Ermenegildo Zegna Group’s DTC Strategy Powers Through Challenges in Q1 2025

The Ermenegildo Zegna Group posted Q1 2025 revenues of €458.8 million, marking a slight year-on-year decline (-0.9%) compared to Q1 2024’s €463.2 million. While macroeconomic headwinds and regional volatility weighed on results, the Group’s strategic pivot toward its Direct-to-Consumer (DTC) channel proved resilient. All three brands—ZEGNA, Thom Browne, and TOM FORD FASHION—delivered DTC growth, underscoring the Group’s ability to navigate challenges through brand strength and operational agility.

DTC Dominance: The Engine of Growth

The DTC channel, which accounts for 81% of branded product revenues, grew +5.2% YoY to €345.1 million. This performance was driven by all three brands:
- ZEGNA: DTC rose +4.7% to €250.8 million, fueled by double-digit growth in the Americas and EMEA. Ultra-luxury collections and new store openings, including in Riyadh, Saudi Arabia, bolstered its premium positioning.
- Thom Browne: Despite a -18.9% decline in total revenues due to wholesale reductions, DTC grew +3.5% to €46.3 million, aided by strong sales in Japan and South Korea.
- TOM FORD FASHION: DTC surged +10% to €48.1 million, with Haider Ackermann’s March 2025 fashion show sparking demand for womenswear.

The shift to DTC reflects a deliberate strategy to reduce reliance on wholesale partners, particularly at Thom Browne, where wholesale revenue plummeted -48% as the brand streamlined its distribution network. This realignment, though painful in the short term, positions the Group to capture higher margins and customer loyalty in the long run.

Regional Performance: Americas Lead, GCR Lag

Geographically, the Americas delivered the strongest growth (+9.5% YoY), driven by ZEGNA’s U.S. performance and TOM FORD FASHION’s expansion. Meanwhile, the Greater China Region (GCR) remained a drag (-11.6% YoY), reflecting cautious consumer spending across all brands. EMEA showed modest resilience (-1.6% YoY), with ZEGNA and TOM FORD FASHION offsetting Thom Browne’s struggles.

Wholesale Decline: A Strategic Necessity

The wholesale segment fell -19.8% YoY to €79.5 million, as the Group prioritized DTC over traditional wholesale partnerships. ZEGNA’s wholesale dipped slightly (-2.6%), while Thom Browne’s wholesale collapsed (-48%), aligning with its shift to retail concessions. TOM FORD FASHION’s wholesale also declined (-8.9%), partly due to cautious Spring/Summer 2025 orders ahead of its Fall/Winter 2025 collection.

Operational Momentum and Risks

• Store Expansion: The Group added 4 net stores in Q1, bringing total DTC locations to 465 across all brands. Strategic openings in Saudi Arabia, Spain, and Florida underscore its focus on high-growth markets.
• CEO Outlook: Ermenegildo Zegna, Chairman and CEO, emphasized cautious optimism, noting no major shifts in consumer behavior but acknowledging risks such as geopolitical tensions and economic uncertainty.

Despite the Q1 results, the stock has faced downward pressure, with a YTD decline of ~15%. This may reflect investor concerns over GCR weakness and the Group’s reliance on discretionary spending. However, the DTC momentum and brand-specific tailwinds suggest resilience, particularly if global luxury demand stabilizes.

Conclusion: Strategic Resilience Amid Volatility

The Ermenegildo Zegna Group’s Q1 results highlight both strengths and vulnerabilities. Its DTC strategy is delivering consistent growth, with all three brands contributing meaningfully—especially TOM FORD FASHION, which leveraged Haider Ackermann’s creative impact. The Americas’ robust performance and disciplined store expansion further reinforce this channel’s potential.

However, challenges persist. The GCR’s sluggishness and Thom Browne’s wholesale contraction—though strategic—are headwinds that require close monitoring. The Group’s focus on brand differentiation, innovation, and customer-centricity bodes well for long-term sustainability.

With FY 2024 revenues of €1.95 billion and a forward-looking pipeline (including upcoming collections and H1 2025 results), the Group appears positioned to weather near-term headwinds. Investors should watch for Q3 2025 performance, when TOM FORD FASHION’s Fall/Winter collection could drive a rebound in wholesale demand. For now, the DTC engine remains the key to unlocking value—a strategy that, if sustained, could propel the Group toward recovery in 2025 and beyond.