Red-hot shoe brand On Running, which has become an important brand for outdoor retailers, posted revenue of 1.8 billion Swiss Francs ($2 billion) for 2023, a 55% increase in constant currency.
The Swiss company, which released financial earnings last week, said the results significantly exceeded expectations set at the beginning of the year.
Further, On reported a gross profit margin of 59.6%, net income of 79.6 million Swiss Francs ($90 million) and an adjusted EBITDA margin of 15.5%, “showcasing On’s ongoing commitment to combine strong growth with continuously increasing profitability,” according to a release.
Monster Momentum
During a conference call with investors, On co-founder David Allemann pointed to the brand’s ability to capture market share.
He highlighted the Cloudmonster running shoe emerging as the brand’s franchise product in the span of two years. The company has quickly released an updated 2.0 version as well as a Hyper version.
“This not only amplifies the momentum in running, but also introduces a range of options for our channel partners,” Allemann said.
Beyond those styles, Allemann listed several other shoes that are helping to push the brand forward, such as the Cloudeclipse and the Cloudnova.
“We’re expanding the strength and diversity of our innovation-driven portfolio like never before,” he said.
Integrated Fashion
On’s shoes, with their unusual sole design, are also a fashion statement for some consumers who are weaving sports into their everyday life, according to Allemann.
“The last pivotal years made it clear that sport is the new normal that will continue to transcend culture and fashion,” he said. “Sport is not just an activity. It’s a statement, a lifestyle, and new luxury for a generation valuing movement and exploration over possession and status.”
To capitalize on that, On will be opening an additional 100 brand stores internationally in the coming years that feature its shoes as well as apparel.
On opened 50 new stores in 2023, including 10 in China. In the fourth quarter alone, it opened 6 stores, in London, Miami, Paris, Beijing, Chengdu, and Guangzhou. The company sees ongoing strong momentum in China and Japan.
“We will continue to manage our different channels very consciously. We will be adding a lower number of incremental wholesale doors in the future than we have over the past two years,” Hoffmann said. “We’ve seen significant potential for deeper penetration in strategic accounts, same-store growth and ongoing market share gains.”
Continued Rapid Growth
By channel, CFO and co-CEO Martin Hoffmann said On has grown its direct-to-consumer business from 36.4% of total sales to 37.5%.
“Record high traffic to our website and stores around the world are a true testament to the strength of the brand and increased global awareness,” he added. “As a result, we achieved the highest B2C share in the history of On, supporting our highest gross profit margin since the IPO.”
On’s website had more than 230 million visitors in 2023, a 63% year-over-year increase.
“We significantly optimized our inventory position and achieved a positive cash flow of 163 million Swiss Francs ($184.3 million), the highest in the history of the brand,” Hoffmann said. “Thanks to our partnership with the best and most meaningful retail partners, net sales from the wholesale channel exceeded 1 billion Swiss Francs ($1.13 billion).”
A strong focus in 2023 for On was improving and strengthening its balance sheet, including inventory and liquidity.
“Due to the expedited recovery of the global supply chain, we started the year with an elevated inventory position,” Hoffmann said. “Our teams have done a tremendous job to finish 2023 with roughly the same number of items in our inventory as we had at the end of 2022.”
Including retail, On’s workforce has grown from 1,700 to 2,400, in more than 20 offices around the world.
By region, sales in Europe, Middle East and Africa in 2023 increased to 488.7 million Swiss Francs ($552.7 million), up 35% in constant currency.
Sales in the Americas region rose to 1.2 billion Swiss Francs ($1.35 billion), up 61% in constant currency for the year. And sales for 2023 rose to 141.1 million Swiss Francs ($159.59 million) in the Asia-Pacific region, an increase of 96% in constant currency.
On’s Q4 Results
For the quarter ended Dec. 31, 2023, On reported net sales of 447.1 million Swiss Francs ($505.8 million), a 31% increase in constant currency from the previous quarter.
On saw record-high traffic to its website and retail stores around the globe, with DTC accounting for 46.2% of total sales.
On’s gross profit margin in Q4 2023 reached 60.4%, above its stated mid-term ambition to exceed 60%.
Looking Ahead
For the full year 2024, On expects to achieve a constant currency net sales growth rate of at least 30%, and full year revenue of at least 2.25 billion ($2.54 billion) Swiss Francs.
On expects to achieve a gross profit margin of approximately 60% and an adjusted EBITDA margin in the range of 16% – 16.5% for the full year 2024.
The brand will be pushing out new products this year.
“We are very clear on our priorities for 2024,” Hoffmann said. “No. 1 is capitalizing on the immense global momentum of our brand. We will continue to grow at unprecedented rate at this scale.”
The second priority for the year is On’s apparel line, including for tennis and training.
Third is to fine-tune On’s retail store concept and continue its expansion as mentioned previously.
The fourth priority is elevating its multi-channel strategy.
“The ever-growing awareness and strong demand for the brand will mean that our DTC will continue to capture a disproportionate share of our growth this year,” Hoffmann said. “Our mission is very clear. We want to be the most premium global sportswear brand.”
