Nike may be clawing its way back to popularity, but don’t count out On Holding.
Despite some analyst hesitation that the popular Swiss running brand may be losing some of its steam to a reviving Nike, the company once again posted record sales and profits in the third quarter ended Sept. 30.
“We continue to reiterate that we are on a different journey — to become the most premium brand in the industry,” Martin Hoffmann, chief executive officer and chief financial officer, told WWD.
It appears to be working.
Adjusted net income in the period nearly tripled to 142 million Swiss francs from 50 million Swiss francs in the prior year on a 24.9 percent sales gain, or 34.5 percent on a constant currency basis, to 794.4 million Swiss francs. Adjusted earnings per share were 0.36 Swiss francs, up from 0.09 Swiss francs in the prior year.
This beat Wall Street expectations of a quarterly sales increase of 20.1 percent and adjusted earnings per share of 0.27 Swiss francs.
The company’s direct-to-consumer sales increased 27.6 percent to 14.7 million Swiss francs, or 37.5 percent on a constant currency basis, while sales in the wholesale channel rose 23.3 percent, or 32.5 percent on a constant currency basis, to 479.6 million Swiss francs.
By region, net sales increased 33 percent in Europe, Middle East and Africa, 21 percent in the Americas and 109.2 percent in Asia-Pacific on a constant currency basis. Analysts were expecting sales in the American market to slow.
“The U.S. continues to be strong,” Hoffmann said. This comes despite a price increase of around 7 percent on select lifestyle products starting in the second half of the year. He said the company has experienced no resistance to the price hikes. “We continue to power on full-price sales,” he said.
By category, net sales from shoes rose 21.1 percent to 731.3 million Swiss francs; apparel sales increased 86.9 percent to 50.1 million Swiss francs, and accessories sales rose 145.3 percent to 13 million Swiss francs.
Although apparel still represents around 7 percent of overall sales, Hoffmann said it is growing more strongly than footwear. And in the quarter, the company sold more than 1 million pieces of apparel for the first time.
He added that apparel penetration in the company’s retail stores is much higher, hitting between 10 percent and 20 percent, and in many cases serves as an introduction to the brand.
On currently operates 60 stores globally with new additions in the Ginza in Tokyo; a flagship in its hometown of Zurich; Palo Alto, Calif.; its first South Korean store in Seoul, and a unit in Riyadh, Saudi Arabia.
Hoffmann said only a small number of stores are slated to open this year but the company will continue to add between 20 and 25 units a year in the future. “That’s the cadence we had this year,” he said.
While its own stores are an important part of the business, Hoffmann stressed that wholesale continues to be a key cog in its wheel. He said that with the big-box stores such as Dick’s Sporting Goods and Foot Locker, there are 60 percent of doors that do not carry the brand. And within the run specialty channel, he expects business to be strong next year as the company introduces new models of some of its key franchises, such as the Cloud Monster and Cloud Runner.
As a result, the company raised its outlook for the year and is now expecting net sales to grow 34 percent on a constant currency basis, to 2.91 billion Swiss francs, up from 31 percent previously. Analysts were expecting sales for the year to increase 28.2 percent.
Hoffmann said the optimism is driven by the momentum already experienced in the fourth quarter and the strong sales in China. Looking ahead, the company plans to release a holiday campaign and continue to lean into collaborations, such as ones that just released with Loewe, with which it codesigned a Cloudsolo sneaker, as well as a capsule of apparel and footwear with SkyHigh Farm Goods. Hoffmann declined to say if its partnership with Zendaya will get a refresh later this year.
Caspar Coppetti, cofounder and executive co-chairman of On, said in a statement after the results were released Wednesday morning: “This quarter was another one for the record books — a true showcase of our premium strategy in action. It reflects the best of what On stands for: innovation, purpose, and performance coming together to inspire movement. Our focus on excellence continues to drive powerful global momentum, earning deep trust with consumers and strengthening the core of our business. With an outstanding product pipeline and boosted by the remarkable achievements of On’s athletes that embody our performance spirit, we carry this momentum forward with confidence and energy.”
Hoffmann added that the company’s “focus on operational excellence and technology is making us faster, smarter, and more agile. These results give us strong confidence — both for a successful holiday season and for the long term, as we continue building the world’s most premium global sportswear brand.”
