High-flying American brand Thom Browne hit turbulence in Greater China, impacting the first-quarter revenue of its parent company, Ermenegildo Zegna Group. The Italian luxury company announced its Q1 2024 earnings on April 23, painting a mixed picture as the Zegna brand turned in solid growth, while Thom Browne slumped amid a restructuring of its business model.
Group revenue declined 5% YoY on an organic basis to €463.2 million ($496 million). The disappointment came from Thom Browne, which saw revenues plummet 34.4% YoY to €79.2 million ($84.8 million). According to Zegna, this was due to “lower-than-expected direct-to-consumer sales in Greater China and the streamlining of its wholesale channel.”
Thom Browne accounted for 17% of group revenues in Q1 and has been a key growth driver for Zegna in recent years. However, the brand faced a “more challenging environment” in China as well as a tough comparison period in early 2023 when it was still riding high, thanks in part to China’s reopening.
In contrast, the core Zegna brand’s revenue grew 6.8% YoY to €282.9 million ($302.7 million), boosted by revenues in footwear, leisurewear and across the Americas and Japan markets. Newly-acquired Tom Ford Fashion contributed €65 million ($69.5 million) in its first quarter under the Zegna umbrella.
While overall revenues fell 13.1% YoY in Greater China to €139.4 million ($149 million), Zegna pointed to the region’s “difficult economic and consumer environment” as a key factor. It revealed that it is “strengthening the team and organization in China to improve” Thom Browne’s performance.
Zegna CEO Gildo Zegna said the company is “taking the right actions to make our brands even stronger and to deliver on our medium-term ambitions,” suggesting confidence that Thom Browne’s growing pains in China will be temporary. Refocusing the brand’s strategy will be crucial to reigniting momentum.