Suitmaker Zegna Tears Up 2015 Budget as SNB Shock Clouds Outlook
(Bloomberg) — Ermenegildo Zegna, head of the Italian luxury suitmaker that bears his name, is tearing up his 2015 budget after the Swiss National Bank unexpectedly removed the cap on the franc last week.
He’ll convene top managers today to review everything from the size of stores to pricing, the chief executive officer said in a Jan. 17 interview. Ermenegildo Zegna Group makes most of its made-to-measure suits in Switzerland, which is now more costly after the franc surged as much as 41 percent against the euro, roiling markets worldwide.
“We have to figure out what to do,” Zegna said before the Trivero, Italy-based company’s fall-winter menswear show. “It’s very destabilizing.”
Zegna will renegotiate wages of its largely Italian Workers in Switzerland and possibly pass on some of the cost increases to consumers, the CEO said. He’ll also assess distribution worldwide and personnel as he seeks to generate a “slight” increase in annual sales after a similar decrease in 2014.
The franc’s climb wiped billions off the value of companies, including watchmaker Swatch Group AG, whose CEO Nick Hayek called the decision a “tsunami” for exports. It adds to pressure on Zegna and other luxury-goods makers already squeezed by a slowdown in China and a drop in Russian spending.
Zegna’s revenue reached 1.27 billion euros ($1.47 billion) in 2013, the last year for which figures were available.
Grassy Banks
“Never as in this time have I questioned myself,” he said backstage at the show, which featured tweed coats and velvet jackets set against grassy banks and trees. “Are we doing the right things?”
Some of the company’s about 300 directly operated stores are “too big,” while it probably has “too many” in markets such as India and Brazil, the executive said. And “we have not done a good job online.”
It’s not all bad news, however. North America is doing well and the strong dollar and yuan mean U.S. and Chinese travelers will help compensate for fewer Russian tourists in Europe, Zegna said. Some plans that won’t change this year include the doubling of Zegna’s store on London’s Bond St., and new outlets in Japan, Australia and New York.
“There are some bright spots, but the challenge is how to cope with all these endogenous variables without being hit,” Zegna said. “The fundamentals and the strategy remain the same. It’s the approach and the execution that will change.”
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To contact the reporter on this story: Andrew Roberts in Paris at aroberts36@bloomberg.net To contact the editors responsible for this story: Celeste Perri at cperri@bloomberg.net Kim McLaughlin, Sara Marley
