Gildo Zegna on Leading an NYSE-Listed Family Business With Patience and Innovation
Last Friday, Ermenegildo Zegna Group, the parent company of Zegna and Thom Browne, and operator of Tom Ford’s fashion business, reported first-quarter earnings results. It was the first fiscal quarter without Ermenegildo “Gildo” Zegna, the third-generation leader of the family business, in the CEO seat. Revenue grew steadily overall, but the Middle East saw a double-digit decline amid the ongoing conflict in Iran. The company’s new CEO, Gianluca Tagliabue, was candid with analysts: April continued the negative trend, and “we are still with a big question mark” about how the region will develop in the coming months.
Tagliabue, who spent a decade as Zegna’s CFO and COO, was appointed to fill the large shoes left by Mr. Zegna, who led the company as CEO for more than 20 years and now serves as executive chairman. As part of that transition, he also named his sons, Edoardo and Angelo Zegna, co-CEOs of the Zegna brand.
A few days before the earnings report, Mr. Zegna was asked about the Middle East at a business event in Washington D.C. He reiterated his patience and long-term vision, saying he believed the region “will come back,” while emphasizing the company’s continued strength in the U.S. and untapped markets such as Japan and Korea. “Be true to your values, and stay the course,” he summed up his leadership principle to an audience.
Mr. Zegna, who turned 70 last September, shares the name of his grandfather, who founded the family business in 1910 as a wool mill in northern Italy. He takes particular pride in the company’s deep historic roots and vertically integrated supply chain, meaning it owns every step of production, from raw textile to finished garments to retail.
Yet, quarterly scrutiny from U.S. public markets is a relatively new experience for a century-old Italian family business. While luxury conglomerates like LVMH and Kering are publicly traded in Europe, Zegna is the only major European luxury group listed in the U.S. With a market cap of $3.25 billion, Mr. Zegna humbly calls his company “a grain in the sand” among those on the New York Stock Exchange, while also viewing the listing as putting the family business “in the championship league,” he told Observer.
Mr. Zegna said the idea of going public had surfaced often among family members. Most of the time, the answer was no. That changed during COVID, when luxury spending surged alongside a wave of SPAC IPOs. Zegna received an investment offer from Andrea Bonomi, a major dealmaker in Italian and European private equity, and went public in December 2021 through a SPAC created by Bonomi, Investindustrial Acquisition Corp, chaired by UBS CEO Sergio Ermotti. The Zegna family retained a controlling stake of nearly 66 percent in the merged company to ensure it continues to make major decisions.
“Looking back, [going public] has improved stability and given us a different sense of scale,” Mr. Zegna said. “It was a move to grow up—more disciplined, more scale, more independent—while putting the family in a position to move forward with the new generations. It came naturally for the time we were in.”
He stressed that Zegna isn’t run by the quarter. “The important thing is to make correct promises. Don’t overpromise. And once you promise something, stick to that. These rules are not that different than when we were a private company,” he said.
Consumer sentiment in the luxury sector has taken a sharp turn in recent years. LVMH, the industry’s bellwether, reported a 6 percent decline in revenue for the first quarter. Zegna is partially insulated from the slowdown thanks to the rise of the quiet luxury trend. “We are one of the few brands that are true examples of quiet luxury. Quiet luxury is very much related to Italy,” Zegna said, noting that even many French ready-to-wear luxury brands are produced in Italy.
That doesn’t mean the company can just sit back and benefit from the fashion cycle. Mr. Zegna, wearing a casual Zegna ready-to-wear jacket and sneakers during the interview, spoke frequently about younger consumers (around age 30). He said Zegna’s average customer in the U.S. is now about 10 years younger than before COVID, and that younger customers continue to support the business in China, a market roughly the same size as the U.S. for the company.
These shifts reflect the company’s effort to modernize its product lines, introducing more casual, contemporary designs such as drawstring pants, shoulderless jackets and sneakers. Shoes are now its most popular category, Mr. Zegna said.
In many ways, the brand’s appeal lies in that balance between heritage and evolution. Mr. Zegna often says that “Zegna is costly, but it’s not expensive,” because a piece can last for decades. “You come and visit our factory and our mill in the mountains, and you understand why we’re costly.”
He said he still owns Zegna coats that belonged to his grandfather, and they remain “as modern and fresh as ever.”