Aubrey Tianello

Aubrey Tianello questioned On's profitability trajectory, noting that the current EBITDA margin guidance for the year is a year ahead of the 2026 target. She asked how to think about the longer-term progression of EBITDA margin, especially given structural improvements in distribution expenses.

Answer

CEO and CFO Martin Hoffmann explained On's philosophy of prioritizing investment into long-term growth (brand building, capabilities, technology) while simultaneously driving year-over-year profitability. He noted that strong Q3 sales and gross profit led to higher profitability. He affirmed that this mindset will continue into 2026, leveraging stronger gross profit, solid sales outlook, and improved distribution to potentially accelerate investments and drive profitability beyond previous targets.

Aubrey Tianello inquired about On's long-term progression of EBITDA margin, given the company is already exceeding its 2026 targets and has achieved structural improvements in distribution expenses.

Answer

Martin Hoffmann (CEO and CFO) reiterated On's philosophy of investing in long-term growth (brand, capabilities, technology) while driving year-over-year profitability. He explained that Q3's high profitability was due to sales exceeding expectations and strong gross margin. He stated that On will approach 2026 with the same mindset, leveraging stronger gross profit, solid sales outlook, and improved distribution to accelerate investments and drive profitability beyond previous targets.

Aubrey Tianello from BNP Paribas Asset Management inquired about the impact of recent product launches like the Cloud 6 and CloudSurfer 2, and asked how On plans to maintain product momentum into 2026 when lapping these successful launches.

Answer

Co-Founder & Executive Co-Chairman David Allemann emphasized the strategy of building resilient product franchises, noting that nine distinct franchises now each contribute over 5% to top-line revenue. He highlighted the re-energized CloudSurfer and upcoming CloudBoom Max as current drivers. CEO & CFO Martin Hoffmann assured that the innovation pipeline remains strong for 2026, with planned launches for the next generation of the CloudMonster and CloudRunner franchises, which will compound on the growth from 2025's launches.

Aubrey Tianello from BNP Paribas requested an update on the performance of flagship stores outside of China and the company's progress toward its long-term goal of 10% revenue share from stores.

Answer

Co-CEO Martin Hoffmann reported that 18 of the 20 stores outside China have exceeded expectations on both revenue and profitability. He confirmed the company is on track to open 20-25 stores annually and achieve its 10% revenue share target, noting they might even exceed it given the current strength and same-store growth. He also highlighted the positive spillover effect from retail to e-commerce.

Aubrey Tianello asked about the new Cloud 6 shoe, inquiring about its expected contribution to 2025 growth and how its launch strategy and segmentation differ from the previous Cloud 5 model.

Answer

Executive Co-Chairman and Co-Founder David Allemann responded that the Cloud has become an iconic staple, especially with younger consumers, and is being positioned as a timeless classic. He noted that comfortable, easy slip-on shoes have a history of becoming enduring products. Allemann also mentioned that initial demand from retailers for the Cloud 6 is incredibly strong ahead of its official launch.

Aubrey Tianello from BNP Paribas asked for details on the product drivers behind the 50% D2C growth and the basis for confidence in accelerating revenue growth in Q4.

Answer

Co-CEO Marc Maurer explained that the D2C surge was driven by heightened brand awareness from the Olympics and celebrity partnerships, successful product launches like LightSpray, and enhanced e-commerce capabilities. CFO and Co-CEO Martin Hoffmann added that Q4 confidence stems from continued momentum, including a record October in APAC, which supports a full-price holiday strategy and preparations for key S/S '25 launches like the Cloud 6, all bolstered by an expanded 50-store retail footprint.

Aubrey Tianello asked for regional performance details for Kurt Geiger, following the reported mid-teens comp sales growth. She also inquired about the progress of revenue synergies, specifically plugging Kurt Geiger into Steve Madden's existing international markets, and when these benefits might materialize.

Answer

Chairman and CEO Ed Rosenfeld stated that Kurt Geiger is experiencing growth across all core regions, including its home market in the U.K., the U.S., and Europe. He confirmed that work on international revenue synergies is underway, with the Kurt Geiger CEO having completed a world tour to meet international teams and partners. Mr. Rosenfeld anticipates seeing some benefits in 2026, with more meaningful impacts expected towards the latter half of the year.

Aubrey Tianello asked for color on how Kurt Geiger performed by region in Q3, given its mid-teens comp sales growth. She also inquired about updates on the revenue synergy potential of plugging Kurt Geiger into Steve Madden's existing international markets and when those benefits might start to materialize.

Answer

Ed Rosenfeld, Chairman and CEO, reported that Kurt Geiger is growing in all core regions, with strong performance in the UK, continued growth in the US, and expansion in Europe. He stated that work on international expansion is underway, with benefits expected to start in 2026, becoming more meaningful towards the latter half of the year.

Aubrey Tianello of BNP Paribas asked about the consumer response to price increases, elasticity by product category, and whether the average 10% price increase is still accurate. She also inquired about learnings from the Kurt Geiger acquisition and its path to becoming a billion-dollar brand.

Answer

Chairman and CEO Edward Rosenfeld stated that the average price increase remains around 10% and consumer acceptance has been positive, particularly for new fashion items like dress shoes and boots, with less pricing power in sandals and fashion sneakers. Regarding Kurt Geiger, Rosenfeld expressed increased confidence in its growth potential, highlighting the significant runway in the U.S. through brand awareness initiatives and retail expansion, as well as major international opportunities in Europe and other untapped markets.

Aubrey Tianello asked about current consumer behavior, specifically if consumers are trying to make purchases before price increases take effect, and inquired about any progress on lobbying efforts in Washington for tariff relief.

Answer

CEO Ed Rosenfeld noted that consumer demand was "holding in there okay" in April, though it's hard to determine if it's driven by consumers trying to pre-buy. He acknowledged the recent dip in consumer confidence is a watchpoint. Regarding lobbying, he stated that while the industry trade group (FDRA) is active, there is no new information, and the company is operating under the assumption that current tariffs will remain in place.

Aubrey Tianello of BNP Paribas inquired about the long-term growth and margin profile expected for the newly acquired Kurt Geiger brand, as well as the company's balance sheet leverage strategy following the transaction.

Answer

Chairman and CEO Edward Rosenfeld projected that Kurt Geiger has the potential for double-digit annual growth for several years. He noted its EBITDA margin was over 11% last year, but the 2025 operating margin is forecast at about 7.5% due to tariffs and amortization, with a long-term goal of reaching double-digit operating margins. Post-acquisition, the company will have a modest net debt position of about 0.5x EBITDA and aims to return to a neutral net debt level before resuming share repurchases.

Aubrey Tianello of BNP Paribas asked for a breakdown of the updated 2024 revenue guidance between the wholesale and DTC channels. She also sought more color on the drivers of the handbag business's impressive growth and its sustainability.

Answer

Chairman and CEO Edward Rosenfeld clarified that the raised revenue guidance is driven by the wholesale channel, now expected to be up mid-teens (or 6-7% excluding Almost Famous), primarily due to continued strength in Steve Madden handbags. He stated the DTC outlook remains unchanged at high single-digit growth. Rosenfeld attributed the handbag success to a multiyear effort in product development, extending the life of popular items, and introducing new on-trend silhouettes and materials.

Aubrey Tianello asked about the timeframe required to relocate production from China if high tariffs persist and which specific business segments are most reliant on Chinese sourcing.

Answer

CEO Andrew Rees detailed that the remaining Crocs brand production could be shifted from China within six months, while the more significant HEYDUDE volume could be moved within twelve months. He clarified that the sourcing is not concentrated in any specific product line, such as kids' footwear, and expressed confidence in their ability to maintain supply.

Aubrey Tianello of BNP Paribas inquired about the results of Heydude's top-of-funnel marketing shift, future investment plans, and the status of the brand's leadership. She also asked about the capital allocation strategy, particularly share repurchases, for the second half of the year.

Answer

CEO Andrew Rees, currently leading the brand, noted positive results from the marketing shift, with aided awareness rising to 35%, and affirmed continued investment. CFO Susan Healy stated that while capital allocation is not pre-committed, the company views its stock as an excellent value and will continue to deploy free cash flow to share buybacks and debt repayment within its target leverage range.