Zegna Sees Sales, Profit Growth in 2011 as Luxury Clothing Demand Returns

Ermenegildo Zegna, the century-old Italian maker of men’s suits, expects revenue and profit to rise next year as it opens at least 20 new stores, half of which will be in China, the company’s chief executive officer said.

Sales will grow “well above 10 percent” this year, led by Zegna’s biggest market of China and exceed the 870.6 million euros ($1.22 billion) generated in 2008, CEO Ermenegildo Zegna also said today in a telephone interview. While the Trivero, Italy-based company’s margins are improving, 2010 profit will be below the 62.3 million euros earned in 2008, Zegna said.

“The recovery is faster than we expected,” said Zegna, who in January forecast low-single-digit sales growth. All growth is coming from its retail business, which is rising more than 20 percent, the executive said, adding that he expects that trend to continue.

Sales of luxury goods may climb this year to the highest level since 2007, led by demand in China and a rebound in the U.S., consulting firm Bain & Co. said this week. Zegna’s net income in 2009 declined to 17.3 million euros as sales fell to 797 million euros, hurt by falling demand in the U.S. and Japan, the suitmaker said in April. Zegna’s 2010 sales won’t exceed 2007’s record, the CEO said today.

European sales are improving, with Spain being the only country that’s not growing, Zegna said. There is “solid growth” in Korea, the Middle East and Brazil, and a gradual recovery in eastern Europe including Russia, he said. Revenue growth in China will be between 30 percent and 40 percent this year, Zegna said.

Watches

After introducing limited-edition timepieces priced at about $30,000 to mark the company’s centennial this year, Zegna said Oct. 7 it was extending its partnership with Sowind Group to include watch collections starting in 2011. The aim is to sell timepieces with Sowind mechanics priced at 5,000 euros to 10,000 euros in about 80 stores, the CEO said today.

“The market for luxury watches is rising extremely fast,” Zegna said.

Zegna plans to open 10 stores in India in the next three years after signing a joint venture with Reliance Brands Ltd. in September, the executive said. Zegna is also preparing a joint venture in Vietnam, which it hasn’t yet finalized, he said without disclosing the potential partner.

Zegna will open its first e-commerce site in December, targeting Europe, North America and Japan, the executive said.

To contact the reporter on this story: Andrew Roberts in Paris at Aroberts36@bloomberg.net; Holger Elfes in Dusseldorf at helfes@bloomberg.net.

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net.

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