Thank you all for joining. I would like to welcome you all to the Ermenegildo Zegna Group Full Year 2022 preliminary review. My name is Breca, and I will be your event specialist operating today's call. If you would like to ask a question today, please press star followed by one on your telephone keypad. If you do change your mind at any time, please press star two. For operator assistance at any point, it is star zero. Thank you. I would now like to hand the call over to our host for today, Francesca Di Pasquantonio. Francesca, please go ahead when you are ready.
Hello. Thank you, Breca, welcome everyone. Thank you all for joining us as we share our preliminary and unaudited revenues for the fourth quarter and full year 2022. I'm here today with Gildo Zegna, Group Chairman and CEO, as well as our COO and CFO, Gianluca Tagliabue , and Rodrigo Bazan, CEO of Thom Browne . After the presentation, we'll be leaving time for Q&A. Before we begin, I also need to point out that we may make certain forward-looking statements during today's call. Our actual results may be materially different from those expressed or implied by these forward-looking statements. All such statements are subject to a number of risks and uncertainties, including those discussed in our SEC filings. I refer you to the safe harbor statement, which is included on page two of today's presentation, of course, this call will be governed by that language.
Again, we thank you for joining us today, and with that, I will turn the call over to Gildo Zegna.
Good morning to everybody, and good afternoon. I am pleased and on how we performed during 2022. Although the year had its challenges, our growth throughout 2022 shows the soundness and continued success of our strategy and our global reach, as well as our strong execution. I must say that for the last few quarters, Global Luxury has been a two-speed world. Surely the COVID-related disruption in China had a negative impact on our performance, especially in the fourth quarter, during which, on top of the restriction, the country faced a new wave of contagion, creating a market backdrop that has even worse than the one faced in the second quarter in terms of restriction and traffic.
Thanks to a very positive response to our brand and to a good execution, the performance in the rest of the world has over associated for these shortcomings. Indeed, the Middle East and the U.S. continue to be major areas of growth for us. Performance in Europe remains very dynamic. These trends have continued in the first weeks of the new year. In addition, after my recent trip to Greater China, Hong Kong and Macau, I can say that I'm optimistic about China reopening. We are witnessing some early sign of rebound, and while it would be premature to draw conclusion, it is refreshing to see the return of the energy of the Chinese consumer. We are ready to capitalize on the return of the Chinese consumer domestically and in due time, worldwide.
As always, we continue to be centered around our values, our commitment to the environment, our employees, and our communities in everything we do. Our performance against these values always goes hand in hand with our financial performance. 2022 was another year of milestone for the group. From our very first Capital Market Day in May at House of Zegna to our partnership as Real Madrid Official Luxury menswear partner and the launch of Oasi Cashmere in September. I'm particularly excited for our partnership with the The Estée Lauder Companies to become the long-term licensee for TOM FORD FASHION, acquire the related operations, and continue building the luxury positioning of the Tom Ford brand.
Every major step we have taken this year and every strategic decision since we became a public company in December of 2021, has worked towards realizing our long-term vision for the group while remaining true to the values instilled in us by the founder. Now let's give you some high-level figure about our financial performance, which Gianluca will take more in detail shortly. Group revenue for the year reached almost EUR 1.5 billion, up 15.5% year-over-year on an actual Forex basis. This is in line with our mid-teens guidance for the year. In line with our mid-teens guidance for the year.
Revenue for the fourth quarter reached EUR 406 million and went down slightly year-over-year as a result of COVID-related restriction in Greater China Region and the end of the Tom Ford international distribution license agreement, which was covering menswear in the Wholesale Channel. The latter has a negative impact of about 2% as points in the quarter. Excluding the Greater China Region, our revenue were up 24.7% for the quarter and 42% for the year, demonstrating the strength of our performance in Europe, the Middle East, the U.S., and the rest of our.
We are ending the year with an increase in our cash surplus, thanks to a strong cash generation in the second half of the year. As for our Adjusted EBITDA profits, which we will be sharing in April, we expect an improvement in 2022 when compared to last year, despite the challenges we face in China, which were worse than what we anticipated back in October. Please turn to slide number four now. What I wanted to add here, and I think that as always, our success is measured by far more than our financial metrics, and this year has been no exception. A couple of highlights by grouping different chapters of our performance. Let's focus first on Zegna and group updates.
On this part, we made several strides on our road, Iconicity, with the Zegna brand, including the launch of a One Brand strategy in July. There are branding of all our store, which is practically completed, and the accelerated rollout of our clienteling Zegna to consumer app, part of our omnichannel world, which today represent a strong 30% of our total retail directly operated sales. Our relationship with our clients are the bedrock of our success, we will continue to innovate in how to grow and maintain them. In August, we announced our partnership with Real Madrid to become the iconic club Official Luxury travel wear partner, we are very excited for the men's football team to wear our outfit at the upcoming game with Liverpool next month.
Building on our belief that our luxury sports is a great opportunity the group, we announced earlier today the acquisition of a minority stake in Canadian technical trail running shoe company, Norda Run. Norda Run, which produces the world's best performing all-weather footwear, aligns perfectly with Zegna's value of creating the best products from the best material. We also accelerated the rollout of our cashmere Zegna collection in our fashion show earlier this month. So far, items from the collection have made up almost 20% of our total fall/winter 2022 retail purchases. This is an important milestone on our road to traceability. We are committed to certifying its fibers as fully traceable by 2024. The fall/winter show also included a few items from our new partnership with a California brand called The Elder Statesman, which shares our values and devotion to incredible craftsmanship.
The collection, which is already enjoying very strong commercial response by the trade, will be celebrated with a dedicated event at Paris Fashion Week soon. Textile platform. The third textile platform, which is the third pillar of our business, is our Made in Italy, which is our Made in Italy base, continues to develop into a world top supplier of the finest fabric, both for our brand and other luxury and fashion labels. We have seen good numbers from the platform, and Gianluca will discuss later in detail. On sustainability, finally, that has been always a foundation of our value, I would say has been completed with 26 specific commitments during our Capital Markets Day this year.
We are on track to meeting this commitment from the Oasi Cashmere launch, to the submission of our targets, to the Science Based Targets initiative in August. One example of our progress so far is the fact that we are now at 25% of our journey to electric or hybrid plug-in corporate vehicle by 2025. On Thom Browne update, I leave the baton to Rodrigo Bazan with some interesting information to share. Rodrigo, go ahead.
Thank you.
Thank you.
Thank you, Gildo. Good morning and good afternoon. I'm pleased to introduce some of the updates from Thom Browne. We are very pleased at Thom Browne to continue to contribute as a strong driver for the Zegna Group. I also want to briefly note how pleased we are with the jury's decision in a federal court earlier this month with respect to the litigation with Adidas. In its verdict, the jury found that Thom Browne has never infringed on any of the trademark rights of Adidas. Thom will continue to bring his wholly unique and distinctive design aesthetics to this great brand. Earlier today, Thom Browne announced an agreement with its partner of 12 years in Korea, Samsung C&T Corporation, to directly operate our Korean business, which consists of 17 stores through a newly created and wholly owned company, Thom Browne Korea.
Thom Browne Korea will assume direct responsibility for all activities within the Korean market. At the same time, Thom Browne and Samsung C&T will continue their successful partnership through an innovative retail management agreement effective July 2023, through which Samsung will operate the Thom Browne stores in Korea. Our goal remains to double Thom Browne's revenues. We're solidly on track to do so by capitalizing on the brand's unique appeal, taking on further of its integration of our business, and with the support of the group and utilization of some of Zegna's platforms and experience. While at the same time pursuing opportunities uniquely to the brand and growing internationally for the brand's reach.
To the Korean case, I would summarize as it's a win for the branding company, it's a win for the talent that runs our business, the Samsung great team that built a really successful business in Korea with us, and it's a win most important for our clients, which is the most important element of the success of our brand. Now with this, I'll pass back to Gildo to continue the update. Thank you.
Okay. I think that these are overall significant milestones across the Zegna and Thom Browne brand, our textile platform, our sustainability efforts, of other strategic steps we are taking as a group. Despite the challenging environment last year, this milestone and our revenue show that our strategy is working and that we are on track to achieve our mid-term goals. I am particularly proud of the work done as our revenue were achieved despite several headwinds, with growth driven by both Zegna and Thom Browne segment. Even with this impact, the Zegna segment saw full year revenue grow almost 14% year-over-year, while Thom Browne revenue grew over 20% year-over-year. At this point, I will turn to Gianluca for a deeper look at the revenue for the quarter and the year. Thank you. Gianluca, your turn.
Thank you, Gildo. Good afternoon. Good morning, everybody. Gildo has already given our headline numbers. I will go right into the split first, starting from the breakdown by segment at page seven. As you have seen, as we anticipate that starting from this quarter, we begin to provide our growth numbers of sales in constant currency also, in line with common practice. We will continue doing so. During the presentation, I will also comment some time on the constant currency. First, Zegna segment. Looking at the fourth quarter, Zegna segment revenues were down 2.2% year-over-year to EUR 334 million due to the impact of COVID-related restriction in China in October, November, and the temporary store closures we had in December resulting from staff illness after the restrictions were lifted.
Excluding GCR, which is the most meaningful way of looking at the real trajectory of the business, growth in the fourth quarter would have been a healthy double-digits, and I'll show it afterwards in the view of the breakdown by geography. For full year 2022, Zegna segment revenues were up 13.7%, reaching EUR 1 billion 170. This is thanks to the success of the ZEGNA One Brand strategy, which was delivered in the stores with the fall/winter 2022 collection and the upward repositioning of Zegna branded products. As we have seen throughout the year, shoes, luxury visual wear categories continue to perform very strongly, and the tailoring and Made-to-Measure have seen a significant rebound throughout U.S. and Europe.
The textile and third-party products, which both fall under the Zegna segment, have also seen a strong rebound in their B2B activity in 2022. We'll break down these numbers in a few minutes when we see the breakdown by product line. Moving to Thom Browne, as Rodrigo was saying, the Thom Browne segment grew 11% in the quarter and 25% year-over-year for whole of 2022. We are seeing across of all Thom Browne product lines the growth, with womenswear growing slightly faster than men's and children more than doubling. On Thom Browne, we are also seeing the positive impact of the rollout of e-commerce through Tmall in the Greater China Region, solid wholesale orders for fall 2022, and successful selling campaign of spring 2023.
Now moving to page nine, which it's important because gives you a plastic visibility of the two-speed world that we have been managing this year. Our performance around the world, excluding Greater China Region, continues to be very strong. Taking China aside, our revenues were up 24% in the quarter and 42% in the year. If we translate these numbers in constant, they are not so different. 24% in the fourth quarter becomes 21 in constant, and 42% for the year becomes 39 in constant currency for the whole 2022 compared to prior year. U.S., which continues to be an area of focus for us, saw revenue growing 26% in the fourth quarter and 53 in the year, reaching almost EUR 77 million and 270 million for the quarter and the year, respectively.
It's important to remark that in U.S., this growth happened despite the end of our old Tom Ford distribution agreement, which had an impact on Q4 revenues for U.S. of a negative 8 percentage points. This was more than offset, of course, by the strength of the Zegna and Thom Browne collections in the market. Europe, Middle East, and Africa continued double-digit growth in the fourth quarter, with revenues growing almost 23% to EUR 114 million for the quarter, bringing full year revenues in 2020, +37% year-over-year. Of that, the Middle East region constitutes EUR 24 million for the quarter, +35% increase over Q4 of 2021. This brings total revenues from the Middle East and Africa to almost EUR 70 million for the year, +56% increase from 2021.
Italy and the rest of Europe also had a positive contribution to the region, with 41% growth in revenues in Italy in 2022, +43% from the U.K., and consistent performance in all the other countries, driven by both strong domestic demand and dynamic tourist traffic in the region. Excluding Greater China Region, Asia-Pac revenues were at EUR 42 million for the quarter, +27% versus the first quarter of last year. For the full year Asia-Pac with revenues excluding China, was likely above EUR 150 million, +40% year-over-year. With China reopening, this part of the world will be probably one of the first to benefit from resumed traveling, and we are ready to reap this advantage.
Looking at the Greater China Region on its own, revenues for the quarter came in at EUR 130 million, -30% from the same period of 2021, due to all the factors that were mentioned before by Gildo and myself. For the full year, Greater China Region revenues were at EUR 494 million, a 16% drop from 2021. It is worth highlighting that while we had expected a difficult fourth quarter in China, as we discussed when we reported our third quarter figures in October, the actual magnitude of this disruption, the -30% in Q4, and the duration of the store closure was more severe than expected. Customer traffic saw significant declines, and we had around 10% of our stores closed in average in Q4.
On the positive side, we removed markdowns in our DTC in China starting from this quarter, thus aligning the region to the rest of the world. This change adds a low single-digit percentage point on GCR of Q4. Moving to page 11. This is the breakdown by product line. As we mentioned, Zegna branded products were negatively impacted by Greater China Region restrictions, which led to a -2.7% in the quarter, to a number of EUR 274 million. Looking at the full year, Zegna branded products were up 9% to EUR 934 million on an actual currency basis. Sneakers, the categories of luxury leisure wear such as knitwear, five-pocket pants, fabric outerwear, overshirts, as well as made-to-measure and tailoring with Brown, all this drove the growth, especially in U.S., Europe and Middle East.
As for Thom Browne, revenues for the quarters were up 11.4% and up 25% for the year as we previously mentioned. The brand was seeing solid growth across all product offerings and strong wholesale demand. Textile revenues were up 7% in the quarter and 33% over the year in 2022, reaching EUR 37 million and 137 million respectively in the quarter and in the year. All of our textile brands were up by double digits for the year. It's important to remind that we had a delta perimeter regarding Tessitura Ubertino, which was consolidated mid-2021, and this contributed to an additional EUR 4 million-5 million in the year.
Third-party brand revenue grew 30% year-over-year on a full year basis, thanks to the strong deliveries of spring and fall 2022 for Tom Ford, which were the last deliveries under the former distribution agreement, and also strong deliveries for the other brands we serve, such as Gucci. On the other hand, the termination of the old Tom Ford distribution license caused third-party brands revenue to be down 18% for the fourth quarter as the agreement shifted from distribution to manufacturing only, and manufacturing only of formal wear. Of course, this will change when we will have the full consolidation of Tom Ford International after the deal closing. Finally, let's talk about channels split between wholesale and retail.
Let's start from wholesale, which grew double digits for both the quarter and the full year at 16% respectively, and 30.7% in the year. Thom Browne wholesale continued to grow at an exceptionally strong rate, 62% in the fourth quarter and 47.7% for the year, thanks to strong deliveries of both seasonal products and classic collections. Looking at the Zegna, wholesale in Q4 was +21% and +12.6% in the year. This is important to remark that happened despite the termination of our shipments to Russia since February 2022, which is a good sign of the strength of the brand out also of our stores. Moving to the DTC, revenues for the group, including e-commerce, was down 6.8% for the fourth quarter, but up 7.8% for the year.
It's important to look at the Zegna DTC excluding Greater China Region because it's a clear indication of how the brand is performing. Zegna DTC, excluding Greater China Region, was up 20.7% in constant currency for the fourth quarter and 45% in constant currency for the year, which is the indication of our strong results everywhere, basically where we didn't suffer the disruptions. Thom Browne DTC revenues were down 10% in the fourth quarter due to the same restrictions in China, which for Thom Browne is a primarily DTC market. Excluding GCR, retail sales for Thom Browne were up double digits.
Looking at the whole year, Thom Browne DTC revenues were up EUR 546 million and up by very solid double digits excluding China, pushed by strong performance in U.S., Europe, Japan and a solid e-commerce performance. Important to remember that Thom Browne added 11 stores directly operated to its network to the year, reaching at this point a total of 63 DOS at the end of December, now is well positioned to capitalize fully on the China reopening. Zegna largely reduced the DTC store by six. This is to be read also in line with the Z Zegna discontinuation which occurred with the One Brand strategy. With that, let me turn back to Gildo to talk about the final remarks, Adjusted EBITDA and profit guidance for the year which I remember once again we will be sharing in April. Thank you.
Okay. Thank you, Gianluca. Despite the significant headwinds from the Greater China Region, especially from March to May, and then again in the fourth quarter, we met our full-year revenue guidance, and we continue to expect a moderate improvement in our Adjusted EBIT and a substantial improvement in our profit for 2022. We are happy about this result, which we are achieving in spite of a significant deterioration in trading condition in China for all the reasons we have discussed. On the other hand, the response we continue to see as well around the world, which is evident in last year performance and this year so far, underpins our confidence in our strategy and target. We are happy to see early sign of inflection in China too, and strong growth in the rest of the region.
We maintain our medium-term target unchanged, targeting EUR 2 billion in revenue and 15% Adjusted EBIT margin in the medium term. This is all excluding the new Tom Ford Fashion agreement , which expect to be finalized later this year and which we will present and explain in full details as soon as possible after the summer. Of course, this is all assuming no further deterioration of the war in Ukraine, a continuing normalization of the COVID pandemic in China, no significant macroeconomic deterioration and no other unforeseen events. We are now ready to answer questions. Thank you.
Thank you, Gildo. Hi, Breca. You can go ahead with the question and answer session, please. Keep in mind I have received a couple of questions offline, so why don't you start with opening the phone line for questions. Thank you.
Thank you. If you would like to ask a question, please press star then one on your telephone keypads now. We have our first question on the phone lines from Susy Tibaldi of UBS. Please go ahead when you're ready, Susy.
Hi. Hello, everyone. Thank you so much for the presentation. I have two questions. The first one, Gildo, it would be great if you can elaborate a little bit more on your recent trip in China, because we're all quite eager to understand how the situation is evolving there. It sounds like you are really optimistic, and you're starting to see early signs of a rebound there. To give us an idea, do you think that Q1 is already gonna be, let's say, a normal quarter in China? Or do you think there is still, you know, a bit of a tail impact of these restrictions and... Well, not restriction, but you know, people, maybe mobility restrictions in terms of people being sick or stores being impacted at all.
The second question, when we think about the rest of the world, you had very, very strong growth in 2022 that also continued in the fourth quarter. When we look ahead, into 2023, do you think it can be another year of double-digit growth for the rest of the world, excluding China? Are we getting to a point where your comp base is now, you know, you've done so well for a few years, do you think we're getting to a stage where maybe the growth will start to somewhat moderate or maybe just specific regions where you're starting to see maybe any sign of growth slowing at all?
Thirdly, on your profitability, we saw the slight change in the phrasing in terms of the expectations for this year, which are completely understandable because it's the China impact. If I remember correctly, in the past you mentioned that China is a little bit more profitable for the brands, for the group. I was wondering if in 2023, we see the return of tourism in China, so people start to move back to Europe and spend a bit less in mainland China and a bit more in Europe. Do you expect this to be a headwind for your group margin? Thank you.
Yeah. Lots of interesting questions. Thank you. I start with the order. Now, I must say that probably I've been the first luxury entrepreneur to enter China. I'm talking about the luxury side. On the seventh of January, I was there for days, Hong Kong and Macau. Because of visa restriction, I could not enter mainland China, which I will do as quickly as possible. The reason why I wanted to check the temperature, I wanted to see my people again, who I hadn't seen for about three years. I must say that I came back more positive than I expected.
Not only because of my positive mind, because I felt the energy of landlords, of consumer, of investor, and the final clients wanting to come back and to show that Hong Kong is still in good shape. I was in Macau. I saw the major operator, and they had a full booking for this Chinese New Year week, ready to go and all the store looked perfect, full of great merchandise and so ready to go. That was the energy, and I think that when there is a positive energy, it means that we will start running again. I must say that.
in the mainland China, I think we are off to a good start, in particular, you know, during these first three weeks. Traffic is not yet what it used to be, but it's up. I think that, you know, China is back and will be back stronger in the course of the year. I keep a positive mind, in particular after this trip. The rest of the world, I must say that I never fully understood, I mean, all the negative press about Europe and about America in the past six to eight months. I think that the real economy, at least for the luxury, is kind of...
I must say that we enjoyed, probably growth higher than we expected in 2022. To be honest with you, my wish is that we continue the course. You know, let's put it this way, if the locals, like, start buying, regardless of the fear of recession, regardless of the fear of inflation, regardless of the average cost, regardless of the higher interest cost. I mean, if you are a brand that keeps creating excellent product, excellent service, and believes in innovation and is capable to surprise the final customer, I don't see why it should be different than it was 2022. I cannot give you any numbers. We do have numbers that we can share. I am, you know, on that regard, also on a positive side.
One piece of good news is that the Chinese is that it seems that the first destination will be Hong Kong, you know, in order to travel outside the country. Second destination seems to be Japan, and third destination seems to be Thailand. Okay. I don't expect yet to see them much in Europe, to be honest with you, or in the United States. Surely, not in the first half of the year. Hopefully, we start seeing somebody in the second half. I think that we remain prudent of the Chinese traveling to Europe and to the States during the course of 2023, but we remain positive instead for them consuming more at home and traveling more across Asia. I leave the profitability side to Gianluca.
Yeah. Susy, I think... No, the answer is no. If we fear that China business back in China or elsewhere might, especially elsewhere, might dilute the margin. We have lost, if you let me have this word, EUR 100 million of revenues in Greater China because there was a decline of 16% this year. If those EUR 100 million revenue pop up in Europe, which probably, as Gildo Zegna was saying, is unlikely in the short term, or comes out in Thailand or Korea or the delta price is not that much. Of course, it's more interesting to have the margin in China, we took also advantage, a thing that was not mentioned during the call, we took advantage also to realign some prices.
China prices, also with the renminbi weaker now at 7.30, it's in the price index is not as it used to be before COVID. We realign them by raising prices in Europe, especially in Europe, more than in China. We are ready to take advantage of Chinese consumer being back, either in mainland or also elsewhere, and without any fear of having a dilution in the margin.
Okay, understood. Sorry, just two very quick follow-ups. On the first one, that you mentioned on mainland China, I think, Gildo mentioned that traffic is not yet back what it used to be, but it's up. Sorry, I was just confused what... If you meant that the traffic is already up year on year or it's not. Sorry, I'm just confused on that. Secondly, sorry-
Go ahead.
Please?
Go ahead. Go ahead.
Just on the profitability. You kind of readjusted the price gaps. Can you remind us more or less what is China compared to Europe? Because of these price gaps now being more aligned, it means that it doesn't matter where they shop? Just wanted to understand, to see if I correctly. Thank you.
Traffic is up, I would say double-digit, compared to last year. It's not yet where it was. We hope that, you know, it gradually will increase. Maybe there are some differences, you know, around the country, the trend is positive. Gianluca, you want to respond to that question?
In terms of pricing, at this point we are, let's say EUR 130- 140 in the apparel, and EUR 120 in the leather goods, which is shoes and bags, something like that. It was not the case, it was higher before, and this reduction came through price increase, higher in Europe than in China.
Okay. Thank you.
Thank you, Susy.
Thank you.
Breca, we can move to the next question, please.
Perfect. Our next question comes from the line of Matt Garland of Deutsche Bank. Please go ahead. Your line is now open.
Hi. Thank you for taking my questions. Just a couple of quick follow-ups to what we've just discussed. In terms of, I guess, the increase in pricing last year and then what you're thinking about this year, can you kind of quantify exactly how much that's been? Mid-single digit, high single digit, just some context around that would be useful. In terms of, I guess, the percentage of sales from Chinese consumers coming into Europe, do you have a sort of idea of what the magnitude of Chinese consumer spending in Europe was on a pre-COVID basis? Just two quick follow-up questions.
One was just in terms of Thom Browne in Korea, can you give an indication of sort of the magnitude of that switch in terms of how it should help sales growth into next year? Just as a last question, I know that you've obviously focused around iconic building blocks as being a big part of your medium-term strategy. For sort of the growth in the Triple Stitch shoe, how has that kind of trended across this year? Have you sort of seen the acceleration? How should we sort of think about that? Thank you.
Yeah. Let me start with the last one, and then I'll let Gianluca do the first one and Rodrigo do the second one. Now, I would say that iconic is not only the Triple Stitch, which we have seen a continuous growth throughout the years and across the country. I must say that we are expanding the family. As a matter of fact, for winter, we have introduced an evolution of the Triple Stitch on a winter version, which is going to be very attractive. We have expanded the color range.
We have expanded the leather offer, you know, with, for instance, the inside of the shoe is warmer, with the, an iconic fabrics or, that, you know, that keeps your, your foot warm. We see that this trend will continue. That makes us very pleased because it's a shoe that gives you know, several possibility to wear and possibility to wear with different lifestyle as the family expands.
Beside that, we have other iconic project and product, and I must say that cashmere, the traceable cashmere, of course, the cashmere is going to become an iconic product, not only through the knitwear, through the puffer, through other luxury outdoor pieces that go, you know, in the skiing direction. I think that is a mix between technicality and luxury. I think that these are some of the icons.
We will continue the journey across next season. I cannot anticipate you anything, but we have another extraordinary project to continue the iconicity route, which I think is very important, not only in helping the store look focused and exciting, but also to improve our penetration throughout the digital world and social media, you know. I think that is, when you have a strong icon, it's easier to tell a story. Behind, I think that, it helps in the journey to create a more appealing and modern brand. I don't know if that answered the question.
Yeah. Did you, do you also see growth in, sorry, the Triple Stitch above-
Yes
Sort of the group rate?
Yes. I think we will continue growth, this year along similar lines as we have seen in 2022. As a matter of fact, we still have some market to conquer, so there are some markets that are fully penetrated, markets that are penetrated, not fully. So just a question to do. And the other good thing is to do a balance between retail and wholesale. You know, initially we really pushed the product to retail. Finally, wholesale is coming and is appreciating, when they come back, with refill. And I must say this essential program, I mean, about 50% of the shoes in Triple Stitch family is thanks to the replenishment program. That was incredibly helpful in this product and in other products.
For instance, we have the both the sweater and the 5 pocket pants that are both iconic pieces, and are really enjoying the same advantage of their replenishment program. I think it's a, it's a mix of, you know, merchandising, of supply chain and of storytelling through social media that creates the buzz beside the product itself, which I think is a winner. Gianluca, you picked the one on-.
On price increase. Price increase, I refer to spring 2023 and to the upcoming fall 2023, which we are selling now. In average, it's an average that sees two faces. In average, we might be in the mid-single digit, but it's more on the high side for the Western world, and it's in the low side in China, as I mentioned before. It's asymmetrical. As it regards to Chinese in Europe pre-COVID, this is a tough question to test my memory. I think it's around 15%, but I take the freedom to come back to you through Francesco if the number is substantially different. I think it was something like 15%, Chinese in Europe.
Okay. Thank you.
Rodrigo on Thom Browne.
Sure. I think the question is focused on Korea. We are extremely pleased with the evolution of our business, which was done in a very collaborative way with Samsung. This is gonna be a meaningful evolution of our sales and profit in the Korea business. It's a very important business for Thom Browne, extremely well-positioned, and I have to recognize the great job that Samsung has done. As I said earlier, it's a win for brand and company because we continue to expand our DTC with the benefits on data, benefits on farther stock availability and stock efficiencies in the country, and stock opportunities.
From a data point of view from clients, it's a win because we secure the best potential talent to run our business with us, and it's a win for the client because ultimately the most important is the client experience and the client opportunity. We are very strong clienteling, and this is just. It couldn't have been a better news for our future in the Korea business.
Great. Thank you.
I think we can move to the next question.
We now have Oliver Chen of Cowen. Please go ahead. Your line is open, Oliver.
Hi. Thank you very much. Regarding what you're seeing in China, what are your thoughts on inventories and how you're thinking about inventories in the context of reopening? On your comments on traffic, Gildo, would love your sense on if you think they'll continue to be volatile and how traffic may proceed. Second question, the U.S. continues to be quite remarkable, and Zegna, the One Brand strategy looks really solid. What are key priorities for the U.S. market? Elder Statesman is a great L.A. brand. Would love your thoughts strategically on why this made sense. Third question, sustainability is a core competency at Zegna. Would love your thoughts on how this appeals to the younger customer and the consumer side of traceability and what you're seeing with demand there. Thanks a lot. Yeah. Okay.
Let me pick on America we change region for a second. I see America still strong, both in retail and wholesale. I don't know how other do, we are doing particularly well because our rebranding and our remerchandising is very appealing. I think it is very unique beside some of the what other competitor like Buccellati or Loro Piana do. Because I think we have a good follower from the more mature clientele, we are gaining a lot of interest by a younger client. I'm not saying the children of the loyal, patient.
We are talking to my generation, the 50% and 60%, which are the backbone of the Zegna tailoring, was the backbone and is the backbone of Zegna tailoring, but we are catering more and more to the 30 years old guys that are appreciating what we do. That says a, is a general thought. Second, we are opening more store. I think that our network in America is okay, but I think that a more regional resort area or maybe what we considering a mid cities, you know, can be appealing to us, so we are gradually expanding the number of those. Third, there is this transformation, gradual transformation from on sale into concession in certain doors.
For instance, we'll be finally opening our Fifth Avenue store in Fifth Avenue, New York, which I think it will be a big game changer. For instance, we are opening another door with Bloomingdale's after the success we had in 57 New York store. I think that all that is really helping our enrolled journey to the United States. Traffic in China, you know, if the situation remains open, the consumer is there and is willing to spend money, I think that he has been spending very little money. It's a little bit like the American consumer, you know.
One of the reason why America literally exploded last year is because, you know, the consumer, I mean, had been sitting at home or wherever in the country and was anxious to go back and spend their money. I think that is a similar story with the Chinese. As soon as you open up and people are not afraid to be seen, you know, around, you know, they will. With the offer of luxury brand they find, I mean, they will be, you know, inclined to spend. I think that it will be a gradual improvement.
I do believe that the country will stay open and the situation will improve both in land and outside by favoring first Asian destination before European or American one. You know, it's very hard to make. I'm sure if you ask three different brands a prediction, each one will say different. I. That's my feeling. I must say that I hope not to be wrong because it will be the third time that China bounces back strong. When China comes back strong, you know, more than the other, okay. This time we can say America came out also very strong.
We are talking about a luxury consumer that is more resilient to many of the phenomenon that we read on the paper more and more, the energy prices, the inflation, the recession. Provided you can offer him or her something special and something exclusive, I think that they will keep spending. That's my point of view.
Gianluca, would you like to take the question on inventory in China?
Yes. I finished the question also of Deutsche Bank before. Chinese in Europe pre-COVID 2019 were 14.9%, so it was close to the 15% they said. Inventory in China, I think it's interesting to share how we manage inventory in China this year, and then where we stand at this point. Having an integrated supply chain, we were quick enough during the first disruption of March, May, and March, May, to redirect several merchandise that was devoted to China on essentials.
On the last day of the spring, full summer season, we redirected this merchandise to the markets that need it. This helped not losing, not missing sales opportunity, either in Dubai or in U.S. or in the touristic destination in Europe. In terms of fall, winter, and especially spring 2023, we didn't cut so much the Open to Buy. At this, ready to take advantage. If the market is growing, we have a good inventory coverage on the spring 2023 and essentials for the months to come. We see it in this way.
Finally, the sustainability and younger customers question.
No. About the younger customer, I think I've answered and the new products that we are launching, I mean, are really well received by the younger clients that are coming back. It's not that they just buy once and they stay out. On the sustainability side, I think the angle there is the traceability. Traceability is important because they understand where the material come from. Every time you see Oasi ticket, it means that the fiber is traceable or is in the process to be fully traceable. We will continue along that line. I think that the younger customer, yes, is more sensitive to that phenomenon than the mature customer.
I think that everybody is interested to know where not only the product but the fiber come from. understanding the articulate process which is the one that you know from ship to shop. That Zegna has and is unique to anybody else to the textile luxury platform. Thank you.
I have a couple follow-up.
Thank you. Thank you, follow-up.
O kay. Quick, because we have a few other questions on the line. Thank you.
Just on Thom Browne, I've been wearing it for a decade, Rodrigo. Just what's happening with SKU proliferation over time, and maybe we can follow up offline? The assortment has attractively expanded, but would love your thoughts there. Thank you. Best regards.
Thank you. Thank you. We love passionate long-term clients. Just to understand, SKU, you're talking about the size of the collections?
Breadth and depth, as you continue to have really nice growth, how you see the assortment evolving? Yeah, the size.
First, over seven years I've been with the company, we did a significant expansion, namely women's has become a significant business. At the same time, I think we have also focused the collections, and specifically during COVID, we managed to really focus the collections by a third with a very, very focused approach. We are having a very consistent seasonless business. That's a large archive of items that have been sold at least weekly or daily for over a year, and then we continue to fit them in specific periods of the year, and we also have very focused seasonal collections.
What we are working farther is also a strong focus on bags and shoes for the next years to come to make that business, as we committed in the capitals markets, to make them a quarter of our revenue over the next couple of years. We have focused expansion, but very focused at the same time. We do love the size of our stores. We do like the clarity in the message. We do like also the season-less focus of the classics collections with a focus on seasonality and newness.
Best regards. Thanks.
Thank you.
Thank you. Breca, can we move to the next question, please?
Of course. The next question comes from Ed Aubin of Morgan Stanley. Your line is now open.
Good, good afternoon. Good morning, guys. Congratulations for the good sets of results. A few from me. First one, Gildo, just on the clarification on China. Just to make sure I understood, you said that, you know, traffic was up double-digit, you know, at the beginning of the year, but it was not yet where it was before. You're talking sequentially, right? Not year-over-year, because I assume traffic in January 2022 was up back then. Just if you would, if you could clarify that would be helpful. Number two, on China, sorry, I know you already had a lot of questions. Your sales were down 16%, as you said in the full year.
You know, not to ping you with, you know, detailed guidance or anything, but, you know, if you were to be up 20%, that would mean, you know, kind of flattish versus 2021, up 30%, up 9% versus 2021. You know, would that be kind of a range and you think up 30% is, you know, is the ball. I know you don't have a crystal ball and there are many uncertainties, but just, you know, how you think about the rebound, that would be helpful. Maybe a last and longer term question.
You know, you have, you know, a great success with your casualization efforts over the past few years. Some of your peers, you know, have observed a trend towards more return of to formal wear. Have you kind of noticed the same, or is it just simply that, you know, about men wanting to dress up better overall after the pandemic, either, you know, formal wear or casually? Thank you.
I start with the last one, since it's different from similar question until now. We are part of that. I mean, the fact that we are not talking about clothing any longer, it doesn't mean that we are out of that. On the contrary, it remains the core of Zegna. The fact is that unless we keep talking about casual wear, the message doesn't get through the customer mind. You know, you enter today a Zegna store, you feel that we don't sell suits any longer, but there are still many suits and a good offer available. We offer a super Made-to-Measure program, and we keep selling suits. For me, it's a fait accompli.
I would say to give you a trend, we are not yet back to the suits where we're selling in 2019, but we are not very far. It means that from the, you know, the down that we had in 2020, we have been gradually coming back. I must say that this fall we have seen an uplift in the sale of clothing, which is suits and jacketing, and I would say a good trend of Made-to-Measure. We are promoting the casual wear, but we are still selling a good number of suits and jackets. Our Made-to-Measure project is increasing.
In terms of traffic, I'm comparing traffic for the period. You know, we are tracking traffic on weekly basis. I can tell you that traffic is up double-digit compared to the same period of 2022. That's the comparison. The point is that, you know, we had a quarter in which we had a good percentage of our stores that were still closed. You know, the fact that they're open surely makes a difference. Even though we had a second phase of COVID in which we had to re-close the shop because of COVID, you know, the.. It has been going through so many phases in 22 that it's really hard to compare notes. When I say there's a uplift of traffic, I compare it to a period in which traffic was already quite normalized. Gianluca, you want to answer?
To the last question on China.
To the other question in China. It was about what?
It was about, what we see, relative to 2019.
Yeah.
China in 2023.
In terms of potential growth. I don't think we can give much
No. Maybe Gianluca wants to give some color.
Of course, we are not giving guidance on 2023. We will give it in April. I reiterate what Gildo was saying. Of course, compared to last year, you have to take into consideration that there is a slight difference in timing of Chinese New Year. If you look, and we did it, and we looked at 2020 before the horrible start of the pandemic. If you isolate until the 20th of January of that year, are comparable because the Chinese New Year that year was on the 25th. This year is on the 22nd. Comparing those before the pandemic burst out, we are quite significantly ahead. It's the double digit that Gildo was mentioning. We are tracking well compared to that normal and same Chinese New Year. We are comparing.
We are tracking well against our budget, which of course doesn't mean anything to you. We are seeing good traction. Of course, it's just three, four weeks, and we are subject to the volatility of risk of after Chinese New Year, some wave of illness, hopefully not. That's why we cannot commit to any guidance. I think nobody can do it in this moment because we have seen so many ups and downs.
Okay. Thank you so much, guys.
Thank you, Ed. We move to the next question, please.
Thank you. Your next question comes from Mark Rogers of Sidman Advisors . Your line is now open.
Hello, everyone, thank you for the question. My first question is for Rodrigo. We have observed a wide range of promotional activity across different wholesale channels for Thom Browne. Specifically when we look at companies like Farfetch, we see a much higher level of promotion, % discounts, and a greater % of total SKUs being discounted. We look at other wholesale channels, the level of promotional activity, it's there, but it's less, and many SKUs remain full price. Specifically for Thom Browne, how is the company thinking about the optimization of wholesale channels? I guess you can answer for all the brands, Thom Browne, Zegna, and Tom Ford over the next year.
My second question for Gildo is if you could comment on a recent article that suggested that some of the millionaires and billionaires of the cryptocurrency industry are shifting their luxury fashion preferences from, let's call them flashier brands, like say a Versace, to what I would call understated elegance like a Zegna. The article actually specifically called out Zegna. Is this something you are seeing in your sales activity, specifically in the U.S.? Can you discuss how your marketing campaign and outreach targets this group of buyers, if at all? Thank you.
Start with the last one. Let Rodrigo go. Yeah. Okay. I think that you kicked in a key niche. I don't know which article you saw, but I enjoyed the recent FT article on ultra-luxury or uber-luxury consumer, in particular focusing the U.S. and taking New York as an example. I enjoyed really reading the article because exactly this is what is happening at Zegna. We have lifted the bar way up, we are literally doing extremely well in New York and in other capital of the United States because we are finally offering the best of the crop that Zegna can have. I think this goes beyond. This goes the talk of casualization. Of course, casualization is part of that.
We are literally selling also in the clothing and tailoring. The most of what we sell is handmade tailoring or what we call our couture line, and in the most expensive fabrics. We have introduced a project called 12milmil12, which is the finest wool in the world. It's as fine as cashmere, and we can't keep it enough stock. We're creating that icon project. Actually, we never talked about it because so niche, more color and more style. Vicuna is coming back. Worsted cashmere is coming back. Every time there is something super special, something super exclusive, there is certain customer that go for it.
Yes, we are encountering that. And it's hard to stay, you know, up to the request because we are talking about extremely exclusive product with very refined and limited material, you know, that are hard to find. We are surely creating something more appropriate for that demand already for fall/winter 2024, but we see a strong increment in that niche. To be honest with you, it's very few who can go for that. It could be the Zegna, it could be the European in particular, you might have some Cucinelli, you might have some Kiton, that's it. And you know, that's the reality.
I would say probably it's more a men's phenomenon than a women's phenomenon. If we take advantage of our unique Made-to-Measure project, you can really dress up any type of man into that, providing a great service and making sure that if you don't have any stock in the shop, you can let them have the product at home with the unique service. It's becoming an important part of our American retail business. To be honest with you, the other part which I think is important was mentioned, evening wear. Evening wear is becoming for tailoring something very, very important because if you go for a soiree or you want to show up, price is not an object.
You just want to have something unique, something special nobody else can do. That's another big niche, that we are coming up with, and we're going to have in every major store an evening wear, you know, offer that is not only a tuxedo. You know, it's creating a casual style within upper luxury evening wear. It's... To be honest with you, if I may say, Tom Ford, I mean, is the best example of that. I don't see why it cannot be expanded further with Tom Ford, but until Tom Ford is our, surely we will do that with Zegna. Surely we have not taken enough care of that niche.
Just people just want to go out at night, enjoy themselves, and just wear exclusive things. I mean, I don't know. I'm sure you have... I don't know your age, but, you know. I've got two sons in their thirties. I don't know. I can't... They have more wedding in one year than the wedding I took part in my 60 years all of life. It's... Every time you go to a wedding, you want to wear something different, not only the she, but also the he. To cut a long story short, yes, we are on top of that, and I think it's going to be quite an interesting opportunity. Starting in the States, but I don't see why we cannot take it throughout our country. It's just a matter to establish, you know, a reputation in that and provide it into your store with a proper service.
I hope that answers, Mark, and we'll leave Rodrigo to answer your last question.
Sure. Thank you for the question. Just to clarify, we really believe on a healthy business in the long term. That's why we very leads with the ownership of Zegna also for Thom Browne, with Thom and Zegna. Just to clarify, we only discount products past Christmas, which is a number of weeks later than a number of brands across the world. In fact, we did see a lot of competition discounting, offering discounts officially four weeks ahead of time in China and also in other, in the Western world. We did not follow that policy. The only thing that we discount is the seasonality of the fashion part of the collection in excluding only down jackets and outerwear for the season. With regards to Farfetch, we have a very deep partnership. We work with them on several platforms.
We've been working so deeply with them across the board since 2017. I can confirm you that over the past years, they've always confirmed to us that we have the lowest level of markdown contribution in the platform. I have different information. We are a seasonal brand. We're a fashion brand and luxury brand. We have a substantial seasonless business which is not discounted, and we have a component which is seasonality, and we're still a clothing brand largely. There will be a component of markdown, but it's certainly healthy, tight. We only have seven stores until Christmas last year, which are outlets for us, out of 105 at the end of the year, with the 8th opening just after Christmas.
We have a very, very limited component of markdown in our overall revenue. It's very healthy. We don't sell any product outside to be discounted, and it's only dealt with in our outlets in a very, very elegant way and months after it left the store. We really believe in that, and we want to continue that way. Just to finish on wholesale versus DTC. Clearly, with the announcement today of Korea, us taking over the ownership of the business in Korea, our DTC will naturally become bigger than wholesale. As we have said in the past, we do like wholesale, but we do like wholesale because of the opportunity to put product in front of many more eyeballs.
Our biggest goal is to expand our customer base while keeping our customer base very, very well served and taken care of and continue to evolve with them. For that, wholesale is good, it's excellent, but we are 150 doors in the world in fashion and luxury. We work with them not to push volume, but just to represent the collection well, to buy it with a point of view, with creativity, is fashion, the way they also buy it. Our goal is just to keep that component without pushing volume out, but having the best representation in wholesale.
Thank you for the clarification. Great answer. Look forward to speaking to all of you soon. Best of luck.
Thank you so much.
Thank you, Mark. Thank you, everyone, thank you, operator. I will give back the line to you for closing the conference call, unless there are any additional questions.
Thank you. I can confirm we have no further questions. I will close this call here. Thank you all for joining. You may now disconnect your lines.
Thank you. Bye-bye.