In This Article:
On Holding AG ONON is benefiting from its multi-channel strategy with strong growth fueled by a significant boost in its direct-to-consumer (DTC) channel, increased global brand awareness and recent operational improvements. Strategic partnerships have also played a key role in strengthening the brand and expanding its market presence.
Shares of this Swiss-based sportswear company have gained 105.6% in the past year compared with the Zacks Retail - Apparel and Shoes industry’s 40.1% growth. The stock has also surpassed the broader Retail-Wholesale sector and the S&P's increase of 30.9% and 24.7%, respectively, during the same period. However, the competitive landscape and high marketing expenses are concerns.
Image Source: Zacks Investment Research
Let us delve into the factors that highlight why investors should retain this Zacks Rank #3 (Hold) stock.
Growth Drivers for ONON Stock
On's multi-channel strategy has been a key driver of its strong growth with the DTC channel seeing remarkable expansion. In line with its strategic ambitions, the DTC channel has notably outpaced the wholesale channel in 2024. In the first nine months of 2024, net sales increased 27.3% and 30.7% on a constant currency basis. The strong growth is fueled by a significant acceleration in On's DTC channel, which grew 39% year over year and 43% on a constant currency basis. This performance highlights the momentum of the brand, driven by growing global awareness and operational enhancements.
The company also achieved its highest gross profit margin since its IPO in September 2021, reaching 60.6% in the third quarter of 2024, up 70 basis points year over year. This increase is largely attributed to growth in the DTC channel and a continued focus on full-price sales.
The company’s focus on expanding its global presence and strategic partnerships has played a significant role in increasing market share and brand awareness. On has seen a surge in brand recognition, driven by a strong presence at the Paris Olympics, the success of its athletes, coverage of the company’s innovative LightSpray technology and long-term partnerships with influential personalities like Zendaya. This momentum is further supported by growth in the APAC region, strategic store openings in key cities and the continued success of On’s core running franchises, all reinforcing its long-term vision of becoming the most premium global sportswear brand.
In the third quarter of 2024, the company opened several new stores in key locations, including its third New York City store and first stores in Austin and Chicago. The New York City Flatiron and Chicago stores are now the largest in the region. In EMEA, the company also opened a new store in Milan, expanding its retail presence in Western and Southern Europe. In the APAC region, the company opened its first store in Australia, located in Melbourne, along with five new locations in China.