Ermenegildo Zegna Q1 Earnings Call Highlights

Key Points

• Group Q1 results: Ermenegildo Zegna reported Q1 fiscal 2026 revenues of EUR 470 million, up 7% organically, led by a 14% rise in direct‑to‑consumer sales that now account for about 85% of branded revenues and offset wholesale weakness.
• Wholesale pullback is intentional: Management framed wholesale declines as a strategic move to protect brand exclusivity—Thom Browne wholesale fell 59% (while its DTC rose ~20%)—and expects full‑year wholesale to remain down but materially less severe than Q1 across the brands.
• Outlook and margin context: The company is not revising guidance, cites consensus adjusted EBIT of €185–190m, expects margins to be broadly sideways excluding a tax hit, and flagged FX, Greater China volatility and Middle East disruption as key risks.

Ermenegildo Zegna NYSE: ZGN reported first-quarter fiscal 2026 revenues of EUR 470 million, up 7% organically, as growth in direct-to-consumer (DTC) more than offset continued weakness in wholesale. Management described the quarter as a “sequential acceleration compared to the previous quarter,” with DTC up 14% at the group level and now representing 85% of branded revenues, according to Chief of External Relations and Sustainability Paola Durante.

Group revenue trend led by DTC

During the call, Durante said revenue growth was positive across all regions, led by the Americas at +17% and Greater China Region (GCR) at +5%. By geography, EMEA represented 33% of group revenues and grew 1% organically, as “strong DTC performance” was “counterbalanced by the decline in those sales,” referring to wholesale. The Americas accounted for 29% of revenues, GCR 26%, and the rest of APAC 12%, which grew 8% driven “particularly [by] Korea and Japan.”

Management reiterated that wholesale performance reflects a deliberate strategy. “Wholesaler performance continues to reflect the decision…to improve the quality of the network and to protect our icons,” Durante said.

Brand performance: Zegna strength, Thom Browne wholesale reset, TOM FORD FASHION momentum

Zegna posted EUR 310 million in Q1 revenues, up 11% organically, which Durante attributed to “a solid DTC performance…across all regions.” Zegna DTC revenues rose 14% organically and represented 88% of brand revenues. Durante added that Rest of APAC and GCR improved sequentially, with “the Chinese cluster” turning positive in the quarter. Zegna reduced its directly operated store (DOS) network by three stores by the end of March, and wholesale revenues declined 5% as the company continued to reduce exposure to protect “exclusivity and iconicity.”

Thom Browne reported EUR 58 million in revenues, down 3% organically. Durante said the decline reflected “a strong DTC performance…up double digits” offset by contraction in wholesale. DTC grew 20% in the quarter, helped by a limited-edition sneaker launch with ASICS in early March. Thom Browne opened two DOS in the quarter, while wholesale revenue fell 59%. Durante cautioned that the wholesale decline was also affected by timing shifts from Q1 to Q2 and said Q1 “should not be taken as a proxy for full year.” She reiterated expectations for 2026 Thom Browne wholesale to be down double digits, “but less than what we have seen in the first quarter.”

TOM FORD FASHION posted EUR 68 million in revenues, up 5% organically, supported by DTC. Durante said DTC grew 9% on “consistent performance across all regions,” particularly in the Americas, aided by the new spring collection and supported by the brand’s March show in Paris. The brand opened two DOS in the quarter. Wholesale declined 3% as the group continued to prioritize DTC.

During Q&A, management provided additional category commentary at TOM FORD FASHION. Durante said the business is approximately “70/30 men to women.” CEO Gianluca Tagliabue noted the group is seeing momentum in “leather wear rather than leather goods,” with knitwear becoming “more and more important” and ready-to-wear driving growth so far. He added the company is “still working hard on the bag,” calling it “one key work stream” and “an untapped potential.”

China, pricing and mix, and customer acquisition

Analysts focused heavily on Greater China. Tagliabue said Zegna’s Chinese cluster “did turn positive in the quarter,” but management remained cautious due to volatility. “We stay cautious because…we see some volatility in the results,” he said, adding that the company continues to plan for Greater China as “more as a flat environment on a comp basis.” He pointed to momentum in Hong Kong and said the company plans an opening at Harbour City.

On the drivers of growth, Tagliabue told analysts that for Zegna, the key contributor was higher average unit retail (AUR), with a “low mid…price component” and “a bigger component of mix,” citing categories including “elevated luxury leisure wear” and “the component of Triple Stitch.” He also said Su Misura (made-to-measure) carries intrinsically higher pricing and is a differentiating factor for Zegna, with the company working to expand made-to-measure in TOM FORD and Thom Browne from “a lower base.” During Q&A, Durante said Su Misura for Zegna is “around 10%” of sales and growing, while it remains “minimal so far” for the other two brands.

Tagliabue also said Zegna is seeing “an increased number of new” clients and emphasized retention. He cited multiple “entry doors” for new customers, including Triple Stitch, a “232” shoe platform, and the launch of a fragrance collection called “Memorie,” which he described as another way for customers to enter the brand.

On Thom Browne, Tagliabue declined to quantify the revenue contribution from ASICS but said it was “an important contributor” to DTC growth, while “substantial growth comes from non-ASICS.” He also said the collaboration helped recruit new customers, and management intends to convert a portion of them into repeat clients, with jersey and knitwear expected to be “second purchase” categories.

Middle East disruption and early Q2 trading

Tagliabue addressed the operating environment in the Middle East, noting the group has 16 DOS in the region plus a limited number of franchise stores. “All our stores are open and operational,” he said, while acknowledging a complex environment. He said the company implemented immediate actions to contain inventory and adjust discretionary costs.

He stated that regional revenues were down double-digit, but the decline was “more contained than the decrease in average mall’s traffic.” Tagliabue also said that considering the Middle Eastern resident “cluster” (clients spending locally and abroad), the impact since the beginning of the conflict was “substantially flat to last year,” suggesting resilience supported by long-term investments and client relationships. Management said its long-term commitment to the region is unchanged.

On current trading, Tagliabue emphasized that the company was only one month into Q2. For Zegna DTC, trends were “broadly in line with Q1, excluding the Middle East,” where April remained double-digit negative but at a lower rate than broader market traffic declines. He also said TOM FORD FASHION’s spring/summer collection has been well received, with April confirming a positive trend, while Thom Browne’s Q2 revenue trend is expected to normalize as the ASICS effect laps and as the product is “almost sold out across the regions.”

Wholesale strategy and margin framework

Management repeatedly framed wholesale declines as strategic. Tagliabue said the company is intentionally “streamlin[ing]” distribution and protecting iconic products, adding that the group “could definitely open the gate for more and more revenues,” but is choosing not to. He said the company expects Thom Browne wholesale declines for the full year to be far less severe than Q1, while TOM FORD wholesale is expected to be single-digit negative and Zegna wholesale “around low double-digit” for the year.

While the call focused on revenues, Tagliabue offered margin-related context when asked. He said the company was not revising its outlook and referenced consensus expectations of “between EUR 185 million–EUR 190 million for adjusted EBIT.” He reiterated the company’s expectation for margins to be “moving sideways to last year, excluding the hit by tax,” citing heavy investment in IT systems and currency headwinds. Durante said FX was a roughly 5-point impact in Q1, and Tagliabue said the company does not expect that level for the full year, anticipating something “close to 2 points.”

Looking further out, Tagliabue said the group remains comfortable with the “lower part” of its 2027 targets, noting that currency moves since guidance was set have been meaningful and adding that uncertainty remains around the Middle East.

The company said its next release and conference call will take place July 23 for H1 preliminary revenues.

About Ermenegildo Zegna NYSE: ZGN

Ermenegildo Zegna is a global luxury fashion house specializing in men's tailored clothing, casualwear, accessories, footwear and fragrances. With a focus on high-quality fabrics and craftsmanship, the company manages the entire value chain from wool sourcing and textile production to garment design, manufacturing and retail distribution.

Founded in 1910 by Ermenegildo Zegna in Trivero, Italy, the company began as a textile mill dedicated to producing fine wool fabrics. Over the decades it expanded into ready-to-wear clothing and built a reputation for sartorial excellence.

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