Last week, On hold (ONO 3.26%)the Swiss maker of On Cloud and other high-end athletic shoes and apparel, has released a better-than-expected version third quarter 2023 report.
On’s revenue and profit beat Wall Street estimates. Revenue jumped 47% year over year to 480.5 million Swiss francs (CHF), or about $525 million, beating the $508 million expected by analysts. Adjusted earnings per share (EPS) soared 186% to CHF0.20 (around $0.22), beating analysts’ consensus estimate of $0.17.
Additionally, management raised its full-year 2023 revenue forecast to CHF 1.79 billion, from CHF 1.76 billion. The new outlook implies annual growth of more than 46%.
Results publications only tell part of the story. Here are three key takeaways from On’s third-quarter earnings call that investors should know.
1. Develop brand awareness
Excerpt from remarks by Co-Chairman and Co-CEO Caspar Coppetti:
We are making strategic changes to our marketing spend to further strengthen On’s global awareness. The song “Dream On Hellen Obiri” could also be seen on billboards across New York City in recent weeks, and Dream On did so with its dominant marathon victory, making Hellen the first woman to win Boston and New York in the marathon. same season in 34 years. I can’t stress enough how important successes like this are to our brand and our ambition to become the #1 running brand.
We were founded in 2010, so it hasn’t been around that long. As such, it does not enjoy as high brand awareness as long-standing industry leaders. global sports shoes space, Nike And Adidas. But the company has done a great job increasing its brand awareness, which was further boosted by its initial public offering (IPO) in fall 2021. And it’s growing much faster than Nike and Adidas.
On-sponsored athletes have recently achieved high-profile victories, which management says increases brand awareness and lends credibility to the company. Coppetti said that when American professional tennis player Ben Shelton, an On-sponsored athlete, reached the semifinals of the US Open in September and played against Novak Djokovic, “a lot of people were introduced for the first time both on mainstream television and on social media at the On. brand.”
2. Aim to become the “most premium sportswear brand”
According to Coppetti’s remarks:
We aim to be the most premium global sportswear brand, rooted in innovation, design and sustainability. …Our design collaboration with JW Anderson and Loewe demonstrates the premium positioning of the On brand, and in particular the On clothing range, which will once again be present in the collaboration with Loewe in the coming months.
Coppetti had noted at another point during the call that “performance is at the very heart of the On brand, and our premium products allow us to command premium prices.” In addition to linking its marketing campaigns to top-performing athletes, On uses other methods to achieve and maintain its premium positioning. These include design collaborations with luxury retailers, such as fashion house Loewe, owned by LVMHwhose stable of high-end brands also includes Tiffany and Bulgari.
Additionally, the company operates a full-price policy, meaning it rarely offers discounts on its products.
3. Rapid expansion plans in China
According to remarks from co-CEO and CFO Martin Hoffmann:
Finally, we will continue to expand our presence in China at a rapid pace, accelerating market share gains in one of On’s fastest growing markets. …APAC (Asia Pacific region) achieved net sales of CHF 41.6 million in the third quarter, representing a growth rate of 71.5% (year-on-year). the other). …At constant exchange rates, the region’s growth would have been above 95%. Overall, growth was broadly distributed across all sub-regions and channels, with calls for continued strength from our own retail stores in China, particularly during the Golden Week holiday period.
First of all, a clarification on the conditions: China has a few national holidays lasting a few weeks called Golden Weeks. Hoffmann is referring to the Golden Week which included October 1, the day in 1949 of the founding of the People’s Republic of China. These weeks are usually peak times for tourism and shopping.
Hoffmann said the company was optimistic about its fourth-quarter performance in China, given its strong sales momentum in the first month and a half of the quarter. Despite On’s no-discount policy, its sales volume jumped more than 70% year-on-year in China during the Double 11 holiday period. (This nickname given to the Singles’ Day, which celebrates singles, derives from its date of November 11.) This growth is particularly impressive given that the overall market has remained stable during this period, according to Hoffman, meaning the company has gained market share. .
Beth McKenna has no position in any of the stocks mentioned. The Motley Fool posts and recommends Nike. The Motley Fool recommends the following options: Long January 2025 $47.50 calls on Nike. The Mad Motley has a disclosure policy.
