Zegna Charts Steady Course Amid Leadership Shift and China Volatility, Fueled by DTC Momentum
In a year marked by cautious consumer spending and regional volatility, the Ermenegildo Zegna Group (NYSE: ZGN) demonstrated the resilience of its direct-to-consumer (DTC) strategy. Preliminary figures for fiscal 2025 show the Italian luxury house navigating leadership changes and a challenging Chinese market to post steady growth, with momentum building into the final quarter.
Executive Chairman Gildo Zegna framed the recent management overhaul—appointing Gianluca Tagliabue as Group CEO and naming the founder's grandsons, Edoardo and Angelo Zegna, as co-CEOs of the flagship brand—as a "generational milestone." This move, he stated, is designed to fortify the group's future while preserving its heritage of craftsmanship, anchored by its vertically integrated filiera (supply chain).
Tagliabue reported full-year revenues of €1.917 billion, a 1% organic increase. The more telling figure was the fourth-quarter surge to €591 million, up 4.6% organically, signaling a strong finish. The engine of this growth was unmistakable: DTC revenue jumped 10% in Q4, now accounting for a dominant 82% of the group's branded sales.
"Our consistent shift toward direct retail is not just a margin story; it's a brand equity story," Tagliabue emphasized during the call. The strategy played out clearly across the portfolio. The core Zegna brand saw DTC rise 10% in Q4 (88% of brand revenue), driven by double-digit gains in the Americas and EMEA. At Thom Browne, a "retail-first" push fueled 11% DTC growth, supported by high-profile store openings from Tokyo's Ginza to New York's Madison Avenue. Tom Ford Fashion posted more modest 5% DTC growth, which management attributed to a tough comparison period.
Geographically, the story was one of divergence. The Americas (30% of revenue) and EMEA (36%) grew 16% and 7% in Q4, respectively, showcasing sustained demand. Greater China (23% of revenue), however, declined 10%. Tagliabue noted the region now represents roughly half its contribution at the time of the group's 2021 IPO, reflecting both deliberate strategy and market softness. While Zegna's DTC performance in China improved sequentially, it remained negative. "We expect volatility in China to persist through the year," Tagliabue cautioned, adding that the group has budgeted conservatively for 2026.
The company also addressed the elephant in the room for luxury retailers: the recent Chapter 11 filing of Saks Global. Tagliabue confirmed Saks as an "important partner" but noted discussions on receivables are ongoing. He sought to reassure investors, stating the exposure is limited to a low single-digit percentage of group revenue, with the primary risk being bad-debt accruals rather than inventory.
Looking ahead, management signaled that growth will be increasingly driven by price/mix rather than volume, with mid-single-digit price increases planned for 2026 to counter currency fluctuations. The store footprint continues to evolve strategically, with new openings planned in the U.S., Middle East, and key Asian cities like Shenzhen, even as the group considers not renewing leases for roughly 10 stores in Greater China over the medium term.
Market Voices: Analysts and Observers Weigh In
Eleanor Vance, Luxury Goods Analyst at Sterling Capital: "Zegna's DTC numbers are impressive and validate a painful but necessary transition. Reducing wholesale dependency insulates them from channel volatility and boosts profitability. The leadership transition appears seamless, which is critical for a family-led house. The real test will be stabilizing China without sacrificing brand heat."
Marcus Thorne, Editor at 'The Sartorial Ledger': "The 10% DTC growth in Q4 isn't just a number—it's proof that their focus on experiential retail and control over the client journey is working. The new store formats, especially for Thom Browne, are becoming destinations. This report shows a group that's managing a multi-brand portfolio with distinct strategies, which is no small feat."
David Chen, Independent Retail Consultant: "The China narrative is worrying. A 10% decline in Q4, even with 'improved' DTC, suggests deeper issues than just wholesale timing. The luxury market there is fundamentally shifting. Zegna's plan to close stores might be prudent, but it also signals a retreat in the world's most important future market. Their 'prudent' budgeting for 2026 reads like preparation for more pain."
Sophie Ricci, Portfolio Manager at Fonteyn Investments: "The market is underestimating the Saks exposure. In a fragile environment, any bad debt write-downs hit margins directly. While the revenue share is small, the symbolic impact of a key retail partner failing is large. This, coupled with China's volatility, casts a shadow over an otherwise solid DTC-driven report. I'm not convinced the worst is behind them."