Ermenegildo Zegna (NYSE:ZGN) reported first-half 2026 adjusted EBIT of slightly more than €74 million, up from €69 million a year earlier, as a higher direct-to-consumer mix and operating leverage supported profitability. Reported profit, however, declined to €28 million from €48 million in the prior-year period, largely due to the absence of a favorable remeasurement gain related to the Thom Browne put option liability.
Paola Durante, Chief of External Relations and Sustainability, said gross profit reached €668 million, representing a 67.6% margin on revenue. The result benefited from the expansion of the group’s direct-to-consumer business, which generated 86% of branded group revenue in the first half, compared with 82% a year earlier. Since direct-to-consumer sales carry higher gross margins than wholesale sales, the channel mix was favorable, though foreign-exchange movements partly offset the benefit.
Segment performance
The Zegna segment, which includes the Zegna brand, textile division and third-party brands, generated adjusted EBIT of €107 million, up from a margin of 14.3% to 14.8%. Durante said the 50-basis-point improvement was driven primarily by operating leverage in direct retail, including higher revenue per square meter, stronger sell-through and improved direct-to-consumer key performance indicators.
Thom Browne recorded an adjusted EBIT loss of €8 million, compared with adjusted EBIT of €4 million in the first half of 2025. The decline reflected a more severe foreign-exchange impact than the group average, inventory and bad-debt reserve trends, as well as costs associated with management hiring and investments supporting the brand’s transition to a retail-focused operating model.
Tom Ford Fashion narrowed its adjusted EBIT loss to €12 million from €19 million a year earlier. Durante attributed the improvement to revenue growth that helped absorb fixed costs, along with continuing cost discipline.
Group CEO Gianluca Tagliabue said the Zegna brand continued to post “substantial, solid, double-digit positive” direct-to-consumer growth in July and August across regions and customer nationalities. He said the brand’s performance has been supported by gains in market share among existing customers and by new customer acquisition, while maintaining its positioning.
Tagliabue said Zegna was seeing growth in the number of consumers and sales volumes in strategic categories including footwear, knitwear, five-pocket pants, eyewear and fragrances. In China, he said the Zegna brand has continued to perform well and gain market share despite broader market volatility, while softness in the country has had a greater effect on Thom Browne.
Thom Browne transformation and wholesale changes
Management said Thom Browne’s transformation from a wholesale-led business to a retail-oriented model is taking longer than initially expected, partly due to challenging macroeconomic conditions. Tagliabue said the company has been reshaping much of the brand’s senior leadership team to add retail capabilities and is reviewing merchandising, assortment, open-to-buy planning, marketing and go-to-market execution.
He said the brand’s collaboration with ASICS demonstrated ongoing consumer appeal, but added that broader product availability and customer engagement are needed to build a more sustainable growth platform. Near-term opportunities include women’s daywear, made-to-measure offerings, women’s tailoring and leather outerwear, while management views women’s handbags as a medium-term opportunity.
For the second half, Zegna expects Thom Browne adjusted EBIT to return to positive territory, bringing the brand close to break-even for the full year. Tagliabue cited a lower expected currency headwind, tighter open-to-buy and inventory management, and cost controls as factors supporting improvement.
Wholesale is not expected to be a growth driver in 2026. Tagliabue said Zegna wholesale sales are expected to decline by a low-double-digit percentage as the company protects recognizable products and further improves distribution quality. Tom Ford wholesale is expected to be roughly stable, while Thom Browne wholesale is expected to decline as the company continues to streamline its network.
Thom Browne wholesale revenue fell to about €77 million in 2025 from roughly €129 million to €130 million in 2024, according to Tagliabue. He said the expected absolute decline in 2026 should be approximately half the magnitude of the prior year’s reduction.
Cash flow, investments and outlook
First-half capital expenditures totaled €64 million, up €10 million from a year earlier. The increase was mainly tied to production investments, including the group’s new shoe manufacturing plant in Parma, which is expected to begin operating by year-end.
Trade working capital stood at €420 million at the end of June, down from €442 million a year earlier, primarily because of lower receivables following the streamlining of wholesale operations. Free cash flow was €19.9 million, compared with a €23 million outflow in the first half of 2025, while net cash increased to €60 million at the end of June from €52 million at the end of December 2025.
Reported profit was affected by financial and foreign-exchange items. The combined balance of financial income and expenses and foreign-exchange gains and losses was a €23 million loss in the first half, compared with a €6 million gain a year earlier. The prior-year result included €28 million of non-monetary, non-taxable income from the remeasurement of the U.S.-dollar-denominated Thom Browne put option liability.
Durante said the first-half effective tax rate was 39%, compared with 30% a year earlier, and that the group expects the rate to decline in the second half. She said the group’s normal tax rate is about 28% to 30%.
For 2026, Tagliabue said the company expects the Zegna segment’s adjusted EBIT margin to be around 15%. He also said the company considered market consensus of approximately €195 million in adjusted EBIT for the full year reasonable, though more challenging than the roughly €190 million consensus cited in late July.
The company reaffirmed its 2027 outlook at the lower end of its previously discussed range, referring to €2.2 billion in revenue and €250 million in adjusted EBIT. Tagliabue said the longer-term objective for the Zegna segment is to progress from its 15% margin target toward a range between 15% and 20%, though he said this would take time.
On retail expansion, the group recently opened Zegna locations in Shenzhen, Hong Kong’s Harbour City and Madrid. It plans to open a new St. Moritz store in December, while no other material Zegna openings are planned for the remainder of the year. Tom Ford Fashion is scheduled to open stores in Costa Mesa, San Diego and Bal Harbour in the U.S., followed by a Paris flagship in late January. Tagliabue said Tom Ford Fashion is expected to post positive adjusted EBIT in the second half and a full-year adjusted EBIT loss of only a few million euros.
About Ermenegildo Zegna (NYSE:ZGN)
Ermenegildo Zegna is a global luxury fashion house specializing in men’s tailored clothing, casualwear, accessories, footwear and fragrances. With a focus on high-quality fabrics and craftsmanship, the company manages the entire value chain from wool sourcing and textile production to garment design, manufacturing and retail distribution.
Founded in 1910 by Ermenegildo Zegna in Trivero, Italy, the company began as a textile mill dedicated to producing fine wool fabrics. Over the decades it expanded into ready-to-wear clothing and built a reputation for sartorial excellence.
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