Ermenegildo Zegna(ZGN) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The Ermenegildo Zegna Group reported total revenues of EUR 1.917 billion for FY 2025, representing a 1% increase compared to the previous year, with Q4 revenues reaching EUR 591 million, up 4.6% organically [13][16] - The Zegna brand achieved revenues of EUR 1.2 billion, with Q4 revenues of EUR 362 million, reflecting a 7% growth driven by the DTC channel [3][15] - Thom Browne reported Q4 revenues of EUR 91 million, a 1.4% organic increase, while Tom Ford Fashion reached EUR 98 million, up 1.5% [14][15] Business Line Data and Key Metrics Changes - The DTC channel for the group grew by 10% in Q4, accounting for 82% of the group's branded revenues for FY 2025 [18][19] - Zegna DTC revenues grew 10% in Q4, representing 88% of the brand's full-year revenues, with strong performance in the Americas and EMEA regions [19] - Thom Browne's DTC revenues increased by 11% in Q4, driven by new store openings, while the wholesale channel reported a decline of 14% [20] - Tom Ford Fashion's DTC growth was 5% in Q4, with a 4% decline in the wholesale channel [21] Market Data and Key Metrics Changes - Europe, the Middle East, and Africa accounted for 36% of total revenues, with a 7% increase in Q4, while the Americas represented 30% of revenues, showing a 16% increase in Q4 [16][17] - The Greater China region accounted for 23% of total revenues, but reported a 10% decline in Q4, attributed to the wholesale channel's performance [17] - The rest of the Asia Pacific region saw a 5% growth in Q4, driven by improvements in Japan and Korea [17] Company Strategy and Development Direction - The company aims to strengthen its DTC channel and reduce reliance on wholesale, with a focus on elevating product offerings and enhancing customer experiences [8][19] - The leadership transition, with Gianluca Tagliabue as Group CEO, is expected to drive integration and accelerate ambitions across brands [12][3] - The company plans to continue expanding its retail presence, with new store openings in key markets, including Paris and the U.S. [83][107] Management's Comments on Operating Environment and Future Outlook - Management acknowledges a "new normal" characterized by uncertainty and volatility, emphasizing the need for agility and coherence in strategy execution [10] - The outlook for 2026 includes expectations of continued growth in the U.S. market, despite potential challenges from the wholesale channel and the situation with Saks Global [75][76] - Management remains optimistic about the resilience of high-spending customers and plans to focus on this segment for future growth [90] Other Important Information - The company is closely monitoring the Chapter 11 bankruptcy situation of Saks Global, which has a limited impact on Zegna Group revenues [23][46] - The company is implementing a pricing strategy with mid-single-digit increases to offset currency fluctuations [89] Q&A Session Summary Question: What is the growth rate of Zegna brand DTC excluding China? - Management confirmed that the growth rate is around high teens percentage year-over-year, excluding China [25][28] Question: What FX impact is expected for 2026? - A headwind of approximately 2-3% is anticipated due to currency fluctuations, with some mitigation through hedging [28] Question: What are the key drivers for Zegna retail productivity? - Key drivers include mix and price, with a focus on elevating product offerings and customer experiences [41] Question: What is the exposure to Saks Global? - The overall exposure to Saks Global is in the low single-digit range of the group's revenues [46] Question: What are the expectations for wholesale performance in 2026? - Wholesale is expected to decline, with high single-digit negative growth anticipated for the group, particularly for Thom Browne [55][56] Question: How is the U.S. market performing? - The U.S. market continues to show strong performance, with good traction across all brands [75][76] Question: What is the strategy for Tom Ford moving forward? - The strategy includes expanding the store base and enhancing marketing efforts to maintain momentum [100]