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Ermenegildo Zegna Group (ZGN)
:ZGN
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Ermenegildo Zegna
(NYSE:ZGN)
Rating:74Outperform
Price Target:
$10.50
▲(10.53%Upside)
Positive Factors
Competitive Advantage
The company's deep heritage in craftsmanship and vertical integration are seen as competitive advantages.
Revenue Growth
Zegna DTC will be among three luxury companies where faster revenue growth is expected in the second quarter compared to the first quarter, alongside Hermes and Burberry.
Negative Factors
Geopolitical Tensions
Cautious stance on the Middle East due to geopolitical tensions and flight cancellations.
Tourism Spend
The key driver of the sector slowdown is reduced tourism spend in both Europe and Japan.
Wholesale Challenges
Wholesale is expected to remain challenging across the group as Zegna continues to rationalize its exposure.
Ermenegildo Zegna (ZGN) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$3.87B
Dividend Yield0.16%
Average Volume (3M)1.57M
Price to Earnings (P/E)28.7
Beta (1Y)1.11
Revenue Growth2.26%
EPS Growth-37.52%
CountryUS
Employees7,185
SectorConsumer Cyclical
Sector Strength71
IndustryApparel - Manufacturers
Share Statistics
EPS (TTM)0.25
Shares Outstanding252,579,880
10 Day Avg. Volume922,607
30 Day Avg. Volume1,573,010
Financial Highlights & Ratios
PEG Ratio-1.38
Price to Book (P/B)2.14
Price to Sales (P/S)0.00
P/FCF Ratio10.59
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$9.61Price Target Upside1.16% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering4
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:Mar 27, 2025
(Q4-2024)
| % Change Since: 36.30%|
Next Earnings Date:Sep 05, 2025
Earnings Call Sentiment Neutral
The earnings call presented a mix of positive developments, particularly in North America and strategic investments, alongside challenges in the Thom Browne segment and GCR. While the company showed resilience and strategic forward movement, some areas like China and the textile segment faced headwinds.Q4-2024 Updates
Positive Updates
Q4 2024 Revenue Growth
Q4 2024 revenue grew by 3%, both organic and reported. The Zegna brand grew 7% organically, and the DTC channel grew 8% organically at the group level. North America delivered 15% organic growth.
Strong Performance in North America
North America delivered 15% organic growth, driven by sequential acceleration and better-than-group performance for the Zegna brand.
Strategic Investments and Strengthening
In 2024, the company reinforced talents, strengthened the business division at TOM FORD FASHION, invested in CRM, and enhanced merchandising and retail operations across regions.
Zegna Brand's Product Innovation
The Zegna Vellus Aureum project, showcasing the finest wool textiles, was acclaimed at Men's Fashion Week.
TOM FORD FASHION's Positive Trends
TOM FORD FASHION recorded a 9% organic growth in DTC in Q4, with a strong performance in the U.S. and EMEA.
Negative Updates
Decline in Thom Browne and Textile Segments
Thom Browne segment revenues declined by 4%, and textile performance was negative at -30% organic, largely due to decreasing demand from luxury brands outside the group.
Challenges in Greater China Region (GCR)
GCR revenues declined by 11% in Q4, showing a sequential improvement from Q3 but still facing limited visibility and volatility.
Company Guidance
During the Ermenegildo Zegna Group's call on January 27, 2025, the leadership team, including CEO Gildo Zegna and CFO Gianluca Tagliabue, provided guidance and key metrics for Q4 2024. The group's total revenue grew by 3% organically, with the Zegna brand experiencing a 7% organic growth and the direct-to-consumer channel growing by 8%. The North American region led with a 15% organic growth, supported by a strong performance from the Zegna brand. The group highlighted strategic initiatives such as reinforcing talent, enhancing CRM, and expanding geographic focus on the U.S. and the Middle East. The leadership emphasized a shift towards a more integrated model across corporate functions to drive efficiency. Despite a challenging environment affecting profitability, the group remains committed to long-term brand value enhancement and market expansion, particularly in the U.S. and EMEA for TOM FORD FASHION, and continued investment in the Filiera supply chain for excellence and innovation. Overall, the call focused on the group's strategic positioning and selective investment in key projects to drive future growth.Ermenegildo Zegna Financial Statement Overview
Summary
Ermenegildo Zegna shows strong revenue growth and gross margins, but declining net profit margin and increased leverage are concerning. Cash generation is stable, but higher capital expenditures have impacted 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
9.50
Price Trends
8.67
Positive
8.01
Positive
8.10
Positive
Market Momentum
0.17
Negative
58.38
Neutral
86.37
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 9.5 is above the 20-day moving average (MA) of 8.89, above the 50-day MA of 8.67, and above the 200-day MA of 8.10, indicating a bullish trend. The MACD of 0.17 indicates Negative momentum. The RSI at 58.38 is Neutral, neither overbought nor oversold. The STOCH value of 86.37 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 (63)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
78 Outperform | $8.34B | 20.84 | 20.93% | 2.51% | 2.90% | 182.72% | |
76 Outperform | $17.83B | 25.36 | 29.49% | 1.15% | 6.75% | 19.71% | |
74 Outperform | $3.87B | 28.66 | 8.89% | 0.16% | 2.26% | -37.52% | |
69 Neutral | $3.72B | 10.92 | 8.31% | 0.24% | -3.63% | -37.24% | |
67 Neutral | $3.42B | 15.95 | 12.34% | 1.92% | -1.69% | -4.01% | |
63 Neutral | $17.32B | 10.90 | -7.25% | 3.10% | 1.66% | -25.40% | |
51 Neutral | $5.07B | ― | -2.39% | 2.68% | -7.52% | 94.28% |
* Consumer Cyclical Sector Average
Performance Comparison
ZGN
Ermenegildo Zegna
9.19
-1.76
-16.07%
COLM
Columbia Sportswear
62.46
-12.73
-16.93%
PVH
PVH
77.45
-22.43
-22.46%
RL
Ralph Lauren
294.33
128.69
77.69%
VFC
VF
13.43
-2.62
-16.32%
LEVI
Levi Strauss & Co
21.09
3.75
21.63%
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.