Zegna’s IPO Path Raises Question: Is This the Next Big Fashion Trend?

Image for representation

Ermenegildo Zegna is bringing a new luxury product to the New York Stock Exchange itself. And it is doing it in the most financially trendy way.

On Monday, the Italian company known for its master of the universe suits will become, it says, the first Italian fashion brand to list on the exchange. It is going public by merging with a shell corporation known as a special purpose acquisition company, the Wall Street fad product better known as a SPAC. Zegna’s SPAC, which was created by Investindustrial, is led by Sergio Ermotti, former CEO of UBS.

The offering may be the zenith of the luxury industry’s rebound in 2021 after the pandemic closed stores across the globe in 2020, causing revenues to plummet — so much so that Ermenegildo Zegna, Zegna’s chief executive, who goes by “Gildo,” compared it to his “World War III.”

But the arrival of vaccines set off consumer optimism that helped drive growth in the luxury market to nearly 30% over 2020, according to Bain Consulting Group, and Zegna said he and Investindustrial felt it was time to take advantage of the moment. And their move may, he said, start a new trend in the industry for 2022 as well as signaling Italy’s comeback to the world.

This year “has been the year of Italy,” Zegna said in an interview Friday at the Zegna boutique on West 57th Street in Manhattan. “It will be the year of our story, and I think for the rest of the industry as well. It’s a moment where Italy has an amount of energy that we want to create a position in the world.”

He added, “We are the first one in fashion to go, so maybe these will open up for more to come.”

Zegna spoke alongside Andrea Bonomi, who runs Investindustrial.

The deal, which values Zegna at about $3 billion, will give the company about $760 million in new funding while allowing its founding family to retain a roughly 66% stake. Zegna (pronounced ZEN-ya) now has nearly 300 stores across the globe. It expects to bring in about 1.2 billion euros (about $1.35 billion) in sales this year.

Last month, Zegna announced that it was folding its three lines into a single collection with a premium price point under the global creative leadership of designer Alessandro Sartori. It also said the brand name would be “Zegna,” dropping the first name of its chief executive and his grandfather, who founded the company. (“Personally, I’ve been affected,” he said with a laugh.)

It also unveiled a new double-striped logo, meant to harken back to Road 232 in the mountains of Northern Italy where Zegna was built. And it is increasing its focus on casual wear and digital content and outreach as the pandemic hastened changes already underway in how people dressed and interacted online. At the same time, it is repositioning itself as a pure luxury brand.

Zegna is “trying to build themselves a space in the formal and elegant, informal market,” said Luca Solca, a retail analyst with Bernstein in London. “In the most recent years, they’ve done a lot of homework to be more credible and more appealing outside of formal wear, and I think they’ve gone a long way with that work.” Continuing to demonstrate that shift may be among Zegna’s biggest challenges, Solca said.

Zegna believes that its origins as a textile manufacturer will help it make the shift. To this day, the brand’s mills provide luxury materials for some of the world’s premier brands, including Gucci, Prada, Chanel and Dior, not to mention Tom Ford. (Ermenegildo Zegna is also on the board of Tom Ford, and owns 15% of the company.)

To further ensure its supply chain, Zegna teamed with Prada this year to each buy 40% of Italian cashmere producer Filati Biagioli Modesto, and Ermenegildo Zegna said Zegna might use proceeds from the IPO to further invest in Italian textile manufacturing.

Control over production has the added benefit of ensuring traceability and sustainability, an increasing focus of the younger generation of customers Zegna is courting. One of the brand’s most celebrated assets is Oasi Zegna, a sprawling Italian park in Trivero, Piedmont, the brand’s hometown, which was created by Zegna’s founder to preserve the local ecosystem that is 30 times the size of New York’s Central Park (as the company boasts in the investor deck it prepared for the SPAC). During the interview, Zegna proudly pointed to his sneakers, made from recycled components, and the fact that the brand now has a program to reconfigure the scraps of fabric left on the cutting room floor so they no longer go to waste.

But even with quality and supply chain on its side, Zegna, as a public company, will be competing with the French giants of luxury that have spent decades plucking up the world’s best-known brands. LVMH Moët Hennessy Louis Vuitton, which has amassed a stable of over 75 brands including Tiffany & Co., Dior and Pucci, has grown to a market capitalization of nearly $400 billion. Kering, the owner of labels like Gucci and Saint Laurent, is worth nearly $100 billion.

“One part of the reason we did what we did is because of scale,” Zegna said of the decision to go public. “Scale — it’s our agenda — don’t ask me how big scale would be, but surely bigger than what it is right now.”

Footnote: (Author: Lauren Hirsch and Vanessa Friedman)/(c.2021 The New York Times Company)