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On, the Roger Federer-Backed Running Brand, Tees Up an IPO

After a summer of speculation, On Running is pulling the trigger on a proposed $100 million initial public offering (IPO), announcing today that it has publicly filed an F-1 registration statement with the U.S.  Securities and Exchange Commission (SEC).

The Swiss brand, which wants people wearing its shoes to feel like they’re “run[ning] on clouds” with soft landings followed by explosive takeoffs—saw sales jump 84.6 percent in the first six months of 2021.

In that period, net sales jumped to 315.5 million Swiss francs ($344 million) from 171 million Swiss francs ($187 million) a year earlier, the company said. It also reported a net income of 3.8 million Swiss francs ($4.1 million), compared to a loss of 33.1 million Swiss francs ($36.2 million) a year prior.

While On Running was valued at $2 billion after its most recent investment round, according to Reuters, the footwear brand sought a valuation between $4 billion and $6 billion as part of an IPO. Since its founding in 2010, net sales reached an 85 percent compound annual growth rate (CAGR) through 2020.

On is one of a handful of brands that have taken the industry by storm in the wake of the Covid-19 pandemic, when more consumers took to the outdoors as gyms closed. Brands such as Deckers’ Hoka One One and Wolverine Worldwide’s Saucony have been massive beneficiaries of the buying shift, while the category as a whole has grown 19 percent in the first half of 2021 on a two-year basis, according to data from The NPD Group.

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On’s net sales through the DTC sales channel increased 57.5 percent to 115.4 million francs ($126.4 million), bringing DTC’s total share to 36.6 percent. Meanwhile, wholesale sales increased 104.9 percent to 200.1 million francs ($219.1 million) across the company’s 8,100 retail doors.

While many of the top brands have opted to intensify their DTC focus during the pandemic, whether its Nike, Adidas or Under Armour, the lightweight, performance-heavy brand is taking a measured approach to enter “additional premium doors in less mature but also in many established markets by tapping into new customer segments,” the company said in the filing. As part of the expansion, On said it still has room to increase sales per door.

The footwear brand also plans to build more physical stores to strengthen its local community and brand reach, particularly in China, where it currently operates six mall-based mono-brand stores in Shanghai and Chengdu. On opened its first flagship retail location in New York City in 2020, and the company aims to be selective about where to build flagships in the future.

Gross profit in the first six months of 2021 increased 95 percent to 187.2 million Swiss francs ($205 million), with gross margin jumping 3.1 percentage points to 59.3 percent of total sales.

Over the past year, the Roger Federer-backed brand had its biggest jump in the North American market, with sales leaping 104.9 percent to $163.9 million Swiss francs ($179.5 million) due to a strong recovery in physical retail as Covid-19 restrictions eased. The market has now surpassed Europe as its highest-selling market with 52 percent of total sales. Europe, which now represents 40.6 percent of total sales, saw growth of 56.5 percent to $127.9 million Swiss francs ($140 million).

Net sales growth of 153.7 percent in Asia-Pacific was primarily driven by strong sales growth in China and Australia, the company said.

Although footwear amounts to nearly 95 percent of On’s total product sold, the company wants to be known more as a performance sportswear brand as it seeks growth in what it calls an approximately $300 billion global sportswear industry, where it has dabbled in some apparel products like outerwear. Citing Euromonitor International data, On Running calls this the intersection of the $119 billion sports footwear market and the $174 billion sports apparel market.

The global sportswear market is projected to grow at an 8.9 percent CAGR over the next five years, outpacing the global non-sports footwear and apparel market five-year CAGR of 6.8 percent.

On Running works with approximately 17 suppliers, five of which produced approximately 85 percent of its products in the six-month period ended June 30, 2021. All footwear was produced by 10 suppliers in Vietnam across 13 different production sites, while apparel and accessories were sourced from seven different suppliers across various countries including China, Vietnam, Portugal and Germany.

For the six-month period, suppliers in China produced approximately 56 percent of apparel for On Running, and no single supplier was responsible for more than 27 percent of its total footwear, apparel and accessories.

All the products are engineered in Zurich, Switzerland, with On’s in-house research and development teams working on the innovation, engineering, design and testing of its products.

On has applied to list its common stock on the New York Stock Exchange under the symbol “ONON.”

Goldman Sachs & Co. LLC, Morgan Stanley and J.P. Morgan are acting as joint lead bookrunning managers for the proposed offering, with Allen & Company LLC, UBS Investment Bank and Credit Suisse acting as joint bookrunning managers.