On Holding AG (NYSE: $ONON) is an exceptional sports garments company. Founded in 2010 with the mission of igniting the human spirit through movement, On has swiftly risen to become a force to be reckoned with.
Headquartered in Zurich, the company’s award-winning CloudTec innovation, purposeful design, and groundbreaking strides within the circular economy have attracted a rapidly growing global fan base, inspiring humans to explore, discover, and Dream On.
On May 14, 2024, On Holding AG announced its Q1 fiscal 2024 financial results ended March 31, 2024, beating expectations and with a strong full-year 2024 outlook.
Q124 Key Financial Highlights
On Holding AG started the financial year 2024 with a record-breaking performance, surpassing CHF 500 million in net sales for the first time in its record. The company’s total net sales attained an impressive CHF 508.2 million, marking a massive 20.9% year-over-year growth and an even more impressive 29.2% increase on a constant currency basis.
The cornerstone of ONON’s exceptional performance lies in the strong demand and momentum witnessed in its direct-to-consumer (DTC) channel. During the first quarter, DTC net sales skyrocketed by a remarkable 39.0% year-over-year and an astonishing 48.7% on a constant currency basis.
The DTC channel now accounts for 37.5% of ONON’s total net sales, a clear indication of the company’s ability to connect with and cater to its dedicated fan base.
Profitability and Efficiency at the Forefront
ONON’s significant increase in DTC net sales and efficient inventory management has led to an impressive expansion of its premium gross profit margin to 59.7%, a notable increase from 58.3% in the previous year. This achievement places the company closer to its mid-term goal of exceeding 60% gross profit margin.
In line with ONON’s objective of achieving substantial growth and continuous profitability expansion, the increased gross profit margin has resulted in a record-high quarterly net income of CHF 91.4 million and a significant adjusted EBITDA expansion, reaching CHF 77.4 million.
Outlook and Strategic Priorities
The continued high demand for the On brand has strengthened the company’s confidence in its stated goals for 2024 on a constant currency basis, which translates to reported net sales of at least CHF 2.29 billion in 2024 and beyond. On has reiterated its full-year expectation of at least 30% growth in net sales on a constant currency basis.
Additionally, On expects to maintain a gross profit margin of around 60% and an adjusted EBITDA margin in the range of 16.0 – 16.5% for the full year 2024. These projections highlight the company’s commitment to sustainable growth and profitability.
Global Expansion and Performance Credibility
ONON’s growing performance credibility, exemplified by successes such as Hellen Obiri’s second consecutive win at the marathon in Boston, continues to drive significant market share gains among runners worldwide.
Simultaneously, initial launches in newer verticals such as Tennis and Training are expanding ONON’s addressable market, aligning with its mission to become the most premium global sportswear brand.
Strategic Partnerships and Innovations
Looking ahead, On is poised to capitalize on groundbreaking innovations, big partnerships, and the opportunity to make a notable impact in Paris this summer. These strategic initiatives are expected to pave the way for the company’s next growth phase, further solidifying its position as a leading force in the global sportswear industry.
On Holding’s Stock Performance
On Holding’s impressive first-quarter results and outstanding financial performance have propelled its stock to new heights. On Tuesday, the company’s shares soared by an impressive 18%, closing at $36.30 and marking its largest single-day gain since March 21, 2023, when it rose by 26%.
This surge in stock price reflects the market’s confidence in ONON’s ability to deliver consistent growth and profitability. The stock’s performance also emphasizes investors’ recognition of the company’s strong brand momentum, innovative product offerings and strategic positioning in the premium sportswear market.
Should You Buy On Holding Stock in 2024?
According to the earnings report and analyst commentary, On Holding presents an attractive investment opportunity in 2024. The company’s record-breaking first-quarter performance, driven by strong demand and a strong direct-to-consumer channel, showcases its ability to capitalize on the growing athleisure market.
With ambitious growth targets, including a projected 30% increase in net sales on a constant currency basis and a commitment to profitability expansion, On Holding stock could potentially deliver substantial returns for investors. However, it is essential to consider the dynamic macroeconomic environment and consumer trends.
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