Dive Brief:
- Swiss apparel and footwear brand On announced plans to expand its global presence, adding 100 additional stores over the coming years, David Allemann, co-founder and executive co-chairman, said on a call with analysts Tuesday. The stores are intended to showcase both the brand’s footwear offerings as well as apparel, which made “significant progress” last year.
- The announcement came as the brand reported fourth-quarter net sales increased 21.9% year over year to 447.1 million Swiss francs (about $509 million); net sales through the DTC channel increased 38.2% to 206.6 million Swiss francs, while net sales through the wholesale channel increased 10.7% to 240.5 million Swiss francs.
- By region, revenue within the brand's Europe, Middle East and Africa unit increased 23% from the year-ago period, Americas grew 19% and Asia-Pacific increased 58%. But losses also grew during the period: On’s Q4 net loss widened 1.5% from the year-ago period to $26.8 million, according to a company press release.
Dive Insight:
Since its IPO over two years ago, On has been on a tear with its line of footwear, apparel and accessories, partnering with elite athletes as brand ambassadors.
But perhaps On has become a victim of its own explosive growth and why the last quarter was somewhat of a letdown, according to analysts.
On "didn't crush top-line expectations in Q4,” Wedbush analysts led by Tom Nikic said in an emailed client note. “Given that investors have become acclimated to huge revenue beats from this company, this is likely to be viewed as a major disappointment.”
For the full year, the brand reported net sales increased 46.6% from the year-ago period to 1.8 billion Swiss francs. By channel, DTC sales increased 50.9% to 671.8 million Swiss Francs and wholesale grew 44.2% to 1.1 billion Swiss Francs.
Last October, On announced to investors that it aimed to double net sales by 2026, representing a compound annual growth rate of over 26%. For 2024, On said it expects to grow even beyond this rate and to achieve a constant currency net sales growth rate of at least 30%.
While On in November said it intended to slow its wholesale expansion, it is leaning into its DTC channel: The brand has new locations planned for China and Latin America, among other places, and it will open its first store in Berlin later this month.
The company, which became popular for its running shoes, has also been making strides in apparel. In the brand's New York, Paris and Shanghai flagship stores, for example, Allemann said roughly one in six On items sold are for the body not the feet.
“While our portfolio is deeply rooted in our commitment to innovation, catering first to athletes and runners, we recognize the wider opportunities for On in the evolving sports and fashion landscape,” Allemann said in a statement. “As we look to further expand our presence in the global premium sportswear market, we have put a big emphasis on building awareness for our apparel offering.”
The company is intent on using the 2024 Paris Olympics to showcase the brand and grow market share, Hoffmann said.
For the first quarter of 2024, On projects its share of DTC sales to increase as it achieves a constant currency net sales growth rate of 26%. The company expects first-quarter net sales to reach 495 million Swiss francs.
