On Holding AG delivered strong Q2 2024 results, with reported net sales growing 27.8% year-over-year to CHF567.7 million, demonstrating continued momentum and brand strength.
Top 5 Key Takeaways for Investors
- Robust Growth: On Holding AG achieved 27.8% year-over-year net sales growth, surpassing CHF1 billion in net sales for a six-month period for the first time.
- Profitability Improvement: Gross profit margin increased to 59.9%, with adjusted EBITDA margin rising to 16% from 14.1% in Q2 2023.
- Strong D2C Performance: Direct-to-consumer (D2C) channel outperformed wholesale, growing 28.1% year-over-year and reaching 36.9% of total sales.
- Innovation Focus: Launch of groundbreaking LightSpray technology and new product releases driving brand momentum and future growth potential.
- Supply Chain Challenges: Ongoing warehouse transition in Atlanta impacting product availability and delivery times, particularly in the Americas region.
Summary
On Holding AG reported impressive Q2 2024 results, with net sales reaching CHF567.7 million, representing a 27.8% year-over-year growth on a reported basis and 29.4% on a constant currency basis. This strong performance keeps the company well on track to achieve its full-year goals. CFO and Co-CEO Martin Hoffmann emphasized the company’s long-term focus:
“We are thrilled to see that all the attention we are generating is leading to increased brand awareness and converting into online and offline traffic. This provides us with a lot of confidence for the continued high-demand for the On-brand and our products, even above our expectations.”
Main Themes
- Guidance: Reiterated full-year 2024 constant-currency net sales growth rate expectation of at least 30%
- New Product Announcements: Launch of LightSpray technology and several new footwear and apparel products
- Consumer Demand: Strong brand momentum driving increased demand across all channels and regions
- Supply Chain Challenges: Ongoing warehouse transition in Atlanta impacting product availability and delivery times
- Profitability Improvement: Gross profit margin of 59.9% and adjusted EBITDA margin of 16% for Q2 2024
Insights
On Holding AG’s innovative LightSpray technology represents a significant breakthrough in manufacturing and sustainability. The technology allows for near-shoring production, reducing CO2 emissions by 75% compared to traditional uppers. This innovation positions On for potential long-term advantages in manufacturing efficiency, sustainability, and supply chain optimization.
The company’s multi-channel strategy is effectively capturing brand momentum globally, with strong performance across wholesale and D2C channels. The successful launch of On’s first commercial app and the expansion of its retail store network are driving increased customer engagement and higher apparel sales.
Market Opportunity
On Holding AG is expanding its addressable market through product diversification and entry into new verticals. The company’s focus on performance running is complemented by growth in lifestyle products, tennis, and training gear. The launch of the Cloudtilt and collaborations with fashion brands like Loewe are attracting younger consumers and expanding On’s reach beyond core running enthusiasts.
Market Commentary
The global athletic footwear and apparel market continues to show strong growth potential, driven by increasing health consciousness and athleisure trends. On Holding AG’s focus on innovation and premium positioning allows it to capitalize on these trends, particularly in developed markets like North America and Europe.
Customer Behaviors
On is seeing strong full-price demand across its wholesale partners and specialty retailers, both in physical and digital channels. The company’s D2C channel is experiencing record-high traffic and strong conversion rates, indicating growing brand awareness and customer loyalty. The newly launched app is showing high engagement levels and a higher apparel share comparable to the retail environment.
Capex
- Capital expenditures: CHF16.9 million in Q2 2024
- 3% of net sales, up slightly from 2.5% in Q2 2023
Economy Insights
Despite concerns about a potential US consumer stepdown, On Holding AG remains confident in consumer demand. Co-CEO Marc Maurer stated:
“We see very positive signs over the last couple of weeks. So actually what we see happening within our channels, what we hear from our partners versus what some of the market reaction was is not exactly in-line and this gives us also confidence from US perspective for the rest of the year.”
Industry Insights
On’s success in premium performance footwear and apparel suggests continued growth potential for brands focusing on innovation and quality in the athletic wear market. The company’s ability to blend performance with lifestyle appeal indicates a shift in consumer preferences towards versatile, high-performance products that can be worn both for sports and casual occasions.
Key Metrics
Financial Metrics
- Net sales: CHF567.7 million (+27.8% YoY)
- Gross profit margin: 59.9%
- Adjusted EBITDA margin: 16% (up from 14.1% in Q2 2023)
- Net income: CHF30.8 million (up from CHF3.3 million in Q2 2023)
KPIs
- D2C net sales: CHF209.4 million (+28.1% YoY)
- Wholesale net sales: CHF358.2 million (+27.6% YoY)
- Apparel net sales: CHF21.9 million (+63% YoY)
- EMEA net sales: CHF138.4 million (+21.8% YoY)
- Americas net sales: CHF370 million (+24.8% YoY)
- APAC net sales: CHF59.2 million (+73.7% YoY)
Competitive Differentiators
- Innovative product technology (e.g., LightSpray)
- Strong brand partnerships (e.g., Zendaya, Roger Federer)
- Multi-channel distribution strategy
- Focus on performance running with lifestyle crossover appeal
- Sustainability initiatives integrated into product design
Key Risks
- Supply chain disruptions, particularly in the Americas region
- Potential economic slowdown affecting consumer discretionary spending
- Increased competition in the premium athletic footwear and apparel market
- Currency fluctuations impacting international sales and profitability
- Execution risks associated with rapid expansion and new product launches
Analyst Q&A Focus Areas
Analysts focused on:
- Supply chain constraints and their impact on sales growth
- Marketing initiatives and their effectiveness in driving brand awareness
- Apparel growth potential and strategies
- Regional performance differences and growth opportunities
- New product launches and their reception in the market
On Holding AG Summary
On Holding AG continues to demonstrate strong growth and brand momentum, driven by innovative product launches and effective marketing strategies. The company’s focus on long-term value creation through investments in technology, brand partnerships, and channel expansion positions it well for sustained growth. However, investors should monitor the ongoing supply chain challenges and their potential impact on short-term performance. The company’s ability to maintain its premium positioning while expanding into new product categories and markets will be crucial for future success.
