Shares of Ermenegildo Zegna (ZGN 2.24%) were taking a dive today after the fashion company posted disappointing full-year earnings results this morning.
As of 1:55 p.m. ET, the stock was down 14.5%.
Image source: Getty Images.
Zegna comes up short
The Milan-based fashion label said that revenue in 2023 jumped 27.6% to 1.9 billion euros ($2.06 billion) with organic growth up 19.3%.
Estimates were not available for comparison, but the company delivered solid gross-margin expansion as well, with gross margin up 62.2% to 64.3%.
Overall, the results were strong for the year, and the company had already reported full-year revenues as is customary for European companies.
However, operating margin and operating profit both lagged in the second half of the year, even though the fourth quarter tends to be the seasonally strongest in the fashion industry.
The company reported an operating profit of 116.5 million euros ($126.37 million) in the first half of the year but just 92.6 million ($100.36 million) in the second half even though it brought in more revenue in the second half. Similarly, its operating margin in the second half of the year was just 9%, compared to 13% in the first half of the year.
Investors seem to be reacting to that weakness as the report otherwise seemed strong.
What's next for Zegna
Zegna looks to be in place for continued growth as it delivered double-digit revenue growth in both the Zegna segment, by far the largest, and Thom Browne. It also acquired Tom Ford Fashion at the start of the year, which brought in 235.5 million euros ($255.22 million) for the year but was slightly unprofitable.
Heading into next year, the company is focused on streamlining its wholesale distribution and filling out its management team at Tom Ford Fashion.
If it can maintain its 2023 growth rate, the apparel stock should rebound with time.
