist a high-performance Girard-Perregaux watch, from the limited-edition Zegna partnership; on his collar the ribbon of Cavaliere del Lavoro – the Italian equivalent of the legion of honor - given to him by Italian president Giorgio Napolitano in 2011.
“Look at the way you dress today,” he says to this sexagenarian editor. “You could be wearing the same outfit as my son. And he’s in the late 20s. With the exception, obviously, that he wouldn’t wear a Brunello Cucinelli jacket! But I am talking about your overall look - your jeans, the down vest, from Aspesi, Zegna or even Uniqlo; expensive boots and black and blue jeans. So, we’ve had to react to that – and the arrival of Alessandro has done that: accessorization, casualization and modernization. Yet keeping the DNA of the brand in the fabrics - the richness and texture and hand and look. That’s what we are good at.”
That sea of change is reflected in Zegna’s revenue streams. Today, tailored clothing and made-to-measure account for half their business; but five years ago it was 70 percent! Accessories now are 20 percent, more than double their proportion a half decade back – most notably in China. A decade ago you said China was the project of our generation. How has that gone?
China is very important. It is the number one market. After two years of reorganization in 2015 and 2016, we have reacted very well. The Chinese are very smart shoppers. They travel. They like innovation and they are the most open-minded to that. So China is more and more is a testing ground for ideas, projects or materials. We threw in a capsule collection in May 2017 when things were pretty warm and we did summer weight but with winter colors, and it worked very well. Now we might do it for other countries.
In greater China we have about 80 stores, after consolidating from around 90. It’s very much scrap and build. In China you almost need stores on wheels, as the city centers continually move. Let’s says if you have a store in Milan on via Montenapoleone it might be your flagship for the next three generations, but in China it will maybe move several times in one decade. The French have been the best at moving stores and relocating. As a hot luxury location last year can become very quickly decadent today. So you have to anticipate that, and the French do. In China, more than any other country, it is about location. In which mall are you? And who is your neighbor? So you need a good organization; one that talks to landlords and can close and open stores quickly. Leases in China are generally five years, and you can get out of them. It’s not like in American where you have to go to these malls and they insist on 10-year leases and they kill you!”
In Paris, we are in Printemps, Bon Marché and Galeries Lafayette, and have stores on Avenue George V and on the Faubourg St Honoré. Unfortunately that’s almost in front of the Elysées which hurts traffic. We do okay, but it is not amazing,” concedes Gildo, who has gussied up many flagships in recent years; like London, Zurich and New York, where they moved to possibly the world’s single most prestigious retail corner – on Fifth Avenue to 57th street - in front of Bergdorf Goodman.
“We have made stores brighter; more open and more accessible, with lots of merchandise on tables. That way is more emotional – inducing you to touch things. Plus we chose younger sales staff, speaking more languages – like Russian and Chinese,” says Gildo, adding that the brand now has over 500 stores, half them owned directly by the Zegna, the rest franchises and corners.
“One third of our business is wholesale and we want to keep that because it’s good to compete with the other brands. You benchmark and you can measure your temperature. Plus, we have a generational relationship with department stores and for many of them Zegna is still an anchor brand.”
What’s your view of See Now Buy Now?
I don’t believe in it and we don’t play that game. Our own supply chain is already pretty swift; we can turn merchandise around very quickly. We already have eight drops a year, and we might even go to 10 with pre-collections and capsule collections. Alex is fun as he has lots of ideas and we just go with them. He even dreamed up a toy collection that came out in November and stayed in the stores just one month.”
Under Sartori, you have gone for a decidedly more humanist, ironically iconic, ad strategy. Named Defining Moments, its first ads starred Robert de Niro and young up-and-comer McCaul Lombardi; the newest ads feature Javier Bardem and Dev Patel.
“Robert de Niro is a legend and the ads felt like a dialogue. He is liked worldwide which is hard to get. After those ads our brand awareness went up sharply. You see, if your temperature is down in China or America or in Paris or London then you are in trouble!” argues Gildo.
Last year, Zegna launched Achill Farm, an organic 2,500-hectare estate in Australia producing 100% organic wool. Sartori also developed a new Techmerino, a 100% machine washable blazer that can be simply hung out to dry; while Oasi Zegna, the house’s top line fabric is dyed with local leaves, herbs and roots. So, how important is fabric innovation for your brand?
“We have about a dozen people just developing new fabrics. Oasi was actually something we had in the drawer a decade ago, but it was premature. But when we eventually showed it, there was this explosion! We may not sell so much, but it is such a strong message. It is fully made by us, all the colors used are from where we are from; it’s unique – it’s impossible to with chemical coloration. Nature is unique.
What are you doing about sustainability?
"Oasi is good example. Almost all our fabrics are natural and produced in our own factories. Where we use our own two hydro-electric power stations. That’s pure sustainability. We were dumb not to communicate before. We have been doing this for decades!” said Gildo, one of four members of the third generation of Zegnas managing the business.
Back in 1918, founder Ermenegildo Zegna had a dream to create the finest possible fabrics when he started with just four looms. Gildo’s own son, Edoardo, joined the company in 2015, after working in retail in America. Does Zegna have any company rule like the descendants of Salvatore Ferragamo, who rigorously limit entrance into the family business to just one member of each family?
“That’s their choice. We do have strict rules and regulations in terms of governance. A family member has to be a university graduate and speak languages. They must be fit for the job that might be offered. And have worked outside for five years. Serious jobs, so they joining with a certain seniority. Not some bullshit job - forget about PR internships in New York for a few seasons!”
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