On Holding (ONON +4.26%), a Swiss sportswear company known for its high-performance footwear and apparel, released its financial results for the first quarter of 2024 on May 14. The company reported net sales of 508.2 million Swiss francs, exceeding management's expectations of 495 million Swiss francs. Additionally, the company achieved a gross profit margin of 59.7%, up from 58.3% in the prior year, mainly driven by strong direct-to-consumer (DTC) sales and excellent inventory management. However, increased selling, general, and administrative (SG&A) expenses and currency fluctuations remain areas of concern.
Investors reacted favorably to the report.
| Metric | Q1 2024 | Management's Expectation | Q1 2023 | % Change (YOY) |
|---|---|---|---|---|
| Net sales (Swiss francs) | 508.2 million | 495 million | 420.2 million | 21% |
| Gross profit margin | 59.7% | N/A | 58.3% | 1.4 pp |
| Adjusted EBITDA | 77.4 million | N/A | 61.0 million | 27% |
| Net income (Swiss francs) | 91.4 million | N/A | 44.4 million | 106% |
|
Source: Company report and management's guidance, as provided in 2024-03-12 earnings report. |
About On Holding
Founded in 2010 and headquartered in Zurich, On Holding is renowned for its innovative athletic footwear, apparel, and accessories. The company sells its products through independent retailers, distributors, online platforms, and physical stores worldwide. Recent focuses include product innovation, increasing DTC sales, and expanding its international footprint, particularly in Asia and the Americas.
NYSE: ONON
Key Data Points
The key to On Holding's success lies in its commitment to continuous product innovation and maintaining a diverse sales and distribution network. The company's strong market presence and efforts in expanding its international reach further bolster its competitive position.
Quarterly achievements and highlights
This quarter saw On Holding achieve remarkable financial and operational milestones. Net sales hit 508 Swiss francs, surpassing the 500-million mark for the first time in a single quarter. This 21% year-over-year growth was largely driven by a 39% increase in DTC sales, which now account for 37.5% of total sales.
The gross profit margin showed significant improvement, rising to 59.7% from 58.3% in the previous year. This increase is attributed to the strong sales performance in the DTC channel and effective inventory management. However, the adjusted EBITDA margin saw only a slight increase to 15.2% from 14.5%, indicating rising operational costs. SG&A expenses rose significantly by roughly 31%, to 265 million Swiss francs, due partly to higher marketing costs and a jump in share-based compensation.
The company also continued to enhance its global market presence. The Asia-Pacific region's net sales surged by 67% or 90.7% on a constant-currency basis, driven by notable growth in China and Japan. "We're very happy with what we're seeing in China. Japan is extraordinary. It's well ahead of our expectations..." said co-founder and Executive Co-Chairman Caspar Coppetti in the conference call with analysts.
Participation in high-visibility events, such as Hellen Obiri's win at the Boston marathon, further strengthened the brand's credibility and market position.
Looking ahead
Management reiterated its positive outlook for the full year, targeting at least 30% net sales growth on a constant-currency basis, translating to at least 2.3 billion Swiss francs in reported net sales. The expected gross profit margin remains around 60%, with the adjusted EBITDA margin projected to be between 16% and 16.5%. The company's strategy will continue to focus on expanding its DTC channel, introducing innovative products, and scaling its international footprint.
