Swiss sneaker maker On Holding AG forecast sales growth for this year that disappointed investors, sending shares to their biggest-ever decline.
The Roger Federer-backed company also posted revenue in the last quarter of 2023 that narrowly missed analysts’ estimates.
The shares tumbled as much as 19 percent in early New York trading, the most since On’s initial public offering in September 2021. Even so, the stock is still up about 41 percent over the past 12 months, more than rivals Nike Inc., Adidas AG or Puma SE.
Investors are watching sports brands for any sign of weakness after Nike and Puma raised doubts about the strength of consumer spending. While On has become a darling of the industry with its popular line of running and tennis shoes, that momentum has also raised the stakes for the company to keep up the pace of growth or risk disappointing investors.
On expects sales to grow at least 30 percent this year to 2.25 billion Swiss francs ($2.56 billion) or more, according to a statement Tuesday. That compares with the 2.32 billion-franc average of analyst estimates. First-quarter sales may reach 495 million francs, it said, less than the 527 million-franc average estimate.
Founded just over a decade ago, On has expanded rapidly across Europe and North America thanks in part to strong uptake from an ever-growing network of wholesale partners and specialty running stores. Now, it’s taking on new partners at a slower rate while pushing for faster growth from its own direct-to-consumer business.
On said it’s experiencing a “very strong start” to 2024, both with its retail partners and its fast-growing e-commerce business. The sports apparel maker is expanding its network of company-owned stores, which now includes about a dozen locations — not counting China — with an opening in Berlin this week. Within China, On has 22 stores, up from 12 a year ago.
The company has stopped supplying products to about 200 retailers in Germany, Austria and Switzerland, as it seeks to increase the prestige of the brand in those markets. That’s pushed more customers to e-commerce channels, co-chief executive officer Martin Hoffmann said in an interview.
Meantime, there’s still lots of room for growth at major retailers including Foot Locker Inc., JD Sports Fashion Plc and Dick’s Sporting Goods Inc., he said.
On still has only about 6 percent to 10 percent of market share for running shoes in key locations, Hoffmann said. It’s looking to increase that, while also selling more apparel designed for runners, tennis players and people working out in gyms. That should enable the company to keep growing in line with its multi-year ambitions, he said, even if some of its larger rivals resort to layoffs and pare back growth plans.
“We are a growth brand and we are gaining market share, and this is probably a bit of a different story than, maybe, defending market share,” Hoffmann said.
The Zurich-based company expects negative effects of the strong Swiss franc on its business to be more pronounced in the first half of 2024 than later in the year, it said.
On’s gross profit margin reached 60.4 percent in the fourth quarter, topping expectations. Revenue in that period jumped 19 percent in the Americas, 58 percent in Asia-Pacific and 23 percent in Europe, Middle East and Africa, it said.
By Tim Loh
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