Key highlights from the report include: 

- Net sales increased by 46.5% year-over-year (YoY) to CHF 480.5 million, with growth seen across all regions and product categories. 

- The direct-to-consumer (DTC) channel drove growth .

- Gross profit margin increased to 59.9% from 57.1% in Q3 .

- Adjusted EBITDA increased by 44.3% YoY to CHF 81.3 million, while the adjusted EBITDA margin decreased slightly to 16.9% from 17.2%.

On Holding AG, the Swiss-based sports and lifestyle brand, has reported strong financial results for the third quarter of 2023, reflecting the company's continued growth and profitability.

It posted net sales of CHF 1,345.0 million year-to-date, a solid 46% increase from the prior year period. This growth can be largely attributed to the success of On's direct-to-consumer (DTC) channel, which rose 54.6% in Q3 2023. 

On's net income reached CHF 58.7 million in Q3, along with an adjusted EBITDA of CHF 81.3 million, demonstrating the company's commitment to achieving both growth and profitability. 

One of the notable achievements in Q3 2023 was On's highest gross profit margin since its IPO two years ago, which increased to 59.9% compared to 57.1% in the same period of the previous year. Several factors contributed to this increase, including strong full-price sales, a higher proportion of DTC sales compared to the previous year, favorable freight and FX rates, and a decrease in extraordinary airfreight costs. 

Based on their strong performance in the first nine months of 2023 and their confidence in the demand for the On brand, the company has revised their net sales outlook for the full year 2023 to CHF 1.79 billion from CHF 1.76 billion. Additionally, On expects to achieve a gross profit margin of at least 59.0% for the full year while maintaining a 15.0% adjusted EBITDA margin. 

On's success can be attributed to its expanding popularity and credibility among athletes globally. Notably, Hellen Obiri's victory at the New York City Marathon, making her the first woman in 34 years to win both the New York and Boston marathons in the same season, has garnered significant attention. 

On plans to focus on their existing wholesale partners and their DTC channels, including e-commerce and retail. The company aims to add fewer additional wholesale doors in the future.

 

There were a few red flags for investors. Most notably indications of potential pull through orders given the spike in receivables while inventories were up 66% from the prior year. This is why shares of ONON reacted negatively to the report. 

In conclusion, On has delivered outstanding financial results in the first nine months of 2023, with significant growth in net sales, gross profit margin, and net income. The company's success is driven by the strong performance of its DTC channel and the increasing popularity of the On brand among athletes. With the increased outlook for the full year 2023 and its recently announced Dream On vision for 2026, the company enters the holiday season with confidence and excitement for the road ahead but that rise in inventories will keep investors cautious.