Ermenegildo Zegna NV (ZGN) 2022 Q4 法說會逐字稿

Hello, everyone, and welcome to the Ermenegildo Zegna Group Full Year 2022 Results. My name is Bruno, and I'll be the operator of today. (Operator Instructions) I will now hand over to your host, Francesca Di Pasquantonio. Please go ahead.

Hello, everyone, and thank you for joining us as we share our full year results for 2022. I'm here today with Gildo Zegna, Group Chairman and CEO; as well as our COO [and CFO, Gianluca Tagliabue]; and Rodrigo Bazan, CEO of Thom Browne.

We filed today our 20-F form, and we've also filed (technical difficulty) form, which is the customary conversion from the previous F-1 form. Before we begin, I need to point out that we may make certain forward-looking statements during today's call. Our actual results may be materially different from those expressed or implied by these forward-looking statements.

All such statements are subject to a number of risks and uncertainties, including those discussed in our SEC filings. I refer you to the safe harbor statement, which is included on Page 2 of today's presentation. And of course, this call will be governed by that language.

I'm pleased to now hand over to Gildo.

Thank you, Francesca, and hello to everyone. I'm very happy to share that we ended another strong year. And our results for '22 reflect a strong momentum and the scalability of the Zegna and Thom Browne brands as well as the soundness and success of our strategy and execution.

Last year, we kicked off the re-branding of Zegna, unveiling the ZEGNA One Brand and strategy, which has seen excellent success with customers so far around the world. We are still early in the re-branding journey. And we just launched our second season. And however, we have a number of initiatives to continue building on Zegna success and reinforce its position as one of the world's top luxury brand and the leader in menswear.

Thom Browne continues to show strong performance also. And besides the numbers, we are very proud of the great reaction Thom Browne Paris and New York shows, that has been received last year as well as this year from customer, the media and influencers. And of course, no discussion of our '22 is complete without mentioning our very exciting partnership with the Estée Lauder Companies for the TOM FORD fashion business. We expect the deal to close in a few weeks, at which time we'll be able to share more about our plans for this top brand.

So far, '23 has been off to a very encouraging start with very solid double-digit performance across our retail network for both Zegna and Thom Browne. I'm optimistic that the reopening of the Greater China region, combined with the positive response we are seeing from customer to our collection across our global network and in particular, European and American customers, will continue to drive our growth this year. And we are particularly excited by the progress of our Made-to-Measure business, which is up double digits when compared with 2019 that was already a tough year.

We expect that our results for '23 will comfortably show that we are on the trajectory to meet our goal of annual revenues exceeding EUR 2 billion and adjusted EBIT margin of at least 15% by the end of fiscal 2025, excluding the TOM FORD fashion business.

We will continue to execute on our strategy that aims at strengthening our market-leading position and pioneering new high-potential markets as Saudi, as Central Asia and Southeast Asia and India. And we are also, as always, working to strengthen our Made in Italy manufacturing platform with projects aiming at expanding our production capacity in footwear as well as in clothing manufacturing plants, adding up to 300 people to our Italian workforce by the midterm.

Made in Italy manufacturing actually remains a priority for us today, 113 years after the foundation of the company. And in this regard, I am also proud to remark that we have launched Accademia dei Mestieri, our vocational training project. And Accademia will focus on skills and expertise in textile, clothing and leather goods within the group and is part of our sustainable growth strategy to ensure excellence and innovation in our manufacturing.

If you now please turn to Page 4. I think that I'd like to turn to some financial highlights of '22, while Gianluca will go more into depth later in this call. As we disclosed in January, our revenue for the year were almost EUR 1.5 billion, and 11% increase in constant currency and 15.5% increase over '21, in line with the mid-teen guidance we've shared.

Excluding the Greater China region, which was heavily affected by COVID-19-related restriction in the second and in particular fourth quarter, our revenue grew 42% in '22 over '21 with strong performances by U.S. and European customers as well as consumer from the Middle East. Our profit for '22 ended at EUR 65.3 million and adjusted EBIT at EUR 157.7 million, up 6% from the previous year, in line with our guidance of moderate improvement.

Adjusted EBIT margin came in at 10.6%, down 90 basis points from '21, due to increased cost and the negative impact of COVID-19 disruption in Greater China, which Gianluca will discuss in more detail, which were partially offset by healthy profitability improvement in other geographies.

Our cash surplus at year-end was EUR 122.2 million, down 16% from '21, but reflecting cash generation in the second half of last year, in line with guidance. And Gianluca will give you more details on this point later on as well.

Now please turn to Page #5. And in looking at our journey over the last 3 years, '22 showed continued sales growth and healthy profitability even as the global environment continued to be uncertain, and as Greater China was hit with temporary store closure and COVID-19-related restriction. As I said earlier, we are seeing the reopening in the Greater China already have a positive impact on '23, which we believe will continue for the rest of the year.

Now please turn to Slide #6. I'd like to talk to some highlights for last year. As I mentioned, the ZEGNA One Brand was proven successful with our customers since we launched it in July of last year. We see increased demand for our iconic product, especially footwear and our luxury leisurewear, that continue to perform very well, proving the soundness of our decision to focus on luxury leisurewear as a pillar of our Zegna business.

Meanwhile, we are also seeing a continued rebound in formalwear, in line with the return to offices and the uptick in demand for menswear for social and special occasion, in particular, in evening wear. Our relationship with our customer is one of the strongest drivers for our success, and we have always prided ourselves on providing excellent customization in the product and service. Our CRM is becoming more sophisticated. And last year, our direct customer engagement was responsible for driving 35% of the revenue of our boutique worldwide.

Our proprietary Clienteling application, which we have renamed ZEGNA X is continuing to see an accelerated rollout, and this provides an exciting new channel for us to build on strengthening this relationship. And as of today, the business generated through this outreach approach reached 50% of our boutique revenue, ahead 2 years to the target. Outreach represent a powerful tool to intercept demand and capitalize on the increasing popularity of our collection and iconic product.

Thom Browne also had a number of milestones last year. The brand added 11 net new directly operated stores around the world, bringing the total to 63 DOS and 105 point-of-sales.

Rodrigo will now give you some color on Thom Browne now. Thank you. Rodrigo, go ahead.

Thank you, Gildo. Similar to the Board of Zegna, and although we come from different histories and different backgrounds and different amount of years in the market, we have an equally important customers interested at Thom Browne. So we continue to strengthen our client value management program, which is the key tool and the key program that we're looking to expand, not only the exceptional high level clients that we have, the additional new visitors to the brand that have very significant initial purchases as well as the walk-in and initial transactions. We're very, very focused on this.

Our main goals going forward are two. One is big expansion on brand awareness, and secondly, a big significant expansion on clients. In order to support that, we do believe that we have an exceptional product, an exceptional client, and we have to have exceptional tool suite. So we are completing at the end of this month the rollout of the sales force tool for Clienteling marketing and customer service. We'll be having a similar solution for China later in the year as well as for Korea as soon as we take over the business in July.

As the brand continues to grow and consolidate its presence, we're also keeping our marketing investment to expand significantly at customer base. We have been extremely pleased for the reception of our shows, both in New York and Paris, over the past 9 months. And starting from this summer, we'll be celebrating 20 years of Thom Browne, which allows us to have a fantastic opportunity to celebrate globally with events, including Thom in different parts of the world over the following 12 months.

And with this, I would like to pass back the call to Gildo.

Yes. Thank you, Rodrigo. And I must add that '22 also saw us continue a journey of caring for our employees, the environment and the world around us. People was a key theme during '22. In keeping up with the commitments we announced at our Capital Markets Day in May, we developed a number of DE&I and talent management strategies, including hire our first DE&I Officer. During the year, we have also launched a welfare initiative for our most vulnerable employees.

And as I anticipated already, we are also investing in our Accademia dei Mestieri as part of our approach to preserve and valorize our tradition, our manufacture excellence and our Italian know-how, while extending professional opportunities to young people.

When it comes to care for the environment, we met a number of our commitments last year. First, we submitted our net zero target to the Science-Based Target Initiative, a big step in ensuring that we are fulfilling our role to combat the climate crisis. We launched Oasi Cashmere, and we are committed to having all cashmere used in all the cashmere collection be fully traceable by next year, as certified by the Sustainability Fiber Alliance (sic - see press release, "Sustainable Fibre Alliance"). This is one of many steps on our Road to Traceability, leading to our long-term commitment of having at least 50% of our raw materials traced to the geography of origin and coming from a lower impact sources by 2026.

Finally, we know that having sustainability as a proof of everything we do is not just about what we do as a group but about what the fashion industry does collectively. This is why we joined a number of partners to spearhead among others the industry sustainability project last year.

First, we joined the Camera Nazionale della Moda Italiana and a number of other Italian luxury brands and launched the Re.Crea Consortium to manage product at end-of-life. We also joined The Fashion Pact with a number of global fashion brands in the Collective Virtual Power Purchase Agreement, which is accelerating the adoption of renewable electricity across the fashion industry.

Please now turn to Page #7. Before I hand over to Gianluca for a deeper dive into the numbers, I want to share just a few recent events that we announced over the past few months. In February, we completed the redemption of our group warrants outstanding as of February 27, 2023, resulting in a total number of outstanding shares of about 248 million and in minimized dilution of around 2.3%. On January 23, we announced the agreement to purchase a minority stake in Canadian technical trail-running shoe company Norda Run, with an option to gradually increase our stake over the next 9 years.

Luxury outdoor as a part of luxury leisurewear continues to be an area of focus for us. And Norda Run uses the finest material to produce all-weather footwear of the highest quality, which aligns perfectly with our value of creating the best product from the best material. The agreement also provides us with a strong industrial and commercial partner and the exciting potential for the future. And I must tell you that since the shoe has been launched a few months ago, we -- so far, we really had good market reaction across the board.

The Zegna for winter '23 collection also had 2 very exciting features. First, 70% of the collection was created using Oasi Cashmere, which besides being a central development on our Road to Traceability, also reflects our focus on quality in using the best material available to create our product. Second, we presented a full collection in partnership with Los Angeles-based The Elder Statesman, which was based on the strong relationship between our very own artistic -- Sartori and Greg Chait, the brand's founder.

Finally, the launch of ZEGNA X, a couple of weeks ago, which sets another milestone in our Road to Digital, adding a powerful Made-to-Measure configurator, which will further enhance our customized level.

Thank you. And now we'll go over the recent events of Thom Browne led by Rodrigo.

Yes, I'm here. Sorry. Yes, we saw the return of Thom Browne in New York Fashion Week. We saw an exceptional fall/winter 2023 recollections, both in the showroom and in the show itself. We had a great opportunity with the show having a very significant coverage in terms of attendance and also of press. We would like also to use this opportunity to congratulate Thom on this great collection and the return to New York Fashion Week, supporting it being by now the Chairman of the CFDA.

In respect to the lawsuit filed by Adidas in the U.S., Thom Browne faced a jury trial in January in New York, whose outcome has been -- was that Thom Browne did not infringe on any of the trademarks of Adidas America. This was a jury decision that came out within a very short amount of time right after almost a couple of weeks of trial.

Another exciting development in Thom Browne, in line with the continued worldwide growth, is the agreement with the Korean partner of 2 years, which is Samsung C&T Corporation, through which Thom Browne will directly operate the Korean business. And as of July 1, Thom Browne Korea will assume direct responsibility for all activities in Korea, which is 17 direct Liberty stores, turning to 18 direct Liberty stores later this year. So we will be fully owning the business in Korea, and we will continue the partnership with Samsung, which is a very innovative, we believe, retail management agreement with Samsung. We have never had such an agreement. And in a nutshell, this is having one of the most exciting markets in the planet, which is South Korea today, run by one of the most -- one of the strongest talent teams in Korea, which is the Samsung C&T team running the business. They have done an exceptional job running their business and right now, we fully own it.

And with that, I'll pass the word to Gianluca to go through the financials this year.

Thank you, Rodrigo, and thank you all for joining us today. Page 8, let me start by reminding briefly where we stand in terms of revenues. As we disclosed in January, revenues for the year were slightly under EUR 1.5 billion, an increase of 15.5% over '21 in actual terms and 11% in constant currency. Both Zegna and Thom Browne segments continue to show good momentum, despite the COVID well-known disruption in China of the second and fourth quarters. This disruption have generated a kind of 2-speed world in our business last year, and we want to point out our pleased 42% growth year-over-year out of Greater China with this benefit from the success of the brands and the expansion of the footprint, especially on the Thom Browne side.

We remind you also that the fourth quarter of 2022 saw the impact of the termination of the distribution license on menswear with TOM FORD, which also affects part of 2023, until the integration of the TOM FORD Fashion business will take place with the closing, which, as Gildo was mentioning before, is expected to happen in the second quarter of this year. At that point, this decline of the termination of distribution will be compensated by the line-by-line integration of TOM FORD.

Moving to Page 9, profitability. The adjusted EBIT for the year was up 5.8% from 2021 to reach EUR 157.7 million compared to an adjusted EBIT of last year. It was 90 basis points higher and this year, so we get to 10.6%.

The decrease in the margin was due to the following factors. First, the step-up in marketing costs for both brands, which we anticipated in the Capital Markets Day and which will slightly continue also this year. It's a journey. Second, an increase in what we call and you will see in the new approach of segment reporting, corporate costs, which have been allocated to a new dimension of segment reporting, and we will discuss shortly. These are EUR 11 million of increase.

Third, the cost related to the SOX, Sarbanes-Oxley compliance, which occur in both the Zegna segment and Thom Browne segment. Finally, which is the biggest impact, is the COVID-related disruption in Greater China in the second and fourth quarters of last year, which created an unfavorable geographical mix effect. This has created, as I said before, the largest impact.

And if we want to turn it into 2023, it becomes an important tailwind for us, adding into this new year. So it becomes like a credit from the recovery of China. This has been all partially offset by an important improvement in the profitability of the business everywhere else, in the other geographies and in the other product lines.

Adjusted profit at the end landed at EUR 73.6 million, down slightly from EUR 75 million of last year, despite the improvement at the operating level that I mentioned before, due to financial items and financial charges.

I will mention and I will call out, especially because they are peculiar, the increase of put option liability and warrant liabilities for a total charge of EUR 23 million in 2022 P&L as well as financial charges related to portfolio results in '22 compared to a profit in prior year.

We note that after the redemption, the ups and downs of warrant liability will get out from our P&L, but only from 2024. While in 2023, we expect the redemption of warrants that occurred in the last month to have a negative one-off impact that we estimate in the range of EUR 26 million. This is coming from the mark-to-market value of the warrant redemption compared to the fair value that was posted at the end of 2022.

Group profit for '22 came in at EUR 65 million compared to a loss of EUR 127 million last year, which was primarily attributable to the cost incurred in connection with the business combination with the [SPAC].

Now moving to Page 10. I don't want to go line-by-line into this income statement, but this is just to anticipate that this current shape of our income statement, as we had the chance also of talking with some of you along the way, we are preparing in 2023 the transition to a representation of cost by destination, which is much more common in the industry. And this will allow us to report the gross margin, which in our current structure of the income statement is not visible.

So this will happen with the first half results, and we hope to be able to provide you with a restated pro forma of prior years when we release our first half revenues at the end of July.

Now let's go through to the profitability by segment, starting Page 12 with the Zegna segment, which I remember both the Zegna brand, the Textile business and Third-Party products that is when we produce for other brands like Gucci -- and before -- and it was also TOM FORD.

We mentioned in prior announcement that we have traditionally allocated the corporate cost to the Zegna segment, thus affecting negatively this segment's profitability. Now as I anticipated before, we have started to report corporate costs separately, and we will discuss this shortly. Under this new approach to segment reporting, the adjusted EBIT for Zegna segment came in at EUR 141 million, up 7% from prior year, with a margin -- EBIT margin of 12% compared to the 12.7% of the prior year.

The ZEGNA One Brand strategy and our repositioning drove improvement for the segment. The 2 are partially offset by the country mix, mainly the impact in China; the higher marketing costs, together with rebranding; higher personnel and compliance costs, mostly related to the SOX compliance; and higher depreciation and amortization.

If we go to Page 13, Thom Browne segment saw an improvement in both the absolute adjusted EBIT as well as in the margin. The adjusted EBIT for the segment was up a strong 26% to reach EUR 48 million, while the adjusted EBIT margin went up from 14.4% to 14.5% in 2022.

As we continue to invest in the growth of Thom Browne, scale benefits are contributing to the improvement. On the other side, they were partially offset by growth-related expenses, including the expansion of the store network of net 11 DOS, higher marketing costs as for Zegna and investments to improve central processes within Thom Browne.

Page 14. Now we've come, as I said before, to the topic of corporate costs. These costs include activities and functions belonging to the holdings that are not attributable to either Zegna or Thom Browne segment. These costs, as I said, were previously included in the Zegna segment. These costs have increased significantly following the company's public listing in December. Primarily, they relate to the Board, the cost of functions that are centrally managed on behalf of the entire group, such as Group General Counsel, internal audit, investor relations, central finance, the insurance coverage for directors and officers, and so on.

For 2022, corporate costs came in at EUR 31.9 million, 2.1% of revenues. This compares to EUR 21 million, 1.6% in 2021, where all our structure was not up and running entirely. Other listing costs are posted directly in the Zegna and Thom Browne business, and these are related to the SOX compliance within the operating legal entities of the 2 segments.

Going to Page 15, some details on cash position, and we make cash situations like CapEx and working capital. We ended '22 with a cash surplus of EUR 122 million, up compared to the midyear of EUR 103 million in line with the guidance and down from EUR 144 million at the end of the year. If you want to bridge end of '22 compared to end of '21, these are the driving factors.

We paid within the year: EUR 26 million in dividends, not only the dividends to the N.V. shareholders, Zegna N.V., but also to other minority shareholders of controlled entities; EUR 73 million in payments for CapEx, mostly related to store network; then this on -- the Zegna side mostly is remodeling and Thom Browne is mostly expansion. But I would also like -- have to flag IT investments, investments in manufacturing plants to expand capacity. A couple of examples we are expanding capacity on sleeve-units and outerwear and those will improve efficiency and sustainability we are putting for several [pipelines], several groups of the plant.

There has been another topic that this factor affecting cash is EUR 41 million higher trade working capital, which had a flat percentage on revenues around 21% and EUR 33 million in real estate settlements on stores. This P&L charge had been already accrued prior to 2022, but saw the cash outflow for some settlements related to Madison Avenue, Ginza store or (inaudible) taking place in 2022.

As we look at, we believe that we have worked carefully on the optimization of our store networks and so most of the rationalization has happened at this point. As we see the specific part of the trade working capital, it's important to understand what happened to the inventory in order to be not, let's say, concern. A significant portion of the increase was planned. There is -- a part of the increase was related to our desire to secure precious raw materials availability during times of volatility. So there has been aware decision to build inventory in some specific raw materials like cashmere or fine wools.

And we also built solid availability of the essentials. Essentials is the continuative part of our Zegna brand, which is aimed to be never out of stock. So we made a step-up one-off of the availability of Zegna essentials. And of course, there has been the part that was unplanned related to the fourth quarter of China, which has lack of some stock, which we believe with the reopening in China, now becoming -- has become in Q1, an opportunity in order to capture an increase in demand. And so we don't see any problem on the inventory coming from China.

We expect this excess at the end of '22 to be -- quickly be absorbed in this last month and next month.

So now I'll give it back to Gildo to talk about dividend.

Thank you, Gianluca. It's a very clear explanation. Finally, let me share a quick update on our dividends. And subject to the acquired approvals, we tend to make a dividend distribution of EUR 0.10 per share -- it's EUR 0.10 per share -- to the holders of ordinary shares, a total of approximately EUR 25 million. This will be decided to our next AGM, which is currently expected to be held on June 27.

Now I'd like to talk briefly about our outlook for '23 and beyond.

And at our Capital Markets Day last May, as you recall, we shared our medium-term target for the group, excluding the integration of TOM FORD Fashion, of course, which was mainly a revenue of EUR 2 billion overall and an adjusted EBIT margin of at least 15%. As I shared at the top of the call, we now define medium term as the end of fiscal year 2025.

For '23, we are encouraged by the start of the year, which is well above our expectation, with broad-based strength, a very dynamic Made-to-Measure business, which well exceeds the prior record level of both '22 and 2019. And there are [term] maturities to Europe and key Asian hubs like Hong Kong and Macau, which I think is very important. We expect that our 2023 results will show comfortably that we are on the trajectory to meet our ambitious goal by the end of '25, again, excluding the integration of TOM FORD.

This is acknowledging the ever-changing environment with macro and financial markets volatility by assuming a further significant geopolitical, macroeconomic or financial market deterioration, no further disruption linked to the COVID-19 pandemic and no other unforeseen events.

And with that, we are ready to answer any questions you might have. Thank you.

Thank you, Gildo. Bruno, we are ready for the Q&A session.

(Operator Instructions) We have our first question. It comes from Susy Tibaldi from UBS.

Congratulations on another strong year. On your comments that you had a very good start of the year 2023 and that Q1 is expected to grow double digit with a very broad-based strength, could you give a little bit more detail in terms of the growth that you're seeing by region? In China, I'm sure you're seeing a very strong rebound. If there is any way you can help us understand what kind of rebound you're seeing there? Maybe give some number, it would be super helpful.

And also, you said this strength is really broad-based. We are hearing from some of your peers that in the U.S., there is a little bit of weakening in consumer sentiment. Is this something that you're seeing as well? And also, comment on Europeans would be super helpful.

And my second question would be, when you're thinking about the investment that you're planning for 2023, is there any kind of step-up in investments that we should think about? Is there any specific areas that you feel like is necessary to keep investing? And if there is any project that you have planned for 2023?

Gianluca here. So in terms of numbers, I -- we cannot anticipate what we are going to disclose at the end of the month. And we disclosed Q1. But anyway, I give you the flavor. As we said, we are seeing double-digit growth at a group level. If we isolate -- since you were asking for a geographical split, if we isolate retail, retail overall is solid double digits. Solid double digit, of course, then becomes double digit when you also take into consideration the TOM FORD the fact, which slows down the number because, last year, we were still distributing TOM FORD in Q1.

So looking at -- retail is solid double digit across the regions. We are seeing solid performance everywhere, also in U.S., which I'm fully aware, someone has not seen. We are not -- we are not having this feeling. Our performance is solid throughout Q1 in retail for Zegna -- mainly for Zegna, mostly for Zegna brand. And so that is the picture I'm going to give you.

In terms of investment, we expect 2023 to be slightly higher than 2022 in terms of amount. This, of course, becomes with the continuous footprint expansion of Thom Browne. We are seeing some perimeter opportunity in Zegna, which is a piece of news because so far, we took advantage of rationalizing the network in Zegna, also with the discontinuation of Z Zegna. Now it's time for us, and we see the opportunity of expansion in North America, in parts of Europe, in some parts of Europe, in China, still some tactical growth.

So we will make a step-up in terms of CapEx in 2023. And as I said before, also the investments in the supply chain. We believe that our supply chain is a strength for us. We are investing -- we have been investing in '22, but we continue investing in '23 in expanding our internal capacity in some product lines. And so this will become a further driver of the investment, together with IT investments in the direction of digitalization, as we have anticipated Zegna X, the tool of configurator which will be presented directly to the community in a few days. That would be also in a direction of investment for the group.

Well, we surely are, I would say, positively surprised by the result of the fourth quarter that is quite unexpectedly are strong across the board, as Gianluca said. But I think there is a reason -- just not organic growth. I think that all our tries to become a sophisticated retailer in terms of product merchandising, in terms of marketing, in terms of personalization, in terms of digitalization, a new way to reach out the customer, is bringing some good results. And we are extremely pleased about this outreach, new process we have, which has become a part of the cost of our retail method, which is quite extensive.

So last year, we had some regions that were already pretty ahead and others that were behind. Now we can see that they are very consistent across the board and the customer is reacting to the new rebranding, to the new merchandising offer of Zegna, and it's -- we are getting really good traction, both by the large customer through Made-to-Measure. The Made-to-Measure has reached (inaudible) being with Made-to-Measure the level of '19, which were quite at the peak. I mean, it's quite positive both on the tailoring side and also on the leisure side, and then all the accounting development is bringing the results.

So if you just visit our store and you see more and more of a difference. So I think that every season -- this is the second season of our branding, add a bit to it, and we are moving in that direction. So the engine is there. We just have to make the engine to go faster, but we are very pleased about the execution so far of what we have put together last year.

Susy, does it answer?

Yes. Yes, that's great. And we look forward to the TOM FORD integration as well.

We do as well.

We are a few weeks away, hopefully.

(Operator Instructions) First question is from Louise Singlehurst from Goldman Sachs.

Just following up on the China question from earlier. I wondered if you can help...

Can your raise your voice? Sorry, we hear you very far away. Sorry.

Apologies. Is that a little bit better?

Yes.

Do you hear me now?

Yes.

Yes. Better.

I was just going to follow-up with a question with regards to China, and thank you for the information so far. But can you help us think about the attitude of the Chinese customers that you know, which are already shoppers at the brand, the appetite to spending? I suppose what we're all trying to think about is the reopening and the appetite of the consumer to spend versus save in terms of a luxury environment. I wonder if there's any color that you can give us on the customers that you know well at Zegna.

And then secondly, just on the broader -- the rebranding and the new initiatives. Can you help us think about the number of like new customers that you think that you're getting to your customer base from the customize -- the digitalization initiatives that we're seeing in the store? Presumably, that's been a very big driver of new customers to the brand.

Yes. Okay. I'll start with the China since I have been twice already and probably, I'm going to be there for the third time, probably before the summer.

Listen, the biggest surprise is Hong Kong and Macau, which it was not given, to be honest with you, during the first visit, but it was after a second where I got to understand the Chinese were finally free to move around also outside their boundaries and that Hong Kong and Macau would have been their first destination, for sure.

Then I remember on the list, Japan was -- Tokyo was top on the list, Bangkok and Singapore. And we see this happening. This is literally it's what's going on now. Predicting whether this trend will hold on for the rest of the year, whether they will be traveling also abroad outside their boundaries, even more so of Asian territory, I don't know. We believe that they would stay in Asia. So we think that we will see them more, for sure, '24, and we are ready for that.

But right now, we arrived the results in the Greater China region and in some territories in Asia. Now in terms of more color, listen, I think they liked our color. They like the new color of the brand, and they go for newness. I mean I just can tell you now we just came out with the linen short collection, and it's [landing] these days on the market. And it's just that we just over that. We just shipped the first shot of Norda shoes and they just are on fire.

So whatever newness you send to them, they respond. And I tell you, I mean, these -- we're talking not only about loyal Zegna customers, we're talking about newness. And I can tell you in the iconic product, I would say, at least between 30% and 50% of the purchases are with new customers. So we have a lot, a lot to do in the next months and season to make sure to surprise them.

But I think that the -- what -- if you remember, we talked last year quite often about collaboration. I think that this collaboration route, I think is a very smart move in terms of marketing, in terms to allure to come back and to make sure that whenever they come back and they visit often to the store -- I think that one of characteristics of Chinese, they visit the store more often than any other consumer. We see this happening again. As a matter of fact, traffic is up, not yet to where it was at the peak of '21, but surely nicely up around, I would say, low double digits.

But I think that the important thing is to make sure that they are surprised every time they visit the store. And I think that all these new [characteristic] and denominating factor of Sartori with the marketing led by (inaudible) I think [we'll continue to see] some good results.

The other thing is Made-to-Measure, as I said, I just want to repeat. Made-to-Measure is our formula 1, and we are surely a leader in that. And it's coming back, and that's a very good news. And that's why, as Gianluca was saying, we are strengthening our tailoring supply chain, increasing the nature of the production because we just are -- we just want to keep up. We have a 2 to 4 weeks' delivery cycle there according to the speed we want to give, and we just want to make sure that we keep being on top of that. So I think that overall, I mean pretty good news. And there is no reason why it should slow down in the rest of the year. We remain [update] in particular in Greater China.

It's an area where we see with -- generally high. It's an area where we see, of course, the new clients coming into the brand are definitely the new iconic products. So [people] (inaudible) definitely an entry door. Network is becoming an important entry door to the brand. Network, whether it's cashmere or cashmere and silk or the new linen network, it's becoming an important entry door. And overshirts are the new deconstructed -- whether it's a shirt or a jacket, you decide, but those new items are becoming an attractive hook for new clients to explore Zegna as a new brand for them.

Does it answer, Louise?

That's perfect. Very helpful.

Thank you. Bruno, can we move to the next question, please?

Okay. We currently have no further questions. So I would like to hand over back to you.

Okay. So thank you very much, everyone, for listening to the call. Our next reporting is going to be the first quarter that's on the 20th of April, and there will not be the conference call because we have just given you the flagship update. But I will be available for -- to discuss the press release of the first quarter results, together with the management that -- should you need to ask questions. Happy holidays and speak soon. Bye.

Ladies and gentlemen, this concludes today's call. You may now disconnect your lines. Thank you.