Ermenegildo Zegna Group FY 2025 Earnings Call - Resilient DTC lifts margins despite wholesale and Middle East headwinds

Antoine Belge, Analyst, BNP Paribas0: Good afternoon, good morning, everyone. Thank you for joining the Ermenegildo Zegna Group FY 2025 preliminary revenues call. Please note that today’s material and presentation are available on the zegnagroup.com website. Joining us today, the Zegna Group leadership team, including Gildo Zegna, Group Executive Chairman, and Gianluca Tagliabue, Group CEO. Before we begin, we need to point out that the team will make certain forward-looking statements during the call. The Group’s actual results may be materially different from those expressed or implied by these forward-looking statements. Also, these statements are subject to a number of risks and uncertainties, including those described in our SEC filings. Please refer to the forward-looking statements cautionary statement included at page 2 of today’s presentation. I will now hand over to Gildo Zegna.

Gildo Zegna, Group Executive Chairman, Ermenegildo Zegna Group: Good morning and good afternoon, everyone. Thank you for joining today call on our group fiscal year 2025 results. Before we run through our performance, I wanted to take a moment to express our deep appreciation to our colleagues in the Middle East for their dedication, professionalism, and commitment during this complex period. On behalf of the group and of the Zegna family, I want to affirm our support for them and for all our friends and partners across the region. The Middle East remains an important region for our group, and although in the short term we are adjusting our activities to reflect the situation, we expect the region to continue to play an important role in our business over the longer term, in particular, thanks to the resilience of our customer.

Let me now turn to the business update, starting with the recent Tom Ford fashion show, which, as you know, has taken place earlier this month. Haider Ackermann third runway show, presented in Paris, March fourth, has been widely acclaimed. Haider Ackermann has further demonstrated his ability to interpret the brand codes and DNA in a way that is unique, contemporary, and deeply personal. The seductive elegance of Tom Ford, its craftsmanship and tailoring heritage, and its iconic leather pieces, reimagined with modernity, were all powerfully affirmed in this collection, which also added innovative knitwear garments. I found the whole collection very confident and consistent in one word, very strong, and I want to extend my applause to Haider Ackermann and to the entire team who worked alongside him to bring these shows to life.

We all know that fashion shows are important, but they only translate into results when they are supported by strong production, commercial, and marketing execution. We’re confident that Lelio Gavazza and the Tom Ford fashion management team, supported by Gianluca Tagliabue and the whole group, are working to build on this success. I was also very pleased to see the promising start of recently launched Thom Browne sneaker in collaboration with ASICS. First presented during the Fall/Winter 2026 fashion shows, the brand hosted in San Francisco ahead of the Super Bowl. These limited sneakers were officially launched worldwide on March second. The launch was supported by several high visibility pop-up events, including at Selfridges in London, Isetan Tokyo, and Plaza 66 in Shanghai. The collaboration is achieving strong resonance ahead of our expectations, not only in terms of social media visibility, but more importantly, of revenues.

This collaboration will be a way for the brand to attract and retain new customer. Sam Lobban and his team are focusing on these critical KPIs, aiming not only to ensure the commercial success of the collaboration but also to drive meaningful acquisition of new customer. There is a journey our clients, especially these new clients, should undertake. Jersey and even more so knitwear are important, a second purchase for them. I’m also excited that in June, Thom Browne will show in Milan during the Milan Fashion Week Men’s for the first time. Moving to Zegna, as you know, at the beginning of this year, Zegna presented its Fall/Winter 2026 show in Milan, titled A Family Closet. The idea behind this collection was simple but deeply rooted in our history. Clothes are never just garments. They carry memories. They move across generation, preserving experience and stories over time.

This concept of memory as living legacy continues to inform many of the initiatives we are developing across the world. Finally, looking ahead. In March, we introduced Memorie, a fragrance collection that translates moments from the founder’s life into scent. Rather than being conceived as a traditional perfume launch, Memorie distills more than a century of Zegna history into six chapters inspired by a place, gesture, or object from Ermenegildo Zegna’s daily world. The collection is currently available in selected Zegna locations, with a progressive global rollout continuing through 2026. Beyond this launch, we are also very proud that Zegna has been announced as the main sponsor of the Italian Pavilion at the sixty-first International Art Exhibition, La Biennale di Venezia 2026, one of the most important platforms for contemporary art worldwide.

The Italian Pavilion will present Con te con tutto, a project by artist Chiara Camoni, curated by Cecilia Canziani, with whom we have developed a meaningful dialogue over the past decade. This initiative, alongside our global partnership with Art Basel, reflects how Zegna operates not only as a luxury brand, but as a cultural platform connecting fashion, contemporary art, and landscape, continuing a vision that has been part of the company since our founder, Ermenegildo Zegna, first imagined. Finally, looking ahead, Zegna will present the spring and summer 2027 fashion show in Los Angeles by creative director Alessandro Sartori, together with the launch of Villa Zegna L.A. Following the experience that we create in Dubai last year, Los Angeles will allow us to showcase our collection within one of the most dynamic markets of our group.

The city resonates not only as a global fashion hub, but also as a cultural capital, with influence extent far beyond its border. Together, this initiative reflects Zegna’s long-term vision, building a brand that moves seamlessly between fashion, culture, and landscape, while remaining deeply rooted in the values of its founder. Now, let me hand over to Gianluca. Thank you.

Gianluca Tagliabue, Group CEO, Ermenegildo Zegna Group: Thank you, Gil. Good morning, good afternoon to all of you. Let’s move to page seven of the presentation, where you find full year 2025 results key highlights. The revenues for full year 2025 have already been disclosed early February, and we confirm them at EUR 1,917 million, -1.5% year-over-year on a reported basis, and +1.1% on an organic basis. In 2025, the group reached a 67.5% gross margin and adjusted EBIT of EUR 163 million, which does include EUR 10 million of provisions related to losses on trade receivables for Saks Global Chapter 11 procedure. Thus, without this EUR 10 million bad debt provision, the adjusted EBIT would have been EUR 173 million.

The group also reached EUR 109 million of profit, up 20% from EUR 91 million last year. More, at the end of the year, the group had net cash surplus of EUR 52 million. Let’s move to the following pages to comment more on these results. Page 8. In full year 2025, gross profit rose by 90 basis points to 67.5%, driven mostly by channel mix, with DTC that reached 82% of branded revenues versus 78% last year. As you know, DTC gross margin is higher than the wholesale one. Moving to SG&A. SG&A in full year 2025 reached EUR 1,034 million with 53.9% incidence on revenues compared to 51.8% last year.

This increase in the SG&A incidence is linked to the following factors: the investments in talent, systems, and organization across different functions and brands, looking at the long-term vision for each of the brand, store network expansions, in particular for Thom Browne and Tom Ford. More, it has been impacted by the negative operating leverage caused by the streamlining of the wholesale at Thom Browne. This SG&A line of EUR 1,034 million includes also EUR 10 million provisions related to the expected losses on trade receivables owed by Saks Global. Moving to the marketing expenses. In 2025, they were EUR 121 million, equal to 6.3% of revenues, in line with the prior year and our indications of a fair midterm marketing on revenues incidence of around 6%.

Let’s move to page nine, where we report the adjusted EBIT of the group and by segment. As always, this is the main performance metric used by the management to analyze the performance of the business at group and at segment level, and you can find the reconciliations in the appendix. Let’s move to the analysis by segment. Zegna segment, which includes the brand, Zegna brand, the textile division, and third-party brands business, generated an adjusted EBIT of EUR 197 million and a margin of 14.4% versus 13.9% last year. This result in EBIT reflects and includes EUR 3 million of provisions in relation to Saks Global, because these provisions are not in the adjustment or affecting the adjusted EBIT, without which the adjusted EBIT for the Zegna segment would have been EUR 200 million with 14.7% margin.

Thom Browne segment has been the most hit by the reduction in revenues driven by the wholesale streamline and achieved EUR 1 million of adjusted EBIT. This performance includes EUR 2 million provisions in relation to Saks. Tom Ford Fashion segment reported a loss at adjusted EBIT level for EUR 16 million generated in H1, while in the second half of the last year, Tom Ford Fashion recorded a positive adjusted EBIT performance. Full year 2025 results for Tom Ford include EUR 5 million of provisions in relation to Saks Global. On the positive side, corporate costs decreased, mostly due to lower insurance costs. Moving to page 10, you can see here summarized our reported income statement. A brief comment on taxes.

As you see, the effective tax rate decreased to 22% compared to 30% last year due to non-taxable income in 2025 related to the remeasurement of put option liabilities, mainly the one on the remaining 8% stake on Thom Browne. As a result of the above, we reported group profit in full year 2025 at EUR 109.5 million, up 20% versus EUR 90.9 million in 2024. Based on this result and in line with our dividend policy, the board of directors proposed a dividend distribution of 12 cents of EUR per ordinary shares, which equals to a total dividend distribution of approximately EUR 32 million. Let’s now move to page 11, where we comment on CapEx and trade working capital.

Cash outlay for CapEx in 2025 reached EUR 103 million, 5.4% on revenues, of which about 60% are related to store network, and the remaining 40 to investment in production, including the shoe factory we are building close to Parma and in IT. As we have already anticipated, 2026 is going to be an important year in terms of CapEx since the investments are related to the new shoe factory in Parma, which will be completed by this year. For this reason, we expect CapEx in 2026 to be closer to the 7% mark.

Trade working capital reached EUR 408 million at the end of December 2025, equal to 21.3% of revenues, compared to EUR 460 million and 23.6% of revenues at the end of 2024. This was the effect of an improved inventory management, control of trade receivables, and Forex impact. Looking at free cash flow at page 12, let me highlight the group generated EUR 82 million of positive free cash flow compared to EUR 10 million in the prior year. This despite the already mentioned CapEx of EUR 103 million paid and EUR 150 million for lease liabilities and right-of-use assets.

Finally, on page 13, you can see that thanks to the positive free cash flow and the inflow from the sale of treasury shares to Temasek for EUR 107 million, the group reported at the end of December a positive cash surplus of EUR 52 million versus EUR 94 million of net financial indebtedness at the end of 2024. Let me conclude again with a brief comment on the impacts of the current situation in the Middle East. As you know, Middle East is a relevant region for our group and for the Zegna brand in particular. Revenues for the region represent a mid-high single digit share for the group’s total. All our stores in the area are open and operating.

At this stage, it is difficult to fairly assess the potential input of this conflict on 2026 results, as it will largely depend on the duration and possible implications for the global economic outlook. As our executive chairman also said, we continue to work toward delivering our 2027 targets, knowing that the overall outlook has become increasingly uncertain due to these factors. Now to Paola for your questions.

Antoine Belge, Analyst, BNP Paribas1: Thank you. Thank you, Mr. Gildo. Thank you, Gianluca. I’ll open up for the Q&A session.

Antoine Belge, Analyst, BNP Paribas0: Thank you. If you would like to ask a question today, please do so now by pressing star followed by the number 1 on your telephone keypad. If you change your mind or you feel like your question has already been answered, you can press star followed by 2 to remove yourself from the queue. Our first question today comes from Chris Huang with UBS. Chris, please go ahead.

Chris Huang, Analyst, UBS: Hello. Hi, it’s Chris from UBS, and thank you for taking my questions. I have three. First, starting with the top-line momentum, I think at the previous conference call in Q4, you were saying that excluding the Chinese New Year timing impact, things are not seeing any meaningful change on a sequential basis versus Q4. I’m just wondering if you can give an update on the latest trends you are seeing by different regions, nationalities, whatever you can provide. Second, on the margin, it seems like Zegna segment excluding the tax impact for the year ended around 14.7% EBIT. If I look at the latest consensus, I think people are modeling around 14.1%.

Are there any reasons why you believe that given the pickups in theory for like-for-like growth into 2026, you shouldn’t be able to do a margin that is higher than what you did in 2025? That’s my second question for the Zegna segment. Last but not least, I think FX moved a bit over the last few weeks. I think part of your caution on 2026 margins was coming from the fact that FX is not supportive. I’m just curious to know if the recent moves of FX makes you feel a bit more comfortable in meeting the 2027 targets in terms of profitability. Thank you.

Antoine Belge, Analyst, BNP Paribas1: Thank you, Chris, and thank you for the three questions. I think the first one is for Mr. Gildo and is related to the current trend and an outlook or a comment across all the regions. Of course, let’s say I anticipated that. The sales information will be more given at the end of April when we release the Q1 numbers, but very happy to provide a comment on the current trend.

Gildo Zegna, Group Executive Chairman, Ermenegildo Zegna Group: Yeah. Thank you, Paola. Overall, the year has started well, with the trend slightly better than Q4 2025 in DTC. This notwithstanding the uncertainties we are facing in the past few weeks with the war in the Middle East. We saw a good performance in Tom Ford Fashion thanks to the new spring/summer product and the continuation of a good trend also in Thom Browne, in particular in recent weeks after the launch of the Thom Browne x ASICS sneaker. Maybe a comment on China, where we are seeing some sequential improvement in the region. However, we remain cautious, and we continue to assume a flattish performance for the year. We are satisfied with the performance of Chinese New Year, slightly ahead of expectation.

so that we know what we have to do, and we’ll adopt a focused store strategy to enhance the quality and efficiency of our DOS network in the region. On the other two major region, in particular, the Americas, United States and Latin America, remain resilient, and we see a continuation of a good growth as we did last year. I would say that also Europe looks pretty resilient, besides the conflict in the Middle East. Overall, you know, not a bad situation of the first 8-10 weeks of the year.

Antoine Belge, Analyst, BNP Paribas1: Okay. The second is for Gianluca, and it is related to the Zegna segment, EBIT performance.

Gianluca Tagliabue, Group CEO, Ermenegildo Zegna Group: Hi, Chris. I think you pointed out an important angle that is, of course, that the profitability of Zegna segment EBIT margin in the second half, if you exclude the Saks Chapter 11 provisions, would have been close to 15%. We are pleased of that step. We know that Zegna segment deserves stronger profitability still. We are working on it. On the other side, we also know that we have projects critical to support the long-term trajectory of the brand, and we don’t want to chase short-term quick results. We observe with pleasure the fact that we’ll get there.

Linking to also your last sentence, it’s true that in the recent weeks when we talked early February, the dollar was 1.18 and now is 1.15, 1.16, and the renminbi was at 8.10 and now is below 8. We have seen some inflection point on currency, which should favor us. Still, if we compare 2026 to 2025, we are still in the mindset of having a couple of points, almost around 2 points of headwind from currencies. This is still a factor that will impact the group, will impact also the Zegna side. Having 2 points of headwind from currency definitely will be a dragging factor in the profitability. That’s why also I linked to one of the statement that I did last time that we want to see.

We are expecting to move sideways on the profitability for the group in 2026, taking aside the one-time provisions of Saks. I think I put together the second and third question.

Chris Huang, Analyst, UBS: Perfect. Thank you so much. Maybe just to clarify. The commentary on Q1 DTC momentum, you’re referring to an acceleration versus the Q4, which was 10% at group level. Is that correct?

Gianluca Tagliabue, Group CEO, Ermenegildo Zegna Group: It’s correct. It’s correct.

Chris Huang, Analyst, UBS: Perfect. Thank you.

Antoine Belge, Analyst, BNP Paribas1: Thank you, Chris. Second?

Antoine Belge, Analyst, BNP Paribas0: Thank you. The next question comes from Adrien Duverger with Goldman Sachs. Adrien, please go ahead.

Adrien Duverger, Analyst, Goldman Sachs: Hey, good afternoon, Gildo, Gianluca, and Paula. Thank you very much for taking my questions. I guess the first one would be on the current environment. Have you seen any changes in consumer behavior in the last few weeks? I mean, I guess the real question is, have you seen any second order impacts in other regions? Within the Middle East, are you taking any specific initiatives to maintain your relationships with the clients there? My second question would be on the resilience from the higher spending cohort. Have you continued to see, like, an increase in the proportion this year compared to Q4? If so, have you seen any differences by different geographies?

Thank you very much.

Antoine Belge, Analyst, BNP Paribas1: Hi, Adrien. In terms of current environment, if we have seen any headwind, any negative after the war, I-

Gildo Zegna, Group Executive Chairman, Ermenegildo Zegna Group: No, as I said previously, not with the exception of the Middle East, in which the store have been you know initially closed and then opened, but there is less traffic, and there is you know less energy surely. Customer are surely down you know quite a bit. I would say that we are scoring better than what we have heard. That shows the brand is very well-placed in that part of the world. The event that we did last year, I mean, surely has created an incredible resonance of our brand.

I think that many of those customers probably, you know, will be buying hopefully outside the area and are the top resilient customers that we are talking about. Overall, with the exception of that particular area, I think that the rest is continuing the expected, you know, growth.

Antoine Belge, Analyst, BNP Paribas1: The question on the third one was also related to which cohort and, in particular, if the high spenders are continuing to drive the growth.

Gildo Zegna, Group Executive Chairman, Ermenegildo Zegna Group: Well, we have you know a program around the world of personalization. I think that we are becoming more and more known to do that extremely well. Appointments and store events that goes beyond the Villa Zegna. I think that that could be a good flow of business of product that also you don’t find in the store. That helps keep the resilience of those customer high.

Antoine Belge, Analyst, BNP Paribas1: In terms of relationship or what we are doing with the Middle East customer, Andrew was also asking if there is something particular that we are doing so far. I think, in terms of relationship in the Middle East.

Gildo Zegna, Group Executive Chairman, Ermenegildo Zegna Group: No, I don’t think, you know, we have a good partner there. There’s actually two good partners. One is Anta for Zegna, and the other one is Chalhoub for Tom Ford. I think that, you know, we are following the situation very closely and we know that they are trying to keep the mall as open and as active as ever. That’s the partnership with local is important and to support them, you know, with the merchandise and with some local promotion.

Antoine Belge, Analyst, BNP Paribas1: Also, the relationship that our client advisor has with all our customers, they continue is something that clearly help in this situation. Andrew, I think we answered to your questions.

Adrien Duverger, Analyst, Goldman Sachs: Anthony.

Antoine Belge, Analyst, BNP Paribas1: An-Anthony.

Adrien Duverger, Analyst, Goldman Sachs: Yes. Thank you very much.

Antoine Belge, Analyst, BNP Paribas1: And, uh...

Adrien Duverger, Analyst, Goldman Sachs: Can I follow up with a quick question on pricing maybe, in terms of what you’re seeing for the pricing environment this year, and if there is more opportunity to continue to drive higher pricing, both from like for like and mix?

Antoine Belge, Analyst, BNP Paribas1: Gianluca Tagliabue, do you?

Gianluca Tagliabue, Group CEO, Ermenegildo Zegna Group: No, as we said last time, we continue doing low mid-single digit price increase on a like for like. We continue having an evolution of the mix upwards. That is, both, as Gino was saying, through exclusive collection, but also in the store in ready-to-wear, we keep elevating the offer. This is, of course, in Zegna, but also on the other brands. I think the rule of thumb stays with a low mid-single digit price increase in order to offset the cost factors.

Gildo Zegna, Group Executive Chairman, Ermenegildo Zegna Group: One addition in particular to Zegna is the drop strategy of coming up every several weeks with new deliveries and with product that looks different from the previous delivery brings an incredible excitement to the store. I think that color is a driving force. I think iconic product and not only the Triple Stitch but also other categories are meeting more and more the desires of customer. I think that the outreach is very important. To keep the interest of the store high, it’s extremely a priority in times where overall you see a little bit less traffic.

I think that the possibility to apply the same rules to Thom Browne and Tom Ford is very, very important. I think that the excitement that Haider Ackermann will bring with the new collection is important to not only retain current customer, but to attract new customer. The possibility to have Thom Browne show in Milan. We know that Thom Browne has to strengthen his presence in Europe, in particular in the retail. I think that having a show in Milan will enhance his brand awareness and his exposure to the local.

I think fine to expect the flow of foreign customer, but I think the key is work well with the local, and have, you know, stuff in the store that created this relationship that made Zegna so strong in the States and in other parts of the world.

Adrien Duverger, Analyst, Goldman Sachs: Thank you very much.

Antoine Belge, Analyst, BNP Paribas1: Thank you, Adriano. Ciao, thank you. I, the next one.

Antoine Belge, Analyst, BNP Paribas0: Thank you. The next question comes from Chiara Battistini with JP Morgan. Please go ahead.

Chiara Battistini, Analyst, JP Morgan: Thank you very much. Good afternoon, everyone. I have a follow-up question on the situation in the Middle East. Notably, I was wondering, in terms of the shipments of the merchandise to the Middle East, have you reduced or suspended shipments to the region or it’s still business as usual from that point of view? And also a clarification on rents in the Middle East, are they variable or fixed? That’s my first question on the Middle East. The second question on Tom Ford, the profitability improvements in H2. I calculate actually excluding the tax provision and the profit release went back to positive territory. So I was wondering if you could expand on the margin drivers for Tom Ford in H2 and whether that comes mainly from gross margin or OpEx.

Finally, can you remind us, I think you’re highly exposed to the local spend rather than tourism, but can you remind us how much of your sales come from tourist spend, please? Thank you.

Antoine Belge, Analyst, BNP Paribas1: Which?

Gianluca Tagliabue, Group CEO, Ermenegildo Zegna Group: Tourist spend.

Antoine Belge, Analyst, BNP Paribas1: Oh, tourist.

Gianluca Tagliabue, Group CEO, Ermenegildo Zegna Group: I didn’t get the third question.

Antoine Belge, Analyst, BNP Paribas1: Okay. Chiara, maybe you can help us going through the four because

Gianluca Tagliabue, Group CEO, Ermenegildo Zegna Group: Sure.

Antoine Belge, Analyst, BNP Paribas1: I don’t know if we fully understand all of them. In any case, the first on Middle East in terms of shippers and rents. I’ll leave it to Gianluca to comment.

Gianluca Tagliabue, Group CEO, Ermenegildo Zegna Group: Now we are at the tail of the spring/summer shipments. We have basically most of the collection already delivered before the end of February to the market. We will have some tail of summer still to be delivered, and we monitor the situation, but this is the situation so far. The product has been shipped until late summer deliveries to the market. In terms of costs, I think some relevant stores have variable with some fixed, but we are well above the fixed. I think I would say it’s more skewed to the variable than a fixed, like a typical Western European street side store. We have more variable than fixed, the rent.

Antoine Belge, Analyst, BNP Paribas1: Thank you.

Gianluca Tagliabue, Group CEO, Ermenegildo Zegna Group: The Tom Ford, the second part, I think that we have, as we said, we have built the infrastructure of Tom Ford at this point. We have come to a certain point of we have built the OpEx, and, I think we have been starting enjoying some good results in the second half and some scale. On gross margin, there has been also some step up on gross margin linked to the effort that we are doing in terms of, full price sell through, with the team, with the merchandising team, with Lelio Gavazza.

I think it’s a combination of the two things, quality of gross margin and the inflection, starting to see some slowdown in the growth that we have done in the last couple of years to build the structure both at headquarters and market level for Tom Ford. I think this is, in a nutshell, the situation of the second half of Tom Ford EBIT.

Antoine Belge, Analyst, BNP Paribas1: The last question was on the level of tourists. Chiara, I didn’t get if it’s in general or you asked a certain area.

Chiara Battistini, Analyst, JP Morgan: No, no, it’s in general. I think you have a very high exposure to local consumption, but I just wanted to make sure what your tourism exposure at group level is. Thank you.

Gianluca Tagliabue, Group CEO, Ermenegildo Zegna Group: It’s minimal because, well, if you take Greater China, it’s mostly locals. If it’s America, it’s low double-digit, the non-locals. Of course, in Europe, you have Europe, not Middle East, you have 30%, 40%. I think that is the our client base is of course, for the intrinsic nature, especially of Zegna, but also Tom Ford and Ermenegildo Zegna, which are skewed to men’s, there is a big component of locals. There is a big component of the top of the pyramid. That’s why, as Gildo was saying, of course, we see the uncertainty in front of us, but we enjoy also the resilience of our customer base.

Chiara Battistini, Analyst, JP Morgan: Perfect. Thank you.

Antoine Belge, Analyst, BNP Paribas1: Thank you. Grazie, Chiara. Thank you. Next one.

Antoine Belge, Analyst, BNP Paribas0: Thank you. The next question comes from Antoine Belge with BNP Paribas. Please go ahead.

Antoine Belge, Analyst, BNP Paribas: Yes. Hello, everyone. It’s Antoine Belge at BNP Paribas. 3 questions. The first one is that in 2026, not asking for a forecast, but you know, within your portfolio, would you expect a lot of difference between the top line goals of the three brands, especially now that maybe there should be less impact from you know, wholesale adjustments? Yeah, so any you know, maybe an update on wholesale and which brands have the most exciting prospects, at least for 2026. My second question is about the gross margin. What are going to be the moving parts you know, in terms of channel mix? I’m not sure I understood the impact of FX when you said a couple of points.

You said, was it about like a -2% impact on the top line, or was it an impact of basis points on the margins? Finally on the Middle East.

Antoine Belge, Analyst, BNP Paribas1: Mm-hmm.

Antoine Belge, Analyst, BNP Paribas: Just to understand. The exposure to the Middle East is mid- to high-single-digit. Within that, how much are people who are not originating from the Middle East? Then also, the sort of opposite question, which is, what’s the percentage of Middle Eastern consumer and spending elsewhere, notably, in Europe to get an idea of the.

Antoine Belge, Analyst, BNP Paribas1: Okay.

Antoine Belge, Analyst, BNP Paribas: If I deduct and then I add, then I get to the cluster. Thank you.

Antoine Belge, Analyst, BNP Paribas1: Okay. Thank you, Anthony.

Antoine Belge, Analyst, BNP Paribas: Antoine.

Antoine Belge, Analyst, BNP Paribas1: Sorry. In 2026, I asked Gianluca to comment on the difference expected growth by brand, and I think that there was also a question on wholesale.

Gianluca Tagliabue, Group CEO, Ermenegildo Zegna Group: I start from wholesale. First, I reiterate the fact that on the DTC, the three brands, all the three brands are growing very well. All combined, we are growing more than the trend that we have shown in Q4. That performance is well-balanced on the three brands. That is to take out the DTC. On wholesale, we have said that, and we reiterate that wholesale is not going to be a driving force. It will continue to contract in a different intensity by brand. Zegna, I would expect it to decline by mid-teens, considering both our intentional icon protection and some still wholesale conversions. Tom Ford should be possibly negative single digit, and this is mostly related to selling to the wholesale partners in the Middle East region.

Thom Browne will still be solid in double-digit negative, although less than last year, and of course, much less than last year in absolute terms. At this point, the business of Thom Browne wholesale is smaller and the reduction, and therefore the impact in absolute terms to the business is becoming smaller and smaller, and the decline in absolute terms will be much less than last year. This is in total. Linking to your second question of the 2 points FX impact, it was related to revenues. Of course then how this translates into the bottom line, you have of course also the OpEx deflating. It’s part of that. It creates an impact much lower, of course, than 2 points the effects. 2 points were related to top line.

Antoine Belge, Analyst, BNP Paribas1: Okay.

Gianluca Tagliabue, Group CEO, Ermenegildo Zegna Group: What was the last question?

Antoine Belge, Analyst, BNP Paribas1: There was a few questions on gross margin, if it was driven mainly by channel mix, and then the impact on Forex.

Gianluca Tagliabue, Group CEO, Ermenegildo Zegna Group: No. This, I just answered.

Antoine Belge, Analyst, BNP Paribas1: Yes. This you answered.

Gianluca Tagliabue, Group CEO, Ermenegildo Zegna Group: Well, the impact of the channel mix is definitely an important driver of the step forward on the growth margin. The second driver that we are working heavily with the team of Thom Browne and Tom Ford is stepping up the incidence of full price sell-through. That is the second big driver of improvement for Thom Browne and Tom Ford.

Antoine Belge, Analyst, BNP Paribas1: Okay.

Gianluca Tagliabue, Group CEO, Ermenegildo Zegna Group: The last question was on Middle East?

Antoine Belge, Analyst, BNP Paribas1: Yes, on the nationality, how many are not local?

Gianluca Tagliabue, Group CEO, Ermenegildo Zegna Group: It can be empirical. It’s an important part that we have people either traveling or resident there temporarily, but we don’t have a specific number. That’s why also we expect to see some of them elsewhere. That is also an outcome of this because we see, of course, there are some residents locally there, but they move to London, to Istanbul. We have been seeing people, same customers, there and elsewhere. That is also part of our safety net together with resilience because our clients are moving, so especially the ones that we have been serving in the Middle East.

Antoine Belge, Analyst, BNP Paribas: Thank you very much. Very clear.

Antoine Belge, Analyst, BNP Paribas1: Sorry, Anthony. Thank you to you. If there are other questions, yeah.

Antoine Belge, Analyst, BNP Paribas0: Thank you. The next question comes from Oliver Chen with TD Cowen. Oliver, please go ahead.

Gianluca Tagliabue, Group CEO, Ermenegildo Zegna Group: Oliver.

Oliver Chen, Analyst, TD Cowen: Thanks. Hi, Gildo and Gianluca. Thank you. Regarding Thom Browne and Tom Ford, a lot of great initiatives. How is profitability at both, you know, moving relative to your targets? And what’s realistic for us in terms of modeling those profitability profiles this year and then longer term at both of those? And then on the second question, consumer confidence and sentiment, we continue to see a really robust environment in the Americas. We just love your thoughts on that as it applies to China and the Americas, kind of different, what’s happening. Thank you.

Antoine Belge, Analyst, BNP Paribas1: The first one, I’ll leave it to Gianluca on the Thom Browne and Tom Ford profitability in 2026 and longer term, and on U.S., I’ll leave it to Gildo after.

Gianluca Tagliabue, Group CEO, Ermenegildo Zegna Group: On the EBIT of Thom Browne and Tom Ford. First, to give a qualitative perspective, both are enjoying growth in DTC, as I said before, and it’s not just only from space, but it’s comps. Our current comp trend on those two brands, part of it is the success of the new collections for Tom Ford. There has been, and that is a very strategically important initiative, all the initiatives put together by Sam and the team are around making the most of the merchandising drops. For instance, in the first month that have been put together, drops in the Zegna-like way around denim, around ASICS, and these are, especially the ASICS one, very instrumental to capture names of new clients that don’t know the brand.

These are leading indicators for something improving in both the brands. In terms of profitability, on Thom Browne, of course, we have seen a second half that has been tough with the streamlining of the wholesale business and negative EBIT in the second half of 2025. We do not expect a loss of Thom Browne. On the contrary, to make sure we expect to go back to reasonable profitability on Thom Browne and still injecting talents in the organization. We want to go back to decent profitability. Tom Ford, we expect EBIT performance to be better in 2026 than 2025 with a substantial improvement.

Antoine Belge, Analyst, BNP Paribas1: Longer term now?

Gianluca Tagliabue, Group CEO, Ermenegildo Zegna Group: Longer term, Thom Browne needs to go to a double digit. Of course, EBIT margin, there is no way that it doesn’t go back there. Tom Ford, the same with the drag of royalties to be paid to the IP owner of the brand. Both brands enjoying a journey towards a scale that is much higher than the 300 that we see today, $300 million, enjoying scale. Both, at this point, they are ready to enjoy that scale and go to a profitability that is needs to be a double digit.

Antoine Belge, Analyst, BNP Paribas1: Perfect. On consumer confidence in the U.S. and the U.S. market overall, I’ll leave it to Gildo to comment.

Gildo Zegna, Group Executive Chairman, Ermenegildo Zegna Group: Well, I would say the confidence remains pretty good across the States. We don’t see any negative. We planned another good year as it was last year in all three brands, in particular Zegna and Tom Ford. However, also with Thom Browne, we are building a stronger retail network that should help. We have a couple of openings for both Tom Ford and Zegna across the year that will materialize and give us an even more homogeneous and stronger network distribution across the country. Maybe a word on Saks Global, since it’s a strong wholesaler of ours. I think that it seems they are moving according to plan. We have shipped spring/summer, and we decided to produce for winter.

you know, we keep our fingers crossed, but we do believe that Saks Global will remain an important partner of ours in the future to move ahead together. We were reassured by the validity of the plan, and surely we supported them, you know, after having been hit last year. I think that we decided to support them from the beginning, and I think it will happen. Another important thing, Latin America. Latin America, we are one of the leader in luxury because the brand is known, has been known. I’m talking about Zegna now for many years.

The fact that we have relaunched our stores in the past few years, and we have a good network, in particular of stores in Mexico and Brazil, with a similar level of service and product that we have across the world, I mean, it makes that customer more loyal, which before he was buying all over the world. I think that it’s quite incredible the growth, the percentage growth that we had in Latin America in the past 2 years, and it will continue. Surely our attention will be not only in North America, but also in South America, in particular in those two countries.

Oliver Chen, Analyst, TD Cowen: Gildo, on China, are you seeing encouraging traffic and conversion? Like, how would you characterize that environment? One more time with the free model.

Gildo Zegna, Group Executive Chairman, Ermenegildo Zegna Group: I’m traveling with Paola tomorrow, so I can be more specific after our trip. I tell you, as I said before, we have seen some signs of improvement here and there. I would say in particular in Hong Kong. I think Hong Kong and Macau have seen a more encouraging improvement compared to PRC. As I said, Chinese New Year, we did our plan and I do believe that we touched the bottom, and it will be a gradual recovery. However, we remain prudent for 2026, you know, and if things will improve, we surely share it with you. For the time being, we remain cautious on 2026.

We plan 2026 cautiously, but we see some signs, some small signs of improvement. Thank you. I’m Gianluca. Follow up on SG&A. Can that line item grow lower than sales? Or what should we know in terms of any non-recurring or the forecast on the SG&A side? Then, lots of excitement on Thom Browne. I’m on the ASICS wait list as well. Nice job. Thanks.

Gianluca Tagliabue, Group CEO, Ermenegildo Zegna Group: Well, definitely the step up in profitability needs to come from SG&A leverage. This year, of course, if you go back, we reduced EUR 50 million more or less from the sale of Thom Browne, and that has not come together with a relevant drop of SG&A because it’s a SG&A light business. Since we said that the drop going forward of all sales in absolute terms of Thom Browne is smaller, that dragging factor should not be replicated. Definitely our journey towards improved profitability goes definitely through improved SG&A. The other factor has been we invested in the last 18-24 months in the structures of Tom Ford, especially, and therefore, as I said before, we are coming to a sort of inflection point in the growth.

Those are two factors that should help us phase out from the deleverage on the SG&A.

Gildo Zegna, Group Executive Chairman, Ermenegildo Zegna Group: Gentlemen, best regards.

Antoine Belge, Analyst, BNP Paribas1: Thank you, Oliver. Thank you. Can we ask the operator if there are follow-up or other questions?

Antoine Belge, Analyst, BNP Paribas0: Our next question comes from Natasha H. Banoori at Morgan Stanley. Natasha, please go ahead.

Natasha H. Banoori, Analyst, Morgan Stanley: Hi. Thank you very much for taking my questions. The first is just coming back down to the Middle East. I know you said it was about mid-single-digit, high single-digit percentage of your sales. Could you split it by country? Is the UAE, is it fair to assume that it’s the majority, so over 50%? And then if you could split spending just between locals, expats, and tourists. Also in the Middle East, I believe, Gildo Zegna, last year you said that you had plans to open more stores in the country, in the region, sorry. Could you let us know what those plans are for this year and next? My second question is previously on the EBIT margin for 2026, you had guided to it moving sort of sideways in 2026.

I see consensus has EUR 188 million with a 9.5% margin. Do you see that as feasible at this stage? My last question would just be a clarification on current trends. You said since the start of the conflict in March, you haven’t seen any changes in trends in the rest of the world, right? Excluding the Middle East, everywhere else is still on trend. Thank you very much.

Antoine Belge, Analyst, BNP Paribas1: Thank you, Natasha. I think the question on Middle East and the incidents is the most important part, but I anticipate the answer, but I can leave Gian Luca to comment a little bit more. There was a question from local expert and tourist, which we said we don’t provide this kind of details.

Gianluca Tagliabue, Group CEO, Ermenegildo Zegna Group: Of course, the biggest impact is in UAE because it’s the biggest by far market for the group there. When we talk about decline in the region, it’s basically the decline in Dubai and Abu Dhabi, because those are the two big markets where we see revenues coming from. The second was if we have openings, we have one opening. We have planned an opening in Abu Dhabi around the end of the year. We have already disclosed with The Galleria.

Gildo Zegna, Group Executive Chairman, Ermenegildo Zegna Group: Also Tom Ford.

Gianluca Tagliabue, Group CEO, Ermenegildo Zegna Group: also Tom Ford.

Gildo Zegna, Group Executive Chairman, Ermenegildo Zegna Group: Also, Tom Ford.

Gianluca Tagliabue, Group CEO, Ermenegildo Zegna Group: Tom Ford, we are not changing the plan. We are going forward with the opening because it was already planned and we continue the execution of that store, those two stores.

Antoine Belge, Analyst, BNP Paribas1: Yes. 2026 EBIT consensus.

Gianluca Tagliabue, Group CEO, Ermenegildo Zegna Group: What we have said is, the EBIT margin is guideline. If you take out the accrual of tax, we had more or less 9% this year, so we are moving guideline. The percentage is that one. Of course, the absolute becomes a variable depending on the revenues. We are seeing revenues in the range of EUR 2 billion. But, of course, it’s subject to the length and the impact of the disruption in the Middle East in the next months or weeks. Hopefully.

Antoine Belge, Analyst, BNP Paribas1: In terms of current trend, the last question from Natasha was, if we have seen any difference, after the war apart from Middle East.

Gildo Zegna, Group Executive Chairman, Ermenegildo Zegna Group: I already commented. No.

Antoine Belge, Analyst, BNP Paribas1: No.

Gildo Zegna, Group Executive Chairman, Ermenegildo Zegna Group: We are quite impressed by the resilience of the rest of the country. We are on. It means that we are doing the right things. The good thing is not only with Zegna. Zegna was expected, but the other two. We are doing well with the three brands, I repeat, even after the conflict erupted a few weeks ago. Let’s be positive to continue the trend because we think we know what we’re doing, and there is extremely clear strategy for each brand. I think we finally have three good organization. Nobody asked about the new governance. I’m going to volunteer to say that I think it’s working jolly good. I’m enjoying not rest.

I’m working harder probably now than before. Besides that, I think that the new team is proceeding very well, you know, in creating value and in doing the right things. And in making sure that the two brands that we expect as growth, which are Thom Browne and Tom Ford, are well supported by headquarters and by the leadership of Gianluca supporting the other CEO. I think that it’s good. I’m glad that we did courageously what we did there last year because we are better placed with this organization than we were before.

Antoine Belge, Analyst, BNP Paribas1: Anything to add, Francesca? Are you okay?

Natasha H. Banoori, Analyst, Morgan Stanley: No, I’m good. Thank you very much. Actually, just one thing on the Middle East. What’s the split between retail and wholesale, if you can share? Thanks very much.

Antoine Belge, Analyst, BNP Paribas1: Retail or selling Middle East.

Gianluca Tagliabue, Group CEO, Ermenegildo Zegna Group: Zegna is basically entirely retail. We have already also taken over Qatar, so there is a small portion in Lebanon that is the most relevant wholesale business we have on Zegna. Tom Ford actually instead is 100% wholesale.

Gildo Zegna, Group Executive Chairman, Ermenegildo Zegna Group: Yeah.

Unknown Speaker, Company Representative, Ermenegildo Zegna Group: Thom Browne is not really relevant, so I wouldn’t.

Gildo Zegna, Group Executive Chairman, Ermenegildo Zegna Group: See, when we say wholesaling means the franchising and we still have, the Tom Ford and Thom Browne logo. It’s not that we sell it to specialty store, just,

Unknown Speaker, Company Representative, Ermenegildo Zegna Group: Yes, sir.

Gildo Zegna, Group Executive Chairman, Ermenegildo Zegna Group: It’s just that somebody else runs the stores for us.

Unknown Speaker, Company Representative, Ermenegildo Zegna Group: Tom Ford, we have franchising mono brand stores.

Gildo Zegna, Group Executive Chairman, Ermenegildo Zegna Group: Yeah.

Natasha H. Banoori, Analyst, Morgan Stanley: All right. Thank you.

Antoine Belge, Analyst, BNP Paribas1: Thank you. Thank you to you. Thank you. Next one.

Antoine Belge, Analyst, BNP Paribas0: Thank you. The next question comes from Grace Gao with CLSA. Please go ahead.

Gildo Zegna, Group Executive Chairman, Ermenegildo Zegna Group: Okay.

Unknown Speaker, Company Representative, Ermenegildo Zegna Group: Thank you. Hello, Gildo. Hello, Gianluca, Paola. Thanks for taking my questions. Grace Gao from CLSA. I have a couple of quick follow-up. Firstly, it’s about Chinese demand. We are very happy to see an above expectation current trading 1Q and also in tax guidance for the full year, flat year-over-year. Just wondering that if the current improvement that you see from Chinese is more from the new consumer recruitment or existing consumers. And also maybe could you please share more that which price points of Zegna core brand are seeing more of the acceleration that’s from 4Q 2025. This is the first question. My second question is regarding the sales density in China compared with our global average of Zegna core brand. So basically, where are we now?

How does the sales density in China look like compared with global average? Because we know that there will be a couple of store optimizations in the midterm for Zegna core brand. Also, we’ll also continue with product innovations, strong engagements with our core community. Do you have any, you know, preliminary color that how the midterm sales density recovery in China will look like? This is my second question. The third question is a quick follow-up on Japan, South Korea. Maybe that is not the biggest collateral regions, but still, actually people also cares about the demand trends. Basically, how do you see the demand moving in 1Q 2026 of Japan and South Korea and also the outlook? Thank you.

Antoine Belge, Analyst, BNP Paribas1: Okay. Chris, three long questions. Of course, there are some details that we might better discuss after we provide the Q1 results in end of April. In any case, on the Chinese demand, the question was the current improvement is also from new demand from new consumer or if we can.

Gianluca Tagliabue, Group CEO, Ermenegildo Zegna Group: It’s pretty balanced. We are seeing both new clients coming in also through the type of store that we remember. It was one of the areas of untapped opportunity in China. We see new customers coming in, as well as the execution of the brand elevation that is bringing in ZEGNA friends or doors. I think we are working on both sides of the customer spectrum. This is on China, there is not one angle only, it’s both. The second was?

Gildo Zegna, Group Executive Chairman, Ermenegildo Zegna Group: Yeah, I will increase also the personalization because we opened the Zegna Salotto in China and in the rest of Asia, and we want to make those productive. Those are enhancing the possibility to have, you know, a potential new customer want privacy. In what they buy, they want to find products slightly different than they find in a store. I think that this is something that we expect improvement this year, in particular in China.

Antoine Belge, Analyst, BNP Paribas1: The second question was on sales density in China, but I would leave this specific comment on the call, end of April. On Japan and Korea, if you see some improvements.

Gianluca Tagliabue, Group CEO, Ermenegildo Zegna Group: I confirm that they are growing well, both rest of APAC in general, it’s growing well, and specifically for Zegna.

Thom Browne. Tom Ford is smaller, it’s much smaller in that area than Zegna, Thom Browne, but those brands are in the current trading, they are performing well.

Gildo Zegna, Group Executive Chairman, Ermenegildo Zegna Group: I think that the recent opening of the Ginza shop of Thom Browne shows a very good result, and I think that also the Ginza shop of Zegna we see good traction also with the local. You know, in the past few years, there were lots of Chinese, now less Chinese and more local. It seems also Korea is coming back after a couple of years of slowdown. Southeast Asia also, I would say we see some improvements in that part of the world. Actually we have strengthened our organization and we put attention to make it happen because there is a room for growth for all the three brands.

Antoine Belge, Analyst, BNP Paribas1: Thank you, Chris.

Chiara Battistini, Analyst, JP Morgan: Thank you. Very helpful.

Antoine Belge, Analyst, BNP Paribas1: Thank you. See you. The next one, if there is.

Antoine Belge, Analyst, BNP Paribas0: Thank you. Our final question from the phone lines today comes from Maria Mehta with Bernstein. Maria, please go ahead.

Antoine Belge, Analyst, BNP Paribas1: Maria.

Maria Mehta, Analyst, Bernstein: Good afternoon and thank you for taking my questions. I have two. First one is actually a follow-up on current trading because we have been speaking to your peers this week and a couple of them mentioned weaker than expected tourist trends in Europe. I was just wondering if you’re seeing the same, the same thing for this quarter. The second one is on marketing. Obviously you’ve managed to maintain marketing spend flat despite all the activations and the two brand turnarounds that are ongoing. I was wondering how you were seeing marketing spend for 2026 as well. Thank you.

Antoine Belge, Analyst, BNP Paribas1: Okay. The first one is current trend in Europe. The second one is the marketing spending because we hear you a little bit faint. If I’m not right, please correct me. The first question is what we are seeing in terms of current trend in Europe.

Gildo Zegna, Group Executive Chairman, Ermenegildo Zegna Group: The second one is?

Antoine Belge, Analyst, BNP Paribas1: Marketing spending, how we allocate the marketing spending in 2025 and the budget for 2026.

Gildo Zegna, Group Executive Chairman, Ermenegildo Zegna Group: Well, listen, in Europe, both Gianluca and I were traveling quite a bit across major European capitals and we see a good trend. We don’t see any different trend as compared to last second half of 2024 or 2025 and we see a good resilience of the local. We still see a good traffic by foreigners. It’s no major differences from what we saw in particular in Q4. You know, we have some new resort stores that in Windsor they did fairly well. We did some events, you know, in particular what we will resume to do trunk shows, you know, in particular, taking advantage of our made-to-measure service. As planned, I would say.

No, no particular worries on that side. Hopefully, you know, we will see for the summer enough foreigners so that that’s the thing to watch, but so far, okay.

Antoine Belge, Analyst, BNP Paribas1: Marketing?

Gianluca Tagliabue, Group CEO, Ermenegildo Zegna Group: Marketing, we said that we are heading into 2026 with an incidence of around 6% of marketing spending on revenues. That is our rule of thumb and could be slightly more, slightly less, but that is our normal landing spot.

Gildo Zegna, Group Executive Chairman, Ermenegildo Zegna Group: We have marketing initiatives that we said are important. You know, we moved from sport in a way to more cultural arts. I think this initiative in particular with the art world, I mean, from Biennale to Urbino to the, what’s his name? the Aspen-

Antoine Belge, Analyst, BNP Paribas1: Aspen Institute.

Gildo Zegna, Group Executive Chairman, Ermenegildo Zegna Group: Yeah, the Aspen, yeah, Frieze. I think that will help us nurturing and entertaining customers that should be resilient. I think it’s a good way to share some values that are related also to the world of also Zegna. I think that environment and arts, I mean, are something that we are putting money into the marketing budget for this year. I emphasize every time we do a show, we create an event. I think that this would be additional business that we can create that is very resilient.

Maria Mehta, Analyst, Bernstein: Thank you.

Antoine Belge, Analyst, BNP Paribas1: Are you?

Maria Mehta, Analyst, Bernstein: Thank you.

Antoine Belge, Analyst, BNP Paribas1: If you don’t have any follow-up question, Maria, I think,

Maria Mehta, Analyst, Bernstein: No follow-up. Thank you very much.

Antoine Belge, Analyst, BNP Paribas1: This was the last. Thank you, Maria, too. Operator?

Antoine Belge, Analyst, BNP Paribas0: We have no further questions on the phone line, so Paola, I will hand back to you.

Antoine Belge, Analyst, BNP Paribas1: Thank you to all of you for the many questions today. As usual, if you have a follow-up, we are here, Alice, and myself. Alice, first of all. We will join fairly sooner because we have our call on April 30 for the first quarter results and our silent period starts on April 1. I wish you a little bit in advance, but happy Easter to you all. Thank you. Good night.

Antoine Belge, Analyst, BNP Paribas0: Thank you everyone for joining us today. This concludes our call and you may now disconnect your lines.