On Holding AG, the Swiss performance sportswear brand, has been making waves in the athletic apparel industry with its innovative products and strategic growth initiatives. With a market capitalization of $18.34 billion and an impressive year-to-date return of 112.46%, the company has captured significant investor attention. As it continues to expand its global presence and strengthen its market position, investors and analysts are closely watching its performance and future prospects.
Want deeper insights? InvestingPro reveals 18+ additional tips about ONON’s performance and potential, including crucial metrics that could impact your investment decisions.
Financial Performance and Guidance
On Holding AG delivered a strong performance in the third quarter of 2024, achieving revenue growth of 26.12% over the last twelve months and maintaining an impressive gross profit margin of 60.18%. The company’s growth was particularly robust in the direct-to-consumer (DTC) segment and showed strength in the Americas and Asia-Pacific (APAC) regions, which helped offset weaker performance in Europe, the Middle East, and Africa (EMEA).
The company’s margins have improved due to healthier inventory levels, putting On Holding AG on track to achieve its ambitious target of an 18%+ adjusted EBITDAR by fiscal year 2028. This positive trajectory has led the company to raise its full-year 2024 guidance, reflecting increased brand awareness and ongoing operational strength.
Analysts project that On Holding AG has the potential for 30% organic top-line growth, with some suggesting that second-half estimates for 2024 may be beatable. The company’s reaffirmed guidance for fiscal year 2024 indicates expectations of approximately 30% year-over-year constant currency growth, with net sales forecast at approximately CHF2.29 billion and a gross margin of around 60%.
Strategic Initiatives and Market Position
On Holding AG has positioned itself as a leader in innovation within the athletic wear industry. The company’s focus on direct-to-consumer sales has been a key driver of its success, with the DTC channel accounting for 37.5% of first-quarter sales in 2024. This strategic emphasis on DTC, coupled with efforts to strengthen wholesale partnerships, has allowed On Holding AG to gain market share and improve its multichannel retail management.
Brand awareness has been a crucial factor in On Holding AG’s growth strategy. The company has invested in brand marketing collaborations and is capitalizing on significant brand moments, such as the upcoming Paris Olympics in 2024. These initiatives are expected to drive expanded awareness and accelerate top-line growth.
Product innovation remains at the forefront of On Holding AG’s strategy. The company is focused on developing new technologies and launching innovative products to maintain its competitive edge. Additionally, On Holding AG is expanding its product range into apparel, aiming to establish itself as a comprehensive athletic brand offering a wide range of products from footwear to clothing.
Operational Challenges and Future Outlook
Despite its strong performance, On Holding AG has faced some operational challenges. The transition to a new Atlanta warehouse in 2024 led to direct-to-consumer out-of-stocks and wholesale cancellations due to shipment delays. These issues temporarily constrained the company’s ability to fulfill U.S. demand, particularly in DTC channels.
However, analysts view these challenges as high-quality problems stemming from growth and transition rather than fundamental weaknesses in the business. The company has shown resilience by meeting quarterly expectations despite these setbacks, indicating strong underlying business fundamentals.
Looking ahead, On Holding AG’s long-term growth potential remains intact. The company maintains a strong financial position with more cash than debt and an “GREAT” Financial Health Score of 3.25 from InvestingPro. The company is well-positioned to capitalize on upcoming events such as the Paris Olympics and the summer months of 2024, which are expected to drive expanded awareness and accelerate growth. The ongoing focus on product innovation, brand marketing, and multichannel execution is likely to support the company’s ambitious growth targets.
Discover why ONON appears on our overvalued stocks list and access comprehensive valuation analysis with an InvestingPro subscription.
Bear Case
How might ongoing warehouse transition issues impact ONON’s growth?
The warehouse transition challenges experienced by On Holding AG in 2024 have highlighted potential risks to the company’s growth trajectory. These operational issues led to direct-to-consumer out-of-stocks and wholesale cancellations, which could have a short-term impact on revenue and customer satisfaction.
If these problems persist or recur during future expansions, they could hinder On Holding AG’s ability to meet growing demand, particularly in key markets like the United States. The company’s ambitious growth targets and increasing reliance on direct-to-consumer channels make efficient inventory management and distribution crucial. Any prolonged disruptions could lead to lost sales opportunities and potentially damage the brand’s reputation for reliability.
Moreover, as On Holding AG continues to expand globally and introduce new product lines, the complexity of its supply chain and distribution network will increase. This growth could exacerbate existing operational challenges or introduce new ones, potentially slowing the company’s expansion plans and impacting its ability to achieve its long-term financial goals.
Could increased competition in the athletic wear market affect ONON’s market share?
The athletic wear market is highly competitive, with established giants and innovative newcomers vying for consumer attention. As On Holding AG continues to grow and gain market share, it may face intensified competition from both traditional sportswear brands and emerging players focusing on performance and sustainability.
Larger competitors with more substantial resources could potentially outspend On Holding AG in areas such as marketing, research and development, and retail expansion. This could make it challenging for the company to maintain its current growth rates and market position, especially as it expands into new product categories like apparel.
Additionally, as the trend towards athleisure and performance wear continues, more fashion-oriented brands may enter the market, potentially diluting On Holding AG’s market share. The company’s premium positioning also makes it vulnerable to economic downturns or shifts in consumer spending patterns, which could lead customers to opt for lower-priced alternatives.
Bull Case
How will ONON’s focus on DTC and brand awareness drive future growth?
On Holding AG’s strategic emphasis on direct-to-consumer (DTC) sales channels is a significant driver of its growth potential. The DTC approach allows the company to maintain greater control over its brand experience, collect valuable customer data, and potentially achieve higher margins compared to traditional wholesale channels.
By increasing its DTC mix, which reached 37.5% of first-quarter sales in 2024, On Holding AG can build stronger relationships with customers, leading to increased brand loyalty and repeat purchases. This direct connection also enables the company to respond more quickly to changing consumer preferences and market trends.
The company’s focus on brand awareness through strategic marketing collaborations and capitalizing on major sporting events like the Olympics is likely to expand its customer base and strengthen its market position. As brand recognition grows, On Holding AG may benefit from increased word-of-mouth marketing and a stronger presence in the competitive athletic wear market.
Furthermore, the combination of DTC growth and heightened brand awareness could create a virtuous cycle, where increased visibility drives more traffic to On Holding AG’s direct channels, leading to higher sales and providing more resources for marketing and innovation.
What impact could the upcoming Paris Olympics have on ONON’s performance?
The 2024 Paris Olympics present a significant opportunity for On Holding AG to boost its global visibility and drive sales growth. Major sporting events like the Olympics often lead to increased interest in athletic wear and performance gear, providing a platform for brands to showcase their latest innovations and connect with a global audience.
On Holding AG’s plans to capitalize on this event through targeted marketing campaigns and potential product launches could result in a substantial uplift in brand awareness and consumer interest. The global media attention surrounding the Olympics may provide the company with valuable exposure to new markets and customer segments.
Moreover, if On Holding AG can successfully associate its brand with Olympic athletes or events, it could enhance its credibility as a performance-focused sportswear brand. This association could lead to long-term benefits in terms of brand perception and customer loyalty, extending well beyond the event itself.
The timing of the Olympics in the summer of 2024 aligns well with On Holding AG’s seasonal product offerings, potentially driving increased sales of running shoes, performance apparel, and other warm-weather gear. A strong performance during this period could set the stage for accelerated growth in the latter half of 2024 and into 2025.
SWOT Analysis
Strengths:
- Strong brand awareness and growing global recognition
- Robust growth in direct-to-consumer channels
- Focus on product innovation and new technologies
- Successful multichannel retail strategy
- Healthy inventory management leading to improved margins
Weaknesses:
- Operational challenges related to warehouse transitions
- Regional performance disparities, particularly weakness in EMEA
- Potential constraints in fulfilling U.S. demand due to distribution issues
Opportunities:
- Expansion into apparel to build a holistic athletic brand
- Upcoming Paris Olympics as a platform for brand exposure
- Potential for new product launches and technologies
- Increasing market share in the growing athletic wear industry
Threats:
- Intense competition in the athletic wear market
- Potential economic downturns affecting consumer spending
- Supply chain disruptions and logistics challenges
- Currency fluctuations impacting international operations
Analysts Targets
- Barclays (LON:): $63.00 (November 13th, 2024)
- KeyBanc: $60.00 (November 13th, 2024)
- Piper Sandler: $52.00 (August 23rd, 2024)
- KeyBanc: $47.00 (August 14th, 2024)
- Barclays: $47.00 (August 14th, 2024)
- KeyBanc: $40.00 (May 15th, 2024)
- Barclays: $40.00 (May 15th, 2024)
This analysis is based on information available up to December 15, 2024.
InvestingPro: Smarter Decisions, Better Returns
Gain an edge in your investment decisions with InvestingPro’s in-depth analysis and exclusive insights on ONON. Our Pro platform offers fair value estimates, performance predictions, and risk assessments, along with additional tips and expert analysis. Explore ONON’s full potential at InvestingPro.
Should you invest in ONON right now? Consider this first:
Investing.com’s ProPicks, an AI-driven service trusted by over 130,000 paying members globally, provides easy-to-follow model portfolios designed for wealth accumulation. Curious if ONON is one of these AI-selected gems? Check out our ProPicks platform to find out and take your investment strategy to the next level.
To evaluate ONON further, use InvestingPro’s Fair Value tool for a comprehensive valuation based on various factors. You can also see if ONON appears on our undervalued or overvalued stock lists.
These tools provide a clearer picture of investment opportunities, enabling more informed decisions about where to allocate your funds.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.
link