20-F: Zegna Navigates Luxury Market Shifts, Boosts DTC

Ermenegildo Zegna N.V. reports a slight revenue dip in 2025 amidst strategic wholesale streamlining and strong DTC growth, while leadership transitions to a new generation.

Summary

• Total revenues for the year ended December 31, 2025, were 1,916,947 thousand EUR, a decrease of 1.5% from 2024, but an increase of 1.1% on an organic basis.
• Profit for 2025 increased to 109,487 thousand EUR from 90,861 thousand EUR in 2024.
• Adjusted EBIT decreased by 11.4% to 162,960 thousand EUR in 2025 from 184,020 thousand EUR in 2024.
• The Direct-to-Consumer (DTC) channel's share of branded product revenues increased to 82.0% in 2025 from 77.6% in 2024, reflecting a strategic shift.
• The ZEGNA brand's DTC channel saw a 4.1% increase in revenues (+7.4% Organic) in 2025, driven by existing stores and Su Misura offerings.
• Thom Browne segment revenues decreased by 14.7% (-12.2% Organic) in 2025, primarily due to strategic streamlining of its wholesale network.
• TOM FORD FASHION segment revenues increased by 0.8% (+3.1% Organic) in 2025, with DTC growth offsetting wholesale declines.
• Net financial expenses decreased significantly by 65.5% to 8,962 thousand EUR in 2025, largely due to net gains from fair value remeasurement of put options.
• Foreign exchange resulted in a gain of 9,000 thousand EUR in 2025, a positive shift from a 11,338 thousand EUR loss in 2024, mainly due to the Thom Browne non-controlling interest put option liability.
• The effective tax rate decreased to 21.8% in 2025 from 30.4% in 2024, influenced by non-taxable income from put option remeasurements and lower uncertain tax provisions.
• Capital expenditure for 2025 was 102,896 thousand EUR, primarily for store network expansion and production facilities.
• Net Financial Indebtedness improved to a cash surplus of 52,093 thousand EUR at December 31, 2025, from a net indebtedness of 94,225 thousand EUR in 2024.
• The Group acquired the ZEGNA business in Qatar on December 7, 2025, including two retail stores, for 1.1 million EUR.
• An additional 7.5% interest in Norda Run Inc. was acquired on December 3, 2025, increasing total interest to 32.5% for 4.0 million EUR.
• The Thom Browne put option liability, relating to the remaining 8% non-controlling interest, amounted to 90,295 thousand EUR at December 31, 2025.

Sentiment

Score: 5

Explanation: StockSavvy.ai views this filing as neutral to slightly negative. While the increase in net profit and strong DTC performance are positive, the overall revenue decline, significant drop in Adjusted EBIT, and challenges in the Thom Browne segment and Greater China region indicate headwinds. The strategic shift and leadership changes are long-term plays, but current operating results show weakness.

Positives

• Profit increased to 109,487 thousand EUR in 2025 from 90,861 thousand EUR in 2024, demonstrating improved profitability.
• Net financial expenses decreased significantly by 65.5% to 8,962 thousand EUR, driven by gains from fair value remeasurement of put options.
• Foreign exchange shifted from a loss of 11,338 thousand EUR in 2024 to a gain of 9,000 thousand EUR in 2025, positively impacting results.
• The effective tax rate decreased to 21.8% in 2025 from 30.4% in 2024, contributing to higher net profit.
• The Direct-to-Consumer (DTC) channel's share of branded product revenues grew to 82.0% in 2025, indicating successful strategic focus on higher-margin distribution.
• The ZEGNA brand's DTC channel showed strong organic growth of 7.4% in 2025, with positive performance in existing stores and Su Misura offerings.
• TOM FORD FASHION's DTC channel also experienced robust organic growth of 9.8% in 2025, reflecting positive performance and network expansion.
• Net Financial Indebtedness improved to a cash surplus of 52,093 thousand EUR at year-end 2025, indicating a stronger liquidity position.
• The Group successfully remediated previously identified material weaknesses in internal control over financial reporting by December 31, 2025.
• Strategic acquisitions like the ZEGNA business in Qatar and increased stake in Norda Run Inc. align with growth and vertical integration strategies.

Negatives

• Total revenues decreased by 1.5% in 2025 compared to 2024, despite organic growth, indicating negative foreign currency impacts.
• Adjusted EBIT decreased by 11.4% to 162,960 thousand EUR in 2025, reflecting pressure on operating profit.
• The Thom Browne segment experienced a significant revenue decrease of 14.7% (-12.2% Organic) in 2025, primarily due to wholesale streamlining and challenging conditions in Greater China.
• Selling, general and administrative expenses increased by 2.5% in 2025, rising to 53.9% of revenues, putting pressure on operating margins.
• Impairment losses on leased and owned stores increased to 15,039 thousand EUR in 2025 from 11,196 thousand EUR in 2024, particularly in Tom Ford Fashion and Zegna segments in Greater China and Rest of APAC.
• The Greater China Region saw a substantial revenue decrease of 14.6% (-11.9% Organic) in 2025, reflecting challenging luxury sector conditions and network optimization.
• The Textile product line experienced a revenue decrease of 2.8% (-3.1% Organic) due to lower orders and market uncertainties.
• The Group recorded 10,077 thousand EUR in provisions for expected losses on trade receivables from Saks Global due to its Chapter 11 bankruptcy filing.
• The Thom Browne segment's Adjusted EBIT margin significantly declined to 0.4% in 2025 from 8.7% in 2024.
• The Tom Ford Fashion segment continues to report negative Adjusted EBIT margins, at -4.9% in 2025, indicating ongoing integration and investment costs.

Risks

• Ability to safeguard brand recognition, integrity, and reputation, and to anticipate and respond to new and changing customer preferences.
• Disruptions arising from political, social, and economic instability, geopolitical tensions, acts of terrorism, civil unrest, or armed conflicts, including ongoing conflicts in Ukraine and the Middle East, and the imposition of sanctions.
• Impact of trading policies and restrictions and the imposition of tariffs.
• Ability to successfully implement the Group's strategy, including DTC channel expansion and new store performance.
• Risks related to the operation of Directly Operated Stores (DOSs), including difficulties in renewing lease agreements, increases in rental charges, impairment charges, or a decline in sales.
• Risks related to the wholesale channel, including issues with third-party points of sale, insolvency of wholesale customers (e.g., Saks Global), and the development of parallel markets.
• Fluctuations in the price or quality of, or disruptions in the availability of, raw materials (e.g., wool, cashmere, leather, vicuña) or commodities like energy, leading to increased costs or supply delays.
• Inability to negotiate, maintain, or renew license or co-branding agreements with high-end third-party brands (e.g., TFF License).
• Disruptions to manufacturing and logistics facilities, as well as stores, due to operational risks, natural disasters, or government-imposed shutdowns.
• Loss or unavailability of skilled personnel, including highly specialized craftsmen, and certain key senior personnel.
• Impact of pandemics or other public health crises on business, consumer spending, supply chain, and financial markets.
• Ability to protect intellectual property rights from counterfeiting, imitation, or third-party claims, including ongoing litigation with Adidas AG.
• Disruptions or breaches in information technology systems, including from cybercrimes or AI technologies, compromising business operations or confidential information.
• Exposure to the risk that personal information of customers, employees, and other parties may be damaged, lost, stolen, divulged, or processed for unauthorized purposes.
• Risks related to related party transactions, including renewal of agreements on favorable terms.
• Exposure to currency related risks due to operations in multiple international markets and differences in currency denominations for revenues and costs.
• Risks relating to fluctuations in interest rates and other market risks on financial instruments and borrowings.
• High levels of competition in the luxury goods market from established operators and new entrants.
• Developments in Greater China and other growth and emerging markets, including economic slowdowns, changes in consumer confidence, and geopolitical tensions.
• Significant inflation affecting costs for raw materials, energy, labor, and production, potentially reducing profit margins.
• Changes in tax, tariff, or fiscal policies, or the interpretation/application of tax laws (e.g., Pillar Two Directive), potentially increasing tax burden or compliance costs.
• Uncertainty regarding Passive Foreign Investment Company (PFIC) tax considerations for US holders.
• Uncertainty regarding the tax treatment of the loyalty voting program and Special Voting Shares for Italian and U.S. tax purposes.
• Dependence on special tax regimes (e.g., Patent Box) which may not be available in the future.
• Complexity and uncertainty in interpretation of transfer pricing rules, leading to potential adjustments and penalties.
• Volatility in the market price of the Company's securities due to various factors, including low liquidity and substantial sales by shareholders (e.g., Temasek lock-up expiry).
• Control exercised by majority shareholders (Monterubello) potentially limiting other shareholders' influence and delaying or preventing changes in corporate control.
• Differences in shareholder rights compared to companies organized in the United States due to Dutch corporate law.
• Exemption from certain SEC rules as a foreign private issuer, resulting in less publicly available information.
• Failure to maintain an effective system of internal controls, potentially leading to material misstatements and adverse regulatory consequences.
• Limitations on the Company's ability to pay dividends and the level of future dividends being subject to change.
• Difficulty in enforcing U.S. judgments against the Company due to its incorporation in the Netherlands and assets outside the U.S.
• Risks associated with climate change and other environmental impacts, including raw material availability, business interruptions, and compliance costs with new regulations.
• Increased scrutiny from stakeholders on environmental, social, and governance (ESG) matters, potentially leading to reputational damage, litigation, or impact on share price and cost of capital.

Future Outlook

The Group aims to reinforce and extend its leading position in the luxury market by developing its three complementary brands, strengthening its unique 'Filiera' (integrated supply chain), and consistently pursuing sustainable development. Key strategies include nourishing ZEGNA as a timeless luxury menswear brand, supporting Thom Browne's DTC presence and global expansion, aligning TOM FORD FASHION's business with its global recognition, integrating corporate functions, and investing in its Made-in-Italy luxury textiles and manufacturing platform. The global personal luxury goods market is estimated to reach 365-375 billion EUR in 2026, with 3-5% growth at constant exchange rates, led by the United States, Europe, and Japan, with China showing steady recovery.

Management Comments

• Gildo Zegna, Group Executive Chairman, focuses on providing strategic direction and guidance on the brands identity, as well as driving long-term value creation, overseeing the Groups Textile Division, Group General Counsel's office, and External Relations department.
• Gianluca A. Tagliabue, acting Group Chief Executive Officer, is responsible for all the Group's brands, shaping and executing the Group's long-term strategy, driving business performance, and strengthening corporate function integration.
• Angelo Zegna, Co-Chief Executive Officer of the ZEGNA brand, leads the brand's retail and wholesale strategy, product development, and merchandising.
• Edoardo Zegna, Co-Chief Executive Officer of the ZEGNA brand, oversees the brand's creative direction and expression across design, marketing, communications, and media, and leads the Group's sustainability strategy.
• Management believes that true luxury is not just about what we create, but how we create it, with integrity, care, and a promise to give back.
• Management believes that the breadth of the Su Misura offering and the lead times, as well as the service quality and the experience provided to customers, are setting standards in the industry.
• Management believes that these investments (in DTC channel and store network) are essential to strengthening our brands, deepening direct relationships with customers and supporting sustainable long-term growth.

Industry Context

StockSavvy.ai notes that the personal luxury goods market experienced a mild decrease of approximately 2% in 2024 and is expected to decrease by another 2% in 2025 at current exchange rates, reflecting broader macroeconomic uncertainties and shifts in consumer confidence. Despite this, the market is projected to rebound in 2026 with 3-5% growth, led by the US, Europe, and Japan, with China showing a steady recovery. Zegna's strategic focus on its DTC channel and brand elevation aligns with the industry's trend towards direct customer engagement and premiumization, aiming to capture market share in a competitive and evolving landscape.

Comparison to Industry Standards

• The Group's Su Misura (Made-to-Measure) business offers best-in-class lead times ranging from 2 weeks in certain key stores (particularly for ZEGNA) to 4 or 6 weeks, setting high standards in the industry.
• The Group's target of 100% of electricity from renewable sources in Europe and the United States by 2024 was achieved, demonstrating leadership in sustainability compared to general industry benchmarks.
• The luxury apparel market is characterized by high levels of competition and the presence of established operators and new entrants, some with significant financial resources or well-known brands, indicating Zegna operates in a highly competitive environment.

Management Changes

Corporate Governance

Legal Proceedings

• Adidas AG commenced an action against Thom Browne, Inc. in the Southern District of New York for trademark infringement, unfair competition, dilution, and state claims related to Thom Browne's five-color grosgrain ribbon and four-bar designs, allegedly infringing Adidas' three-stripe marks. A jury found no infringement on January 12, 2023, and Adidas' appeal was denied. Adidas filed a motion for a new trial based on discovery flaws, which was denied and appealed; a decision is expected in the first half of 2026.
• Adidas filed an opposition against several Thom Browne Inc. trademarks in the European Union, which was substantially denied, but another opposition is pending, holding up registration.
• Adidas' claims for infringement against Thom Browne Inc. in the UK High Court of Justice in London, alleging infringement of Adidas marks by Thom Browne's grosgrain ribbon and four-bar design, were fully dismissed on November 22, 2024, and Adidas did not appeal, making the decision final.
• Adidas commenced a lawsuit in 2022 before the Nuremberg-Furth District Court in Germany against Thom Browne, Inc. and Thom Browne Retail Italy S.r.l., alleging infringement of Adidas' three-stripe mark by Thom Browne's four-bar signature. The Court rejected Adidas' claims in the first instance, and Adidas appealed; the case is pending.

Related Party Transactions

• Purchase of raw materials (carded yarns) from Filati Biagioli Modesto (associate).
• Purchase of finished products from Norda Run Inc. and Luigi Fedeli e Figlio S.r.l. (associates).
• Supply agreement with TFI and its subsidiaries (TFI Group) prior to the TFI Acquisition in April 2023.
• Purchase of raw materials (wool) from Gruppo Schneider S.p.A and its subsidiaries (controlled by Monterubello or its shareholders).
• Purchase of industrial services (fabrics finishing) from Finissaggio e Tintoria Ferraris S.p.A. (controlled by Monterubello or its shareholders).
• Purchase of industrial services from Pettinatura di Verrone S.r.l. (controlled by Monterubello or its shareholders).
• Rental of properties from EZ Real Estate S.p.A. or its subsidiaries under lease agreements (controlled by Monterubello or its shareholders).
• Licensing, marketing, and other sustainability-related services from Oasi Zegna (controlled by Monterubello or its shareholders).
• Support to the activities of Fondazione Zegna, a charitable organization (related to Zegna family and Group employees).
• Put contracts with Mr. Thom Browne for the remaining non-controlling interests in Thom Browne (related to a Director).
• Transactions with UBS Group AG and its subsidiaries for borrowings, revolving credit lines, financial assets, and derivative contracts (UBS Group AG became a related party following Mr. Sergio Ermotti's appointment as Group CEO of UBS Group AG in April 2023).

Stakeholder Impact

• **Shareholders:** Potential for long-term value creation through strategic brand development and DTC expansion, but short-term revenue and Adjusted EBIT declines, along with ongoing legal disputes, may create volatility. The loyalty voting structure concentrates control with majority shareholders, potentially limiting influence for other shareholders. Dividend policy aims for consistent returns.
• **Employees:** Leadership changes at the Group and ZEGNA brand, along with new hires in TOM FORD FASHION and Thom Browne, indicate career opportunities. However, resizing of the APAC organization in ZEGNA led to a net decrease in employees in that segment. Share-based compensation plans aim to align management and employee interests with shareholder value.
• **Customers:** Continued focus on DTC channel aims to enhance customer experience and personalized offerings. Introduction of new collections (e.g., Vellus Aureum, Torino style) and immersive events (VILLA ZEGNA) seek to deepen brand engagement. Strategic streamlining of wholesale channels may alter product availability in some multi-brand retailers.
• **Suppliers:** Emphasis on the 'Filiera' and vertical integration strengthens relationships with Italian textile producers. Increased focus on sustainability and traceability requirements may impact supplier selection and compliance costs. Risks of raw material price fluctuations and supply disruptions could affect supplier relationships and costs.
• **Creditors:** Improved Net Financial Indebtedness to a cash surplus position strengthens the Group's financial health and ability to meet obligations. Compliance with debt covenants is maintained. However, exposure to interest rate and foreign currency risks remains.

Next Steps

• The Board of Directors proposed a dividend distribution of 0.12 EUR per share for 2025, subject to shareholder approval at the 2026 annual general meeting.
• The 2026 annual general meeting of shareholders is expected to be held on June 26, 2026, where the dividend proposal and appointment of Gianluca Tagliabue as Executive Director are expected to be approved.
• The new luxury footwear and leather goods production facility in Sala Baganza (Parma, Italy) is expected to be completed by the end of 2026, with full capacity employment of over 300 employees in 2027.
• The Group intends to submit a new tax ruling request to renew the current position that its dividends are not subject to Dutch withholding tax prior to the expiry of the current ruling (December 31, 2026).
• The Group is developing a multi-year plan to promote greater integration of cybersecurity capabilities, including progressive centralization of certain services, leveraging findings from a 2025 assessment.
• The appeal in the Adidas AG vs. Thom Browne, Inc. trademark dispute is expected to have a decision in the first half of 2026, which could lead to a new trial if decided in favor of Adidas.

Key Dates

Recommendation

The filing presents a mixed financial picture. While Zegna's strategic shift to DTC is yielding positive organic growth and improving gross margins, overall revenue declined due to foreign exchange headwinds and a significant streamlining of the Thom Browne wholesale business. The substantial drop in Adjusted EBIT and ongoing losses in the Tom Ford Fashion segment are concerning, indicating that strategic investments and integration costs are weighing on profitability. The improved net cash position and remediation of internal control weaknesses are positives. However, the challenging luxury market conditions in Greater China, increased impairment charges, and ongoing legal disputes create uncertainty. Given the current market headwinds and the long-term nature of the strategic initiatives, a 'hold' recommendation is appropriate, allowing investors to observe the sustained impact of these strategies on overall profitability and market performance.

Keywords

Luxury Goods, Menswear, Fashion, Zegna, Thom Browne, Tom Ford Fashion, DTC, Wholesale, SEC Filing, Financial Results, Annual Report, EBIT, EBITDA, Net Financial Indebtedness, Share-based Payments, Acquisitions, Supply Chain, Sustainability, Corporate Governance, Risk Management, Geopolitical Risk, Foreign Exchange Risk, Taxation, Intellectual Property, Cybersecurity, Leadership Change