Ermenegildo Zegna N.V. 2026 H1 Earnings Call

Thank you. Thank you, operator, and good morning, good afternoon, everyone. Thank you for being here today with our conference call on first half of 2026 results. I will briefly comment on our financial results, which highlights you can find on page 3 of the presentation, and then I will leave the floor to Gianluca Tagliabue, our Group CEO, for some final remarks, of course, before opening to your questions. On page 3, we skip commenting on H1 revenues since they've been already fully analyzed during the July call. Let's move directly to page 4 of the presentation to deep dive on the main metrics of our reported profit and loss. Starting with gross profit. In the first half of 2026, gross profit reached EUR 668 million, with a margin on revenues of 67.6%.

Gross profit remained supported by a favorable channel mix, given that DTC revenues generated 86% of branded group revenues, up from 82% in the first half of last year. As you know, DTC gross margin is higher than the wholesale one. This positive effect was partially offset by adverse foreign exchange movement. As a reminder, Forex movement in the first six months of this year reduced top-line growth by 3 percentage points. Selling, general, and administrative. SG&A expenses amounted in the first half of 2026 to EUR 531 million, with an incidence on revenues that has slightly decreased to 53.8%. This has been primarily driven by improved operating leverage and lower impairment costs, and it happened despite ongoing investments in the expansion of the DTC distribution network.

Finally, on marketing expenses reached EUR 68 million, remaining broadly stable at 6.9% of revenues, reflecting our brand's disciplined approach in supporting their equity through focused and selective investments. Let's then move to page 5, where we report adjusted EBIT for the group and by segment. As you know, adjusted EBIT is the main metric used by management to analyze business performance at groups and segment level. In the first six months of 2026, adjusted EBIT landed slightly above EUR 74 million compared to EUR 69 million in the first six months of last year, with a margin of 7.5%. Looking at the results by segment, the Zegna segment, which includes Zegna brand, the textile division, and the third-party brands, generated an adjusted EBIT of EUR 107 million, which corresponded to a margin of 14.8% compared to 14.3% in the first six months of last year.

The 50 basis points increase in margin has been largely driven by operating leverage in the DTC channel, benefiting from higher revenues per square meter and improved DTC KPIs, including the sell-through. Adjusted EBIT for Thom Browne segment was negative EUR 8 million compared to EUR 4 million positive in the first six months of last year. The decline reflects the adverse impact of foreign exchange movements, which for Thom Browne has been more severe than the group's average. Inventories and bad debt reserve evolution in line with the business trend and the cost related to talent acquisition and other investments to support the brand's transition towards a retail-first culture. Moving now to Tom Ford Fashion segment. The Tom Ford Fashion recorded a EUR 12 million of adjusted EBIT loss compared to a negative 19 in the first six months of last year.

This improvement is primarily attributable to revenue growth, which allowed for greater absorption of fixed costs together with an ongoing cost discipline. Let's move to page six. Here you find summarized our reported income statement for the first half of this year and last year. I will comment here on profit specifically. In the first six months of 2026, profit reached EUR 28 million compared to EUR 48 million last year, which, as you remember, included the positive effect from the remeasurement of the Thom Browne put option liability, that remeasurement that did not occur this year. More specifically, the sum of financial income and expenses, foreign exchange gains and losses in the first half of 2026 move to a negative EUR 23 million from a positive EUR 6 million in the first half of last year. This difference mostly reflects the just mentioned remeasurement of the Thom Browne non-controlling interest put option liabilities.

That is, I remind you, denominated in the US dollar. The value of the put option was reduced in the first half of last year, also reflecting the sharp dollar depreciation. This generated non-monetary and non-taxable income for EUR 28 million in the first half of 2025. As a reminder, in fiscal year 2025, the total positive impact from the Thom Browne put option was at EUR 37 million, so only an additional EUR 9 million income was recognized in the second part of 2025. Commenting now on income taxes. First half of 2026 income taxes resulted in a higher effective tax rate equal to 39% versus 30% in the first six months of last year, mainly due to the already mentioned tax effect on non-taxable income.

Tax rate for the group is normally higher in the first part of the year, therefore, also in this year, also in 2026, we expect the tax rate in the second half to be lower than what we recorded in the first six months. As already said in the past, commenting our results, a normal tax rate for the group is around 28%-30%. Moving now quickly to page seven, CapEx and trade working capital. CapEx, in the first six months, reached EUR 64 million. The EUR 10 million increase compared to last year was mainly related to higher investments in production, including the new shoe production plant in Parma, which should start to operate by the end of the year. Very happy for that. Trade working capital stood at EUR 420 million at the end of June, compared to EUR 442 million at the end of June last year.

The reduction has been mainly driven by lower receivable as a result of the streamlining of the wholesale business. Finally, on free cash flow and cash surplus, page 8 and page 9. On page 8, you can see that we generated EUR 19.9 million of free cash flow this year, compared to a EUR 23 million absorption in the first six months of last year. This thanks to a stronger cash generation from operating activities, which of course was driven by higher EBIT and also by an improved trade working capital. Finally, on page 9, our net cash was EUR 60 million at the end of June, an increase higher than the EUR 52 million at the end of December 2025. With this, I finish my brief comments, and I leave the floor to Gianluca.

Thank you, Paola. Before we open the floor to your questions, let me leave you with a few final thoughts by brand. In H1, the results once again reflect the excellent work that the Zegna brand team is doing to strengthen the brand. The consistency and discipline behind the clear strategic vision continue to translate into solid top-line growth while also supporting the margin expansion. This trend continues to be supported by the brand's ability to both increase its market share among the loyal customers, as well as attract new clients, all while remaining highly consistent in its positioning. Indeed, the very solid momentum has continued through July and August. As you may have noticed, we launched our fall/winter campaign today, fully dedicated to Su Misura, Make to Measure, which is also featured on the cover of this presentation and in several major publications.

The campaign is a tribute to our legacy and to the craftsmanship expertise and personalized approach that have distinguished Zegna brand for generations, because a Zegna Su Misura suit is not just a suit, it's a legacy that will be carried forward across generations. Regarding Tom Ford Fashion, this fall, we unveiled a powerful marketing campaign that, in my view, effectively conveys the brand's evolution and its increasingly sophisticated expression of elegance and seduction. Marketing is a strategic area where we are prepared to selectively deploy additional resources to further strengthen brand awareness and hype. In the past weeks, Tom Ford Fashion has continued to perform well, with healthy momentum as awareness and engagement continue to build. Now let me focus on Thom Browne. As you know, the brand's deep transformation is ongoing as it moves away from a wholesale-driven model into a retail-oriented go-to-market approach and culture.

This transition is taking place in several phases. We are completing the reduction and upgrading of the wholesale network, and to be honest, the process has been taking longer than initially anticipated partially due to a challenging macroeconomic environment. In 2025, we also began evolving the brand's leadership team. Sam Lobban, Thom Browne's new CEO, is building the organization with a stronger focus on DTC and a more customer-centric culture. As part of this effort, he has been reshaping the senior leadership team. We are confident that Sam, together with Thom, of course, are bringing the brand towards the right direction. Transformations of this nature require time and may temporarily weigh on results. The operating performance in H1 this year reflects both the decisions we have taken and the actions we continue to implement to strengthen the brand's long-term foundations.

The success of the ASICS collaboration confirmed that the Thom Browne brand continues to resonate with consumers. However, while brand desirability is essential, it is not enough on its own. We are working with Sam across all the key levers of the business, including collection merchandising, open-to-buy planning and assortment, marketing, go-to-market execution, in order to ensure that both existing and prospective customers are engaged, can find the right product offering, and continue to build a relationship with the brand over time. The more recent marketing campaign of Thom Browne, which went out in the last few days, I believe, offer evidence of the brand intention to widen its customer base. Fashion operates on long lead times. Building a stronger brand and a more sustainable growth platform requires patience, disciplined execution, and consistency.

As we did a few years ago with the one brand strategy of the Zegna brand, our focus for Thom Browne is exactly this, building a stronger brand with foundations able to deliver sustainable and profitable growth for the long term. Looking ahead, we expect Thom Browne H2 2026 EBIT to return positive in the semester, bringing full-year EBIT close to breakeven. In H2, Forex will have less negative impact, our comparison base will become less demanding, and we have implemented actions to support gross profit and to control costs. Let me conclude now with a comment on our Parma factory, which is a strategic project that we launched a couple of years ago. We are now completing this important investment, which is much more than a manufacturing facility.