Prepared remarks
Good afternoon. Good morning, everyone. Thank you for joining the Ermenegildo Zegna Group Q1 2025 Revenues Call. Please note that today's material and presentation are available under the zegnagroup.com website. Joining us today, the Zegna Group's senior management team, including Gianluca Tagliabue, Group CFO and COO; Paola Durante, Chief of External Relations. Before we begin, we need to point out that the team will make certain forward-looking statements during the call. The group's actual results may be materially different from those expressed or implied by these forward-looking statements. Also, these statements are subject to a number of risks and uncertainties, including those described in our SEC filings. Please refer to the forward-looking statements, cautionary statements included at Page 2 of today's presentation. I will now turn the call over to Paola to begin. Paola, please go ahead.
Thank you. Thank you, operator. Good morning and good afternoon, everyone, and welcome to our first quarter 2025 revenues call. As anticipated, today's call is led by Gianluca Tagliabue, Group COO and CFO; and by myself. Alice Poggioli, Investor Relations Director, is also here with us. Our CEO, Mr. Gildo Zegna, will attend the July call. I will start this call with a brief comment on our results and then I will leave to Gianluca for a few final remarks before opening the Q&A session. So let's move directly to Page 8 of the presentation, where you find the key highlights of our results. In the first quarter of 2025, the group reported EUR 459 million in revenues compared to EUR 463 million in the first quarter of last year. The revenues were down 1% year-on-year in both reported and organic terms. As of this quarter, organic performance corresponds to constant currency, having no difference in the perimeter of consolidation.
And I remind you that as usual, during the presentation, I will comment on organic performance. Talking about our three brands, Zegna brand and Tom Ford Fashion reported solid growth driven by the direct-to-consumer channel. At Thom Browne, the positive results from the DTC were balanced by the anticipated ongoing reduction in wholesale. By regions, let me highlight that the Americas remains our best-performing region for all three brands, followed by APAC. Let's move to Page 9. I will not go into the details of the by-segment analysis since I believe it’s more useful for you if I focus on the by brand on the next pages. Let me just point out something that I'm sure you know already, but Zegna segment includes revenues from Zegna brand, which drove the segment performance in the quarter, as well as revenues from the textile and other division. So moving now to Page 10, where you find the performance by brand and product line.
With EUR 293 million of revenues, Zegna brand continues to show very solid performance. In the quarter, the brand was up 3%, supported by DTC particularly in the EMEA regions and the U.S. Thom Browne reported revenues of EUR 64 million, down 9% organic, as I already mentioned due to the ongoing streamlining of the wholesale channel. Tom Ford Fashion recorded revenues of EUR 67 million with a 3% organic growth. This growth has been driven by a very solid DTC channel also supported by the positive impact of Haider Ackermann's first fashion show in March. I remind you that since September last year, Haider is the new creative director at Tom Ford. Moving now to Textile. The performance of the Textile product line was down 9%, and this is largely due to a decrease in global demand from luxury goods brands outside the group. Finally, on the other revenues, a marginal comment, but let me underline that the positive performance is largely related to different timing in deliveries.
So let's now move to Page 11 of the presentation where we present the revenues by geographic area. Starting with EMEA, which in the quarter represented 34% of total revenues and is our largest region. EMEA was down 2% entirely as a result of the decline in Thom Browne, mainly in the wholesale channel, while both Zegna and Tom Ford Fashion continued to grow by strong double digits in the region. The Americas, our second-largest region, which contributed to 27% of total revenues in the quarter, recorded a 9% organic growth with strong double-digit growth from Zegna brand, particularly in the U.S. market. Let me also anticipate that Zegna is continuing to do well in the Americas, both domestically and travelers from abroad. Moving now to the Greater China region. In the quarter, this region generated EUR 123 million of revenues and accounted for 27% of the group revenues. The region reported revenues down 12%, a similar trend to Q4 last year.
As commented in our previous call, we continue to have a prudent approach on the region even if we are starting to see some initial proof that our actions are paying off, especially at Zegna brand. At Zegna, in fact, we are experiencing ongoing positive reactions to new product launches or new initiatives as for the recent Zegna switch activations that we just had. I have also underlined that main retail KPIs are moving positively in the region, partially balancing the still ongoing negative trend in traffic that we are all aware. I remind you that for Zegna, most of the Greater China region clients are actually buying locally, as I can say, and I can anticipate that also the cluster has shown a similar trend to that of the region. And finally, on the rest of APAC, which contributed to 12% of Q1 revenues, rest of APAC reported 8% growth driven by Japan, which has been very solid across the three brands, but also I would underline the Singapore performance, which has been good in the quarter.
So going to Page 12, not much to underline here given that we will go by channel at each brand level. Just a couple of quick remarks. I would like to highlight 5% growth in DTC with positive results across all the brands and the wholesale down 19%, which as we already said reflects the strategic decision to focus on the DTC channel and the performance of Thom Browne. So let's go now to Page 13, talking about Zegna and analyzing Zegna revenues by distribution channel. In the first quarter of 2025, Zegna DTC revenues grew by 4% and accounted for 86% of the brand's total revenues. Europe, the Middle East, and the Americas, in particular the U.S., but also LatAm, all continue to record very solid double-digit growth. Revenues from the Greater China region also at Zegna were down low double digits, substantially in line with the average of the group and substantially in line with the trend reported in Q4 last year.
The brand opened two DOS net during the quarter, including the important Riyadh Solitaire store in Saudi Arabia. Talking about wholesale at Zegna, wholesale revenues recorded a negative 2% organic growth. The performance actually includes the impact from the conversion of the wholesale stores into concessions in the Americas, that we already mentioned in previous calls, but also in line with our strategy, a more selective distribution approach on iconic pieces, which will continue throughout the year. And I move now to Thom Browne, Page 14, analyzing revenues by distribution channel at Thom Browne. So for Thom Browne DTC revenues were up 3% organic, driven by the contribution of new store openings. By region, I would highlight the good double-digit growth in Japan and in Korea for these channels. In the quarter, Thom Browne opened one DOS in Palm Beach in line with our strategy to focus more on reinforcing brand knowledge in the important North American market.
In the first three months, wholesale was down 48% organic, and this is very much in line with the indications that we have provided during our last call at the end of March. This performance has been impacted by three factors. The first one, and the most important, is our decision to reduce volumes in the channel and to focus on DTC distribution. The second one is a different timing in deliveries as we commented in January; we had some early shipments in Q4 thanks to a better production cycle. So we had products ready and produced and ready to be delivered. And third, some wholesale shop-in-shop conversions into retail concessions, mainly in North America. And last comment on Tom Ford Fashion, moving now to Page 15 of the presentation. In the first quarter, Tom Ford Fashion reported a very solid 9% organic growth in DTC, which is composed of strong double-digit growth in EMEA and robust performance in the U.S. These numbers also reflect a boost in traffic and in demand generated by the success of the first fashion show from Haider Ackermann, as I've already mentioned, that took place in Paris on March 5th this year.
During the quarter, Tom Ford Fashion opened one DOS in Puerto Banus, Spain. Talking about wholesale, wholesale was down 8%, largely reflecting both the impact of some wholesale shop-in-shop conversions into retail and the natural slowdown in orders ahead of the launch of new designer collections. I can now hand over to Gianluca for the final remarks. But before doing this, please, on Page 16, you can see the nice facade of a Zegna store in Monte Carlo. Thank you, and I leave it to Gianluca.
Thank you, Paola. Before going to Q&A, let me briefly comment on what our brands have done since we last spoke in late January and on the overall environment, touching on some points that I assume will be part of your Q&A. As Paola mentioned, in early April, at Zegna brand, we presented our summer drop collection, which celebrates the unique characteristics of our fabrics, which are not only the best quality but also 100% traceable, and the Moccasin shoe, which in Italian means local. The Moccasin is a new family of formal shoes in the Zegna world. This drop launch was accompanied by a marketing campaign featuring Matt Nicholson, the brand's global ambassador, highlighting Zegna's philosophy of a non-complicated style of life. The response from customers has been extremely positive across all regions on the overall drop, including the Moccasin shoe. At Thom Browne, we recently opened the Palm Beach store as Paola anticipated.
Since opening, the results have been good and actually above initial expectations. Of course, it is early to make a final assessment also because the overall environment remains uncertain, but we have been particularly surprised by the response, especially for the womenswear collection. This week, we are also opening a Thom Browne store in Los Angeles Melrose Place, another important opening to strengthen the brand presence in the U.S. market. At Tom Ford Fashion in April, we continue to leverage the momentum from the March fall/winter '25 fashion show. We are satisfied with the results of the see now, buy now collection that has been presented in a limited number of Tom Ford stores in the weeks following the show. While we are talking about small numbers, the results are encouraging. As you know, the Ackermann fall/winter '25 collection will hit stores starting in September. Let me now make a general comment on the topic that has been on top of everybody's agenda the past few weeks, U.S. tariffs.
First, let me clarify that, as our Group CEO and Chairman also stated in his call, since the beginning of April, we have not seen significant changes in the overall demand globally across any of our operations. On the contrary, if anything, we have seen some improvement, particularly at the Zegna brand alongside the launch of the spring/summer '25 products drop, which I believe is more related to the successful launch of the summer drop I just mentioned. This is true globally, but especially in the U.S. In terms of the impact from the 10% increase in tariffs on products imported to the U.S., I want to reaffirm what I'm sure you already know. We will take the necessary actions to protect our EBIT. Within the current scenario of a 10% tariff increase for fall/winter '25, we are considering a mid single-digit increase in pricing in the U.S. And with this, I will now open the Q&A session.
Questions and answers
Our first question comes from Oliver Chen of TD Cowen.
The Zegna Americas numbers continue to be impressive. What's happening geographically in terms of trends you might be seeing? And could you speak to stronger versus less strong products as well? We've been seeing a ton of market volatility. Obviously, are your thoughts that double-digit growth can continue? It sounds like you've been really favorable on the momentum. Second question, Haider is quite exciting and commercial and the show was outstanding. So what's the timing on impact that you may have that we should be aware of as we think about our models? And then finally, just any framework for thinking about that mid single-digit price increase with tariffs. And as you think about all these complexities of sourcing, have you made any changes that we should be aware of in this dynamic environment?
Thank you for your questions. Actually, the second one was not very clear to us, but I will go back after maybe. The first one, of course for Gianluca is on the overall performance by regions, I think U.S. with some comments on U.S., but also globally. And the third one is on the pricing.
I don't understand if your question on U.S. was within U.S., if we are seeing specific areas within U.S. So I would say that within U.S., we have not seen areas of softness or stronger performance; we have seen on Zegna especially a strong performance across the board. Of course, New York is the epicenter of everything, so the big numbers come from there. But we have seen good performance in Florida. We have seen good performance in Southern California. We have some stores perform well everywhere. So I think it's on Zegna pretty much spread across the world. As we have seen around the world outside of U.S., we have been pleased by Japan and Singapore. We continue to see softness within Greater China in Hong Kong. We are very pleased with the Middle Eastern area, Dubai, Abu Dhabi and Continental Europe is performing especially for Zegna and Tom Ford very well. So I think that the areas of weaknesses are still Greater China with a stronger softness in Hong Kong.
In terms of the third question, which I understood the mid single-digit, if we are changing any logic of sourcing, we are definitely not thinking about moving any activities on manufacturing in the U.S. That is not feasible. We are where we are. Most of the production is based in Italy and will stay so. And it's an important part of our reason why. So we are not changing the sourcing strategy according to the tariffs. We will adjust, as I mentioned, prices in fall/winter in that range in order to offset the tariff.
Can you just repeat the second one? Sorry, Oliver.
Yes. On Haider Ackermann, as we look forward, the new product relative to carryover and/or timing of launches that we should be aware of? He has really good momentum.
Yes.
So the fall/winter products will be delivered starting from the end of May. So the big drops will occur from June onwards. But especially also to take advantage of the window of the tariffs so far at 10%, we are pushing as much as possible on deliveries of fall by early July. So the big drops will be, yes, June onwards, we will see the fall coming in, and the tail of the fall will be in September. So we'll see more impact in Q2 and the full impact in Q3.
I want to emphasize that most of the Haider collections will be effectively installed more toward the end of Q3, particularly in August and September. If that was your question, I want to clarify that all the products intended for the fall season, even if not all designs are ready, have been supervised by...
...edited by.
The first shops will be edited by him, and the real design by Haider will be in the second part of the season, so more towards the third quarter than the second quarter. If you're okay we can move to the second question.
Of course. Our next question comes from Chris Huang of UBS.
I have three. The first one, just coming back to the Zegna brand DTC channel, the growth by cluster. If I caught it correctly, I think, Paola, you were making the comment that the Chinese clusters kind of remained in line with the Greater China region around a low double-digit decline. So if we assume that kind of a low teens decline in line with Q4, if my math is correct, it would imply other regions seeing a little bit of softness as we see for other peers in this sector. So just wanted to understand there, what are the key nationalities that are perhaps moderating, still very strong, but a little bit of moderation. And then secondly, on the EBIT, I think at the previous conference call, you were kind of expecting a low single-digit EBIT growth for 2025. Just wanted to check here if there's any change in thinking when it comes to that number. And last but not least, on Tom Ford. Obviously, in Q1, we saw a very strong solid beat at the brand. But as I look into the rest of the years from Q2 to Q4, I think comps are getting a bit tougher. But of course, as you just mentioned, you have the new collections really hitting stores from Q3 onwards. So just really trying to get a sense of your thinking here in terms of if we should expect a sequential acceleration, or should we expect something more stable on a sequential basis?
Thank you, Chris. Okay. Yes, I'll leave Gianluca to answer on the clusters. But let's say, I can anticipate, we didn't see many differences, but I'll leave Gianluca to comment more.
From a cluster and geographical perspective, we are observing solid double-digit growth among U.S. consumers, including both domestic customers and travelers, similar to what we saw in Q4. Europe is also showing double-digit growth, and the Middle East is performing extremely well. The only area where we’re noticing some softness is in China, which is still experiencing low double-digit growth.
The second one was on the guidance.
Yes, we confirm the low single-digit EBIT guidance that we have declared a few weeks ago. As I said, we are going to offset if there is any cost on the tariff side through the prices, and we are not seeing change or inflection in the direction of our performance on the DTC channel. So we are confirming the EBIT low single-digit that was in our guidance. The third was?
For the tougher comps in the second part of the year, if I remember well.
Well, in general, we see Tom Ford as still an early story. So the comp is something that is more meaningful for a mature story. Tom Ford Fashion, we see it as an early stage of a journey. We see untapped opportunities there. Of course, then the second part, we started performing slightly better, but we still see blank space in front of us. Of course, either will be one lever to compete against tougher comp, but we are confident that the journey of the brand is a long-term journey. So we are not worried about having a comp base that is in the second half that was more positive, but we are going against it.
Chris, I'm not sure if we addressed your questions. If you have any follow-ups, please let us know.
Yes. Super clear.
Our next question comes from Anthony Charchafji of BNP Paribas.
It's Anthony from BNP Paribas. Just a few additional ones. The first one would be on the Zegna brand DTC 4%. Could you break down just mix, price and volume and maybe share with us if the performance of the Triple Stitch shoe is above or below that number? My second question would be on Thom Browne, the wholesale outlook for the year. So I acknowledge the shift from Q1 to Q4. So maybe we don't take the minus 48%, but let's say, on 6 months out of the minus 30% in wholesale that you have at Thom Browne, could you maybe help us to understand what is due to the rationalization and what is due to the weaker demand from a partner? And just asking because your DTC is up low single digit, but with 30-something more stores. So just to understand the level of brand hit and engagement versus the rationalization at Thom Browne. And my last question would be on Tom Ford. So I noted, and it's something a bit rare in luxury that you noticed an increase in traffic since the beginning of March, I assume, so post the fashion show. Again here, I mean, it seems that the DTC trend might be maybe negative on like-for-like without the openings. So can you maybe share with us some retail KPIs for Tom Ford in the retail and also in terms of pricing architecture of the new product, if we should expect more mix benefit or price a bit above what the previous collections are?
Okay. So three questions always very interesting. Thank you, Anthony. The first one is on the DTC mix price and volumes.
So on Zegna DTC, the major driver in Q1 has been mix within a context where the organic growth is almost entirely comp.
Yes.
So within that mix is the major part. Also, remember that it was the quarter when we launched the Benezaro, which has positively impacted our higher ticket items. Thus, there is a mix, and within the retail KPIs, average unit retail, or average selling price, has been an important driver. Triple Stitch is still performing above average in retail. As Paola mentioned, in wholesale, we are increasingly selective about distributing iconic items, with Triple Stitch being one of them. Consequently, the volumes of Triple Stitch in the wholesale channel contribute to our performance.
Negative impact.
So I think on the Zegna DTC was the first one. On Thom Browne wholesale outlook, I think that if we go beyond the quarters because they have ebbs and flows, if we look at the full year that our outlook is more to stay in the 25%, 30% down compared to 2024 for Thom Browne wholesale. And it's driven by our policy of being more selective in distributing through that channel, which, as you well know, is more exposed to discounting to over-purchase of some items. So we want to be mindful of protecting the brand. So that is the reason for the decline. On the other side, when you look at DTC, just looking at the numbers of stores of increase, you need to be mindful that we have added a lot of small stores.
Across all the brands, including Tom.
We have converted many Nordstrom shop-in-shop locations in Canada. Therefore, the increase in the number of stores doesn’t accurately reflect business growth. The DTC growth of Thom Browne is indeed coming from space, which when compared on a year-over-year basis is negative, unlike Tom Ford. Regarding Tom Ford, the year-over-year comparison is actually positive and is a significant contributor to its growth. The 9% DTC growth is largely driven by this positive comparison, and within that, there are various contributing factors including a shift as we are expanding more in women's offerings.
Volume.
...price where we are applying some inflationary price increase. We have seen traffic coming into the stores. On Tom Ford, it's a balanced mix of levers in a context where the comp, not the new openings, is the major driver.
I don't know if we answered all the questions, Anthony.
It's super helpful. Just maybe the last one on the retail KPIs for Tom Ford and also the new pricing architecture of the new collection at Tom Ford, if there is going to be more mix and prices versus the previous one?
The new collection from Ackermann is not yet available in stores, as mentioned earlier. Currently, Tom Ford's pricing strategy includes higher-ticket items, which will certainly be present once they are available in stores. We anticipate that women's items will see more growth compared to men's, something we did not observe last year but are noticing a bit now, partly due to the positive influence of the show, even though Ackermann's collection isn't in stores yet. We will definitely complete the pricing strategy, offering a mix of smaller-ticket items alongside the higher-ticket items.
Yes. But we don't see a revolution on the price.
No, it's not absolutely...
Not a revolution on the price.
I don't know if that was your question, Anthony.
Yes. It's perfect.
Our next question comes from Natasha Banoori.
I have three questions. First, I’d like to follow up on the Zegna brand and its growth strategy. The insights you shared for Q1 were helpful, but could you elaborate on your expectations for pricing, product mix, and sales volumes for both the Zegna brand and Thom Browne for the year? My second question pertains to the tariffs. Your comments on your plans for mid single-digit pricing were useful. Can you share how confident you are that all your brands can implement this mid single-digit pricing without negatively impacting volumes? Is that your plan across all three brands? Lastly, I want to ask about your EBIT for this year. You mentioned a low single-digit growth in adjusted EBIT, which seems to align with the consensus of around EUR 185 million to EUR 190 million. Given the current subdued environment, could you provide more details on how you’re managing your operating expenses and any cost-saving initiatives you could share?
Thank you, Natasha. First question on the Zegna algorithm for the year, price mix and volume. And I think Natasha, you also asked the same for Thom Browne and Tom Ford to comment.
Yes. On Zegna, I think if we look forward, we expect a balance. Q1 was extremely skewed towards mix. But if we go beyond, we expect the three levers to play a role: volumes also through some openings, price through inflationary adjustment, and of course, if there is the need, the tariff adjustment. I come back to the tariff adjustment later on the second question and mix because we are continuing to inject novelties on the upper side of the equation. And we are pushing heavily on exclusive channel sales like the suites that Paola was mentioning or the special installations that are non-temporary but permanent stores where we celebrate the best of our offering.
For the special installations.
That will take place in Dubai in a few weeks following the Zegna fashion show. We are addressing all three aspects simultaneously. Regarding mid single-digit increases in light of the 10% tariff, this applies across all three brands, and with this level, we don't anticipate a significant decline in volume. I believe that in our sector, the changes in pricing do not significantly impact volume. As for low single-digit EBIT, we are also evaluating operational expenses related to discretionary costs, ensuring we prioritize what is essential for the brand's long-term sustainability. For instance, we are intensifying our efforts for the fashion show in Dubai alongside the Villa Zegna.
Will cost more than the fashion show in Milan.
Yes. So while we keep on having whatever is needed for the long-term health of the brand, we are looking on the other side to everything that can be discretionary in a group like ours; we have areas and wiggle room to maneuver, whether it's general expenses, whether it's some hirings, so there are several levers that you can play with to defend the bottom line without hurting the midterm trajectory of each of the three brands.
I don't know if we answered all of the three questions, Natasha.
Yes.
Our next question comes from Louise Singlehurst of Goldman Sachs. We're not receiving any audio from Louise's line. So we'll move on to the next questioner. The next question is from Daria Nasledysheva of Bank of America.
This is Daria from Bank of America. I have three quick ones, please. The first one, could you please share your own internal expectation around Greater China across Mainland and also Hong Kong for the remainder of the year? The second one is within Thom Browne; you spoke about full-year outlook on wholesale. How should we generally think about wholesale phasing through the year? Are there any particular quarterly one-offs that we should be aware of as well? And if there's anything else that you could comment on the wholesale outlook for the other brands for the full year? And then my last one is, if you could just help us understand a little bit what level of organic revenue growth of Zegna do you need to achieve for the full year to have stable margins year-over-year?
Thank you, Daria. Regarding the Greater China region expectations for 2025, we maintain a cautious approach toward China and GCR.
We have positioned ourselves to manage the ongoing challenges in Greater China, expecting the situation to remain negative throughout the year, though likely less severe than in the first quarter. Our forecast is based on the assumption that the negative trends will gradually lessen over the year, but we anticipate they will still be negative overall. For our three brands, we foresee that the wholesale channel will not significantly contribute to growth from 2026 onwards. This year serves as a reset for these brands. The challenges for Zegna and Tom Ford are partly due to recent wholesale conversions, such as Tom Ford’s changes at Saks Fifth Avenue and Zegna’s adjustments in Canada. Additionally, Zegna is focusing on being more selective with the distribution of iconic products to avoid competition between our direct-to-consumer sales and wholesale.
And also to be more retail-exclusive with some products.
These are products we don't even distribute through wholesale. So the softness of wholesale is driven by these two factors.
For Tom Ford, the focus is primarily on the wholesale conversion. Additionally, we need to understand what level of organic growth is necessary to maintain stable margins, particularly in relation to Zegna, if I understood correctly. We're actively working on this. Gianluca has already mentioned that we are confident the low single-digit growth in terms of top line and EBIT that we indicated in our March call remains valid. I'd like to comment further on that.
Okay. And can I also confirm on Thom Browne within the year, quarterly wholesale?
Yes. On the sales Thom Browne, Gianluca, there is...
There is always more ups and downs. So I would stick on the 25%, 30% on the year because on the quarter, really, you can have anticipated deliveries, especially now that we have the deadline of the 10% tariffs by early July. So I would not stick to the quarters for wholesale even more in this environment. So I would stick to a full-year guidance that we shared about 25%, 30% down wholesale to Thom Browne.
You can expect a percentage slightly lower than the 48% we reported in Q1, but it won't be significantly different this time. I'm not sure if you have any follow-up questions or if we addressed your inquiry.
No, it's all perfect. You answered everything.
And I don't know if Louise, operator, has been able to connect.
Yes, of course. We will just attempt to reopen Louise's line.
I do apologize. I had problems with the audio. Two follow-ups for me, if I could, please. Gianluca, you talked about the very robust performance of the cluster particularly in the U.S. in Q1, and it sounds though that’s continuing. I just wonder, given that they have a huge amount of historical information, but if you think back about the Zegna brand specifically when you've had moments of weakening consumer sentiment in terms of your experience, and we've talked a lot about OpEx on the call as well. But just in terms of the different scenarios you might be looking at periods of time in history that you can talk to us about in terms of the Zegna DTC? And then my second question was a comment. I think, Paola, you mentioned that the main retail KPIs for China are showing some moments of improvement. Traffic is still very challenged. But I wondered if you could talk about those retail KPIs and what you're seeing in terms of improvement.
Thank you, Louise, I'm glad we could connect. Regarding your question, you were asking about the previous slowdown in direct-to-consumer sales for Zegna in the U.S.
It's important to analyze historical periods where consumer sentiment has negatively affected the brand's performance. Unfortunately, we lack access to past performance data. Can you provide any insights? Are we looking at more late cycle factors under strain?
In the past, yes. I would say that the Zegna brand is very different today compared to even five years ago. So making comparisons is somewhat difficult right now because the evolution has been significant, but I will let Gianluca provide further comments.
Yes. Since I joined in 2016, I've witnessed some weakness before the rebranding in the U.S., which was closely tied to the Zegna brand's focus on formalwear. At that time, we had a more conservative and rigid image, often resorting to discounts and relying heavily on wholesale. However, the weaknesses we experienced are no longer present because we have made significant changes. We have reduced our wholesale reliance, eliminated discounts, and completely revamped our assortment.
And also brand perception.
And the brand perception. So I think it's difficult to extrapolate from historical weakness if we are exposed today because I think we tackled those weaknesses by the turnaround and rebranding of the assortment and distribution footprint. So, of course, we can be exposed like everybody to recession risks and the fact that we are seeing today, and also in the few weeks of April, we see that our assortment is well-liked. We see that...
Relationship with customers.
The relationship with customers is very strong. When we reach out to them with our clientele with novelties, with the new drops and content in the new drops, we see traction. We are confident that this leaves us in a more resilient environment also within a context that is definitely the macroeconomic situation we don't control entirely. So...but we control our capacity to convince clients, and we see in the KPIs that you were mentioning before the question; we are seeing good traction, for instance, in the KPIs that are very much linked to our control, which are conversion rates and AUR, which is related to our capacity to deliver and selling rates at the high-ticket items.
In particularly in the U.S., I have to say.
Particularly in the U.S.
And related to this, we control our capacity to convince clients, and we see in the KPIs that you mentioned before the question; we are seeing good traction, for instance, in the KPIs that are very much linked to our control, which are conversion rates and AUR, which is related to our capacity to deliver and selling rates at the high-ticket items. Particularly in the U.S., I have to say.
Within China.
Within China. Yes.
We talk about the KPIs where we see good traction in China are those two: conversion rates and AUR.
Yes. In fact, this was the second question. So in terms of KPI, when I mentioned the positive retail KPI, I was referring to really AUR and conversion rates, which are offsetting the lowest traffic trends. I don't know if we answered, Louise, your questions.
Very helpful.
Thank you very much. I’m not sure if you have any follow-up questions. I believe we are approaching the hour mark, so if there is one final question, we can address it; otherwise, we can conclude the call.
No further questions registered by the telephone lines.
Okay. So before closing, let me remind you that our next release and conference call will be on July 30 on H1 results. And the selling period will start at the beginning of the month. So thank you, everyone, for participating today. If you have any other clarifications, of course, do not hesitate to contact us. Have a nice rest of the day. Thank you. Ciao. Ciao to everybody, and thank you for participating.
Ladies and gentlemen, this concludes today's call. Thank you for joining. You may now disconnect your lines.