On Holding AG reached its highest quarterly net sales in the company’s history in the second quarter of 2022, driven by strong wholesale and direct to consumer growth in North America.
Net sales for the Zurich-based athletic company in Q2 increased 66.6% to CHF 291.7 million ($307.2 million, based on current exchange). Net income in the quarter increased to CHF 49.1 million ($51.7 million) from CHF 14.2 million ($14.95 million) the same period last year.
According to On, these results were driven by a wholesale growth of 70.1% and DTC growth of 60.8% in Q2, as well as continued momentum in North America, growing at 102.5%.
As for On’s footwear category, net sales from shoes increased by 68.2% year-over-year for the quarter to CHF 280.6 million ($295.03 million). During the company’s earnings call on Tuesday, Martin Hoffmann, co-CEO and CFO of On Holding, said that its expanded line of performance running shoes, including the Cloud Ultra, Cloud Vista and Cloud Nova, is driving share gains in the running market, both from existing as well as new customers.
Apparel net sales grew 31.3%, slightly under expectations. However, Hoffmann noted the room to “build On as a sportswear brand,” given the strength in apparel sales at owned retail stores and in shop-in-shops.
Hoffmann noted the success of On’s own retail stores. The company’s flagship stores in Tokyo and Zurich, while financially important, also serve as hubs for the local run community. And On’s New York City flagship had its strongest quarter in history. The company plans to open flagships in Los Angeles, Miami and London, ideally ending 2022 with 13 owned and operated stores in China and six owned retail stores in all other markets.
On the digital side, On will roll out its new website in October that will aim to provide consumers a “much more tailored, individualized brand experience.” It will also allow the company to show more product details, which Hoffmann believes is a key driver for further growth of On’s apparel share.
Despite ongoing macroeconomic uncertainties, including supply shortages due to factory closures, On is confident in its ability to execute its growth strategy in the second half of 2022.
The company plans to reduce its use of air freight in the second half of the year, using it selectively to ensure availability of its more recently launched products, which did not have an initial inventory position.
Taking into consideration the current macroeconomic challenges as well as the successful first half year of 2022, On is increasing its outlook for net sales and adjusted EBITDA. For the fiscal year ending Dec. 31, 2022, On now expects net sales to reach CHF 1.1 billion ($1.16 billion), representing a year-over-year growth of 52% compared to 2021.
The company noted that the higher anticipated net sales will allow additional, growth focused investments into the brand while increasing its adjusted EBITDA target for the full year to CHF 145 million ($152.45 million), confirming its goal of an adjusted EBITDA margin of 13.2% even at the significantly elevated top line outlook.
“This is our fourth earnings call post-IPO and on behalf of the whole On team, we are very proud to present another record quarter,” Caspar Coppetti, co-founder and executive co-chairman of On Holding, said on the company’s earnings call on Tuesday. “Consumer demand for the On brand remains very high.”