ONON Q4 2024: Guides 27% sales growth for FY25 after Cloud 6 success
- Strong Product Innovation: The re-launch of the Cloud 6, which is returning as a significant growth driver with early positive feedback and iconic status, underscores On’s ability to rejuvenate its core product lineup, supporting a bull case for continued revenue growth.
- Robust Regional and Channel Growth: The Q&A highlighted expectations of Q1 growth in the low to mid-30s and continued strength in D2C and wholesale channels across key markets like Asia Pacific, Europe, and the US. This diversified, high-growth outlook supports a bullish view on On’s expansive market reach and revenue performance.
- Expanding Apparel and Retail Presence: Breaking CHF 100 million in apparel sales for the first time and targeting an increase to 10% of revenue, coupled with strategic retail expansion initiatives, indicates a broadening revenue mix and margin improvement, further bolstering the bull case for On.
- Operational and supply chain disruptions: The team noted challenges in H1, including issues from the Atlanta warehouse automation ramp-up and marketplace allocation shifts, which could lead to higher incremental costs and temporary inefficiencies.
- Weakening U.S. consumer environment: There were concerns about a softer U.S. market post-holiday season, with uncertainty around consumer demand due to macroeconomic headwinds and potentially adverse weather effects, possibly impacting sales and margins.
- Macro uncertainty impacting guidance: Executives emphasized prudence in their full-year guidance, pointing to macroeconomic uncertainties and headwinds that may slow growth and put pressure on profitability if adverse conditions persist.
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Guidance Outlook
Q: What are full-year regional sales expectations?
A: Management anticipates at least 27% constant currency growth for full year 2025 with sales reaching around CHF 2.94 billion, driven by strong performance in key markets such as the U.S. and Asia Pacific. -
Margin & Efficiency
Q: How will efficiencies drive margin expansion?
A: They plan to improve operating leverage with warehouse automation and tighter G&A controls, targeting adjusted EBITDA margins of 17–17.5% to support long-term growth. -
Operational Headwinds
Q: What were the impacts of supply disruptions?
A: Management noted challenges from European store closures and early warehouse transition costs, while expecting modest wholesale door growth from 10,700 to about 11,300 doors to help offset these issues. -
Apparel Growth
Q: What is apparel strategy for revenue growth?
A: Apparel sales have exceeded CHF 100 million, with plans to boost this category to around 10% of total revenue by streamlining collections and enhancing own retail and e-commerce efforts. -
Consumer Insights
Q: How is young consumer engagement improving?
A: Through focused product launches and marketing partnerships, On has seen a significant uptick in appeal among buyers under 35, reinforcing long-term brand loyalty. -
Competitive Landscape
Q: How does competition affect future strategy?
A: Management emphasized On’s differentiated, premium positioning and performance-driven innovations, which secure full-price sell-through and a strong margin profile against peers. -
Cloud 6 Strategy
Q: What distinguishes Cloud 6 from Cloud 5?
A: Cloud 6 is positioned as a renewed, iconic product aimed at younger consumers with refined segmentation, marking a notable evolution from the Cloud 5 launch.
Research analysts covering On Holding.