On Holding Posts Another Record Quarter as DTC Sales Soar
The brand will be focusing less on wholesale and more on e-commerce.
The juggernaut continues to roll for On Holding.
The Swiss sports brand reported the strongest quarter in its history Tuesday morning with a jump of 46.5 percent in net sales to 480.5 million Swiss francs, driven in large part by its direct-toconsumer business.
As a result, the company will focus primarily on its own DTC efforts going forward and stick with the wholesale partners it already has without significantly adding to its stable. DTC accounts for 35 percent of overall sales.
In the period ended Sept. 30, DTC sales rose 54.6 percent to 164.7 million Swiss francs over the same period last year. Wholesale sales also increased, rising 42.6 percent to 315.7 million in the period
Although apparel sales still represent less than 10 percent of overall sales for the company, the company views the category as a significant growth opportunity going foward, said Martin Hoffmann, co-chief executive officer and chief financial officer. “Our own retail will play an elevated role in helping us in our vision to become a premium sportswear brand and help drive apparel sales,” he told WWD. And apparel performs significantly better in brick-andmortar locations, accounting for a sales percentage in the high teens or above.
“Apparel product resonates with customers if we showcase it in the right way,” Hoffmann said. And it is a key part of the strategy for On to “build a headto-toe brand,” he said. He pointed to the company's recently opened store in Miami where apparel accounts for 24 percent of sales and Spitalfields in London where it's 19 percent.
Next up is a store that will open later this week in Paris that will sport a new concept, which will shine an even better light on apparel, he said.
At the time of the IPO, the company operated only one store in New York City and seven in China. By the end of this year, that number will be 30 — 22 in China and 10 in other countries.
Hoffmann stressed that despite the focus on DTC, On still believes in a multichannel approach and is working to ensure that all its distribution channels are “in harmony.” He pointed to successful partnerships with retailers such as Dick's Sporting Goods and Foot Locker and said the company hopes to replicate that in other markets.
In the third quarter, On reported net income of 58.7 million Swiss francs, up from 20.6 million the prior year, a jump of more 184 percent. Adjusted earnings before interest, taxes, depreciation and amortization rose 44.3 percent to 81.3 million from 56.3 million Swiss francs.
The company's gross profit margin was also the highest since its initial public offering two years ago, increasing to 59.9 percent from 57.1 percent in the prioryear period. That increase was driven by continued full-price sales as well as favorable freight and currency rates in the period, the company said.
By region, sales in Europe, the Middle East and Africa rose 19.9 percent to 144 million Swiss francs while the Americas jumped 60.5 percent to 294.9 million
Swiss francs and Asia-Pacific 71.5 percent to 41.6 million Swiss francs.
“Today we announced our seventh consecutive quarter of record growth, up 60.5 percent in the Americas,” said Britt Olsen, general mangaer of the Americas and head of global commercial strategy. “There is so much for us to be proud of. We're expanding our physical retail presence with store openings this year in Williamsburg and Miami as well as Austin, Chicago and Portland in the coming months. Our new Miami store is a great way to connect our
U.S. and Latin America markets, as we continue to see strong demand in Latin America and the Caribbean. In our online shop and at our wholesale partners, we're seeing strong consumer demand and sellthrough. And in August ahead of the U.S. Open, we celebrated our official entrance into tennis, a sport we'll continue to establish credibility in through performance footwear and apparel.”
By category, sales of shoes rose 47 percent to 456.9 million Swiss francs, apparel increased 31.8 percent to 20.1 million Swiss francs, and accessories jumped 84.2 percent to 3.5 million Swiss francs.
As a result, On raised its outlook to
1.79 billion Swiss francs, with an EBITDA margin of 15 percent and a gross profit margin of at least 59 percent for the full year. Earlier, the company had projected sales of 1.76 billion Swiss francs, gross profit margin of at least 58.5 percent and an adjusted EBITDA of 15 percent.
Hoffmann said: “The third quarter has not only been the seventh consecutive record top-line quarter, but also our most successful quarter in history across numerous measures. We are extremely grateful for the hard work that our team is putting behind our joint mission. The brand momentum for On's footwear, apparel and accessories continues to convert into high sales growth across all channels. We are planning to add less additional wholesale doors in the future and to focus on our existing wholesale partners and our own DTC channels, e-com and own retail.” Citing the higher projections for the year and the company's recently announced goal to double sales by 2026, “we are heading into the holiday season with a lot of confidence and are very excited for the road ahead,” he said.
The company pointed to some recent successes from its roster of professional athletes as a highlight in the period. That included Hellen Obiri's win at the New
York City Marathon earlier this month, which followed her win in Boston this spring — the first woman in 34 years to achieve that feat. And Iga Swiatek ended the tennis season with a tournament victory that enabled her to retain her number-one position.
Caspar Coppetti, cofounder and executive co-chairman, said: “We've seen exceptional On athlete performances on the streets, trails, tracks and tennis courts, alongside a number of innovative and exciting product launches. Hellen Obiri's win at the New
York City Marathon was of course a huge highlight, and makes our team even more excited for the Paris Olympics 2024.”
The company is now predicting a growth rate of 21 percent in the fourth quarter, driven by its DTC efforts. Wholesale growth is expected to be more moderate in the period, with increases in the highsingle digits as a result of some holiday shipments arriving in the third quarter and “strategic wholesale door closures in the EMEA region,” the company said.
During its investor day, On said longterm goals include increasing its apparel penetration to more than 10 percent of overall sales, while growing its own retail and its China business to the same percentage. And beyond 2026, On is projecting to grow net sales by 20 to 25 percent a year and exceed 20 percent adjusted EBITDA margin.
In terms of product, Hoffmann said the company just launched the Cloud Eclipse, its most cushioned shoe ever, to good results as well as the Cloudtilt in partnership with Loewe, which is already sold out. And Tuesday, the company launched the Pace Collection, an eight-piece apparel capsule created from CleanCloud polyester that uses carbon emissions as a raw material. Although the company has already employed this technology in shoes, this is the first time it's being used in apparel, he said. It will be offered in limited quantities, but is being viewed as a “showcase” for additional offerings next year.