On Holding AG (NYSE: $ONON) is a premium sports apparel company based in Zurich, Switzerland. Founded by running enthusiasts, ONON designs and markets innovative running shoes and athletic apparel designed to enhance athletic performance and comfort while focusing on sustainability. It uses recycled materials and environmentally friendly production methods and has quickly grown into a global brand sold in over 60 countries.
On March 12, 2024, On Holding AG announced its Q4 and fiscal 2023 financial results. Despite facing its first quarterly loss, the company’s overall performance remained remarkably robust, showcasing its resilience and growth potential in the fiercely competitive sportswear market.
ONON Q4 Financial Performance Highlights
In the fourth quarter, On Holding AG reported revenues of $504.69 million, narrowly missing the Zacks Consensus Estimate by 2.06%. However, this figure represented a substantial 21.9% increase compared to the same period in the previous year. The company’s net sales surged by an impressive 31% on a constant currency basis, amounting to CHF 447.1 million.
The gross profit margin witnessed a positive trajectory, rising to 60.4% from 58.5% in the previous year. Despite this encouraging trend, the company reported a slight uptick in net loss, growing by 1.3% to CHF 26.8 million. Nonetheless, the adjusted EBITDA experienced a remarkable 16.3% increase, reaching CHF 71.9 million. Class A shares’ basic and diluted earnings per share (EPS) stood at CHF -0.08.
The company reported a shift to an adjusted net loss of CHF 16.3 million, down from a profit of CHF 7.5 million in the previous year. It resulted in a reduction of adjusted basic EPS Class A (CHF) from 0.02 to -0.05 and a corresponding decline in adjusted diluted EPS Class A (CHF) from 0.02 to -0.05.
On Holding FY2023 Highlights
The company’s fiscal year 2023 results were equally impressive, with net sales surging by 46.6% to CHF 1,792.1 million, or a staggering 55% on a constant currency basis. The direct-to-consumer (DTC) sales channel experienced a 50.9% increase, reaching CHF 671.8 million, while the wholesale sales channel also saw a substantial boost of 44.2% to CHF 1,120.3 million.
Gross profit surged by 55.8% to CHF 1,067.2 million, with an improved gross profit margin of 59.6%, up from 56.0% in the previous fiscal year. This impressive margin growth underscores the company’s ability to manage costs and maximize profitability effectively.
Net income witnessed a substantial increase of 37.9%, reaching CHF 79.6 million, while basic and diluted earnings per share (EPS) for Class A shares rose to 0.25 from 0.18, reflecting the company’s strong financial standing. Additionally, adjusted EBITDA experienced a remarkable 67.6% surge, reaching CHF 276.9 million, with the adjusted EBITDA margin improving to 15.5% from 13.5%.
Furthermore, adjusted net income rose to CHF 112.4 million from CHF 90.6 million, increasing adjusted basic and diluted EPS for Class A shares to 0.35 CHF from 0.29 and 0.28, respectively.
The company’s cash and cash equivalents position also strengthened, growing by 33.3% to CHF 494.6 million, providing a solid foundation for future investments and strategic initiatives.
On Holding Performance by Region and Category
On Holding AG’s performance was bolstered by robust growth across all geographical regions and product categories. The EMEA region witnessed a 29.2% increase in net sales, while the Americas and Asia-Pacific regions experienced even more substantial growth of 52.2% and 75.9%, respectively.
The company’s core product lines, including shoes, apparel, and accessories, all experienced significant sales increases. Shoes led the charge with 46.6% growth, followed by apparel at 45.5% and accessories at 60.7%. This diversified portfolio and strong demand across multiple segments demonstrate On Holding AG’s ability to cater to various consumer preferences and solidify its position as a comprehensive sportswear brand.
On Holding Issues Upbeat Outlook
Despite the fourth-quarter earnings miss, On Holding AG’s outlook for the upcoming year remains ambitious and optimistic. For the first quarter of 2024, the company expects direct-to-consumer net sales to grow by 26% to 495 million Swiss francs ($564.8 million), while the FactSet consensus anticipates a 5.8% earnings growth to 18 cents per share on 28.1% revenue growth to $601 million.
Looking ahead to the full year 2024, On Holding AG anticipates a net sales growth rate of 30% to 2.25 billion Swiss francs ($2.57 billion), driven by strong demand for the brand and its product pipeline. However, FactSet’s prediction is even more bullish, forecasting a 95% increase in full-year earnings to 78 cents per share on 29.2% sales growth to $2.637 billion.
ONON’s Financial Results Spark 13.65% Decline
Following the release of On Holding (ONON) financial results, the company’s shares experienced a 13.68% decline of from the previous close price of $33.62. They are currently trading at $29.02. The market capitalization is $9.27 billion, with an average volume (3 months) of $5.24 million.
Over the past 52 weeks, ONON has experienced a change of 60.32%, while the S&P500 52-week Change is 30.58% in the same period. The stock’s 52-week high and low are $37.08 and $19.90, respectively, while the 50-day moving average is $29.56. In terms of valuation, the trailing P/E ratio is 122.81, and the forward P/E ratio is 37.04.
Should You Invest in ONON?
According to Wall Street analysts, On Holding AG’s future looks promising. Nine of 12 analysts recommend buying the ONON stock, while 3 suggest holding the shares. The average price target is $37.45, with a high forecast of $51.00 and a low forecast of $26.00, representing a potential upside of 29.16% from the current price of $29.00.
In conclusion, On Holding AG’s robust financial performance, global expansion strategies, and ambitious growth outlook have positioned the company as a formidable player in the sportswear industry. While the fourth-quarter earnings miss may have caused a temporary stock price dip, the company’s overall trajectory and strong brand appeal suggest that the On Holding AG stock remains an attractive investment opportunity for those seeking exposure to the burgeoning athleisure market.
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