ONON Hits Record High on Strong Margins, Asia Growth
2min read On Holding AG (ONON) posted mixed Q3 results, with earnings per share (EPS) of CHF 0.09 falling short of the CHF 0.15 analyst estimate, though revenue exceeded expectations. Revenue reached CHF 635.8 million, a 32.3% year-over-year increase and above the consensus projection of CHF 618.7 million. Despite the initial earnings miss, shares dropped only briefly before rebounding by 4%, as management’s optimistic outlook and strong performance in the Direct-to-Consumer (DTC) channel instilled confidence in investors.
Key metrics showcased the strength of ONON’s growth, particularly in the DTC segment, which saw a 50% year-over-year increase in net sales to CHF 246.7 million, surpassing the estimated CHF 219.7 million. The DTC channel now accounts for 38.8% of total sales, up 450 basis points from last year, reflecting ONON’s focus on driving high-margin sales directly to consumers. Conversely, wholesale net sales grew 23% to CHF 389.1 million, slightly below the CHF 397.3 million forecast, due to some lingering supply chain constraints.
Geographically, ONON recorded significant growth across key regions, with Americas sales up 34.1% to CHF 395.5 million, EMEA (Europe, Middle East, Africa) up 15.1% to CHF 165.8 million, and Asia-Pacific (APAC) experiencing a remarkable 79.3% increase to CHF 74.6 million. The APAC region’s growth is partly due to expanding brand awareness and strategic retail openings, particularly in high-growth markets like China, which ONON sees as critical to its long-term global expansion strategy.
Gross profit improved by 34% year-over-year to CHF 385.3 million, achieving a record-high gross margin of 60.6% since ONON’s IPO, up from 59.9% in the prior year and above the 60.1% estimate. This margin expansion reflects a favorable shift towards the DTC channel and disciplined pricing strategies that reduced reliance on promotions. Adjusted EBITDA also surpassed expectations, climbing 48% to CHF 120.1 million with an EBITDA margin of 18.9%, above the projected CHF 108.4 million and 17.6% margin.
ONON’s strong performance this quarter was fueled by strategic marketing initiatives and high-profile partnerships. The company’s collaboration with Zendaya and the visibility of its products at the Paris Olympics have contributed to growing global brand recognition. These factors, alongside innovative product launches and new store openings in major cities, have amplified ONON’s momentum as it positions itself as a premium global sportswear brand.
For FY24, ONON updated its revenue growth outlook to at least 32% on a constant currency basis, equating to reported net sales of at least CHF 2.29 billion, though this is just shy of the CHF 2.31 billion consensus. The company also raised its gross profit margin target to around 60.5% and expects an adjusted EBITDA margin at the upper end of the previous range of 16-16.5%, showcasing confidence in its ability to manage costs and maintain high profitability.
Looking ahead to the holiday season, management expressed optimism, pointing to sustained consumer demand and a solid operational footing as key drivers. ONON has indicated plans to leverage its DTC channel to capture holiday spending, ensuring that its product availability aligns with seasonal demand. This focus on the high-margin DTC channel is expected to bolster profitability as ONON scales its global footprint.
The market reacted positively to ONON’s future outlook and the overall strength of its brand, despite the EPS miss. Shares initially dipped but rebounded sharply, ending the trading session up about 4%, as investors were reassured by the company’s growth trajectory and efficient cost management. This rebound underscores the market’s confidence in ONON’s brand strength and its long-term potential in the premium sportswear market.
In summary, ONON’s Q3 results underscore the company’s strategic progress in brand expansion and high-margin sales channels. With continued growth in core regions, particularly in APAC, robust DTC performance, and disciplined cost management, ONON is well-positioned for the future. The updated guidance for FY24 reflects management’s confidence as it enters the crucial holiday season, highlighting ONON’s resilience and potential for continued success in a competitive market.