Ermenegildo Zegna (NYSE:ZGN) executives used the company’s FY2025 preliminary revenues call to confirm full-year figures released earlier in February and to discuss brand initiatives, regional trading conditions, and key profitability drivers heading into 2026. Group Executive Chairman Gildo Zegna and Group CEO Gianluca Tagliabue also addressed the impact of the conflict in the Middle East and provided context around wholesale strategy and currency headwinds.
FY2025 results: revenue down on a reported basis, profit up
Management confirmed FY2025 revenue of EUR 1,917 million, down 1.5% year-over-year on a reported basis and up 1.1% organically.
Reported profit rose to EUR 109 million from EUR 91 million in the prior year. Tagliabue attributed part of the change in the tax line to a lower effective tax rate of 22% (from 30% last year), citing non-taxable income in 2025 related to the remeasurement of put option liabilities, “mainly the one on the remaining 8% stake on Thom Browne.”
Based on the results and the company’s dividend policy, the board proposed a dividend of EUR 0.12 per ordinary share, representing a total distribution of about EUR 32 million.
Margins and costs: DTC mix lift, SG&A investments, and Saks provisions
Gross margin improved by 90 basis points to 67.5%, with management pointing primarily to channel mix. Direct-to-consumer (DTC) represented 82% of branded revenue in 2025, up from 78% the year before.
SG&A rose to EUR 1,034 million, representing 53.9% of revenues versus 51.8% in the prior year. Tagliabue said the higher SG&A incidence reflected investments in “talent, systems, and organization,” store network expansion—particularly for Thom Browne and Tom Ford—and negative operating leverage from the streamlining of Thom Browne wholesale. The SG&A line also included the EUR 10 million Saks-related provision.
Marketing expense was EUR 121 million, or 6.3% of revenues, which management said was in line with the prior year and consistent with a midterm target of around 6%.
Segment performance: Zegna resilient, Thom Browne pressured by wholesale reset, Tom Ford improved in H2
By segment, the Zegna segment (including the Zegna brand, textile division, and third-party brands business) delivered adjusted EBIT of EUR 197 million and a 14.4% margin versus 13.9% last year. Tagliabue noted this included EUR 3 million of Saks provisions; excluding that, Zegna segment adjusted EBIT would have been EUR 200 million with a 14.7% margin.
The Thom Browne segment posted EUR 1 million of adjusted EBIT and included EUR 2 million of Saks provisions. Management repeatedly emphasized that Thom Browne results were most impacted by the reduction in revenue driven by wholesale streamlining, though Tagliabue said the absolute impact should diminish as the wholesale base becomes smaller.
Tom Ford Fashion reported a EUR 16 million adjusted EBIT loss generated in the first half, while the second half produced a positive adjusted EBIT result. Tagliabue said the second-half improvement reflected both a step up in gross margin linked to “full price sell-through” efforts and an “inflection point” following prior investments to build the brand’s infrastructure. Full-year Tom Ford results included EUR 5 million of Saks-related provisions.
Cash flow, CapEx, and balance sheet changes
Capital expenditures in 2025 totaled EUR 103 million (5.4% of revenues). About 60% went to the store network, while roughly 40% supported production and IT, including construction of a shoe factory near Parma. Tagliabue said 2026 would be “an important year” for CapEx due to investments tied to the Parma facility, with CapEx expected to be closer to 7% of revenues.
Trade working capital ended 2025 at EUR 408 million (21.3% of revenues), down from EUR 460 million (23.6%) a year earlier, driven by improved inventory management, tighter control of receivables, and foreign exchange effects.
Free cash flow was EUR 82 million, up from EUR 10 million in the prior year, despite EUR 103 million in CapEx and EUR 150 million related to lease liabilities and right-of-use assets. The group ended the year with a net cash surplus of EUR 52 million, compared with net financial indebtedness of EUR 94 million at the end of 2024, helped by free cash flow and EUR 107 million of proceeds from the sale of treasury shares to Temasek.
2026 outlook themes: early DTC acceleration, FX headwinds, and Middle East uncertainty
In Q&A, management said the year had started “well,” with DTC trends “slightly better than Q4 2025,” and confirmed that implied an acceleration versus the group’s Q4 DTC growth of 10%. Tagliabue also said the three brands were growing well in DTC and that the performance was “well-balanced” across them.
Regionally, executives cited sequential improvement in China but maintained a cautious stance, assuming a “flattish” performance for the year. They described the Americas as resilient, with continued growth in the U.S. and Latin America, and said Europe also looked resilient. In Asia, management said Japan and Korea were growing well, with Korea “coming back after a couple of years of slowdown,” and noted improvement in parts of Southeast Asia.
On the Middle East, management said the region represents a mid-high single digit share of group revenue and remains strategically important, but executives acknowledged reduced traffic and “less energy” in the market. Stores were initially closed and then reopened, with all stores currently open and operating. They said it was difficult to assess potential 2026 impact given uncertainty about the conflict’s duration and broader economic implications.
Tagliabue reiterated prior commentary that group profitability could move “sideways” in 2026 (excluding one-time Saks provisions), citing currency pressure. While he noted recent FX moves had become more favorable versus early February levels, he said the company still expected “almost around 2 points of headwind from currencies” in 2026 versus 2025, and clarified that this figure referred to revenue.
On wholesale, Tagliabue said it would not be a “driving force” and would continue to contract at different rates by brand, including expectations for Zegna wholesale to decline by mid-teens (due to “icon protection” and conversions), Tom Ford to be negative single-digit (linked mostly to wholesale partners in the Middle East), and Thom Browne to remain double-digit negative but less severe than last year. He said improved gross margin in Thom Browne and Tom Ford would also be supported by higher full-price sell-through.
Management also discussed ongoing brand initiatives, including Haider Ackermann’s widely acclaimed third runway show for Tom Ford in Paris; early revenue momentum from the Thom Browne sneaker collaboration with ASICS; the Zegna “Memorie” fragrance collection rolling out through 2026; Zegna’s sponsorship of the Italian Pavilion at La Biennale di Venezia 2026; and plans for a Zegna Spring/Summer 2027 show in Los Angeles alongside “Villa Zegna L.A.”
About Ermenegildo Zegna (NYSE:ZGN)
Ermenegildo Zegna is a global luxury fashion house specializing in men’s tailored clothing, casualwear, accessories, footwear and fragrances. With a focus on high-quality fabrics and craftsmanship, the company manages the entire value chain from wool sourcing and textile production to garment design, manufacturing and retail distribution.
Founded in 1910 by Ermenegildo Zegna in Trivero, Italy, the company began as a textile mill dedicated to producing fine wool fabrics. Over the decades it expanded into ready-to-wear clothing and built a reputation for sartorial excellence.
