ONON posts mixed results but maintains full year outlook, sees reacceleration in 2H

On Holding AG (ONON) reported solid Q2 earnings, with revenue and adjusted EBITDA coming in above analyst expectations, although earnings per share (EPS) slightly missed consensus estimates. The company reported net sales of CHF 567.7 million, representing a 28% year-over-year increase, which exceeded the consensus of CHF 562.7 million. Adjusted EBITDA was CHF 90.8 million, surpassing the CHF 85.9 million estimate, driven by strong sales growth. However, EPS came in at CHF 0.090, below the expected CHF 0.11, though significantly higher than the CHF 0.010 reported in the same period last year.

Consumer trends were a mixed bag for ONON in Q2. While the company's Direct-to-Consumer (DTC) channel saw net sales increase by 28.1%, this was below the consensus of 35.9%. Conversely, the Wholesale channel outperformed expectations with a 27.6% increase in net sales, well above the consensus of 20.2%. By geography, EMEA and Asia Pacific regions showed robust growth, with sales up 22.2% and 84.7% respectively, both outperforming analyst expectations. However, sales in the Americas were slightly below estimates, indicating a potential slowdown in that region.

The company maintained its full-year 2024 guidance, signaling confidence in its long-term growth trajectory despite the slight miss in EPS. ONON reiterated its guidance for currency-neutral (cFX) sales growth of at least 30% and net sales of CHF 2.26 billion, slightly below the consensus of CHF 2.30 billion. The gross margin is expected to be around 60%, aligning closely with the consensus of 60.3%, while the adjusted EBITDA margin is forecasted to be between 16% and 16.5%, slightly above the consensus of 16.3%.

During the earnings call, management provided some positive commentary that seemed to resonate with investors, leading to a reversal in the stock price. After initially dropping by 7.5% in pre-market trading, shares of ONON rebounded to post a 4% gain by the time the call concluded. The company highlighted expectations for a reacceleration of trends in the second half of the year, coupled with favorable pricing and product innovation, which could drive better-than-expected performance in the upcoming quarters.

Despite the cautious outlook on consumer demand in certain regions, ONON's management expressed optimism about the company’s ability to navigate the current economic environment. The robust performance in the EMEA and APAC regions, coupled with strong growth in the Wholesale channel, suggests that the company is effectively managing its global operations and adapting to varying market conditions.

In summary, ONON delivered a strong Q2 performance with revenue and EBITDA exceeding expectations, although EPS fell short. The company’s reaffirmed guidance and positive commentary during the earnings call have helped to assuage investor concerns, leading to a positive market reaction. As ONON continues to focus on expanding its global footprint and leveraging its DTC and Wholesale channels, the outlook for the second half of the year remains cautiously optimistic.