Estimated reading time: 7 minutes
Key Takeaways
- On Holding’s Q2 revenue surged 55.5 % year on year, smashing the Refinitiv consensus and prompting an upgraded full-year outlook.
- Direct-to-consumer (DTC) sales now represent 37 % of revenue and carry margins north of 64 %, underscoring a profitable channel shift.
- Net cash of CHF 200 m and falling inventory days give the Swiss group ample fire-power for R&D and store roll-outs.
- Ambitious sustainability goals are validated by the Science Based Targets initiative, boosting brand equity with eco-minded shoppers.
- Shares trade at a premium valuation, but investors appear willing to pay for rapid growth, expanding margins and Roger Federer’s marketing clout.
Table of contents
Company Background
Founded in 2010 by former triathlete Olivier Bernhard and entrepreneurs David Allemann and Caspar Coppetti, On set out to reinvent the feel of running shoes rather than their look. The breakthrough CloudTec midsole — hollow pods that soften on landing and firm for take-off — won the ISPO BrandNew award and catapulted the fledgling brand into specialist retailers just as the minimalist craze waned.
From its first million-pair year in 2016 to a New York Stock Exchange listing in 2021 that raised roughly US$746 m, the company has logged compound annual revenue growth above 40 %. Gross margin has expanded four points to 59.5 % thanks to in-house moulding, premium pricing and limited discounting.
“We’re obsessed with how running feels, not just how it looks,” co-founder Olivier Bernhard once said, capturing the brand’s engineering-first ethos.
Second-Quarter Numbers
Net sales jumped 55.5 % year on year to CHF 749.2 m, handily beating the CHF 704.1 m estimate compiled by Refinitiv. DTC revenue rose 64 % while wholesale climbed 50 %, showing strength across both channels. Lower airfreight and a higher share of full-price sales nudged gross margin to 59.5 %.
Management now guides to at least 31 % constant-currency revenue growth for FY 2025 and sees adjusted EBITDA at the upper end of the mid-teens. Inventory days improved to 118 from 143, signalling smoother supply-chain flow even as volumes soar.
Balance Sheet & Cash Flow
On closed the quarter with CHF 200 m net cash after capex of CHF 40 m, largely for next-generation CloudTec moulds and expansion of its Indonesian plant. Operating cash flow doubled to CHF 88 m, aided by tighter working-capital discipline. Lease liabilities of CHF 306 m — mostly store rents — are offset by a lease-adjusted EBITDAR margin above 20 %.
Strategy & Growth Drivers
Four pillars underpin the growth plan:
- Roger Federer effect — the tennis icon’s 2019 investment and hands-on design role lift visibility, retail traffic and brand credibility.
- Product pipeline — innovations like the Cloudmonster Hyper and Cyclon subscription keep the catalogue fresh and environmentally minded.
- DTC expansion — flagship stores in London, Tokyo and Melbourne pay back in under 18 months; management targets 50+ locations by 2027.
- Sustainability leadership — goals validated by the SBTi resonate with consumers seeking closed-loop solutions like Cyclon.
Competitive Landscape & Valuation
Premium running shoes have grown at roughly 11 % CAGR since 2019, outpacing mass-market models. On’s gross margin sits three points above Hoka and eight above Nike, owing to lower discounting and duty-free EU distribution. Research spend at 7 % of sales rivals tech-heavy apparel peers such as Lululemon.
Following the guidance lift, shares trade at about 41× forward earnings and 5.3× sales — lofty against Nike (27×, 2.9×) but justified by a blend of rapid growth and margin expansion. Women’s footwear share near 1 % and still-low awareness in South-East Asia offer further runway.
Risks to Watch
- Currency — a stronger Swiss franc dilutes overseas revenue and can squeeze margin on euro-linked raw-material contracts.
- Execution — scaling AI-driven demand planning and new factories could create short-term inefficiencies.
- Competition — larger rivals may copy subscription recycling or accelerate plate licensing.
- Consumer spend — premium price points above US$150 could test wallets if macro headwinds deepen.
Outlook & Conclusion
The running boom remains intact: World Athletics notes road-race participation rose 10 % in 2023 and is on track for similar growth this year. Surveys by RunRepeat show 93 % of On buyers intend to repurchase, while NPS sits at 61 versus an industry average in the mid-30s.
With rising cash generation, disciplined inventory control and a pipeline of high-margin innovations, On appears positioned to keep outpacing the broader sportswear sector. The valuation premium leaves little room for mis-steps, yet the blend of technology, sustainability and brand heat suggests this growth story still has distance left to run.
FAQs
Is On Holding profitable?
The company is profitable on an adjusted EBITDA basis and is narrowing the gap to GAAP profitability as gross margin expands and operating expenses scale.
How big is On’s direct-to-consumer channel?
DTC accounts for 37 % of total revenue, with management targeting a share above 40 % over the next few years via new flagships and continued e-commerce optimisation.
What makes CloudTec different from other midsole technologies?
Its hollow pods compress on impact for cushioning and lock together on toe-off for propulsion, delivering a distinct ride that blends comfort and speed.
Why is sustainability central to On’s strategy?
Consumers increasingly demand lower-impact products; initiatives like the Cyclon subscription and SBTi-aligned emissions targets reinforce credibility and open new revenue streams.
Where can investors find more information?
Quarterly reports, presentations and ESG updates are available on the company’s investor relations site.
