Zegna's Profits Surge, But A Troubled Portfolio Clouds The Horizon

MILAN – March 20, 2026 – The Ermenegildo Zegna Group today presented a complex picture of financial health, reporting a robust 20% year-on-year increase in profit to €109.5 million for fiscal year 2025. The Italian luxury giant also celebrated a significant turnaround in its financial position, ending the year with a cash surplus of €52 million, a stark contrast to the €94.2 million net debt reported at the end of 2024.

This strong bottom-line performance, however, was achieved against a backdrop of slightly contracting revenues, which fell 1.5% to €1.92 billion. While organic growth remained positive at 1.1%, the results reveal a company navigating a turbulent luxury market by leaning on operational discipline while grappling with significant challenges within its brand portfolio and mounting external pressures.

"In 2025 our Group delivered solid revenue and net profit growth despite a continued challenging environment for the sector," commented Ermenegildo “Gildo” Zegna, who has recently transitioned to the role of Group Executive Chairman. "Looking ahead, recent developments in the Middle East have introduced additional uncertainty across the sector. In this more complex environment, our priorities remain clear: disciplined growth, strong cash generation, and rigorous execution to deliver on our targets."

The Engine of Profitability: A Direct-to-Consumer Triumph

The driving force behind Zegna's impressive profitability and cash generation was a decisive and successful shift toward its direct-to-consumer (DTC) channels. Sales from the Group's own stores and websites now account for 82% of all branded product revenues, a significant jump from 78% in the previous year.

This strategic pivot has not only given the Group greater control over its brand presentation and customer relationships but has also yielded substantial financial benefits. Gross profit margin improved to 67.5% from 66.6% in 2024, an increase the company attributes directly to this favorable channel mix.

The disciplined approach is most evident in the Group's cash flow statement. Free cash flow skyrocketed to €82.1 million, an eightfold increase from the €10.1 million generated in 2024. This was fueled by higher operating cash flow and better management of working capital, including tighter inventory control and a reduction in trade receivables. This financial fortitude provides the company with what its chairman calls "flexibility" to navigate the uncertainties ahead.

A House Divided: The Uneven Performance of Zegna's Brands

Beneath the strong consolidated profit figures lies a story of starkly divergent fortunes among the Group's three main brands. The flagship ZEGNA brand remains the powerhouse, posting healthy organic revenue growth of 4.7% and an increased Adjusted EBIT margin of 14.4%. It stands as the stable pillar supporting the Group's performance.

The picture is far bleaker for Thom Browne. The brand suffered a dramatic 14.6% drop in reported revenues to €268.9 million. Its profitability was nearly erased, with Adjusted EBIT plummeting 96.5% to just €952,000. This collapse was the result of a deliberate but painful strategic overhaul aimed at streamlining its wholesale channel, which saw revenues from that segment fall by 40%. While the company is investing in new DTC stores to compensate, the transition has inflicted deep, short-term financial pain, only partially offset by cost-control measures.

Meanwhile, TOM FORD FASHION, the newest addition to the portfolio, continues to operate at a loss. The segment recorded a negative Adjusted EBIT of €15.5 million, worsening from a €10.1 million loss in 2024. The Group attributes this to necessary investments in personnel, IT infrastructure, and the DTC network to support the brand's evolution. While these investments are framed as essential for future growth, the persistent losses highlight the significant cost of integrating and scaling the high-profile acquisition.

Navigating External Storms

The Group's internal challenges are compounded by a series of external shocks. The bankruptcy filing of luxury department store Saks Global in January 2026 forced Zegna to book a €10 million provision for expected losses on trade receivables. The impact was spread across the portfolio, with TOM FORD FASHION taking a €5 million hit, the Zegna segment absorbing €3 million, and Thom Browne's already thin profits being further reduced by €2 million.

More ominously, the company explicitly warned of escalating geopolitical tensions in the Middle East. Management acknowledged that the conflict, which intensified in late February 2026, has injected "additional uncertainty" into the global luxury market. With the Middle East accounting for a mid-to-high single-digit share of Group revenues—estimated by analysts to be around 9%—Zegna is more exposed than many of its peers to a potential slowdown in a key growth region.

While Chairman Gildo Zegna affirmed that the company's ambitions remain "unchanged," he also stressed vigilance against potential risks, acknowledging the complex environment the luxury sector now faces.

A New Generation Takes the Helm

In a move to address these challenges and secure its future, the Group implemented a significant leadership restructuring at the start of 2026. Gildo Zegna stepped into the role of Group Executive Chairman, focusing on long-term strategy and brand stewardship. Gianluca Tagliabue, the former CFO and COO, was promoted to Group Chief Executive Officer, taking charge of day-to-day operations and performance across all brands.

Perhaps most notably, the change signals a generational shift at the flagship ZEGNA brand. Edoardo and Angelo Zegna, members of the family's fourth generation, were appointed as Co-CEOs. This new structure aims to blend the operational discipline of a professional CEO with the creative vision and heritage embodied by the founding family's next generation. This new leadership team is now tasked with steering the company's complex portfolio through a volatile market, balancing the immediate need for profitability at its struggling brands with the long-term strategic vision. The proposed dividend distribution of €0.12 per share, subject to shareholder approval, underscores the board's confidence in the Group's financial footing as it navigates the path ahead.