- Following a year of extensive wholesale growth, running brand On reported its fourth quarter net sales increased 91.9% year over year to 366.8 million Swiss francs (about $397 million), according to a company press release Tuesday. Direct-to-consumer sales for Q4 increased 76.4% and wholesale sales increased by 104.3%.
- Gross margin for the quarter remained flat at 58.5%, while net loss decreased by about 85%. Net sales in North America for the brand jumped 81.5% compared to the same period last year, per the release.
- Overall net sales for On in fiscal 2022 increased 68.7% to 1.2 billion Swiss francs, and gross margin decreased to 56% from 59.4%. On reported a net income of 57.7 million Swiss francs for the year compared to a net loss of 170.2 million Swiss francs in 2021.
On’s swing into the black rounds out its first full year as a public company despite handling some challenges stemming from the COVID-19 pandemic.
“The last three years of the pandemic roller coaster has been a huge challenge and has put our teams and operations to the test,” David Allemann, co-founder and executive co-chairman of On, said on a call with analysts Tuesday. “But it is safe to say we are very confident and excited to be heading into a year of increasingly normalized operations where we can focus even more on driving our brand and continuing to build a community of athletes, fans and innovators and an exceptional team that is excited to be part of the next phase.”
Allemann emphasized the brand was excited about continuing its momentum in the running category, as well as its move into tennis and its growing popularity with younger consumers. Earlier in March, the brand moved into the kids category with the launch of its Cloud Play and Cloud Sky sneakers.
On is continuing to invest in its direct-to-consumer presence, which includes the rollout of a new website and domain URL to help attract more online DTC customers, according to co-CEO and CFO Martin Hoffmann. The executive noted that the number of visitors to its website in fiscal 2022 increased from 102 million to 143 million year over year.
“We continue to build strong direct connections to our customers and to invest in our DTC capabilities to drive stronger growth of our DTC channel compared to wholesale,” Hoffmann said on the call. “Our e-commerce capabilities and direct customer connection will be long-term assets for On and our journey of profitable growth.”
The company has been selective in choosing its wholesale partners, a channel that has provided growth for the brand. On’s wholesale network includes Nordstrom, Foot Locker, REI and Dick’s Sporting Goods. But it isn’t turning away from its DTC potential.
“So wholesale growth was basically stronger because of the weakness last year and DTC on the opposite. So there's an opportunity for us to grow our DTC share this year,” Hoffmann said on the call.
As for its 2023 outlook, On expects a net sales growth rate of 61% in Q1 and net sales of at least 1.7 billion Swiss francs for the full year.
“We had high expectations going into On's 4Q22 result and On blew through ours and the Street estimates, as well as its guidance,” Telsey Advisory Group analysts led by Cristina Fernández said in emailed comments. “Positively, the company provided very strong 2023 sales and EBITDA guidance reflecting continued sales momentum and the normalization of freight expenses.”