On Holding AG raised its guidance for the full year after reporting better-than-expected sales and profits in the first quarter ended March 31. The Swiss athletic gear company generated sales of 235.7 million Swiss francs (€225.2m), up by 67.9 percent on the year earlier and comfortably above an analysts consensus for a top line of about CHF 168.6 million (€161.1m) despite continuing supply chain challenges.
| On Holding - Income | |||
|---|---|---|---|
| Quarter ended March 31 (CHF thousand) | |||
| 2022 | 2021 | Change | |
| Net sales | 235,681 | 140,393 | 67.9% |
| Cost of sales | 113,607 | 59,561 | 90.7% |
| Gross profit | 122,074 | 80,832 | 51.0% |
| Selling, gen., admin. expenses | 118,703 | 91,733 | 29.4% |
| Operating result | 3,371 | 10,901 | -69.1% |
| Financial income | 310 | 6 | 5066.7% |
| Financial expenses | 1,499 | 518 | 189.4% |
| Foreign-exchange result | 17,190 | 2,679 | 541.7% |
| Pre-tax | 19,372 | 8,734 | 121.8% |
| Tax | 5,028 | 1,718 | 192.7% |
| Net sales | 14,344 | 10,452 | 37.2% |
| Earnings per share (diluted) | 0.04 | 0.04 | 0.0% |
| Source: On Holding | |||
In March, the company, generally referred to as On Running, shipped more than one million shoes; the first month ever it has passed this threshold. First-quarter sales in the DTC channel grew by 68.0 percent to CHF 83.4 million (€79.7m), while wholesale revenues increased by 67.8 percent to CHF 152.3 million (€145.5m)
On a geographical basis, sales in North America jumped by 86.5 percent to CHF 138.4 million (€132.2m) and accounted for 58.7 percent of total sales. Sales in Europe, which were the most affected by supply chain shortages, nonetheless grew by 31.3 percent to CHF 74.9 million (€71.6m). Sales in Asia-Pacific surged by 125.9 percent to CHF 16.4 million (€15.7m), driven by strong wholesale demand in Japan, triple-digit growth in China’s e-commerce traffic and the continued roll-out of China retail. On’s sales in the rest of the world soared by 219.2 percent to CHF 5.9 million (€5.6m), primarily due to a successful sell-in with distributor markets, particularly Israel and the United Arab Emirates (UAE) as well as continued growth in Brazil.
The quarter was marked by On’s biggest product launch ever, that of the all-new Cloud 5, made with 44 percent of recycled content. On also announced plans to debut a new cushioning technology in Spring 2023 called Cloudtee Phase and generated with advanced Finite Element Analysis (FEA) simulation.
On’s gross margin decreased to 51.8 percent from 57.6 percent in the first quarter of 2021. The company cautioned that margins would remain under pressure as it continues to use more expensive air freight to meet the demand for its products, creating a cumulative margin headwind of 7.00 to 8.00 percentage points in the first half. Adjusted Ebitda decreased by 21.1 percent to CHF 15.7 million (€15.0m), while the adjusted Ebitda margin narrowed by 7.5 percentage points to 6.7 percent. On reported a net profit of CHF 14.3 million (€13.7m) against a loss of CHF 10.5 million. Adjusted earnings per share amounted to CHF 0.05 (€0.05), also beating a consensus for a loss of CHF 0.08 (€0.08)
On does not anticipate a significant impact on either its top or bottom lines from new Covid-19 lockdowns in China, given its still limited position in the country. While it continues to monitor developments in the Russia-Ukraine conflict, On said it had not had a material impact on its financial results so far.
Pointed to the success of new product launches, strong feedback from retail channels and the strength of its supply chain, On raised its guidance for full-year sales to at least CHF 1.04 billion (€994.0m), representing year-over-year growth of at least 44 percent and above previous guidance of CHF 990 million (€946.2m). The higher expected sales growth will enable additional growth-focused investments in the brand and has also allowed the company to lift its adjusted Ebitda margin target to 13.2 percent from 13.1 percent previously.
In the second half of 2022, On plans to expand its presence to most countries in Latin America, with Argentina, Bolivia, Chile, Colombia, Peru and Uruguay debuting as distributor markets.
