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On Sees Shares Rise as Company Sees Spikes in Demand in First Quarter

Shares for On Holding AG were up 3% on Tuesday after the performance athletic brand reported growth in the first quarter of 2022 as demand continues to be strong globally.

The Swiss company reported a net sales increase of 67.9% to CHF 235.7 million (or about $237.51 million, based on current exchange rate) in the first quarter of 2022. Net income in the quarter was CHF 14.3 million (about $14.41 million).

On the company’s first-quarter earnings conference call on Tuesday, co-founder and executive co-chairman Caspar Coppetti said that On exceeded “our own high expectations,” even with the anticipated constraint due to the ongoing supply chain shortages affecting the industry.

According to Coppetti, On is “winning market share at an accelerated pace,” as the combination of strong consumer demand for the brand and better-than-anticipated supply led to “significant gains” in key markets. This can be seen in the reported 87% growth in U.S. business in Q1, versus the same time last year. Meanwhile, sales in the U.K. and Germany grew 54% and 49%, respectively, while China and Japan were up a respective 178% and 148% in the quarter.

Coppetti credits this success to On’s Lightning program, which he said the company has not previously discussed publicly. He explained that the program consists of around 20 engineers, sport scientists, material specialists and coaches, who “focus on how to make the fastest products possible” and work “extremely closely with some of the most talented runners to unleash their full potential.”

New running styles are already seeing significant traction with consumers. The Cloudmonster, which debuted in March, is On’s most cushioned model to date, said Coppetti, and was its second-largest launch in history, only behind the Roger Center Court.

Coppetti also announced on the call that On will introduce a new cushioning technology in spring ’23 called Cloudtec Phase. “This evolution of On’s existing technology was generated completely by computers using advanced Finite Element Analysis simulation, a computerized method for predicting how a product reacts to real use. We have been showing this technology to On’s retail partners over the last weeks as part of spring ‘23 sell-in, and the feedback is very encouraging.”

As for supply chain issues and demand, Martin Hoffmann, On’s co-CEO and CFO, added on Tuesday’s call that “even with these great numbers, our supply shortage had still limited our ability to fulfill demand.” But this hasn’t stopped the company from pushing through the delays. In March, On shipped more than 1 million pairs in a single month for the first time, Hoffman said.

Pressed further by investors on the call about how On is keeping up with demand, Hoffman added that On has invested a lot in building capacity with its key partners. The brand also has a new factory in Vietnam that has the capability to produce 30 million pairs a year that will go live next year, Hoffman added.

As for pricing, Coppetti said that On will adjust prices across all product ranges and geographies to “reaffirm On’s premium positioning.” Coppetti added that these increases will allow the company to “not only absorb some of the expected higher costs in the face of globally rising inflation, but to also reflect inflation in our own 2023 salary rounds as an important retention driver within our teams.”

Looking ahead, On now expects net sales to exceed CHF 1.04 billion (approximately $1.05 billion), representing year-over-year growth of at least 44% compared with 2021.

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