On brand’s DTC sales grew faster than wholesale in Q2

Dive Brief:

Marking yet another record quarter, athletics brand On saw net sales increase 52.3% year over year during its second quarter to 444.3 million Swiss francs (about $506.5 million), the company announced Tuesday in a press release. Meanwhile, On’s net income dropped 93.3% to 3.3 million Swiss francs and gross profit margin jumped to 59.5% from 55.1%.
The Swiss brand’s direct-to-consumer net sales increased 54.7% to 163.5 million Swiss francs during the quarter while wholesale jumped 51% to 280.8 million Swiss francs. The company’s DTC channel share increased to 36.8%.
On raised its outlook for the fiscal year, with net sales expected to reach at least 1.76 billion Swiss francs compared to the previously projected 1.74 billion Swiss francs.

Dive Insight:

Approaching the second year since its IPO, On has steadily worked to grow its DTC sales.

Co-CEO and CFO Martin Hoffmann said on a call with analysts Tuesday said the company sees “the strength of the DTC channel as a validation of our ability to bring consistent innovations to the market.”

“We continue to see a small, but increasing contribution from our owned retail store business,” Hoffmann said. “This does not yet include the material contribution from our new Williamsburg store given the late June launch ... The store serves as another prime example of how retail is able to showcase On as a full head-to-toe brand.”

On’s wholesale channel has also positively contributed to the company’s latest results.

“On continues to gain share and deliver strong results, even as several peers have pointed to a softer US market,” Telsey Group analysts led by Cristina Fernández said in emailed comments. “We attribute On's outperformance to increased brand awareness, success with new product introductions, and expanded distribution with wholesale partners, such as Dick's Sporting Goods, Foot Locker, and JD Sports.”

Hoffmann said on the call that On has supported its growth through full-price sales with wholesale partners and plans to selectively expand its key wholesale partnerships by only adding doors with edited customer bases. Historically, the brand has opened about 400 to 500 new doors to its roster per quarter, though it expects this rate to drop looking forward, executives noted on the call.