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Ermenegildo Zegna (ZGN)
NYSE:ZGN
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Ermenegildo Zegna
(NYSE:ZGN)
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Rating:70Outperform
Price Target:
$9.50
▲(4.05% 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
Revenue Growth
The 30% revenue growth over two years indicates strong demand for Zegna's products and effective market expansion, supporting long-term business sustainability.
Direct-to-Consumer Performance
The strong DTC performance enhances margins and customer engagement, reducing reliance on wholesale channels and improving profitability.
Zegna Segment Margin Improvement
Margin improvement in the core Zegna segment reflects effective cost management and pricing power, contributing to long-term profitability.
Negative Factors
Declining Net Profit Margin
The decline in net profit margin suggests rising costs or inefficiencies, which could pressure future earnings and require strategic adjustments.
Increased Leverage
Higher leverage increases financial risk and could limit flexibility in adverse conditions, necessitating careful debt management.
Thom Browne Segment Challenges
The significant EBIT decline in Thom Browne highlights challenges in the wholesale channel, potentially affecting overall growth and profitability.
Ermenegildo Zegna (ZGN) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$3.89B
Dividend Yield1.54%
Average Volume (3M)811.99K
Price to Earnings (P/E)23.4
Beta (1Y)1.17
Revenue Growth-1.88%
EPS Growth-5.94%
CountryUS
Employees7,185
SectorConsumer Cyclical
Sector Strength84
IndustryApparel - Manufacturers
Share Statistics
EPS (TTM)0.20
Shares Outstanding254,089,370
10 Day Avg. Volume1,006,096
30 Day Avg. Volume811,994
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)N/A
P/FCF RatioN/A
Enterprise Value/Market Cap0.83
Enterprise Value/Revenue1.65
Enterprise Value/Gross Profit2.48
Enterprise Value/Ebitda12.34
Forecast
1Y Price Target
$10.45Price Target Upside14.46% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering6
Ermenegildo Zegna Business Overview & Revenue Model
Company DescriptionErmenegildo Zegna N.V., together with its subsidiaries, designs, manufactures, markets, and distributes luxury menswear, footwear, leather goods, and other accessories under the Zegna and the Thom Browne brands. It provides luxury leisurewear for men; formal suits, tuxedos, shirts, blazers, formal overcoats, and accessories; leather accessories comprising shoes, bags, belts, and small leather accessories; and fragrances. The company also offers luxury womenswear and childrenswear under the Thom Browne brand, as well as provides eyewear, cufflinks and jewelry, watches, underwear, and beachwear manufactured by third parties under licenses. It serves customers through its retail stores and online channels in Europe, the Middle East, Africa, North America, Latin America, the Asia Pacific, and internationally. The company was founded in 1910 and is based in Trivero, Italy. Ermenegildo Zegna N.V. is a subsidiary of Monterubello Societa' Semplice.
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
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.78
Positive
Balance Sheet
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.70
Positive
Cash Flow
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.75
Positive
| Breakdown | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|---|
Income Statement | |||||
| Total Revenue | 1.95B | 1.90B | 1.49B | 1.29B | 1.01B |
| Gross Profit | 1.30B | 1.22B | 743.59M | 925.13M | 698.77M |
| EBITDA | 406.23M | 392.95M | 288.99M | 71.14M | 151.03M |
| Net Income | 77.08M | 121.53M | 51.48M | -127.66M | -46.54M |
Balance Sheet | |||||
| Total Assets | 2.83B | 2.77B | 2.43B | 2.46B | 2.42B |
| Cash, Cash Equivalents and Short-Term Investments | 296.13M | 387.03M | 572.99M | 800.17M | 630.94M |
| Total Debt | 1.04B | 996.35M | 914.56M | 1.07B | 1.08B |
| Total Liabilities | 1.85B | 1.87B | 1.69B | 1.81B | 1.77B |
| Stockholders Equity | 916.12M | 840.29M | 678.95M | 601.21M | 601.76M |
Cash Flow | |||||
| Free Cash Flow | 153.60M | 197.50M | 73.10M | 186.83M | 31.75M |
| Operating Cash Flow | 279.13M | 275.38M | 146.40M | 281.15M | 70.91M |
| Investing Cash Flow | -126.01M | 21.79M | -57.34M | -82.00M | 92.57M |
| Financing Cash Flow | -234.53M | -250.49M | -297.00M | -64.11M | -49.05M |
Ermenegildo Zegna Technical Analysis
Positive
9.13
Price Trends
8.61
Positive
8.58
Positive
8.25
Positive
Market Momentum
0.28
Negative
54.07
Neutral
58.97
Neutral
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 9.13 is above the 20-day moving average (MA) of 9.03, above the 50-day MA of 8.61, and above the 200-day MA of 8.25, indicating a bullish trend. The MACD of 0.28 indicates Negative momentum. The RSI at 54.07 is Neutral, neither overbought nor oversold. The STOCH value of 58.97 is Neutral, 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 | 9.18B | 22.93 | 19.39% | 2.32% | 2.90% | 182.72% | |
77 Outperform | 18.91B | 24.91 | 31.59% | 1.15% | 9.61% | 21.14% | |
73 Outperform | 4.31B | 10.03 | 9.63% | 0.17% | -1.14% | -29.30% | |
70 Outperform | $3.89B | 23.40 | 10.58% | 1.54% | -1.88% | -5.94% | |
67 Neutral | 2.94B | 13.68 | 13.59% | 2.36% | 0.81% | 4.86% | |
53 Neutral | 5.79B | 68.23 | -3.66% | 2.50% | -7.41% | ― | |
61 Neutral | $18.38B | 12.79 | -2.54% | 3.03% | 1.52% | -15.83% |
* Consumer Cyclical Sector Average
Performance Comparison
ZGN
Ermenegildo Zegna
9.13
-0.47
-4.90%
COLM
Columbia Sportswear
50.89
-30.44
-37.43%
PVH
PVH
85.74
-14.51
-14.47%
RL
Ralph Lauren
302.89
108.43
55.76%
VFC
VF
14.39
-4.76
-24.86%
LEVI
Levi Strauss & Co
22.81
1.79
8.52%
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.