Ermenegildo Zegna (ZGN) Q2 2025 Earnings Call September 05, 2025 08:00 AM ET Company ParticipantsPaola Durante - Chief - External RelationsGianluca Tagliabue - CFO & COOAnthony Charchafji - Equity Research Associate - Luxury GoodsTom Nass - VP - Equity ResearchLouise Singlehurst - Managing DirectorConference Call ParticipantsChris Huang - AnalystOperatorHello everyone, and thank you for standing by. Today's Ermenegildo Zegna Group H1 2025 financial results call will be beginning in just two minutes' time. W ...

Financial Data and Key Metrics Changes - In H1 2025, revenues reached €928 million, a decrease of 2% organically, despite a strong DTC organic performance of 6% [3][4] - Gross profit was €626 million, with a margin of 67.5%, reflecting a 110 basis points improvement driven by a better channel mix [4][10] - Adjusted EBITDA for H1 2025 was €69 million, with an EBITDA margin of 7.4%, down 100 basis points compared to the previous year [6][8] - Net profit increased to €48 million, up 53% from €31 million in the previous year, attributed to higher financial income and foreign exchange gains [10][11] - Capital expenditure (CapEx) was €54 million, representing about 6% of revenues, primarily for store network development [12] Business Line Data and Key Metrics Changes - The Zegna segment generated an adjusted EBITDA of €94 million, with a margin of 14.3%, up from 12.8% in H1 2024, due to higher operating leverage [9] - Thom Browne's adjusted EBITDA fell to €4 million from €20 million in H1 2024, driven by a significant decrease in revenues, particularly in the wholesale channel [9] - Tom Ford Fashion recorded an adjusted EBITDA loss of €90 million, compared to a €12 million loss last year, due to planned investments in store expansion and IT infrastructure [10] Market Data and Key Metrics Changes - Strong momentum was noted in Europe, the Middle East, and the Americas, while the Greater China Region (GCR) remains challenging and volatile [17][59] - Initial signs of improvement in GCR were observed, but the market is still considered volatile, with a cautious outlook [17][59] Company Strategy and Development Direction - The company is focusing on expanding its DTC network, with new store openings in key markets like Miami and Shanghai [15] - A strategic emphasis on quality and personalization in the DTC channel is expected to enhance gross margins [23] - The company plans to maintain investments in brand development while managing discretionary costs [42] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenging and volatile sector environment but expressed confidence in actions taken to protect profitability [8][17] - The outlook for H2 2025 includes expectations for low single-digit organic growth, with a cautious approach to the Chinese market [24][59] Other Important Information - Free cash flow absorption was €23 million in H1 2025, compared to €7 million in the previous year, driven by lower operating cash flow [13] - The company confirmed a tax rate of around 30% for the year, down from 35% last year [11] Q&A Session Summary Question: Current performance in terms of margin and expectations for H2 - Management explained that the gross margin improvement is linked to DTC revenues and emphasized the importance of quality in driving margins [20][23] - For H2, management confirmed expectations of low single-digit growth and realistic EBIT consensus [21][25] Question: Margin improvement in the Zegna segment and Thom Browne's margins - Management indicated that Zegna's margins could trend between 13% and 14% for the year, with long-term potential for 15% [30][32] - For Thom Browne, management expects a reduction in the decline of wholesale revenues and aims for a return to double-digit EBIT margins [34] Question: Current trends in the Chinese market - Management noted early signs of improvement in the Chinese market but remained cautious about drawing conclusions from short-term trends [38][59] Question: Pricing strategy and risks for H2 - Management confirmed a systematic low single-digit price increase to offset costs and tariffs, with no significant consumer pushback observed [51][53] - The main risk for H2 is still the volatility in the Chinese market, with a focus on planning for a "new normal" [56][59]

Financial Performance - Consolidated revenues reached €928 million, a decrease compared to €960 million in H1 2024, with a -2% organic growth[8] - Gross profit was €626 million with a 675% margin, compared to €637 million and 664% margin in H1 2024[7, 10] - Adjusted EBIT was €69 million with a 74% margin, down from €81 million and 84% margin in H1 2024[7, 17] - Profit reached €479 million, a +53% increase compared to H1 2024, with the profit margin rising to 52% from 33%[7, 19] Segment Performance - ZEGNA segment revenues were €660 million, with an Adjusted EBIT of €94 million and a margin of 143%, up from €85 million and 128% in H1 2024[15] - THOM BROWNE segment revenues were €129 million, with an Adjusted EBIT of €4 million and a margin of 35%, significantly lower than the 121% margin in H1 2024[15] - TOM FORD FASHION segment revenues were €153 million, with a negative Adjusted EBIT of €19 million, compared to negative €12 million in H1 2024[15] Channel and Geographic Performance - Direct-to-Consumer (DTC) channel accounted for 82% of total branded products revenues in H1 2025, up from 76% in H1 2024[11] - Total Direct to Consumer revenues reached €698035 thousand, a 42% increase compared to €669599 thousand in H1 2024[46] - Greater China Region revenues decreased by 162% to €223101 thousand, compared to €266324 thousand in H1 2024[48] Capital and Cash Flow - Capital expenditure (Capex) in H1 2025 was €54 million, compared to €60 million in H1 2024[24] - Trade working capital was €442 million as of June 30, 2025, down from €476 million as of June 30, 2024[24] - Free Cash Flow was negative €23109 thousand[76]

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or ...

Financial Data and Key Metrics Changes - For H1 2025, the group revenues reached €928 million, down 3% year-on-year and 2% in organic terms, with a solid performance in the DTC channel showing 6% organic growth [20][21] - Q2 2025 revenues were €469 million, down 3% organically, with positive performance in the Zegna and Tom Ford segments, while Thom Browne experienced negative performance [21][22] Business Line Data and Key Metrics Changes - Zegna brand showed solid performance in Q2 with 2% organic growth, driven by the DTC channel, particularly in the Americas and EMEA regions [21][26] - Thom Browne reported a 24% decline in organic growth in Q2 due to the decision to streamline the wholesale channel [22] - Tom Ford Fashion achieved 4% organic growth in Q2, driven by the DTC channel [22][31] Market Data and Key Metrics Changes - The Americas region showed a 10% organic growth in Q2, driven by the DTC channel, with new store openings contributing to this growth [23][26] - Greater China reported a 17% decline in Q2, primarily due to the wholesale channel, while DTC performance remained stable [24][40] - EMEA recorded a 2% organic decline, reflecting negative trends in the wholesale channel, although DTC performance was positive [23] Company Strategy and Development Direction - The company aims to enhance its DTC channel, focusing on a client-first culture and evolving store concepts to provide immersive experiences [8][10] - The partnership with Temasek is expected to strengthen the company's profile and support the development of its brand portfolio [5][6] - The company is committed to innovation, quality, and a timeless proposition while maintaining a vigilant approach to costs and inventory [18] Management Comments on Operating Environment and Future Outlook - Management acknowledged the challenging environment in Greater China but expressed confidence in long-term strategies to adapt to the new normal [39][42] - The U.S. market remains resilient, with strong customer loyalty and conversion rates, particularly in key locations [54][56] - Management expects the trends observed in the first half of the year to continue into the second half, with specific regions like the Gulf and Americas performing well [82] Other Important Information - The company has opened new retail spaces, including exclusive lounges, to enhance customer engagement and provide personalized shopping experiences [12][26] - The company is focused on maintaining exclusivity in its product offerings by limiting distribution in the wholesale channel [29] Q&A Session Summary Question: Insights on Greater China revenue decline and Tom Browne's management priorities - Management noted that Greater China remains challenging, with traffic not meeting expectations, and emphasized the need for a more personalized service approach [38][40] - Regarding Tom Browne, the new CEO is expected to focus on enhancing brand awareness and customer experience [44] Question: Current consumer environment in the U.S. and wholesale trends - Management described the U.S. market as resilient, with strong traffic and conversion rates, and noted that the wholesale channel is expected to see continued streamlining [54][67] Question: Comments on margins and liquidity of shares - Management indicated that the wholesale business is profitable, but the current streamlining may impact margins in the short term [75][78] - There are no immediate plans for dual listing, and management remains confident in the liquidity of shares despite a slight decrease in free float [86][88]

Financial Data and Key Metrics Changes - For H1 2025, group revenues reached €928 million, down 3% year-on-year and 2% in organic terms, with a solid performance in the DTC channel showing 6% organic growth [19][21][32] - Q2 2025 revenues were €469 million, down 3% organically, with positive performance in the Zegna and Tom Ford segments, while Thom Browne experienced negative performance [21][32] Business Line Data and Key Metrics Changes - Zegna brand showed solid performance in Q2 with 2% organic growth, driven by the DTC channel, particularly in the Americas and EMEA [21][26] - Thom Browne reported a 24% decline in organic growth in Q2, reflecting a strategic decision to streamline the wholesale channel [22][32] - Tom Ford Fashion achieved 4% organic growth in Q2, driven by the DTC channel [22][32] Market Data and Key Metrics Changes - The Americas region showed a strong 10% organic growth in Q2, driven by the DTC channel, particularly at the Zegna brand [23][32] - Greater China reported a 17% decline in Q2, primarily due to the wholesale channel's performance, while DTC trends remained stable [24][32] - EMEA recorded a 2% organic decline, reflecting negative trends in the wholesale channel, although DTC performance was positive [23][32] Company Strategy and Development Direction - The company aims to enhance its DTC channel, focusing on a client-first culture and evolving store concepts to prioritize customer experience [8][9] - A partnership with Temasek is expected to support the development of the brand portfolio in an organic and sustainable manner [5][6] - The company is committed to innovation, quality, and a timeless proposition while maintaining a vigilant approach to costs and inventory [18][32] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenging environment in Greater China but expressed confidence in long-term strategies to adapt to the new normal [40][42] - The U.S. market remains resilient, with strong customer loyalty and conversion rates, despite concerns over tariffs [56][62] - The company anticipates continued growth in the Americas and EMEA, while Asia remains volatile [86][90] Other Important Information - The company has opened new retail spaces, including exclusive lounges, to enhance personalized shopping experiences [12][13] - The introduction of new management at Thom Browne is expected to drive brand awareness and customer engagement [15][44] Q&A Session Summary Question: Insights on Greater China revenue decline and traffic - Management noted that Greater China remains challenging, with traffic not meeting expectations, and emphasized the need for a new approach to store operations [38][40] Question: Comments on U.S. consumer environment and traffic - Management described the U.S. market as resilient, with strong traffic and customer loyalty, and noted successful store openings [56][62] Question: Wholesale trends for the second half - Management expects mid-teens negative performance for Zegna wholesale and low double-digit negative for Tom Ford wholesale for the full year [70][72] Question: Acceleration in Tom Ford's performance - The acceleration in Tom Ford's performance was attributed to new store openings and space expansion [73][75] Question: Comments on margins and liquidity - Management indicated that the wholesale business is profitable, but the current streamlining may impact margins in the short term [78][81] - There are no immediate plans for dual listing, and liquidity concerns are not seen as a major issue [90][92]

H1 2025 Financial Performance - Group revenues reached €928 million, a decrease of 3% year-on-year (YoY) and 2% on an organic basis[27] - Q2 revenues amounted to €469 million, reflecting a 6% YoY decrease and a 3% organic decline[27] - ZEGNA brand revenues, constituting 61% of H1 Group revenues, increased by 2% organically, driven by the DTC channel[33] - Thom Browne brand revenues, accounting for 14% of H1 Group revenues, experienced a 24% organic decrease due to wholesale channel streamlining[33] - TOM FORD FASHION brand revenues, representing 16% of H1 Group revenues, grew by 4% organically, propelled by the DTC channel[33] Segment Performance - Zegna segment showed positive performance, boosted by the ZEGNA brand, while the textile division contracted[28] - Thom Browne segment's revenue was impacted by the strategic decision to streamline the wholesale business[28] - Tom Ford Fashion (TFF) segment's revenues were driven by strong double-digit organic growth in the DTC channel[28] Channel Performance - DTC revenues reached €353 million, showing an 8% organic increase, with growth accelerating across all three brands, particularly ZEGNA[42] - Wholesale branded revenues decreased by 33% organically, reflecting a strategic focus on the DTC channel for each brand, especially Thom Browne[42] Geographic Performance - EMEA revenues declined by 2% organically, influenced by wholesale performance in the region[38] - Americas revenues demonstrated strong organic growth of 10%, driven by solid DTC channel results, particularly for ZEGNA and Thom Browne[38] - Greater China Region (GRC) revenues decreased by 17% organically, due to the wholesale channel[38]

Temasek is building a 10% stake in Italian fashion house Zegna worth about $220 million https://t.co/CeV8MgCyRI ...

Ermenegildo Zegna N.V. (ZGN) could be a solid choice for investors given its recent upgrade to a Zacks Rank #2 (Buy). This upgrade primarily reflects an upward trend in earnings estimates, which is one of the most powerful forces impacting stock prices.The Zacks rating relies solely on a company's changing earnings picture. It tracks EPS estimates for the current and following years from the sell-side analysts covering the stock through a consensus measure -- the Zacks Consensus Estimate.Since a changing ea ...

Core Viewpoint - The acceptance of traditional advertising is declining, while the demand for "good content" is increasing, leading to the rise of scenario-based marketing [2][4]. Group 1: Understanding Scenario-Based Marketing - Scenario-based marketing involves analyzing the specific context of consumers to provide them with relevant information or products, ultimately driving transactions [2][4]. - It requires creating a specific "atmosphere" that attracts consumers to experience and purchase products [2][4]. - Key components of scenarios include "time," "place," and "event," reflecting the personalized demands of consumers [2][4]. Group 2: Misconceptions in Scenario Marketing - Misconception 1: Building a scenario is more important than understanding the user. The essence lies in understanding the "scenario profile" of consumers [5][6]. - Misconception 2: Quality of the scenario is prioritized over effectiveness. Scenario marketing should focus on continuous, interactive engagement rather than one-time displays [8][9]. - Misconception 3: Providing emotional value is sufficient for good advertising. Effective scenario marketing requires a deep understanding of consumers' emotional needs and long-term engagement [11][13]. Group 3: Key Steps in Establishing Scenario Marketing - Step 1: Observe life to identify existing specific scenarios linked to products, rather than creating scenarios in isolation [18][19]. - Step 2: Engage the senses and provide multi-scenario services to meet individual emotional needs, enhancing consumer experience [20][22]. - Step 3: Create a value perception that is slightly elevated from ordinary life, ensuring that marketing does not disrupt consumers' established routines [23][26]. Group 4: Case Studies and Examples - The Hong Kong Tourism Board's collaboration with Whale Energy demonstrated effective scenario marketing by repeatedly appearing in various consumer life scenarios, leading to increased tourist visits [11][9]. - ZEGNA's targeted marketing efforts focused on high-value customers, utilizing data to create precise consumer interactions and achieve significant engagement [19][26]. - The success of Yili's "Baby's First MV" campaign showcased how emotional engagement through personalized content can resonate deeply with consumers [20][22].