Half Year 2025 Ermenegildo Zegna Earnings Call
Speaker #1: Hello everyone, and thank you for standing by. Today's Ermenegildo Zegna Group H1 2025 financial results call will begin in just two minutes.
Operator: Hello 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. We thank you for your patience. Good afternoon. Good morning, everyone. Thank you for joining the Ermenegildo Zegna Group H1 2025 financial results call. Please note that today's material and presentation are available under the zegnagroup.com website. Joining us today, the Zegna Group leadership team, including Gianluca Tagliabue, Group CFO and COO, and Paola Durante, Chief of External Relations. Before we begin, we need to point out that the team will make certain forward-looking statements during the call. The Group 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.
Operator: Please refer to the forward-looking statement's cautionary statement included at page 2 of today's presentation. I'll now hand over to Paola Durante.
Paola Durante: Thank you. Thank you, operator, and good morning and good afternoon, everybody. Thank you for being here today on our H1 2025 results conference call. As already has been said by the operator, I'm Paola Durante, and here with me there is Gianluca Tagliabue, our CFO and COO, and Alice Poggioli, our Director. I will briefly comment on the first six months' financial results, and then we'll leave the floor to Gianluca for some final remarks. First, our 2025 revenues have been confirmed at €928 million, minus 2% organic, driven by a good, a very good plus of 6% DTC organic performance. I will skip commenting more on revenues since we have already seen and commented during our call at the end of July. Let's then move on the presentation at page 7. First of all, we start deep diving on our metrics, looking at gross profit.
H. First of all, we start to deep dive into our metrics, looking at gross profit.
Paola Durante: First, our 2025 gross profit reached €626 million, with a margin on sales of 67.5%. The 110 basis point margin improvement has been driven mainly by a better channel mix since the DTC revenues generated 82% of our group branded revenues, which is higher, 6.6% higher compared to the 76% in the first six months of 2024. As you know, you perfectly know, DTC gross margin is higher than the wholesale. Moving to selling, general and administrative costs. You know that these costs are on the other end, the other face of the coin when we are strengthening the DTC channel. This cost reached in the first six months €502 million, in line with the €498 million in the first six months of 2024. The incidence on revenues has grown to 54.1%, which compares to 51.8%. This higher incidence on revenue has been largely driven due to three main effects.
First, uh, for 2025 gross profit reach 626 million euro, with the margin on sales of 767.5%, the 110 Business points, margin Improvement. Have been driven mainly by a better Channel mix since the DTC revenues generated 82% of our group branded revenues uh Which is higher, um, 6.6 Point higher compared to the 76%. In the first 6 months of 2024. And as you know, you probably know DTC gross margin is higher than the wholesale.
Moving to selling, general and administrative cost.
You know that these costs are, on the other hand, the other face of the coin. When we strengthened the DTC channel, this cost reached €5,102 million in the first 6 months, in line with the...
498 million euros. In the first 6 months of 2024, the incidents on the revenues have grown to 54.1%, compared to 51.8% on revenue. This increase has been largely driven by three factors.
Paola Durante: The first one, a negative operating leverage, in particular at Thom Browne. The second, the cost related to support our long-term growth trajectory, in particular in building talent team, in building a stronger IT infrastructure and CRM platform. This in particular, not only, but in particular at TOM FORD FASHION. The third element is a higher initial cost incidence for the newly opened stores. You know, it is normal that at the beginning, stores do not reach the long-term run rate revenue, so the incidence of cost related to the openings is normally initially higher. At the same time, we undertook actions to contain costs across all the three brands, which has helped maintain under control the selling, general and administrative costs. Moving to marketing, marketing expenses reached €63 million, around 7% incidence on revenues, substantially in line with what we reported last year.
Affect the first one, uh, a negative operating leverage in particular at Tom Brown.
The second cost relates to supporting our long-term growth trajectory, particularly in building our Talent team and establishing a stronger IT infrastructure and CRM platform. This investment is crucial, not only for our operations but especially for our passion at home.
The third element is higher initial cost incidents for the newly opened stores. You know, it is normal that at the beginning, stores do not reach the long-term revenue, run-rate revenue, so the incidence of cost related to the openings is normally initially higher.
I mean, it's a big cost moving to marketing expenses, which is €63 million.
Paola Durante: This is notwithstanding some important events that took place in the first six months of 2025. You perfectly remember the Lozenga Dubai. I also remind you that last year we had some important events. With page 7, I would not comment more. Let's move, let's skip to page 8 of the presentation where we analyze our adjusted EBITDA for the group and by segment. First of all, you know that adjusted EBITDA is the main performance metric that we use to analyze our business both at group and at segment level. For the reconciliations between adjusted EBITDA and operating profit, you can look, you can see on the appendix of this presentation. In the first half of 2025, adjusted EBITDA reached €69 million, with an EBITDA margin of 7.4%, down 100 basis points versus the first six months of last year.
Around 7% of incidents on revenues are substantially in line with what we reported last year. And this notwithstanding, some important events took place in the first 6 months of 2025. You probably remember the last de Dubai, but I also remind you that last year we had some important events. Okay. So with page 7, I would not comment more. Let's move. Let's skip to page 8 of the presentation where we analyze our adjusted EBITDA for the group and by segments.
First of all, you know that adjusted EBITDA is the main performance metric that we use to analyze our business, both at the group and at the segment level.
Uh, for the reconciliations between adjusted and operating profit, uh, you can see, uh, on the appendix of this presentation.
Paola Durante: The reason of this decline is clearly linked to what I already commented when talking about selling, general, and administrative higher incidence, and also has been slightly negatively impacted by the currency's movement. You remember that since April, currencies, euro appreciated, in particular compared to US dollar and renminbi, which are the two most important currencies for our group. Let me also comment or add something that we already said during the call in July. We confirmed that also in 2025, in the second part, adjusted EBITDA will be higher compared to the first part of the year. Of course, we are aware that the sector remains challenging and volatile. However, we know that we have implemented actions to protect our profitability. Let's now look to our results by segment.
In the first half of 2025, revenue reached €69 million, reflecting a slight margin decrease of 7.4%, or 100 basis points, compared to the first six months of last year.
The reason for this decline is clearly linked to what I already commented on when talking about selling, general, and administrative higher incidents. It has also been slightly negatively impacted by currency movements. You remember that since April, currencies in Europe have appreciated, particularly compared to the U.S. dollar and the renminbi, which are the two most important currencies for our group.
Let me also comment or address something that we already said during the call in July. Uh, we confirmed that also in 2025 the in the second part just a little bit, will be higher compared to the first part of the year.
Of course, um, we are aware that the sector remains a challenging volatile.
Okay, well, we know that we have implemented action. So, to protect our profitability,
Paola Durante: First of all, talking about ZEGNA segment, which as you know includes not only ZEGNA brand, but also the textile division and the Third Party Brands. This segment generated an adjusted EBITDA of €94 million, with a margin of 14.3%, which compared to 12.8% in the first semester of 2024. This important 150 bps increase has been led by higher operating leverage, largely as a result of a more efficient DTC channel and cost control measures. Thom Browne, adjusted EBITDA for the Thom Browne segment was €4 million compared to €20 million in the first six months of 2024. This adjusted EBITDA contraction was driven by the sharp decrease in revenues in the period, in particular in the wholesale funnel, and an increase in the selling cost, in particular due to the DTC network expansion.
Let's now look at our results by segment. First of all, talking about the segment, which, as you know, includes not only the brand but also the Textile Division and the third-party brands.
This segment generated an adjusted EBIT of €94 million, with a margin of 14.3%, compared to 12.8% in the first semester of 2024.
This important 150 beeps in trees.
Has been led by higher operating leverage, largely as a result of a more efficient DTC channel and cost control measures.
From Brown: Adjusted EBIT for the Tom Brown segment was $4 million compared to $20 million in the first 6 months of 2024.
This adjustable contraction was driven by the sharp decrease in revenues in the period, in particular, in the old sales funnel, and an increase in the selling cost, in particular, due to the DTC network expansion.
Paola Durante: Let's now move to TOM FORD FASHION segment, which has recorded a €19 million adjusted EBITDA loss, which compares to the €12 million negative last year. This is a result of the planned, the expected investments that we made in store network expansion, in talent team, in building a talent team, in building a better, stronger IT infrastructure to create the right size platform to support the business expansion. I leave for further comments and questions at the end. Let's now move to page 9, income statement. Here, I just comment the net profit line or the profit line, which reached in the first six months of this year €48 million, €47.9 million to be precise, up 53% compared to the €31 million last year. The increase in profit is the result of higher financial income and foreign exchange gains.
Now, moving to Tom for the fashion segment, which has recorded a €19 million adjusted EBIT loss, compared to a €12 million negative last year.
This is a result of the plan expected Investments that we made in the store Network expansion in Talent team in building a, a, a talent team in building a, a better stronger. It infrastructure to create the right size platform to support the business expansion.
I live for further comments and question at the end. Let's now move to page, 9 income statement. Here, I just comment the net profit line of the profit line, um, which reached the, uh, in the first 6 months of this year, 48 47.9 to be precise. A million euro up 53% compared to the 31 Million last year.
Paola Durante: These two items combined moved in the semester from a negative €25 million to a positive plus €6 million. This reflects largely, I would say, the fair value measurement of liability for put option held by non-controlling interest. The most important liability is actually held in U.S. dollars. The euro appreciation has also benefited this line. The second important effect to consider is looking at the tax rate, the income taxes, which was of €20.1 million in the first six months of 2025, corresponding to a tax rate of 30% versus last year 35%, as you see from the table. I can also anticipate that a tax rate in the region of 30%, 28% to 30% is more aligned to our expectations for year-end. Now let's look at capital expenditure. Let's move to page 10 of the presentation. CapEx reached €54 million, with an incidence of revenues of around 6%.
Is the result of higher financial income and foreign exchange gains.
These two items combined moved us in the semester from a negative €25 million to a positive €.
And this reflects largely, I would say, the fair value measurement of the liability for the put option.
Held by non-controlling interest.
The most important liability H is actually held in US dollars. So, the Europe appreciation is also benefited this line and the second important, uh, effect to consider, uh, is um, looking at the, um, tax rate, the income taxes, which was of, uh, 20.1 million euro in the first 6 months of 2025, corresponding to a tax rate of 30% versus last year. 35, as you see from the table, I, I can also anticipate that the tax rate in the region of 30%, 28, to 30%, is more aligned to our expectations for year end. And and now let's look at capital expenditure. So, let's move to page 10 of the presentation um topics, uh, reached 54 million
Paola Durante: This €54 million has been two-thirds related to investments in the development of the store network across the three brands. The remaining part is mainly related to the investments in production. You know we are building the important plant for the shoe business in Parma and also some IT investments. For year-end, you remember we anticipate a CapEx incidence on revenue of around 6%, 7%, and I can confirm this expectation also because in the second part of the year, investments for the Greenfield production site for footwear will actually kick in even more importantly. Trade working capital at the end of June was equal to €442 million, which compared to €467 million last year. This reduction has been driven by better inventory management, as you can see from the chart, and also lower receivable. The last one is clearly also linked to the streamlining of the wholesale business.
With the incidents of revenues of around 6%. This $54 million has been 23 related to investments in the development of the store network for the three brands.
And the remaining part is mainly related to the investments in production. You know, we are building the important plant for the shoe, uh, for for, for the shoe business in Parma. And also, some it, um, Investments, uh,
For your end, you remember we anticipate a capex incident on capex, on revenue of around 6-7%, and I can confirm this expectation also because in the second part of the year, investment for the Greenfield production site for food tour will actually kick in even more importantly.
Trade working capital at the end of June was equal to €5,442 million.
Paola Durante: Finally, on page 11, free cash flow, I just commented that the free cash absorption has been of €23 million this year, and last year it was around €7 million. This higher absorption, as you can see, has been driven by the lower operating cash flow. Not much to comment on page 12, just saying that the net debt at the end of June of around €92 million was actually fairly in line with what we reported at the end of December 2024. I will finish here my brief comments and leave now the floor to Gianluca for the final remarks. Thank you.
Which compares to €467 million last year. This reduction has been driven by better inventory management, as you can see from the chart, and also lower receivables from the last plan. This is clearly also linked to the streamlining of the old sales business.
Finally on page uh 11 free cash flow. I just comment that the 3 Clash, the free cash absorption has been of 23 million this year Euro. And last year, it was around 7 million and this a higher absorption. As you can see, has been driven by the lower operating cash flow.
Um, no much comment on page 12, just saying that the net debt at the end of June of around 9 of 92 million. Euro was actually fell in line with what we reported uh, at the end of December 2024.
Gianluca Tagliabue: Thank you, Paola. Good afternoon, everybody. Let me give you a brief update on the actions that we did in the last few weeks since we last spoke before going to the Q&A session. Starting with ZEGNA. We just launched the ZEGNA Fall/Winter 25 marketing campaign labeled "It's not a suit, it's a ZEGNA." For Fall 25, a new chapter has been presented rooted in a century of style. The focus of the campaign is ZEGNA Torino, the suit that comes directly from our founder's closet. We made it with our unique new fabric, the Vellusaeum, the finest wool in the world. In the campaign, the Torino suit is matched with Pecta shoes that are the winter version of our Triple Stitch to create a unique, charismatic, and in one word, ZEGNA look.
I will finish here, my brief comments, and, uh, leave. Now the floor is yours, Jan, uh, for the final remarks. Thank you. Thank you, Paula. Uh, good afternoon, everybody. Let me give you a brief update on the actions that we have taken in the last few weeks since we last spoke, before going to the Q&A session. Starting with Xena, we just launched the Xena Fall/Winter 2025 marketing campaign labeled "It's not a suit. It's a Xena" for Fall 2025. A new chapter has been presented, rooted in a century of style. The focus of the campaign is Xena Torino, the suit that comes directly from our Founder's closet, and we made it with our unique new fabric, the Velarium, the finest wool in the world.
Gianluca Tagliabue: The campaign accompanies the launch of drop two of the Fall/Winter collection, which has received in the stores initial positive feedback since we began pre-sales and pre-orders a couple of weeks ago. Moving on to the ZEGNA direct-to-consumer (DTC) network, we are pleased to announce the opening of our new store in Miami Design District, marking another important step forward in the strategic expansion of our presence in the U.S. market. Additionally, we just opened a new salotto, which are the permanent by appointment stores for our very important client at Plaza 66 in Shanghai, bringing the total to three globally following the openings in Shinkong Place, Beijing, and Paragon, Singapore.
Gianluca Tagliabue: As you know, as I said, the salotto is a by appointment only store offering exclusive collections that you don't find in the regular stores and a unique shopping experience that reflects the essence of ZEGNA luxury and personalization offering. Moving to Thom Browne, we just launched the Fall 25 campaign, which in line with the brand communication strategy, reflects an evolution of uniformity to include lifestyle-oriented visuals with distinctive DNA that makes Thom Browne authentic and unique, remaining unmistakably present. On Thom Browne, let me also remind you that since September 2, that is this week, we are pleased to have Sam Lobban as that has officially started his mandate as CEO of the brand. Finally, TOM FORD FASHION. The first TOM FORD campaign signed by Peter Hawkings has been released and it has been very well received, as confirmed by many comments made by journalists and media experts.
DTC Network. We are pleased to announce the opening of our new store. In Miami Design District marking. Another important step forward in the Strategic expansion of our presence in the US market. Additionally, we just opened a new salotto which are the uh permanent buy appointment stores for our very important client at Plaza 66 in Shanghai, bringing the total to 3 globally, following the openings in income Place, Beijing and Paragon. Singapore as you know as I said the sellout is a buy appointment only store offering exclusive collections that you don't find in the regular stores and the unique shopping experience that reflects the essence of zhenya luxury and personalization offer moving to some brand. We just launched the fall, 25 Campaign, which in line with the brand communication strategy reflects
An evolution of uniformity to include lifestyle-oriented visuals with distinctive DNA that makes some Brown authentic and unique, remaining unmistakably present on Tom Browne. Let me also remind you that since September 2nd, which is this week, we are pleased to have some love, and as such, that has officially started this mandate as CEO of the brand.
Gianluca Tagliabue: Either collection touched the store's floor at the end of August. It is therefore early to comment on the trends, but the first very initial reactions in the stores have been really positive. All in all, I can say we have entered September with good energy across all three brands, but it's essential to remain cautious and vigilant as initial signs should not be considered yet as a consolidated brand. The sector continues to face challenges and uncertainty, which calls for a cautious and thoughtful approach. As a final comment, I can add that by region, we still continue to see strong momentum in Europe, Middle East, and Americas. Greater China remains challenging and volatile. It is true that in some recent weeks, the trend in Greater China has slightly improved, also thanks to easier comparison base, but still staying on the negative side.
And finally done for fashion. The first Tom Ford campaign signed by either Akima is being released, and it has been very well received, as confirmed by many comments made by journalists and media experts.
Either collection touched the store's floor. At the end of August, it is therefore early to comment on the trends. However, the first, very initial reactions in the stores have been really positive.
All in all, I can say we have entered September with good energy across all three brands, but it's essential to remain cautious and vigilant, as initial signs should not be considered yet as a consolidated brand. The sector continues to face.
Which cause for a cautious and thoughtful approach. As a final comment, I can add that by region, we still continue to see strong momentum in Europe, the Middle East, and the Americas.
Gianluca Tagliabue: It is yet early to draw a solid conclusion about this latest trend of Greater China. I think I can stop here and we can now open to the Q&A session. Paola.
GCR remains challenging in volatile conditions. It is true that in some recent weeks, the training GCR has likely improved, also thanks to an easier comparison base, but it is still staying on the negative side. So, it is yet early to draw a solid conclusion about this.
Paola Durante: Thank you.
Latest trend of GCR. I think I can stop here, and we can now open to the Q&A session. Paula?
Gianluca Tagliabue: Thank you.
Paola Durante: Thank you, Gianluca. Please, operator, can you open to the first question from our audience? Thank you.
Thank you. You thank you, please. Operator, can you open to the first question from our audience? Thank you.
Operator: Thank you. We will now begin the question and answer session. If you would like to ask a question, please do so now by pressing STAR followed by the number one on your telephone keypad. Our first question comes from Anthony Charfaggi with BNP Paribas. Please go ahead.
Thank you. We will now begin the question-and-answer session. If you would like to ask a question, please do so by pressing star, followed by the number 1 on your telephone keypad.
Our first question comes from Anthony Cioffi with BMP Paribas.
Please go ahead.
Anthony Charfaggi: Yes, good morning. It's Anthony from BNP. Thank you very much for taking my question. I have just two. The first one would be on the current performance in terms of margin. It seems that the gross profit margin is still continuing its poor direction since last H1 2024. Could you maybe give a bit more color on the bridge of this plus 110 bps? Maybe given the pricing effects impact on top of channel mix. That would be my first question. Also, if we should still see 67% at least a gross margin in H2 despite the tariffs. My second question would be on H2 and I would say expectation. Thank you for giving a bit of color on the current trends. It seems that consensus is expecting close to 4% organic in H2, which is a nice improvement from Q2.
Yes, good morning. It's Antonia from BNP. Thank you very much for taking my question.
Just, uh, just to the first one would be on, um, on the current, uh, uh, performance in terms of margin.
Uh seems that the the gross profit margin is still continuing its upward Direction since uh, since uh, last h124. Could you maybe give a bit more color on the bridge of this plus 110 beeps? Uh, maybe, uh, be given the pricing a fixed impact on top of of, of of Channel mix. That would be my my first question. And also if if we we should still see 767% at least the cost margin in H2 despite the the the the tariffs. Uh my second question would be
On H2, and I would say expectation.
So thank you. Thank thank you for giving a bit of of color on the on the current. Uh uh Trends seems that consensus is expecting.
Anthony Charfaggi: You already commented that you were happy with consensus being around $173 million at the EBIT level, which would imply a flat margin. Are you still expecting this development in terms of both top line and margin? That would be my second question. Thank you.
This development in terms of both top line and margin. That would be my second question. Thank you.
Paola Durante: Thank you, Anthony. I leave clearly all the two questions to Gianluca. The first one on gross profit, both analysis on the first half and what we expect for the second part of the year, and then on the consensus expectations.
Thank you, Anthony. I leave clearly all the two questions to join Luca. The first one on gross profit: both analysis on the first half and what we expect for the second part of the year. And then on the consensus expectations.
Gianluca Tagliabue: Gross margin, hi Anthony, by the way. Gross margin, the evolution is definitely a result of the DTC revenues that are reaching at this point 88% versus 86% last year. Within the DTC, we have been pushing, I think we have discussed many times also the quality of that DTC. It's not something that we report, but we carefully monitor the sell-through and sell-through at full price, which definitely is a step ahead on the ZEGNA brand versus the other two brands. In the three brands with different levels of maturities, we are pushing up the sell-through, implicitly creating the opportunity to reduce the number and the incidence of outlets. One number is evident, the DTC weight; within the DTC, it is the quality of the DTC that is the underlying factor that is helping us move forward the gross margin where we think we deserve to be.
So gross margin. Uh I am Tony by the way uh gross margin. Uh the the evolution is definitely a result of the DTC revenues that are reaching at this point 88% versus 86 last year and within the DTC, we have been pushing, I think we have discussed many times, also the quality of that CTC. Uh it's not something that we report, but we carefully monitored the South through and South through at full price. Uh, which definitely is a a step ahead on the Zenia brand versus the other 2 Brands. But in the 3 brands with different level of maturities, we are pushing up the sell through uh implicitly creating the opportunity, to reduce the number and the incidence of outlets. So those are 1 number is evident the DTC weight within the DTC is the quality of the DTC.
Gianluca Tagliabue: Apart from channel, of course, the journey of personalization is also a driver. The fact that we are able to transfer into the price, the quality, and the service unique that we deliver to our customers. I think that is an indicator, a synthetic indicator of our ability to stay full price and be recognized for the quality that we deliver. In terms of H2, if you remember, we indicated a low single-digit growth on the revenue side for the year. We confirmed that in organic terms. We clarify that in organic terms, when we provided the indication, the euro and renminbi euro were very different from today. We need to take this into account. Today, the consensus that we see at €1,923 million, I go by art, no, but it's the right number, €1,923 million. We believe that correctly reflects also the changing currency.
The underlying factor that is helping us move forward is the gross margin, where we think we deserve to be and...
Uh, apart from channel, of course, the journey of personalization is also a driver. The fact that we are able to transfer into, uh, the price, the quality, and the service unique that we deliver to our customers. So, uh, I think that is an indicator, a synthetic indicator of our ability to stay full price and be recognized for the policy that we deliver.
Gianluca Tagliabue: If you look at that number on an organic basis, it corresponds to low single-digit organic. On the adjusted EBIT, I think that the consensus that we had in front of us, that is €173 million, indeed is incorporating the same thing about the currency swing. We believe that this adjusted EBIT at consensus €173 million is realistic.
In terms of H2, if you remember, we indicated the low single digit growth on the revenue side, um, for the year we confirmed that inorganic terms. So, we clarify that in organic terms when we provide the indication, the USD Europe and REM Euro were very different from today. So, of course, we need to take this into account and today the consensus that we see at 1 1, 1 1 billion 923, I go by Art know, but the test is the right number 1 923, we believe that correctly. Reflects also the change in currency. So if you look at that number on an organic basis, corresponds to, uh, low single digit organic,
and on the
Adjusted debit. I think that our, uh, the consensus that we have in front of us, that is 173. Indeed, it is incorporating the same thing about the currency, uh, swing. We believe that this, uh, adjusted debit at, uh, consensus under 173 is uh,
realistic.
Paola Durante: Okay.
Gianluca Tagliabue: Thank you.
Paola Durante: Anthony, I think we answered, but if there is any follow-up, we are here. If not, we can go to the second question or the second analyst.
Okay. Um, Anthony, I think we answered. But if there is any follow-up, we are here.
It's not that we can, uh, go to the second question. The second analyst from the...
Gianluca Tagliabue: Yeah, all good. Thank you.
all good. Thank you.
Paola Durante: Thank you, Anthony. Operator, for the second one.
Thank you, Anthony.
Operator for the second 1.
Operator: Thank you. Our next question comes from Oliver Chen with TD Cowen. Oliver, please go ahead.
Thank you. Our next question comes from Oliver Chen with TD Cohen.
Oliver, please go ahead.
Tom Nass: Hi, this is Tom Nass on for Oliver. I wanted to ask about the margin improvement in the ZEGNA segment. Specifically, if you could speak to some of the opportunities you think may be on the road ahead as to where segment margins could trend over the longer term. As a follow-up, I wanted to ask on margins in the Thom Browne segment and the progress you've been seeing there with the wholesale rationalization. I guess more specifically, how should we think about modeling margins in the Thom Browne segment over the long term? Thanks.
Hi, this is Tom Nass on for Oliver. I wanted to ask about the margin improvement in the Zegna segment. Specifically, if you could speak to some of the opportunities you think may be on the road ahead.
As to where segment margins could trend over the longer term.
And then as a follow-up, I wanted to ask about margins in the Thom Browne segment and the progress you've been seeing there with the wholesale rationalization. I guess more specifically, how should we think about modeling margins in the Thom Browne segment over the long term? Thanks.
Paola Durante: Thank you, Oli. Thank you for the two questions. They are both on operating margins on EBIT. The first one is for ZEGNA and the opportunities on the long term. The second one is on Thom Browne. Gianluca is your man.
So there are both operating margins on E. The first one is for Xena and the opportunities in the long term, and the second one is on top brand. So again, the look is your man.
Gianluca Tagliabue: Yeah, in terms, hi Oliver. In terms of margin for ZEGNA, we were able to bring it up at this point higher than the 14%. If you ask us what is the journey of this, let's be mindful that we keep on investing on ZEGNA. We will have also investment. We need to decouple short term from long term. If you talk, if we talk about short term, didn't commit to a specific number, but definitely something between 13% and 14% is the number that we see as the number for the year. Definitely, the journey of growth for ZEGNA needs to go. We have always mentioned the 15%. That is the first step we need to get. We see the potential for the brand to get there, not for the year.
To bring it up at this point, uh, higher than the 14%. Uh, if you ask us, what is the journey of this? Let's be mindful that we keep on investing in every aspect of Zegna. We will have also investment. So we need to decouple short-term from long-term. If we talk about short-term, uh,
Didn't commit to a specific number, but definitely something between 13% and 14% is the number that we see as the number for the year.
Definitely the journey of growth for Tom. For Xena, we need to go. We have always mentioned the 15%. That is the first step we need to get.
Uh, so we see the potential for the brand to get there.
uh,
Gianluca Tagliabue: For Thom Browne, of course, we have paid the bill of the minus 52% of wholesale in the first half. We have declared that for the year, the decline of wholesale will not be minus 50%. We see the second half reducing the decline in the range of minus 20%. The impact in the first half has deeply been affected by this step down of revenues, which were much higher in the first half, first quarter of 2024. Of course, having on board Sam Lobban as the new business leader, bringing and injecting what we want to be a DTC-centric approach, starting from merchandising, starting from training in the retail, and all the different levers that then bring to life the stores is what we are betting for Thom Browne to bring Thom Browne back to a double-digit EBIT that is where it should belong.
not for the year. Uh,
For Tom Brown. Of course, we have paid the bill of the minus 52% of all sales in the first half. We have declared that for the year. The decline of wholesale will not be minus 50%. We see the second half.
Uh, if you've seen the decline in the range of -20, the impact in the first half has deeply been affected by this.
step down of revenues, which were very higher much higher in the first half first quarter of 2024 uh and of course having on board Sam
loan as, uh,
The new business leader. But in injecting, what we want to be and it is the PC Centric approach, starting from merchandising, starting from training in the retail and all the different levels that then bring to life. The stores is, is what we are betting for.
Uh, for Tom Brown to bring Tom Brown back to a double-digit team, but that is where it should be longer.
Paola Durante: Perfect. I don't know if, Oliver, we answered your questions or any follow-up. Otherwise, we go to the next one.
I don't know. It's Oliver. We answer your question.
As we go to the next, uh, 1.
Gianluca Tagliabue: That's all. Thank you.
That's all. Thank you.
Paola Durante: Okay, operator, is there any other question?
Okay, operator.
Is there any other questions?
Operator: Thank you. Our next question comes from Chris Huang with UBS. Chris, please go ahead.
Thank you. Our next question comes from Chris Wong with UBS.
Chris, please go ahead.
Anthony Charfaggi: Hello. Hi. Thanks for taking my questions. I have two. The first one on current trends. I think Gianluca, you previously touched on some early signs of improvement when it comes to the Chinese consumers. If I remember correctly, Q3 was the quarter last year when you started to see meaningfully easier comps for the Chinese consumers. Can you maybe help us understand a little bit more on the signs you're seeing? Is it traffic coming back? Is it conversions going up? Can you also confirm with Chinese consumers in the first two months of the quarter? I know it's still declining, but are we talking about maybe less than double-digit decline in the single-digit area? Secondly, on margins, just as a follow-up to the previous question on ZEGNA segment, if I heard correctly, you said that for 2025, you're expecting ZEGNA segment margins to land around 13% to 14%.
Anthony Charfaggi: That would imply H2 to see quite a bit of contraction year over year. On the basis of probably more H1 weighted marketing investments, how do we square this equation? Thank you.
Oh, hi. Thanks for taking my questions. I have to the first 1 on current Trend. Um, I think, John Luka, you previously touched on some early signs of improvement when it comes to the Chinese consumers? If I remember correctly, Q3 was a quarter last year when you started to see, meaningfully easier comes, uh, for the Chinese consumer. So can you maybe help us understand a little bit more? Um, you know, the signs you're seeing is a, is a traffic coming back, is a convergence going up and can you also confirm with Chinese consumers in the first 2 months of the quarter is? I know it's still declining. But are we talking about maybe, less than double the decline, in the single digits area and secondly, our margins, just as a follow up to the previous question. I'm saying as segments if I heard correctly um you said that for 2025, You're Expecting Zenga segment margin to land around 13 to 14%. Um but that would imply H2 to to to seek quite a bit of um contraction year over year. Um and on the basis of probably more
H1 weighted marketing. Uh, investments, how do we square this equation? Thank you.
Paola Durante: Okay. Thank you. Thank you, Chris. Let's start with the second one on margin for ZEGNA. I leave Gianluca to answer. On the China current trend, we can give you some initial more comments on colors. I would like to leave any detailed comment to our Q3 revenue results conference call that, as you know, is in October. This is not a conference call that is meant to comment deeply on current trends. I am leaving to Gianluca on margins.
Gianluca Tagliabue: On margins, we know that we have some investments to be done in the second half. We have, for instance, an event in Miami around Art Basel to be done in December. We have in front of us still four months that are uncertain. We don't want to set expectations that can be disappointing. The combination of two let us invite you to stay within that range, ask it to be at the end of the year to say that I was wrong on the upper side. We know that we have, we don't want to cut strategic actions. We want to keep on fueling the brand that is with positive tailwinds. We don't want to squeeze the numbers of the second half of the year in order to deliver an EBIT on the short term. We see big potential on the long run of the ZEGNA brand.
Okay, thank you. Thank you, Chris. Uh, let's start with the second one on margin for Xena and I will hand it over to Gianluca on the current trend in China. We can give you some initial comments on colors, but really, I would like to leave any detailed comments to our Q3 revenue results conference call, which, as you know, is in October. Uh, this is not a context that is meant to comment deeply on current trends. So, I will now turn it over to Gianluca.
March is, uh,
We know that we have some investments to be done in the second half. We have, for instance, an event in Miami around Art Basel to be done in December. So we have in front of us still four months that are uncertain. So we don't want to set expectations.
That can be disappointing. So,
The combination of tools, let us...
happy to be, uh,
Gianluca Tagliabue: We see results. We want to keep on having the right events, the right investments. We are just cutting discretionary costs, not anything else.
At the end of the year, I want to say that I was wrong on the upper side. But, uh, we know that we don't want to cut strategic actions. We want to keep fueling the brand that is with positive tailwind. So we don't want to squeeze the numbers of the second half of the year in order to deliver any bit on the short term. We see big potential in the long run for the brand. We see results, and we want to keep on having the right events and the right investments. We are just cutting discretionary costs, not anything else.
Not not anything else.
Anthony Charfaggi: Can I just follow up on marketing? Can you just confirm if for the full-year group level, it's still going to be around 6% of sales?
Um, and can I follow up on marketing? Um, can you just confirm, if for the 4-year group level, is there going to be around 6% of sales?
Paola Durante: 6%.
Gianluca Tagliabue: Yeah.
Paola Durante: Yes, around 6%, Chris, for the Group.
Anthony Charfaggi: Okay, thank you.
Paola Durante: Okay.
Anthony Charfaggi: Thank you.
6%. Yes. Yes, around 6%. Chris, for the group? The group. Okay, thank you. Okay, thank you.
Paola Durante: Thank you so much, Chris. I will leave it to the next one.
Thank you so much, Chris, and...
Leave it to the next one.
Operator: Thank you. Our next question comes from Louise Singlehurst with Goldman Sachs. Louise, please go ahead.
Thank you. Our next question comes from Louise Singlehurst with Goldman Sachs.
Louise Singlehurst: Hi, good afternoon, everyone. Gianluca and Paola, thank you for taking my questions. Just two quick follow-ups for me, please. Firstly, on pricing, can you just remind us where we are now going to obviously the fall winter, the pricing that's gone through, and any plans for the second half? I suppose the reference there is really on the commentary for the U.S. because we've been hearing a lot from the peers recently, you know, in terms of the luxury positioning, the price increases that have gone through so far this year, there hasn't really been any impact on volumes or any consumer pushback. Secondly, I know this is a call. It's not about current trading or we're going to get recent trends.
Louise, please. Hi. Good afternoon, everyone. Thank you for taking my questions. Um, just a couple of quick follow-ups for me, please. Firstly, on pricing, can you just remind us where we are now? We're going to obviously full winter; the pricing that's gone through and any plans for the second half.
Louise Singlehurst: If we think about that low single-digit outlook for the full year and where we are, you know, entering September, I suppose where's the biggest, where's the risk that we still see? Is it more on the China aspect and the pace of recovery, or is it more the expectations management across the different regions? Just quite interested to hear your feedback, Gianluca, because obviously the U.S. is probably a lot stronger than we anticipated year to date. Hopefully, there are some tentative signs in China, but I know it's early. Thank you.
And I suppose a reference there is really on the uh, commentary for the us because we've been hearing a lot from the peers recently, you know, in terms of the luxury positioning the price increases that have gone through so far this year, there hasn't really been any impact on volumes or any consumer. Um, push back and then, secondly, I know this is a call, it's not about current trading or or we're going to get recent Trends. But if we think about that low, single digit, um, outlook for the full year and where we are, you know, entering September, I suppose, where where's the where's the biggest? Um, where's where's the risk that we still see it? Is it more on that the China aspect and the pace of recovery or is it more of the expectations management across the different regions? Just quite interesting to hear your feedback on Luca? Because obviously the US is probably a lot stronger than we anticipated year to date and hopefully there are some tentative signs in China but I know it's early. Thank you.
Gianluca Tagliabue: The pricing starts on pricing. As we declared, we have been acting always on a low single-digit price increase, that's on a systematic approach to offset cost dynamics and currency dynamics. In Fall 2025, when there was the addition of incremental tariffs, we have acted in order to reflect this into our U.S. Fall/Winter 2025 prices, which have been live since August of this month. We are simply taking care of covering the burden of incremental tariffs in the U.S. We are not seeing a substantial boomerang from the consumers. As I said before, we keep on seeing good momentum in the U.S. We have not seen a change, an inflection point in our solid trajectory of growth in the U.S., first in the ZEGNA brand, but also more recently with the IDA collection. We can say the same positive momentum also on the TOM FORD FASHION.
So, I always see the pricing starts from pricing as we declare that we have been acting always on a low single-digit price increase. That's on a systematic approach to offset cost dynamics and currency dynamics.
Uh, Info 25. When there was the addition of incremental, uh, Terrace, we have acted in order to reflect this into our U.S.
For winter, 25 prices have been live since August of this month. So we are simply taking care of covering the burden of incremental tariffs in the US. We are not seeing a substantial, uh, boomerang from the consumers, as I said before. We keep on seeing good momentum in the US. So, uh, we have not seen a change in the inflection point in our solid trajectory of growth in the US.
First in the Des, but also more recently with the Either collection, we can say the same positive momentum also on the Tom Ford.
Paola Durante: Also, Thom Browne.
Gianluca Tagliabue: Also, Thom Browne, despite being smaller in the U.S. environment, they just opened some stores, but the business size is smaller. That is the comment on the Fall/Winter 25 pricing. The second, Paola, remind.
Paola Durante: The second was the outlook for H2 and where we see the main risk is China.
Gianluca Tagliabue: It's China because we are still in a volatile environment. We don't want to draw conclusions from a few weeks where we are seeing the trend less negative.
Despite being smaller in the US environment. They are just open some stores, but the business sizes smaller. So, that is the comment on the fall. Winter 25. Pricedale.
Paola Durante: Offer easier based on comparison.
Gianluca Tagliabue: We would be much more comfortable in a situation when we see China solid. As Gildo mentioned last time, we are entering the next year into a cautious mode that we have labeled as China into a new normal. Gildo mentioned that. We want to think and we want to plan and be ready for 2026, which is steady to this year. That is, we are not banking on a rebound for next year of China. If it comes, we will be ready to take advantage and enjoy the growth. We are planning to stay in this new normal situation through next year.
Conclusion from a few weeks where we are seeing the trend less negative, so it is easier based on comparison. So we want to the...
We would be, uh, much more comfortable in a situation when we see China.
Want to think. And we want to plan and be ready for 2026.
Which is, uh, steady to this year. So that is we are not.
Painting on a rebound for next year of China. Then if it comes, we will be ready to take advantage and enjoy the growth. But we are planning to stay in this new normal situation through next year.
Paola Durante: Thank you, Louise.
Louise Singlehurst: Thank you.
Thank you, Lisa. Thank you.
Paola Durante: Okay. Are there any follow-up questions or any other questions from the audience?
Okay. Uh, is there any follow-up questions or any other questions from the...
Audience.
Operator: We have no further questions registered. Paola, I'll hand back to you.
We have no further questions registered. So, Paula, I'll hand back to you.
Paola Durante: Thank you. Thank you to everybody. As always, a very interesting and nice question to us. We always enjoy spending some time with you because we enjoy, we will soon see on October 23rd. Let's see and catch up on Q3 revenues in a month and a half. Thank you, everybody. Have a nice weekend.
Thank you. Thank you to everybody as always. Very interesting and nice question to us. Uh, we always enjoy spending sometimes with you and uh, because we enjoy, we will soon see on October 27th. Uh, so let's see. And catch up on Q3 revenues, uh, in uh, in a month month month and a half. But thank you, everybody have a nice weekend.
Operator: Thank you, everyone, for joining us today. This concludes our call, and you may now disconnect your lines.
Thank you, everyone, for joining us today. This concludes our call, and you may now disconnect your lines.