Yahoo Finance

The Goldman Sachs annual global retailing conference kicking off today, and Yahoo Finance senior reporter Brooke DiPalma is there on the ground now with a look into the sporting apparel scene. Brooke.

Hey Josh, that's right, I'm sitting here with On Running co-CEOs, Martin Hoffman and Mark Mauer. Great to have you both on. Thank you so much.

Thank you for having us.

You guys have such a great global perspective on the consumer right now. Martin, I want to start with you. How would you describe where the consumer's at right now in terms of their spending power?

So our consumer is in a very good position. Uh so we see very strong demand all around the globe. Um we had an amazing first half of the year with 30% growth. Uh one billion in sales, over one billion in sales. Uh very strong gross profit margin, increased EBITDA margin. And uh over the summer, we have done so many exciting things that make it actually quite easy for us to be here at the conference today and to talk about this, to talk about light sprays and Daya, the Olympics and just the demand that we are seeing. Um and and so we continue to win market share.

I do want to understand, Mark, you guys did launch in 2022 a pre-owned or pre-sale option on your website. How is that performing? And do you think that consumers are really looking for that option right now?

Yeah, I think we are very happy with with Onward, the program that we launched especially in the US, and it allows you as a consumer to return your product back to On and basically resell it. Um it also allows us to to have some product that is not in perfect condition and sell it, and it's not only way more sustainable, it also allows a new consumer to tap into On. And so it it works very, it works very, very well. I think Martin had an example. It's it's the uh, how much largest country by uh

We sell more in that Onwards program than we do in Italy for example.

So so you see it's actually working well and it's really been adopted by by the American consumer. And so we are we're looking forward to roll it out also in Europe and other countries.

I I would love to hit on your stake in China. You do have, I believe, 25 stores there. It seems like On Running is immune to the slowdown that we're seeing there. Would you think that's the case, Martin?

We are still at the very beginning of our journey in China, and uh the consumers love us. Um but as you said, we have 20, we have 25 stores. Uh most of our stores are too small, so we're actually looking for bigger spaces. Um but so we are we are growing from such a small uh base that the overall consumer landscape is less relevant. China really, it's an execution game for us. Um so product market fit is there. We have a great team, uh predominantly Chinese people, and and so uh it's all about executing, finding the right stores. Uh we'll be opening probably around 10, 12 stores a year, and then also online uh with Tmall. Um live shopping is a very interesting shopping channel in China, and we invest in that and it's it's a major part of our business. So um yeah, very positive to bring China to 10% of our business very close.

Wow. Um any year projection on when that might be the case, 10% of your business?

Well, it's part of the plan that we laid out for our 26 uh growth aspiration, 10% China, 10% apparel and 10% owned retail, and so that's all connected.

How are you thinking about potential tariffs ahead of the US election? Martin, perhaps, or Mark?

Yeah, I think we are in in the end, um we're still a relatively small player. I think we are trying to bring the right product to the right consumer, and we are observing closely what's happening on a global and and political scale. We're working together with with other brands, and what's important for us is that the US consumer can experience our technology in in an affordable way, and I think I hope we can continue, and the industry can continue to deliver that to the to the consumer.

I do want to hit on one of the latest technologies you have, light spray. It uses a robotic arm to spray a shoe in three minutes. How does this alleviate labor and also bring manufacturing closer to the consumer?

So there are three great things about light spray. It's a unique design, it's highly performing and it allows us to manufacture it in a very automated way, so something that our industry has failed basically to do for a long time. And uh even more important, it's super sustainable. Uh the CO2 footprint is already much lower than of a traditional product, so the upper has a CO2 footprint of 70% less, and it brings us closer to circularity. Um but it's it's really a unique design and it differentiates us, and we think it can revolutionize uh the the running industry and the footwear industry. Uh but we are at the very beginning, so we had one robot in Paris, we were able to spray shoes, we will bring it to more places, um but we really want to make this uh scale and bring it to the mass market.

When Yahoo Finance first started talking to you both about four to five years ago, you just had Roger Federer come onto the team. Now you have three players in the US Open. You have more than 60 playing in the Paris Olympics. What sort of uh return do you see from these big names being part of the On On Running team? And in addition to that, how do you possibly choose who to bring on?

Yeah, I think that's that's a very privileged position we're in, that we get actually to choose, and what's very nice to see, I think that many of the athletes appreciate having more brands that they can select from. So I think a few years back you basically had two brands. So we see a lot of inbound interest from athletes, and and and then it comes down to who are authentic individuals that we want to partner with, and how do these individuals really um verify the product and bring the product to their community. And this is, if we're looking into tennis, we're trying to create amazing product. We're having a player like Ben Shelton, and then we're tapping into the tennis community. And the same we're doing with, for example, Zendaya. Um you know, she's helping us to really enter her community. We're doing a big focus in training, bringing apparel to a younger consumer, and the most beautiful thing is when we can bring Zendaya and Roger together and tap into both communities and play air tennis at the same time.

Them playing air tennis was something I've never seen before. It was great. Uh great ad as well, great partnership as well. Martin Hoffman, Mark Mauer, On Running co-CEOs. Thank you so much for joining us.

Thank you for having us.