Suppliers in Vietnam returned to full capacity in December, and various manufacturing partners are shortening the traditional Chinese New Year shutdown to help catch up with the backlog of orders, said On Running, participating for the first time in a round table discussion in the framework of the traditional ICR Conference for financial analysts in the U.S. Furthermore, the growing Swiss running brand has found a new supplier in Indonesia.
In view of these factors, On’s management is confident that its supply chain shortages will stop by the end of the second quarter of 2022, although some warehouses are operating at lower capacities because of labor shortages. On the other hand, ocean and air freight rates remain elevated.
On reiterated its goal to achieve annual revenue growth of between 20 and 25 percent, a gross margin of over 60 percent and an adjusted Ebitda margin in the high teens. The management believes it has plenty of leverage to raise prices to offset increased costs in order to maintain profit margins, and it has already started to take action on this front in the U.S.
To support its growth objectives, On is expanding and segmenting its product assortment, making certain products available to large generalist retailers like JD Sports Fashion and Foot Locker without cannibalizing its existing distribution with specialty running retailers and upscale fashion stores. Besides apparel and accessories, its footwear range now consists of three main categories: running, outdoor and “performance all-day” styles.
David Allemann, co-founder and executive co-chairman of On, said the brand was focusing on product innovation to differentiate itself from competitors. He said that its shoes’ cushioned landing technology with the subsequent rebound created a “radical running sensation” like the advent of suspension mountain bikes and carving skis, which changed the sports experience for bikers and skiers.
