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Ermenegildo Zegna (ZGN)
NYSE:ZGN
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Ermenegildo Zegna (ZGN) AI Stock Analysis

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ZGN

Ermenegildo Zegna

(NYSE:ZGN)

Rating:70Outperform
Price Target:
$9.50
▲(8.94% Upside)
Ermenegildo Zegna's stock is supported by strong revenue growth and robust gross margins. However, concerns about declining net profit margins, increased leverage, and valuation metrics temper the outlook. Positive earnings call highlights are offset by challenges in specific segments and rising costs.
Positive Factors
Financial Performance
DTC operations showed solid progress with a year-over-year organic growth of 7.5%.
Investment
Temasek will hold a 10% stake in ZGN, with ZGN receiving $126.4 million in cash for the transaction.
Leadership
Sam Lobban was announced as the new CEO for Thom Browne, and his execution abilities are viewed positively.
Negative Factors
Geopolitical Tensions
Cautious stance on the Middle East due to geopolitical tensions and flight cancellations.
Market Conditions
Volatile consumer confidence and luxury industry trends in China and the US limit growth potential for Zegna.
Market Performance
Greater China remains the weakest part of the business at -12% organic, weighed by particular softness in Hong Kong.

Ermenegildo Zegna (ZGN) vs. SPDR S&P 500 ETF (SPY)

Ermenegildo Zegna Business Overview & Revenue Model

Company DescriptionErmenegildo Zegna (ZGN) is a renowned Italian luxury fashion house established in 1910, specializing in the production of high-end menswear, accessories, and textiles. The company is acclaimed for its craftsmanship, innovation, and sustainable practices, offering a diverse range of products including suits, casual wear, leather goods, shoes, and fragrances. Zegna operates globally with a strong retail presence, catering to discerning customers seeking refined and elegant apparel.
How the Company Makes MoneyErmenegildo Zegna generates revenue primarily through the sale of its luxury menswear and accessories. The company operates a network of directly-operated stores, as well as through wholesale partnerships with high-end department stores and specialty retailers worldwide. A significant portion of its income comes from its in-house designed and manufactured products, which are characterized by high-quality materials and craftsmanship. Zegna also leverages its prestigious brand to establish strategic partnerships and collaborations, further enhancing its market presence and revenue potential. Additionally, the company emphasizes sustainability and innovation in its production processes, which not only appeals to eco-conscious consumers but also helps in maintaining operational efficiency and cost management.

Ermenegildo Zegna Earnings Call Summary

Earnings Call Date:Sep 05, 2025
(Q2-2025)
|
% Change Since: |
Next Earnings Date:Apr 02, 2026
Earnings Call Sentiment Neutral
The earnings call presented a mixed picture. While there was strong performance in the Zegna segment and a significant increase in net profit, there were notable challenges with declining EBIT margins, particularly in the Thom Browne and Tom Ford Fashion segments. The increase in selling, general, and administrative costs also weighed on the overall performance.
Q2-2025 Updates
Positive Updates
Zegna Segment Margin Improvement
The Zegna segment generated an adjusted EBIT of EUR 94 million with a margin of 14.3%, which compares to 12.8% in the first semester of 2024, marking a significant 150 bps increase.
Significant Net Profit Increase
Net profit for the first 6 months of 2025 reached EUR 47.9 million, up 53% compared to EUR 31 million last year, driven by higher financial income and foreign exchange gains.
Strong DTC Performance
The DTC (Direct-to-Consumer) channel generated 82% of group branded revenues, a 6 percentage point increase compared to the first 6 months of 2024, leading to a 110 basis points gross margin improvement.
Negative Updates
Adjusted EBIT Decline
Adjusted EBIT for the first half of 2025 was EUR 69 million with a margin of 7.4%, down 100 basis points compared to the first 6 months of last year, impacted by higher selling, general, and administrative costs.
Thom Browne Segment Challenges
Adjusted EBIT for the Thom Browne segment was EUR 4 million compared to EUR 20 million in the first 6 months of 2024, driven by a sharp decrease in revenues, particularly in the wholesale channel.
Tom Ford Fashion Losses
The Tom Ford Fashion segment recorded a EUR 19 million adjusted EBIT loss, compared to a EUR 12 million negative last year, due to planned investments in store network expansion and IT infrastructure.
Selling, General and Administrative Cost Increase
Selling, general, and administrative costs reached EUR 502 million, up from EUR 498 million, with incidence on revenues growing to 54.1% from 51.8%, driven by negative operating leverage and store opening costs.
Company Guidance
During the Ermenegildo Zegna Group H1 2025 Financial Results Call, the leadership team provided detailed guidance on various financial metrics. The company reported first-half revenues of EUR 928 million, with a 2% organic decline despite a 6% increase in direct-to-consumer (DTC) organic performance. Gross profit reached EUR 626 million with a margin of 67.5%, showing a 110 basis point improvement due to a better channel mix with DTC revenues comprising 82% of branded revenues. Selling, general, and administrative costs were EUR 502 million, with a revenue incidence increase to 54.1%, driven by negative operating leverage and investments in long-term growth, including store expansions and IT infrastructure. Marketing expenses accounted for 7% of revenues at EUR 63 million. Adjusted EBIT was EUR 69 million, with a margin of 7.4%, down 100 basis points from last year, impacted by higher costs and currency movements. The Zegna segment achieved an adjusted EBIT margin improvement to 14.3%, while Thom Browne faced a contraction in adjusted EBIT to EUR 4 million due to wholesale revenue declines. Tom Ford Fashion recorded an adjusted EBIT loss of EUR 19 million due to strategic investments. Net profit increased by 53% to EUR 48 million, aided by higher financial income and a lower tax rate of 30%. Capital expenditure totaled EUR 54 million, mainly for store network development and production investments. The company anticipates maintaining a CapEx-to-revenue ratio of 6-7% by year-end.

Ermenegildo Zegna Financial Statement Overview

Summary
Ermenegildo Zegna shows strong revenue growth and robust gross margins, indicating effective cost management. However, the declining net profit margin and increased leverage are concerns, potentially impacting financial stability. Cash generation remains solid, but higher capital expenditures have reduced free cash flow.
Income Statement
78
Positive
Ermenegildo Zegna has demonstrated a steady revenue growth trajectory, with total revenue increasing from $1.49 billion in 2022 to $1.95 billion in 2024, showing a notable 30% growth over two years. The gross profit margin improved to 66.6% in 2024, indicating strong cost management. However, the net profit margin has decreased to 3.96% in 2024 from 6.38% in 2023, suggesting rising expenses or lower operational efficiency. The EBIT margin is stable at 8.57%, but the declining EBITDA margin from 20.63% in 2023 to 20.87% in 2024 indicates pressure on operating profitability.
Balance Sheet
70
Positive
The company's debt-to-equity ratio has increased to 1.13 in 2024, reflecting higher leverage, which could pose risks if earnings do not grow as expected. Return on equity (ROE) dropped to 8.41% in 2024 from 14.46% in 2023, showing reduced profitability for shareholders. However, the equity ratio has improved to 32.31% in 2024 from 30.37% in 2023, indicating a healthier balance between debt and equity financing.
Cash Flow
75
Positive
Ermenegildo Zegna's operating cash flow increased slightly to $279 million in 2024, reflecting stable cash-generating operations. The free cash flow, however, dropped to $153.6 million in 2024 from $197.5 million in 2023, due to higher capital expenditures. The free cash flow to net income ratio remains strong at 1.99, suggesting good cash conversion from earnings.
BreakdownDec 2024Dec 2023Dec 2022Dec 2021Dec 2020
Income Statement
Total Revenue1.95B1.90B1.49B1.29B1.01B
Gross Profit1.30B1.22B743.59M925.13M698.77M
EBITDA406.23M392.95M288.99M71.14M151.03M
Net Income77.08M121.53M51.48M-127.66M-46.54M
Balance Sheet
Total Assets2.83B2.77B2.43B2.46B2.42B
Cash, Cash Equivalents and Short-Term Investments296.13M387.03M572.99M800.17M630.94M
Total Debt1.04B996.35M914.56M1.07B1.08B
Total Liabilities1.85B1.87B1.69B1.81B1.77B
Stockholders Equity916.12M840.29M678.95M601.21M601.76M
Cash Flow
Free Cash Flow153.60M197.50M73.10M186.83M31.75M
Operating Cash Flow279.13M275.38M146.40M281.15M70.91M
Investing Cash Flow-126.01M21.79M-57.34M-82.00M92.57M
Financing Cash Flow-234.53M-250.49M-297.00M-64.11M-49.05M

Ermenegildo Zegna Technical Analysis

Technical Analysis Sentiment
Positive
Last Price8.72
Price Trends
50DMA
8.48
Positive
100DMA
8.29
Positive
200DMA
8.14
Positive
Market Momentum
MACD
0.03
Negative
RSI
61.96
Neutral
STOCH
82.72
Negative
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For ZGN, the sentiment is Positive. The current price of 8.72 is above the 20-day moving average (MA) of 8.14, above the 50-day MA of 8.48, and above the 200-day MA of 8.14, indicating a bullish trend. The MACD of 0.03 indicates Negative momentum. The RSI at 61.96 is Neutral, neither overbought nor oversold. The STOCH value of 82.72 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for ZGN.

Ermenegildo Zegna Risk Analysis

Ermenegildo Zegna disclosed 45 risk factors in its most recent earnings report. Ermenegildo Zegna reported the most risks in the "Finance & Corporate" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 1 New Risks
1.
Summary of Risk Factors Q4, 2023

Ermenegildo Zegna Peers Comparison

Overall Rating
UnderperformOutperform
Sector (61)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
78
Outperform
$8.95B22.3620.93%2.39%2.90%182.72%
77
Outperform
$18.85B24.8332.55%1.09%9.61%21.14%
72
Outperform
$4.29B9.569.32%0.17%-1.14%-29.30%
70
Outperform
$3.57B25.3110.74%1.61%2.26%-37.52%
67
Neutral
$3.09B14.3512.93%2.09%0.81%4.86%
61
Neutral
$17.97B12.87-5.29%2.97%1.26%-14.45%
55
Neutral
$5.85B68.237.83%2.40%-7.41%
* Consumer Cyclical Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
ZGN
Ermenegildo Zegna
9.02
-0.74
-7.58%
COLM
Columbia Sportswear
56.50
-23.61
-29.47%
PVH
PVH
87.76
-7.03
-7.42%
RL
Ralph Lauren
312.02
141.70
83.20%
VFC
VF
15.00
-2.31
-13.34%
LEVI
Levi Strauss & Co
22.22
4.16
23.03%
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.Date of analysis: Sep 05, 2025