Dive Brief:
- Kicking off the fiscal year with a quarterly sales record, footwear brand On reported its Q1 net sales were up 78.3% year over year, reaching 420.2 million Swiss francs (about $467 million), according to a Tuesday press release. Net sales through its direct-to-consumer channel were up 64.3%, while wholesale revenue increased 86%.
- On’s gross margin during the first quarter increased year over year from 51.8% to 58.3%. Meanwhile, its net income jumped 209.2% from 14.3 million to 44.4 million Swiss francs.
- For the full fiscal year, On raised its net sales outlook to at least 1.74 billion Swiss francs. On expects inventory at the end of the year to be in line with December 2022 while maintaining a higher net sales base.
Dive Insight:
Following up on a profitable fiscal year 2022, On reported a healthy quarter on Tuesday with growth across the board.
“Our record net sales in Q1 are a further validation of the strong brand momentum across all regions, channels and product groups,” Martin Hoffmann, co-CEO and CFO of On, said in a statement. “This was supported by a largely normalized supply chain environment versus the first quarter of 2022, which also allowed for the discontinuation of exceptional air freight and corresponding significant gross profit margin improvement. We always emphasize the importance of our multi-channel strategy, and we are very happy to see the contributions of our new retail stores. Supported by an exceptionally strong start for our new London store, our own retail net sales more than quadrupled year-over-year.”
While the brand has always focused on a multichannel strategy, Hoffmann told analysts on a call Tuesday that there is evidence of a demand for larger flagship brick-and-mortar stores. On will open new retail stores in Williamsburg in New York City and Miami during the upcoming months, both with more than double the selling space of its current New York City location.
On’s inventory grew during the quarter 186% year over year, according to comments from Wedbush analysts led by Tom Nikic. However, this compares to the constrained supply chain activity from a year ago and the brand’s quarter was strong nonetheless.
“We think [On] is one of the strongest growth stories in our space, with great products that are gaining brand awareness, gaining new points of distribution, and selling predominantly at full-price,” Wedbush’s analysts said in emailed comments. “Though valuation is quite lofty, the company has a tremendous amount of momentum and a long runway for growth.”
The brand’s expansion of its product offerings, which includes stepping into kids footwear in March, might be a driving force behind its growth.
“We attribute the brand strength to greater awareness and an expanded product assortment that is driving new and repeat purchases as well as larger presentations at wholesale partners,” Telsey Advisory Group analysts led by Cristina Fernández said in emailed comments. “Positively, the majority of On's sales remain full price despite a promotional environment in athletic footwear, particularly in the US.”
