Ermenegildo Zegna NV Q1 FY2025 earnings call

• Zegna brand presented summer drop collection with positive customer response, opened two DOS stores. - Thom Browne opened Palm Beach store, DTC up 3% organic, but wholesale down 48% organic due to focus on DTC and wholesale streamlining. - Tom Ford Fashion DTC up 9% organic driven by Haider Ackermann's fashion show, opened one DOS in Puerto Banus, wholesale down 8% due to shop-in-shop conversions and slowdown in orders. - No significant changes in demand globally since April, planning mid single digit price increase in U.S. for fall/winter '25 to offset 10% tariff increase.

In the first quarter of 2025, the Ermenegildo Zegna Group reported EUR 459 million in revenues, down 1% year-on-year. By brand: Zegna brand had EUR 293 million in revenues, up 3% organic, driven by DTC in EMEA and U.S. Thom Browne had EUR 64 million in revenues, down 9% organic due to wholesale streamlining. Tom Ford Fashion had EUR 67 million in revenues, up 3% organic, driven by strong DTC and Haider Ackermann's fashion show. Textile was down 9% due to decreased global demand from luxury goods brands outside the group. By region: EMEA was 34% of total revenues, down 2%; Americas was 27% of total revenues, up 9% organic; Greater China generated EUR 123 million, 12% of total, down 12%; Rest of APAC was 8% growth. By channel: DTC was up 5% across all brands; wholesale was down 19%, reflecting focus on DTC and Thom Browne's wholesale reduction.

• Confirmed low single digit EBIT growth guidance, expecting to offset tariff costs through pricing. - Zegna and Tom Ford expected to have negative wholesale in 2025, with wholesale channel not a major growth driver from 2026 onwards. - Thom Browne full-year wholesale expected to be down 25-30% compared to 2024.

• 10% increase in tariffs on products imported to the U.S. poses a risk, but planning to offset through mid single digit price increases. - Ongoing reduction in wholesale channels for Thom Browne and others could impact revenues if not managed properly. - General economic uncertainty could affect consumer spending on luxury goods.

Q: The Zegna Americas numbers continue to be impressive. What's happening geographically in terms of trends you might be seeing? And could you speak to a stronger versus less strong products as well? We've been seeing a ton of market volatility obviously. Are your thoughts that double digit growth can continue? It sounds like you've been really favorable on the momentum. Second question, Haider is quite exciting and commercial and the show was outstanding. So what's the timing on impact that you may have that we should know about as we think about our models? And then finally, just any framework for thinking about that mid single digit price increase with tariffs. And as you think about all these complexities of sourcing, have you made any changes that we should be aware of in this dynamic environment?

A: I don't understand if your question on U.S. was within U.S., if we are seeing specific areas within U.S. So I would say that within U.S., we have not seen areas of softness or stronger performance we have seen on Zegna, especially a strong performance across the board. Of course, New York is the epicenter of everything. So the big numbers come from there. But we have seen good performance in Florida. We have seen good performance in Southern California. We have some [indiscernible] in everywhere. So I think it's on Zegna pretty much spread across the world. As we have seen around the world outside of U.S., we have been pleased by Japan, Singapore. We continue seeing softness within Greater China in Hong Kong. We are very pleased on the Middle East area, Dubai, Abu Dhabi and Continental Europe is performing especially for Zegna and Tom Ford for Zegna and Tom Ford very well. So I think that the areas of weaknesses are still Greater China with a stronger softness in Hong Kong. This is the point of attention. In terms of the third question, which I understood the mid single digit, if we are changing any logic of sourcing, we are definitely not thinking about moving any activities on manufacturing in the U.S. That is not feasible. We are where we are. Most of the production is based in Italy and will stay so. And it's an important part of our reason why. So we are not changing the sourcing strategy according to the tariffs. We will adjust, as I mentioned, prices on fall/winter in that range in order to offset the tariff.

Q: Zegna DTC mix, Thom Browne wholesale outlook, Tom Ford retail KPIs A: Zegna DTC mix driven by higher ticket items. Thom Browne wholesale down due to selective distribution. Tom Ford DTC growth from comps, mix, and price increases.

Q: Zegna and Thom Browne price mix volumes, tariff confidence, EBIT OpEx A: Zegna expects balance of price, mix, and volume levers. Confident in passing mid single digit price increases without major volume offset. Managing OpEx through cost initiatives while prioritizing brand investments.

Q: Greater China outlook, Thom Browne wholesale phasing, Zegna organic growth for margin stability A: Greater China expected to remain negative but less deep. Thom Browne wholesale down 25-30% full year. Zegna needs low single digit organic growth for margin stability