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Federer-backed On boosts forecast after sneaker demand rises

Founded just over a decade ago, On has expanded rapidly across Europe and North America thanks in part to strong uptake from a growing network of wholesale partners and specialty running stores.
Founded just over a decade ago, the Swiss footwear company On has expanded rapidly across Europe and North America thanks in part to strong uptake from a growing network of wholesale partners and specialty running stores. © Keystone / Gaeten Bally

Swiss footwear company On Holding AG posted strong first-quarter revenue and nudged its sales forecast higher for the year, boosted by demand for its running shoes and new line of training apparel. 

Roger Federer-backed On reported quarterly sales of CHF508 million ($560 million) at constant exchange rates, up 29% from a year ago and ahead of market expectations. 

The stock rose as much as 22% in New York trading, the biggest intraday gain in 14 months. That’s after the shares climbed 14% this year through Monday’s close in New York.

+ Is Swiss footwear brand On getting too greedy for its own good?

Founded just over a decade ago, On has expanded rapidly across Europe and North America thanks in part to strong uptake from a growing network of wholesale partners and specialty running stores. Now, it’s expanding even faster with its e-commerce channel and network of company-owned stores as it deepens its presence in the tennis and training categories, too. 

The Zurich-based company said it now expects full-year sales of CHF2.29 billion Swiss francs, slightly higher than the CHF2.27 billion average of analyst estimates. 

Because On only attributed the higher guidance to favourable currency swings, there’s probably room for it to further raise its outlook later this year, Cristina Fernandez, an analyst with Telsey Advisory Group, said in a note. 

+ The making of a Swiss footwear multinational

On’s direct-to-consumer sales grew by 39% in the quarter to CHF191 million, boosted by a new commercial app that’s now available globally and new company-owned store openings, including in Berlin and Portland, Oregon, co-Chief Executive Officer Martin Hoffmann said in an interview. On now has about 50 company-owned stores, mostly located in China, and plans to open a second Paris location on the Champs-Élysées ahead of the Olympics this summer.

The momentum has turned On into a darling in the sports industry, raising the stakes for it to keep up the pace or risk disappointing investors. The fact that it continues to expect at least 30% growth in net sales while further ratcheting up profitability sets it apart from many of its sports-industry rivals that are grappling with soft consumer demand, Dylan Carden of William Blair said in a note.

On still has room for growth in running, where it has its most developed portfolio of products. It recently unveiled new footwear including the Cloudmonster 2 and Cloudsurfer Trail and hopes to make a strong showing with its sponsored athletes at the Paris Olympics this summer.

A relative newcomer to the Olympics, On is hoping to build both credibility with its athletes — including back-to-back Boston Marathon winner Helen Obiri of Kenya — and brand awareness in Paris this summer, Hoffmann said. The company will be visible in running events along with the triathlon and tennis, Hoffmann said.

“It’s really the first Olympics where we can go big,” Hoffmann said. “And it’s close to our home, so we can have our full presence available to bring to the games.”

©2024 Bloomberg L.P.

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