Nicholas Sylvia

Nicholas Sylvia asked about the revised SG&A guidance, specifically the planned increases and their allocation across digital, store formats, or other areas. He also inquired about the expected evolution of the digital versus in-store mix over 2026.

Answer

COO and CFO Tom Edwards clarified that the full-year SG&A as a percentage of revenue has moved down, reflecting business leverage. He noted that SG&A is down low single digits year-over-year in Q3 and Q4, benefiting from discipline and variable costs related to higher revenue. Chairman and CEO Tony Spring highlighted growth in the digital business due to replatforming and enhancements, including the China Grove Distribution Center. He emphasized the company's omnichannel focus, aiming for a bigger, healthier customer base where customers choose their shopping method.

Nicholas Sylvia asked about the revised SG&A guidance, specifically the planned increases and their allocation across digital, store formats, or other areas. He also inquired about the expected evolution of the digital versus in-store sales mix into 2026.

Answer

COO and CFO Tom Edwards clarified that full-year SG&A as a percentage of revenue has moved down, reflecting leverage and increased variable costs due to higher sales. He noted Q3 SG&A was down low single digits and levered by 90 basis points, with Q4 expected to follow suit. Chairman and CEO Tony Spring expressed satisfaction with digital business growth, replatforming, and enhancements, as well as the China Grove distribution center's support for both digital fulfillment and store inventory. He emphasized the company's focus on a 'bigger business' through omnichannel, where the customer dictates how they shop.

Nicholas Sylvia sought additional color on the guidance, specifically the primary drivers for the adjusted EBITDA margin change beyond THE OUTNET sale, and insights into regional performance.

Answer

CFO Martin Beer clarified that the adjusted EBITDA margin guidance was actually adjusted *upwards* from -4% to +1% to -2% to +1%. He attributed this improvement to the group's transformation plan, new leadership teams enhancing profitability from both business and back-end operations, and a focus on re-embarking on growth. Beer emphasized SG&A cost ratio reduction as a key element, noting a -$15 million decrease in SG&A costs for the YNAP segments in Q1 compared to the prior year, and projected NET-A-PORTER/MR PORTER to show growth in the second half of the fiscal year. CEO Michael Kliger added that the U.S. continues to show strong traction and accelerating growth, with stable growth in Europe (excluding Germany). He noted that Asia has stabilized at a low level, and the U.S. now accounts for 31% of the group's business, with potential upside in China, though it's still early to confirm.

Nicholas Sylvia, on behalf of Oliver Chen from TD Cowen, asked about the impact of evolving fashion trends (maximalism vs. quiet luxury) and recent creative director changes on consumer interest in the luxury category. He also requested insights into performance by product category and sought clarification on any additional drivers for the adjusted EBITDA margin guidance beyond THE OUTNET sale, as well as regional performance trends.

Answer

CEO Michael Kliger observed a shift towards bolder, more colorful, and feminine styles from new designers, anticipating increased consumer interest as these collections launch. He affirmed the continued success of quiet luxury brands and identified clothing/ready-to-wear as key growth drivers across Mytheresa and NET-A-PORTER/MR PORTER, alongside growing traction in fine jewelry (EUR 20,000-EUR 50,000 price points). CFO Martin Beer clarified that the adjusted EBITDA margin guidance was revised upwards (from -4% to +1% to -2% to +1%), primarily driven by the transformation plan, new leadership efforts, and a EUR 15 million reduction in SG&A costs for the YOOX and NET-A-PORTER segments combined in Q1 compared to the prior year. Kliger added that the U.S. is the fastest-accelerating geography (now 31% of business), Europe (excluding Germany) shows stable growth, Asia has stabilized at a lower level, and China presents potential upside.

Nicholas Sylvia asked how Zegna is leveraging its direct-to-consumer (DTC) network to drive growth and how the company is offsetting FX costs and currency pressures, particularly in light of recent tariff impacts.

Answer

Gianluca Tagliabue, Group CFO and COO, explained that Zegna's DTC growth, particularly the 7.4% organic increase in full-price boutiques, is almost entirely comp-driven by improved conversion rates through CRM and targeted client outreach. He noted an increase in average unit retail (AUR) due to an elevated product mix and mentioned strategic store expansions in the U.S. while consolidating in China. Regarding FX, he detailed that the company hedges currency for price lists months in advance, protecting selling margins, and confirmed coverage through Spring 2026. He also mentioned considering low-to-mid single-digit price growth for Fall/Winter 2026, potentially adjusted for U.S. tariffs. Paola Durante, Chief of External Relations, confirmed positive customer reception to September's tariff-related price increases.