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On Holding Posts Record Quarter, Raises Outlook

The good times continue to roll for On Holding.

The popular Swiss running shoe brand started the fiscal year with another record-setting performance, posting net income that soared more than 200 percent ahead of last year on a 78.3 percent gain in sales.

As a result, the company raised its outlook for the full year and is now projecting sales of at least 1.74 billion Swiss francs.

In the period ended March 31, On reported net income of 44.4 million Swiss francs, up 209 percent from the 14.3 million Swiss francs in the year-ago period. Sales hit 420.2 million Swiss francs from 235.7 million Swiss francs in the first quarter of 2022.

“It was a record quarter — the strongest we’ve ever had,” Martin Hoffmann, co-chief executive officer and chief financial officer, told WWD.

He attributed the strong showing to continued demand for the brand as well as a more “normalized supply chain” that allowed the company to ship orders to wholesale partners that it had been unable to fulfill last year.

In addition, as the supply chain issues eased, it also “allowed for the discontinuation of exceptional air freight” costs, he said, allowing for “significant gross profit margin improvement.”

In the period, gross profit margins increased 100.6 percent to 244.9 million Swiss francs from 122.1 million in the prior period, and gross profit margin rose to 58.3 percent from 51.8 percent.

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Hoffmann also cited the strong performance of the company’s retail stores, especially the new London unit. Since the store opened in February, the company has also seen a “clear uptick” in e-commerce sales in the region, he said.

Outside of the London unit, the company’s other five stores managed to quadruple their sales over the prior year’s quarter. Coming in July, On will open two new stores in the U.S., in Miami and Williamsburg, Brooklyn, with Portland, Oregon, on track for later in the year. Next year, a unit will open in Berlin, he said.

Turning to product, Hoffmann said Hellen Obiri’s win at the Boston Marathon was also a “clear highlight” for On in the quarter. “It’s been our dream since we showed up at the expo in 2014,” he said. And Iga Świątek winning her first tennis tournament as an On ambassador at the Stuttgart Open also helped “increase awareness and credibility of the On brand, leading to visible market share increases with runners across the globe,” the company said.

And On’s strength was across the globe with a 92 percent gain in sales in the U.S., 90 percent increase in Asia and 52 percent uptick in Europe, which included sales that more than doubled in the U.K., Hoffmann said.

“The brand remains very hot and we’re showing up bigger than ever,” he said.

He singled out the Cloudsurfer, with its updated outsole technology, as a standout performer in the period. And while apparel remains a very small part of the overall business, Hoffmann said new pieces for both dedicated runners and those just seeking outfits that allowed them to move comfortably did well in the quarter.

“Apparel is still a small category for us, but it grew strongly in the first quarter,” Hoffmann said, “with 50 percent growth.” He singled out Dick’s Sporting Goods, where the apparel is in 58 stores, as gaining in momentum.

He described the company’s apparel strategy as “a three-year project,” adding that in newer markets and those with only direct-to-consumer sales, apparel outperforms other regions. “We have a huge pipeline of product and have really invested in the team,” he said.

In the quarter, On also launched its first children’s shoe line, and while only available at select retailers and online at this point, it has “resonated very strongly” with customers.

Looking ahead, Hoffmann said the company has high hopes for a cycling T that is made from the same materials as a cycling shoe and also reiterated that On continues to work on new and updated footwear models.

As a result, the future looks bright.

Hoffmann said that in the first few weeks of the second quarter, the company is continuing to experience strong demand. “We have a strong product line,” especially in running with the Cloudmonster and other models, with “more to come.”

And the strong sales also allow the company to increase its spend on marketing to increase awareness with new and existing customers.

On is further maintaining its outlook for gross profit margin in 2023 to reach 58.5 percent, implying an absolute gross profit of more than 1 billion Swiss francs, the company said, and an adjusted earnings before interest, taxes, depreciation and amortization margin outlook for the full year 2023 of 15 percent.

Caspar Coppetti, cofounder and executive co-chairman of On, summed up the performance this way: “We entered into 2023 with high ambitions and we are very pleased to see the continuation of our growth journey and increased profitability in the first quarter of the year. With Hellen Obiri’s win at the Boston Marathon, we were once again able to prove that our highest-level performance products are some of the fastest products available in the market for long distances. At the same time, we are thrilled to see how such achievements at the highest level are increasing the awareness and reach of our products with everyday runners. We recently kicked off the road to Paris 2024, but still have a lot more to come in 2023 to be excited about.”

The company will hold a conference call at 8 a.m. EST Tuesday to discuss the results further.

On was founded 12 years ago by former professional triathlete Olivier Bernhard, who approached his friends David Allemann and Coppetti, executive co-chairmen, about reengineering a running shoe to create a different sort of running sensation. The concept he was seeking was a cushioned landing and explosive takeoff, or what they describe as “running on clouds.”