Gianluca Tagliabue: Can you [indiscernible].
Anthony Charchafji: Yes. Can you hear me better?
Paola Durante: Much better.
Anthony Charchafji: Much better. Okay. Sorry. Yes. So it’s — first question would be on the U.S. trend. I guess that 2024, I mean at a time where the slowdown was already present in 2023 for most of the luxury sector. I mean, for you, it seems that you are quite resilient in the region and that you seem more optimistic than your comment on China. So maybe if you can share your thoughts on the U.S. market currently. My second question would be on the marketing. So I understand that at Thom Browne, that there have been no step up in marketing in 2023, though I would say that it’s starting from a low base. Should we expect, at some point, marketing step up also at Thom Browne to drive a bit the new addition movements were and all that.
The last question would be on the gross margin. I mean, a very nice improvement in 2023. I understand it was driven by — specifically by Thom Browne. Can you tell us if there is more upside? And maybe for Zegna, I mean, knowing that there is this B2B business that is maybe 30% or 35% margin. So I mean — do you see further growth in 2024 and beyond, or should we expect something rather flat? Thank you.
Paola Durante: Okay, perfect. Thank you. So I think we have a first question on U.S. trend, and I’ll ask Gildo to comment, and particularly for Zegna. Then we see we need some more clarity, marketing I’ll leave to Thom Browne, and then gross margin to Gianluca. [Indiscernible] to Gildo.
Ermenegildo Zegna: United States, we remain positive for this year as we were last year. We also remain positive that American will visit Europe as a [indiscernible] last summer. And I think that Zegna has been able to penetrate in the perception of the upper scale American in a great way. Just hitting on the iconic basis I think our economy is really being the shoes of the luxury crowd. Personalization is another very important traction. But I think that it has been a cultural change of our company and of our people, many addition of top retailer merchandise and marketing people in our organization that has led the transformation from a wholesale culture into a retail culture and these branding going from a perceived of a closing of a company to a luxury leisurewear and accessory company has really worked out extremely well around the stage I think that there is no price resistance that’s the other thing.
We are offering an incredible service in every store. The increase in the productivity is quite sensational. And so I think that we have been appreciated. Thanks to our strong brand, but thanks to the changes we brought. And we are gaining not only the more confidence from the loyal Zegna customer that were very business oriented also to new customers and younger ones. So I think that the major changes has been growth into the perception of the brand by offering new products and superior service. Another important factor that level the change of retail — from a wholesale to a retail culture is that we turn many points of sales from wholesale to retail. And the productivity has spiked up, unbelievable, I can make the example of Nordstrom. Did we change our scheme and we change our numbers immensely, just to mention.
And so I think we are proceeding our journey with this determination. And I think that it will go on. So I remain, as I said, positive on the outcome of this big luxury market.
Paola Durante: Do you want to comment on TOM FORD and then I’ll leave to …
Lelio Gavazza: TOM FORD is mainly in American market, where we see that the inflection of it obviously some ’24 [indiscernible] basically in February with the positive reaction from the market on the collection. And with the recent frequent state where I returned just last week, we saw that there are a lot of activity to do in terms of renewal of some of our key selected stores in America, [indiscernible] few more stores [indiscernible] we have a good, good feedback on our wholesaler [indiscernible] new collection where we see possibility of good results with the new production.
Paola Durante: Okay. I leave now to Rodrigo for Thom Browne marketing. But if you want to start Rodrigo, just with the — you are in Los Angeles right now, and you’ve done this big event with Saks, so just a couple of comments on the U.S. market.
Rodrigo Bazan: Sure, sure. The most important point to highlight that we continue to invest in marketing and communications for the brand. That’s a very important point. Something that we are always known for is our fashion show, which is the beginning of everything, when people ask me, what do we sell something Most of what we sell in our stores has passed by shows over the past 20 years and continues to be the case. We have made a conscious effort since last year since the Couture show to make any brand moment on any brand events like the 20th anniversary, a client moment and a client event. We are seeing million and $1 million plus — $1 million plus, a multimillion dollar performance with clients on the back of these events.
We are extremely focused right now on presenting the show collections, not only in New York to our clients, so one-to-one appointments to the FCs and significant clients, but also in Paris. We have had fantastic, fantastic feedback and actual bookings from that. We’ll continue to do the same thing in the second half of the year, particularly in Asia. Last year, we touched Tokyo, Shanghai, and so. It will repeat a couple of capital in Asia in the second part of the year with Thom. We’ve seen a great reaction. When it gets to America, where we are seeing a huge brand awareness growth in the last couple of years, particularly because of the women’s business. Right now, as you pointed out, I’m here and Saks is hosting us with a great event in a fantastic new location in Beverly Hills.
It’s an incredible story and incredible client-focused store. Yesterday, we had a great event hosted by Saks with Thom and clients of VICs and celebrities. And this turns into today a very significant amount of appointments that we have with VICs in order to buy the collection to develop for Saks for the year, which is largely [indiscernible] and made to order [indiscernible], which we’re launching globally here, our launch made to order here. And the opportunity to write made to order or made to order women’s or made to measure men’s. That’s what we’re seeing a fantastic performance as well. So this is — you would say it’s a business, but it does from a marketing point of view, how to communicate, if not fake marketing. It’s real marketing on the collections on what the brand stands for, and this is happening on a global scale.
In all three big continents of the world, we are seeing this great reaction to presenting our collections into business that follows that and linking this with the world of aspiration of clients or the world of very committed clients. This shows a huge positive performance of our businesses. So we are penetrating key communities and this been happening in the United States for the last couple of years where we are presented with the collections in front of significant clients, their performance is outstanding, really committed in the stature of clothing and triggers done right now for accessories and footwear.
Paola Durante: Fantastic. Thank you so much. And I leave now — gross profit to Gianluca.
Gianluca Tagliabue: Gross profit — so first, I qualify for 2023, our growth increase of margin comes above all from Zegna. So Zegna is the biggest driver of increase of gross margin. Second question was how do we look forward the gross margin? I think we still have opportunity to grow the gross margin, and that is our plan for this year. The drivers are several. One is exactly one technical thing that is disappearance of the PPA on cost of sales, this is something that we had this year for €15 million, and we call in 2024, we still have, but a very minor €3 million to €4 million tail of the PPA purchase price allocation on cost of sales. Second, apart from this, we have — apart from this part, we still have upside on the gross margin driven by the fact that we are still in meaningful way managing the price lever.
As Gildo was mentioning, we are going the last mile on retail more and more, North America is the biggest area. We have on Zegna a full 12 months of Korea. The mix, channel mix will be a driver, but the price will also be a driver. So we expect gross margin to be still an area of expansion in terms of margin for 2024.
Paola Durante: Thank you. I hope we answered Anthony. We have — we can go to the next question. And if I ask the next person to keep maybe to one because we would like to leave the floor to all the questions we have on for us tonight. So next one.
Operator: The next question comes from Oliver Chen from TD Cowen. Oliver, your line is open. Please go ahead.
Paola Durante: Hi, Oliver.
Oliver Chen: Hi, Gildo and [indiscernible]. Hello. Good morning here from New York City.
Ermenegildo Zegna: Hello, Oliver.
Oliver Chen: Regarding your comments on aspirational, we are definitely seeing pockets of pressure and continued over inventory trends with aspirational across some brands. You’re very service orientated brands with distinctive characteristics on quite luxury as well. But what’s happening with aspirational? That’s my question. And what do you see happening forward? And what’s in your control and what’s out of your control as we think about that customer coming back later. Thanks a lot.
Paola Durante: Thank you. Thank you, Oliver. I’ll ask Gildo to comment on Zegna and aspirational customer, but then I’ll leave to Rodrigo maybe to add a couple of more comments.
Ermenegildo Zegna: Well, since we decided to go up with our brand the aspirational, I mean, has become less important to us. This just as simple as that. And I think since Zegna was — at least what Zegna branding was concerned was the driver now is not any longer, and we replaced with a lot of courage and a little price the top customer that is driving our business and we’ll keep trying our business because the products are really unique, are not expensive for the sake of being expensive so very high-quality. I mean thanks to our platform, we create the best in order to product with the best material, very exclusive. I mean all this idea of traceability from linen to wool to super fine wool to cashmere, I mean, it’s unique.
