Earnings call transcript: Zegna’s Q4 2025 shows resilience amid revenue dip

Revenue €1.917bn (-1.5% YoY; +1.1% organic) with gross margin up 90bps to 67.5% and net profit €109.5m (+20%). Adjusted EBIT €163m (would be €173m excluding €10m Saks Chapter 11 provision); proposed dividend €0.12/sh (~1.5% yield) and net cash surplus €52m at year-end. Management cites DTC mix (now 82% of branded revenues) as key margin driver and plans to raise CapEx to ~7% of revenue in 2026 for a new shoe factory. Key risks include Middle East disruption, a €10m bad-debt hit from Saks, and ~2pp FX headwind expected to affect 2026 revenue.

Analysis

The strategic pivot to DTC has materially changed the shape of operational risk: higher gross margin potential is now paired with a heavier fixed-cost and inventory sensitivity profile. That makes near-term earnings more dependent on full-price sell-through and CRM-driven repeat purchase economics rather than one-off wholesale orders, so margin upside will lag revenue if SG&A continues to grow faster than sales.

Two asymmetric tail-risks dominate the medium term. A prolonged regional geopolitical shock would not only depress local sales but also re-route high-net-worth customer flows (benefitting some gateway cities while hollowing out mall-based wholesalers), and a disorderly realization of wholesale receivables (Saks-style events) can create step-function hit to EBITDA if provisions reaccelerate.

Catalysts to re-rate the equity are concrete and dateable: proof points on sustained DTC comp trends, visible margin leverage in SG&A, and operational milestones from brand initiatives (product collaborations, store openings, factory ramp). The right way to play it is conviction that management can convert structural margin improvement into free cashflow before incremental capex drag and currency volatility reprice expectations downward.

Key Decisions for Investors

• ZGN — Core long (size 3–5% of liquid equity sleeve). Timeframe 9–12 months to capture margin re-rating as DTC comp trends and brand initiatives compound. Target: +30–40% upside to fair value; risk: -20–25% if Middle East disruption deepens or further receivable provisions appear. Risk management: ladder position and maintain a 20% trailing stop or buy protective puts equivalent to ~20% of position notional.
• ZGN — Structured option (size 1–2% of portfolio): buy a 9–12 month at-the-money call and sell an out-of-the-money call ~25% above to fund premium (vertical call spread). Rationale: asymmetric upside if Q1 trading and Tom Ford/Thom Browne momentum continue; max loss = premium paid, estimated payoff >2x if catalyst set holds.
• ZGN — Short-dated event trade (size 0.5–1%): enter 4–6 weeks ahead of the Q1 release (company quarter-end call) by buying 4–8 week call spreads to capture an information-driven pop in DTC commentary. Exit: within 3 trading days post-release or on 20% loss.
• Risk hedge / partner play — ANTA (size 1%): small long to express exposure to regional operating partners who may buffer distribution disruption in the Middle East. This is low-conviction, short-to-medium term (3–6 months) insurance; downside is limited correlation with luxury recovery so treat as tactical, not a hedge replacement for put protection on ZGN.