Federer-Backed On Sees 28% Sales Increase on Footwear Demand

This content was published on August 13, 2024 - 15:37

3 minutes

(Bloomberg) — On Holding AG saw consumers rush to buy its running shoes and new lines of training apparel, as the Swiss sneaker maker tries to challenge established players like Adidas AG and Nike Inc.

The Roger Federer-backed company said Tuesday that sales jumped 28% from a year earlier in the second quarter to 567.7 million Swiss francs ($654.5 million) at constant exchange rates, slightly ahead of analysts’ estimates.

“We view the 2Q24 result as better than we expected and pointing to strong demand for the brand,” Cristina Fernandez, an analyst at Telsey Advisory Group, wrote in a note.

On’s shares rose as much as 7.5% in early New York trading, bringing the gain this year to about 50%, outpacing rivals including Nike, Adidas and Puma SE.

Founded in 2010, On is a relative newcomer to the sports world and its quarterly results often cause swings in the share price. The company has expanded rapidly across Europe and North America in recent years thanks to strong uptake from wholesale partners and specialty running stores.

Now, it’s selling more of its products directly to consumers and trying to move from being a precocious upstart to an established player that can keep poaching customers from rivals.

The Zurich-based company affirmed its full-year forecast of sales growing by at least 30% and achieving a gross profit margin of around 60%. To get there, it will need to ratchet up the pace of its sales and profit growth in the second half of the year.

The gross profit margin reached 59.9% in the second quarter, a touch behind analyst estimates.

Sportswear Line

The company plans to gain momentum in the coming months by adding more automation to its US warehouses, it said. That’s part of its broader efforts to scale up its distribution capabilities in North America, its biggest market.

On continued its expansion in the Americas, where sales jumped by about 25%, it said Tuesday. Revenue grew by about 22% in the Europe, Middle East and Africa region and by 74% in Asia-Pacific, its smallest region.

The company is increasingly marketing high-end sportswear including hiking T-shirts that sell for $80 and trek jackets that fetch $290. While still small, that business expanded by 63% in the quarter.

On continues to generate most of its business with footwear, thanks in part to new products like the $150 Cloudrunner 2 and the $160 Cloudtilt, which it’s marketing with singer and actress Zendaya, a new brand ambassador.

The company is hoping that Zendaya and FKA Twigs, another ambassador, will help build credibility with younger customers. It also wants to capitalize on the Paris Olympics, where six of its sponsored athletes took home medals, including bronzes for tennis star Iga Świątek and the Boston and New York City marathon champion Hellen Obiri.

“We have seen a significant increase in brand awareness,” co-Chief Executive Officer Martin Hoffmann said in an interview, citing record traffic to the company’s website, among other things. “This is really meant to benefit On in the long term and to lay the foundation for reaching our goals.”

–With assistance from Subrat Patnaik.

(Updates with analyst in third paragraph, shares in fourth)