The Swiss company On Holding, which intends to double its net sales by 2026, increase its gross profit margin to above 60 percent and push its adjusted Ebitda above 18 percent, is only forecasting high-single-digit wholesale growth in Q4 2023. Direct-to-consumer sales (DTC), meanwhile, are expected to continue their torrid growth pace in the final period and grow in importance in 2024 and beyond. FY23 total revenues are now forecast at 1.79 billion Swiss Francs (€1.9bn) and generate a gross margin of at least 59 percent. On’s shares fell by 3.4 percent yesterday to close at $25.65.
Three factors are contributing to On’s immediate wholesale sales outlook. Besides currency headwinds and a difficult year-ago comparison when some Q3 orders were pushed into the final period due to a US warehouse disruption, the group is projecting lower re-orders in the DACH region of the EMEA related to its strategic decision to exit approximately 200 doors in early 2024. The brand is expected to be available in about 10,000 wholesale doors by year-end after adding 200 in the U.S. and 50 in Asia-Pacific during Q3. There is a clear focus on expanding distribution in key global retailers going forward, including JD Sports, Foot Locker, and Dick’s Sporting Goods. The brand is said to be the third-top brand in Germany’s RunningExpert banner and in the Fleet Feet chain in the US.
In Q3, net income soared 185 percent to CHF58.7 million (€60.9m) as total sales grew by 46.5 percent to CHF480.5 million (€498.1m) for the period ended Sep. 30. Operating income was 42 percent higher year-over-year to CHF57.8 million (€59.9m) and gross margin increased by 280 basis points to 59.9 percent from 57.1 percent. DTC sales rose by nearly 55 percent to CH164.7 million (€170.7m). Wholesale revenues, meanwhile, increased by 42.6 percent to CHF315.7 million (€327.3m), helped by early holiday shipments to some accounts in late Q3. Footwear sales stepped up by 47 percent to CHF456.9 million (€473.6m), bolstered by the introductions of the Cloudsurfer and Cloudmonster, and apparel sales hit CHF20.1 million (€20.8m).
| On Holding - Income | |||
|---|---|---|---|
| 2023 | 2022 | Change | |
| Three months ended Sept. 30 (CHF million) | |||
| Net sales | 480.5 | 328.0 | 46.5% |
| Cost of sales | 192.8 | 140.6 | 37.1% |
| Gross profit | 287.7 | 187.4 | 53.5% |
| SG&A expenses | 229.9 | 146.7 | 56.7% |
| Operating result | 57.8 | 40.7 | 42.0% |
| Financial income | 1.0 | 1.9 | -47.4% |
| Financial expenses | 3.2 | 2.5 | 28.0% |
| Pre-tax | 69.3 | 24.7 | 180.6% |
| Tax | 10.6 | 4.1 | 158.5% |
| Net income | 58.7 | 20.6 | 185.0% |
| Diluted EPS class A | 0.18 | 0.06 | 200.0% |
| Diluted EPS class B | 0.0 | 0.0 | 100.0% |
| Nine months ended Sept. 30 (CHF million) | |||
| Net sales | 1,345.0 | 855.4 | 57.2% |
| Cost of sales | 547.9 | 385.0 | 42.3% |
| Gross profit | 797.1 | 470.3 | 69.5% |
| SG&A expenses | 657.6 | 399.9 | 64.4% |
| Operating result | 139.5 | 70.4 | 98.2% |
| Financial income | 7.3 | 3.3 | 121.2% |
| Financial expenses | 6.8 | 5.5 | 23.6% |
| Pre-tax | 114.1 | 102.3 | 11.5% |
| Tax | 7.7 | 18.2 | -57.7% |
| Net income | 106.3 | 84.1 | 26.4% |
| Diluted EPS class A | 0.33 | 0.26 | 26.9% |
| Diluted EPS class B | 0.0 | 0.0 | 0.0% |
| Source: On | |||
Regionally, EMEA sales jumped by 19.9 percent to CHF144.0 million (€149.3m), fueled by significantly stronger d-t-c growth and a significant sales contribution from the UK. Quarterly sales in the Americas increased by 60.5 percent year-over-year to CHF294.9 million (€305.7m) and soared by 71.5 percent in APAC to CHF41.6 million (€43.1m) on continued momentum in Japan and the strength of own stores in Greater China.
On, which sees the importance of its d-t-c continuing to grow, is elevating its marketing spend in Q4 compared to the year-ago period. On the new product front, the brand will introduce the Monster Hyper in Spring 2024, a performance athlete version of the Cloudmonster for DTC and run specialty channels while the Cloudmonster will be relegated to distribution in more mainstream retailers.
