Ermenegildo Zegna N.V. (ZGN) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary indicates a solid financial performance with improved free cash flow and net cash surplus. The Q&A section highlights cautious but optimistic guidance, especially in China and the Middle East, and strong DTC growth. Despite some currency headwinds and uncertainties, the overall sentiment is positive, supported by strategic pricing and marketing plans. Given the market cap of approximately $2.9 billion, the stock is likely to see a positive reaction, between 2% to 8%.
Key Financial Performance
Revenues EUR 1.917 billion, down 1.5% year-over-year on a reported basis, but up 1.1% on an organic basis. The decline was attributed to adjustments in wholesale operations and provisions related to trade receivables.
Gross Margin 67.5%, an increase of 90 basis points year-over-year. This improvement was driven by a higher proportion of revenues from direct-to-consumer (DTC) channels, which have higher margins compared to wholesale.
Adjusted EBIT EUR 163 million, including EUR 10 million provisions for losses on trade receivables due to Saks Global Chapter 11 procedure. Without this provision, adjusted EBIT would have been EUR 173 million.
Profit EUR 109 million, up 20% from EUR 91 million last year. The increase was supported by a lower effective tax rate and operational improvements.
SG&A Expenses EUR 1.034 billion, representing 53.9% of revenues compared to 51.8% last year. The increase was due to investments in talent, systems, store network expansions, and negative operating leverage from wholesale streamlining.
Marketing Expenses EUR 121 million, equal to 6.3% of revenues, consistent with the prior year.
CapEx EUR 103 million, representing 5.4% of revenues. Investments were focused on store network expansion, production facilities, and IT systems.
Trade Working Capital EUR 408 million, equal to 21.3% of revenues, down from EUR 460 million and 23.6% of revenues last year. This improvement was due to better inventory management and control of trade receivables.
Free Cash Flow EUR 82 million, up from EUR 10 million last year. This increase was achieved despite significant CapEx and lease liabilities.
Net Cash Surplus EUR 52 million, compared to a net financial indebtedness of EUR 94 million last year. This improvement was driven by positive free cash flow and proceeds from the sale of treasury shares.
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Operating Highlights
Tom Ford Fashion Show: Haider Ackermann's third runway show in Paris showcased innovative knitwear garments and reimagined iconic leather pieces, receiving wide acclaim.
Thom Browne Sneaker Collaboration: The Thom Browne sneaker collaboration with ASICS launched globally on March 2, supported by high-visibility pop-up events in major cities, exceeding revenue expectations and attracting new customers.
Zegna Fragrance Collection: The 'Memory' fragrance collection launched, translating Zegna's history into scents, with a global rollout continuing through 2026.
Middle East Market: Despite short-term adjustments due to regional complexities, the Middle East remains a key market, with resilience expected in the long term.
Los Angeles Market: Zegna plans to showcase its Spring/Summer '27 collection in Los Angeles, emphasizing the city's role as a dynamic market and cultural hub.
Revenue Performance: FY 2025 revenues reached EUR 1.917 billion, a 1.5% decline year-over-year on a reported basis but a 1.1% increase organically.
Gross Margin: Gross margin improved to 67.5%, driven by a higher share of direct-to-consumer (DTC) sales.
CapEx Investments: CapEx in 2025 was EUR 103 million, with significant investments in store networks, production facilities, and IT systems.
Cultural Initiatives: Zegna is sponsoring the Italian Pavilion at the 61st International Exhibition La Biennale di Venezia and continues its partnership with Art Basel, positioning itself as a cultural platform.
Shoe Factory Development: A new shoe factory near Parma is under construction, expected to be completed in 2026, aligning with long-term operational goals.
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Risk or Challenges
Middle East Conflict Impact: The ongoing conflict in the Middle East poses risks to the company's operations in the region, which represents a mid-high single-digit share of the group's total revenues. The duration and implications of the conflict could affect the global economic outlook and the company's 2026 results.
Saks Global Chapter 11 Procedure: The company incurred EUR 10 million in provisions related to losses on trade receivables due to Saks Global's Chapter 11 bankruptcy procedure, impacting adjusted EBIT across segments.
Increased SG&A Expenses: SG&A expenses rose to EUR 1.034 billion, driven by investments in talent, systems, organization, and store network expansions. This increase, coupled with negative operating leverage from wholesale streamlining, could pressure margins.
Thom Browne Segment Performance: The Thom Browne segment was significantly impacted by a reduction in revenues due to wholesale streamlining, resulting in only EUR 1 million of adjusted EBIT.
Tom Ford Fashion Segment Losses: The Tom Ford Fashion segment reported a loss of EUR 16 million in adjusted EBIT for the first half of 2025, although it achieved positive adjusted EBIT in the second half.
CapEx Increase in 2026: Capital expenditures are expected to rise to approximately 7% of revenues in 2026 due to investments in a new shoe factory and other projects, which could strain cash flow.
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Guidance & Outlook
Middle East Market Outlook: The Middle East remains an important region for the group. While short-term activities are being adjusted due to the current situation, the region is expected to play a significant role in the long term, supported by the resilience of customers.
Thom Browne Collaboration and Customer Acquisition: The Thom Browne sneaker collaboration with ASICS is exceeding expectations in terms of social media visibility and revenues. This initiative aims to attract and retain new customers, with a focus on driving meaningful customer acquisition.
Zegna Fragrance Collection Rollout: The Zegna fragrance collection, 'Memory,' is undergoing a progressive global rollout through 2026, translating the brand's history into a unique product offering.
CapEx Projections for 2026: Capital expenditures in 2026 are expected to increase to approximately 7% of revenues, driven by investments in a new shoe factory in Parma and other production and IT initiatives.
2027 Strategic Vision: Zegna plans to present its Spring/Summer 2027 fashion show in Los Angeles, showcasing its collection in a dynamic market and reinforcing its long-term vision of integrating fashion, culture, and landscape.
Middle East Conflict Impact on 2026 Results: The potential impact of the Middle East conflict on 2026 results is uncertain and will depend on the duration and broader implications for the global economic outlook.
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Shareholder Return Plan
Dividend Policy: The Board of Directors proposed a dividend distribution of EUR 0.12 per ordinary share, totaling approximately EUR 32 million.
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Key Q&A
Q:Can you provide an update on the latest trends you are seeing by different regions and nationalities?
A:The year started well with a trend slightly better than Q4 '25 in DTC. China showed some sequential improvement, but the company remains cautious with a flattish performance expected for the year. The Americas and Europe remain resilient, with good growth continuing. The Middle East faced uncertainties due to the conflict, but overall, the first 8-10 weeks of the year were positive.
Q:Why do you believe the Zegna segment's EBIT margin in 2026 shouldn't be higher than in 2025?
A:The Zegna segment's EBIT margin in 2025, excluding Saks Chapter 11 provisions, was close to 15%. Management is focused on long-term brand trajectory rather than short-term results. Currency headwinds of around 2 points are expected to impact profitability in 2026, leading to a sideline movement in group profitability.
Q:Have you seen any changes in consumer behavior in the last few weeks, particularly in the Middle East?
A:No significant changes were observed outside the Middle East. In the Middle East, stores initially closed and later reopened with reduced traffic and energy. The brand remains well-placed in the region, and customers are expected to buy outside the area. The company is maintaining strong relationships with local partners and clients.
Q:What is the pricing strategy for 2026?
A:The company continues with low mid-single-digit price increases on a like-for-like basis and an upward mix evolution. This strategy offsets cost factors and maintains excitement in stores through frequent new product deliveries and exclusive collections.
Q:Have you reduced or suspended shipments to the Middle East due to the conflict?
A:Most of the spring/summer collection was delivered before the end of February, with some summer deliveries still pending. The company is monitoring the situation closely. Relevant stores in the Middle East have more variable than fixed rents.
Q:What are the margin drivers for TOM FORD in H2 2025?
A:Margin improvement came from better full-price sell-through and a slowdown in OpEx growth after building the TOM FORD infrastructure. The company expects further EBIT performance improvement in 2026.
Q:What is the exposure to tourist spending at the group level?
A:Tourist spending is minimal. Greater China is mostly locals, America has low double-digit non-locals, and Europe has 30-40% tourist spending. The client base is skewed towards locals and the top of the pyramid.
Q:What are the expected growth trends for the three brands in 2026?
A:DTC growth is strong across all three brands. Wholesale is expected to contract: Zegna by mid-teens, TOM FORD by single digits, and Thom Browne by solid double digits but less than last year. FX headwinds of 2 points are expected to impact revenues.
Q:How is profitability moving for Thom Browne and TOM FORD relative to targets?
A:Both brands are growing well in DTC. Thom Browne is expected to return to reasonable profitability in 2026 after a tough H2 2025. TOM FORD is expected to show substantial EBIT improvement in 2026. Longer-term, both brands aim for double-digit EBIT margins.
Q:What is the current trend in China and the outlook for 2026?
A:China showed some signs of improvement, particularly in Hong Kong and Macau. Chinese New Year performance met expectations. The company remains cautious for 2026 but sees potential for gradual recovery.
Q:What is the marketing spend strategy for 2026?
A:Marketing spend is expected to remain around 6% of revenues, focusing on cultural and art initiatives, exclusive events, and maintaining customer engagement.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the split of spending between locals, expats, and tourists in the Middle East. They also did not provide precise data on sales density in China compared to the global average, deferring detailed comments to the Q1 results call in April.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
ASICS Fall
Ackermann runway
Angeles Creative
Angeles collection
Biennale Venezia
Bowl sneaker
CEO statement
Cecilia dialogue
Chairman Group
Closet idea
Clothes garment
Contenuto
Fall Winter
Los Angeles
Milan
Pavilion
Zegna Group
art
collaboration
fashion show
founder
group result
history
initiative Zegna
knitwear
landscape
launch
life
memory
moment
platform
success
visibility
vision
ZGN Transcript
Ermenegildo Zegna N.V. (ZGN) Q4 2025 Earnings Call Transcript
Positive3-20
The earnings call summary indicates a solid financial performance with improved free cash flow and net cash surplus. The Q&A section highlights cautious but optimistic guidance, especially in China and the Middle East, and strong DTC growth. Despite some currency headwinds and uncertainties, the overall sentiment is positive, supported by strategic pricing and marketing plans. Given the market cap of approximately $2.9 billion, the stock is likely to see a positive reaction, between 2% to 8%.
Ermenegildo Zegna N.V. (ZGN) Q2 2025 Earnings Call Transcript
Unknown9-5
Despite strong net profit growth and improved margins in the Zegna segment, the company faces challenges such as declining EBIT in Thom Browne and Tom Ford segments, and higher cash absorption. The cautious outlook on China and flat EBIT guidance temper optimism. The Q&A highlighted risks, particularly in China, and management's reluctance to provide detailed guidance. Given these mixed signals and the company's market cap, a neutral stock price movement is expected.
Ermenegildo Zegna N.V. (ZGN) H1 2025 Sales/ Trading Statement Earnings Call Transcript
Neutral7-31
Ermenegildo Zegna N.V. (ZGN) Q1 2025 Earnings Call Transcript
Unknown4-24
The earnings call highlights a mix of positive and negative elements. While there is growth in the U.S. and EMEA DTC channels, significant declines in Greater China and wholesale revenue, along with economic uncertainties and tariff impacts, weigh heavily. The lack of a share buyback program and management's unclear responses further contribute to a negative sentiment. Despite some optimistic guidance, the overall market reaction is likely to be negative due to these challenges, especially given the company's market cap.
ZGN Report
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