EXEC: On Holding C-Suite See Way of life Appeal, Youthful Customers Propelling Development

On Holding AG raised its full-year outlook as second-quarter gross sales grew a better-than-expected 32 % year-over-year and general outcomes handily topped Wall Street targets. During an analyst convention name, firm officers acknowledged that the continued momentum is being fueled by its success in creating distinct footwear franchises, traction gained in attire and On’s rising attraction to lifestyle-driven and youthful customers.

ONON shares closed Tuesday, August 12, at $49.81, up $4.09, or 9 % for the day.

Second quarter gross sales elevated 32.0 % year-over-year (y/y) and by 38.2 % on a constant-currency (cc) foundation, reaching CHF 749.2 million ($928 mm) and exceeding analysts’ consensus goal of CHF 703.1 million.

Adjusted EBITDA reached CHF 136.1 million in Q2, up 49.9 % year-over-year and comfortably forward of the analysts’ goal of CHF 114.6 million. Adjusted EBITDA margin to 18.2 %, up 220 foundation factors year-over-year.

During an analyst name, David Allemann, co-founder and government co-chairman, highlighted that the income beneficial properties have been “broad-based,” with energy throughout all areas, channels and product classes.

In Footwear, Allemann mentioned On is “building iconic franchises” with 9 footwear franchises, led by the Cloudsurfer and Cloudmonster, and every contributing over 5 % to its gross sales. He added, “That kind of balance is not an accident, it’s the result of a years-long focused strategy to build resilience into our portfolio.”

Allemann famous that attire is rising “very fast” to assist place On as a “full sportwear” model. Relevance in its attire class was bolstered by a displaying in the course of the current Paris Fashion Week and its new attire launch with actress Zendaya.

Allemann additionally pointed to On’s success increasing past working to path, out of doors, tennis, and coaching, with the tennis alternative boosted by current wins by On athlete ambassadors Iga Swiatek at Wimbledon and Ben Shelton on the Canadian Open. He additionally highlighted the brand new coaching capsule with singer FKA Twigs.

However, he notably highlighted On’s success as a life-style model, merging sports activities and trend, which is attracting new units of shoppers, notably Gen Z customers.

“What we’re seeing is that we are no longer just for early adopters,” mentioned Allemann. “We are now resonating with a much wider audience, from established runners to the very young.”

Channel Summary
The 32 % top-line development within the second quarter was led by On’s direct-to-consumer (DTC) channel, the place gross sales vaulted 47.2 % (+54.2 % cc) to CHF 308.3 million, reflecting sturdy demand throughout all of On’s areas. As a consequence, the DTC share reached a brand new second-quarter excessive of 41.1 %.

Martin Hoffmann, CEO and CFO, mentioned on the analyst name that the DTC beneficial properties mirror “strength in both e-commerce and retail, which are continuing to work together to boost our global brand awareness and customer engagement. The strength in e-commerce was particularly evident with accelerated growth in both EMEA and the Americas, while the APAC region continued to deliver results that significantly exceeded expectations.”

Among its retail retailer base, flagship shops stay a key driver of beneficial properties. On’s Paris retailer on Champs-Élysées “continues its strong growth” since opening in July 2024, whereas the LA Abbot Kinney retailer close to California’s Venice Beach noticed the very best year-over-year development within the Americas, supported by sturdy group engagement. Hoffmann mentioned, “As LA prepares to host the 2028 Olympics, we are strategically increasing our brand exposure to capture the city’s rising buzz and excitement.”

Wholesale channel gross sales elevated 23.1 % (+28.8 % cc) year-over-year to CHF 441.0 million, additionally reflecting “strong demand across all regions while we maintain our focus on a slow and controlled store rollout,” acknowledged Hoffmann.

Hoffmann mentioned, “We continue to build and scale relationships with premium distributor partners in select markets. The store we opened in Singapore with one of these partners marks a significant milestone, and we are excited to explore new markets in Southeast Asia and in the Middle East through this channel in the coming quarters.”

Regional Summary
Sales within the Americas, its largest area, elevated 16.8 % (+23.6 % cc) year-over-year to CHF 432.3 million, pushed by DTC. Hoffman mentioned, “As a result of the ongoing strong demand for the brand and our significantly improved operational capabilities, our DTC channel materially outperformed in Q2. Selling into our wholesale partners was at a slower pace, given the timing of product launches, but sell-out rates with our key account partners reflected the same strong demand we saw with our DTC channel.”

EMEA (Europe, Middle East and Africa) area gross sales jumped 42.9 % (+46.1 % cc) year-over-year to CHF 197.8 million. The quarterly development was the strongest for the area previously two years, benefiting from steps to raise the On’s model notion. Said Hoffman, “We’re seeing this accelerated growth across both newer markets like France and Italy and established ones with the U.K. being a particular highlight, delivering extremely strong growth rates on an increasingly large sales base.”

The Asia-Pacific area once more noticed the strongest development with gross sales catapulting 101 % (+111 % cc) year-over-year to CHF 110.9 million, marking its fifth straight quarter of triple-digit development. Hoffman mentioned Asia-Pacific’s outcomes “continue to materially outpace” inside expectations. He mentioned, “In all markets, the demand for our products is outpacing supply. In Greater China, net sales more than doubled, driven by over 50 percent same-store growth in our own retail stores, as well as higher growth rates in our e-commerce channels and the addition of powerful new retail stores. Our flagship store in Chengdu outperforms our expectations on all key retail metrics and will serve as a blueprint for our future retail expansion in this market.”

Category Summary
Shoes class gross sales elevated 29.9 % (+36.0 % cc) year-over-year to CHF 704.9 million. Hoffman attributed the beneficial properties to its success in constructing a number of sturdy franchises with energy throughout efficiency and life-style kinds. He mentioned, “In performance, running, tennis and outdoor grew strongly, with the strongest growth in the Cloudsurfer and Cloudmonster. Our key lifestyle franchises, particularly the Cloud, Cloudtilt and Cloudzone, are resonating deeply with consumers, additionally amplified by our campaigns with Zendaya.”

Apparel class gross sales jumped 67.5 % (+75.5 % cc) year-over-year to CHF 36.7 million. Hoffman mentioned, “We’re particularly encouraged by the deepening consumer engagement in this category. We are seeing a healthy year-over-year increase in repeat transactions. And importantly, also first- and second-time buyers are increasingly adding apparel to their baskets. This is a key indicator of our success in building a full sportswear brand and driving apparel adoption earlier in the customer journey.”

Accessories gross sales surged 133 % (+143 % cc) year-over-year to CHF 7.7 million.

Profitability and Expenses Summary
The 49.9 % achieve in adjusted EBITDA mirrored each enhancing gross margins and expense leverage.

Gross margins improved 160 foundation factors to 61.5 % of gross sales, benefiting from the elevated DTC share, decrease freight bills, in addition to a web overseas alternate tailwind from the additional depreciation of the U.S. greenback in the course of the quarter. Hoffman mentioned, “We implemented selective price increases in the U.S. in early July, so these did not have any effect on our Q2 profitability.”

SG&A bills, excluding share-based compensation, have been decreased to 47.7 % of gross sales in Q2, down from 48.6 % in the identical interval final 12 months, as a consequence of gross sales leverage.

Overall SG&A expense grew 25.6 % to $368 million as On continues to spend money on opening shops, its LightSpray robotics-driven manufacturing initiative, and strengthening IT and tech capabilities. Hoffman added, “At the same time, we saw ongoing benefits from operational efficiencies, particularly in distribution costs, which we now expect to continue throughout the rest of the year.”

On posted a web lack of CHF 40.9 million within the quarter, in comparison with a web earnings of CHF 30.8 million within the 2024 second quarter, as a consequence of overseas alternate losses of $139.9 million, versus a lack of $4.5 million a 12 months in the past.

Hoffman mentioned the alternate price of the U.S. greenback in opposition to the Swiss franc hit multi-decade lows at 0.79 within the quarter. He added, “As highlighted in the past, this effect is mainly driven by the valuation of our U.S. dollar-based assets, especially cash and cash equivalents at quarter-end exchange rates and does not impact or reflect the financial health of our business.”

Adjusted web loss was decreased to CHF 29.7 million from CHF 46.9 million a 12 months in the past.

On’s Expanding Appeal
Allemann famous that whereas “fundamentally a sports brand,” the cultural shift merging spots and trend is supporting On’s positioning as a life-style model, “unlocking a much larger addressable market.”

He added, “Our hugely successful collaboration with Loewe on the Cloudtilt, which sold out almost entirely within days, retailing at USD $590, perfectly illustrates this intersection. The seed for the most premium global multi-sports brand is planted.”

Allemann additional famous that On’s model energy is over-indexing with Gen Z customers. He mentioned, “In the U.S., we have previously shared that awareness has more than doubled in a single year, making On one of the top wanted athletic shoe brands among teens. They love the Soft Wins campaign with Elmo for the Cloudsurfer. We’re also seeing this broad appeal powered by diverse sports and franchises like the Cloud, which has grown from a running shoe into an everyday essential.”

He acknowledged, “For us, it feels like we’ve reached a tipping point. We are converting broad communities who are buying On’s premium sports products again and again.”

“What’s truly unique is how we are reinforcing our position at the intersection of sport and lifestyle,” added Hoffman. “Our brand record shows we are the only brand growing our connection with both performance and lifestyle simultaneously, a rare position to be in that speaks to the strength and versatility of the On brand.”

Hoffman nonetheless famous that On is seeing energy throughout classes.

“This brand heat is spreading,” he mentioned. “We are seeing great traction in tennis apparel and the new Cloudultra Pro and Cloudultra 3 are strengthening our connection with dedicated trail runners.”

He additionally mentioned On is holding onto its sturdy attraction with runners, noting that working “remains the foundation of our brand, and it’s where our credibility is rooted.”  He mentioned On’s proprietary model tracker has proven a major enhance within the model’s reference to runners and its efficiency credibility.

“We also grew overall brand awareness faster than any other brand in our category,” added Hoffman. “This momentum will carry forward with the launch of the Cloudboom Max next week. It’s our first super shoe built for the everyday runner, and many of our team members, including myself, will be wearing it in our fall marathons.”

Outlook
Hoffman mentioned On is elevating its outlook for the 12 months because of the “strong performance in Q2, continued powerful momentum in the first weeks of Q3, a strong order book for the fall/winter season and the continued efficiency tailwinds driven by our focus and commitment to operational excellence.”

The up to date steering requires:

• Net gross sales: Expected to be up at the very least 31 % year-over-year on a relentless forex foundation (beforehand up at the very least 28 %). At present spot charges, On mentioned this corresponds to reported web gross sales of at the very least CHF 2.91 billion (beforehand CHF 2.86 billion).
• Gross revenue margin: Expected to be within the vary of 60.5 % to 61.0 % (beforehand 60.0 % to 60.5 %).
• Adjusted EBITDA margin: Expected to be within the vary of 17.0 % to 17.5 % (beforehand 16.5 % to 17.5 %).

Hoffman mentioned the gross margin expectations are supported by the continued energy of the DTC channel, mixed with a concentrate on full-price gross sales, favorable freight price expectations, and constructive overseas alternate charges. The outlook already consists of the impression of a 20 % incremental tariff on imports to the U.S. from Vietnam, slightly than the ten % assumed in earlier steering.

Hoffman mentioned he’s assured that On’s premium positioning and top-line momentum will assist the corporate discover methods to offset tariff prices.

Hoffman mentioned, “Over the last years, we have done so many investments and upscaling of our abilities to drive more gross profit margin, which means innovation products that come at higher price points. It’s increasing our DTC mix, it’s economies of scale on our product cost, it’s supply chain optimizations. We have done price increases as of 1st of July in the U.S. We are well positioned. And we have not even yet spoken to our retail partners, our factory partners about mitigation efforts, which is still something we can do, but we haven’t needed it yet.”

Images courtesy On Holding AG