Estimated reading time: 6 minutes
Key Takeaways
- Q1 FY25 revenue at CHF 726.6 million, a 43% jump year-on-year
- Gross margin expanded to 59.7%, aided by lower air-freight costs
- Direct-to-consumer mix climbed to 37% of sales, with ambitious 45%+ target
- Roger Federer’s brand halo drives higher repurchase rates and visibility
- Management raised full-year guidance to at least CHF 3.35 billion in revenue
Table of Contents
The Federer Effect
“Great design is grounded in movement.” That quote, frequently attributed to Roger Federer during his creative sessions at On’s Zürich HQ, sums up the partnership’s value. Since the 20-time Grand Slam champion bought an equity stake in 2019, brand-awareness surveys show a 12-point lift among consumers exposed to Federer-led campaigns. The Roger line itself accounts for only ~6% of pairs sold, yet buyers of these court-inspired shoes repurchase performance runners at twice the rate of other shoppers—a cross-pollination goldmine.
Federer’s cameo in a short film aired during Indian Wells lit up social channels, boosting engagement 35% week-over-week. *Star power, it appears, still converts to Swiss francs.*
Solid Q1 Metrics
Management credited the “strongest quarter since listing” to three levers—product pipeline, operational discipline and sharper storytelling. Highlights include:
- Launches such as *Cloud 6* and *Cloudsurfer 2* pushed sell-through above 65% at key wholesale partners
- Factory lead-times shortened as 2022’s logistics backlog cleared, trimming expedited shipping to <1% of volume
- Markdowns stayed below 3% of revenue, protecting premium positioning
Direct-to-Consumer Surge
DTC revenue leapt 49%, raising the channel mix to 37%. New flagship stores in Seoul and Manchester joined a modernised e-commerce stack to fuel the jump. Management sees the mix topping 45% “over time,” though CFO Martin Hoffmann conceded that “absorbing logistics costs could clip gross margin by ~80 bps.” Still, tighter consumer data often translates to lower acquisition costs and richer storytelling.
Competitive Landscape
Global performance running grew ~8% to USD 25 billion last year, with carbon-plate racers and maximal-cushion trainers setting the pace. On’s early entry via *Cloudboom* and *Cloudmonster* won it first-mover advantage. According to Euromonitor, Nike’s share slipped 110 bps to 28%, while On advanced 60 bps to 4.8%. Challenger brand Hoka holds 5.6%, making the Berlin and London marathon sponsorships a high-stakes duel for visibility.
Analysts at Morgan Stanley project that if On maintains current sell-through rates it could double market share by 2028, implying ~25% annual revenue growth. The prerequisite: relentless innovation and broader product mix beyond footwear.
Sustainability Initiatives
Gen-Z runners cite environmental credentials as a purchase driver. On’s answer is *Cloudneo*—a subscription shoe made from a single polymer, fully recyclable into new uppers and midsoles. Early pilots show an 89% return rate versus an industry average near 30%. Management has pledged full circularity by 2030, forecasting that circular products could reach 10% of revenue by 2028 without margin dilution once scale hits.
Guidance & Outlook
Revised guidance pegs full-year net sales at a minimum of CHF 3.35 billion (up from CHF 3.05 billion) and an EBITDA margin near 16%. Capex is seen around CHF 120 million—mainly new stores and automation in Rotterdam—while free cash flow conversion should stay above 70%.
Risks? A stubbornly strong Swiss franc could shave ~90 bps from margin for every 5% appreciation, and dependency on a single supplier for CloudTec pods remains higher than ideal. At ~46× forward earnings, the valuation assumes near-flawless execution.
FAQs
How much of On Holding does Roger Federer own?
Exact figures aren’t public, but filings suggest a stake just under 3%, aligning the tennis legend’s incentives with long-term brand growth.
Why did gross margin improve despite higher marketing spend?
Lower air-freight reliance and smoother factory lead-times outweighed the 60 bps rise in marketing as a share of revenue.
Is the direct-to-consumer push risky for profitability?
Short term, yes—absorbing costs now borne by wholesalers could compress margin. Long term, richer data and higher lifetime value often offset that drag.
How does On plan to diversify its supply chain?
Management is onboarding a second manufacturer for CloudTec pods in Indonesia and evaluating additive-manufacturing options in Europe for redundancy.
What could derail the growth story?
A sharp slowdown in performance-running demand, unexpected factory disruption, or intensified pricing pressure from Nike, Hoka or Asics would challenge the bullish thesis.
