ZGN - Ermenegildo Zegna: Rising Clouds Above The Luxury Oasis

2024-05-29 10:01:54 ET

Summary

• Zegna demonstrated notable financial growth with an 8% increase in Q1 2024 sales, despite a 5% organic decline due to challenges in China and strategic changes at Thom Browne.
• The company faced headwinds in China and made a strategic decision to streamline Thom Browne’s wholesale business, impacting short-term performance.
• However, Zegna's management remains focused on optimizing operations and maintaining brand exclusivity to ensure long-term value.
• The company's strategic initiatives and strong brand positioning suggest promising upside potential for long-term investors.

In January this year, I've presented the Zegna Group ( ZGN ) as an interesting opportunity for investors due to the company's sound financial results and the discounted valuation across the industry. Since the time of writing, the company published its comprehensive results for the last year and already a glimpse of 2024 through its Q1 revenue results. After I was almost ready to reap the fruits of my thesis when Zegna's stock was up 30%, we're now 12% ahead of this years' start, after the company scared investors with a negative outlook for the first quarter given a setback at Thom Browne due to the management's decision to streamline the wholesale business significantly. Additionally, we saw challenging demand in China across the brands, while the medium-term outlook for the company was once again confirmed....

For further details see: