On Holding peeled back the curtain on its internal operations on Friday — and its growth trajectory is impressive.
In reporting its first full-year results as a public company, the Swiss running shoe brand said sales in the fourth quarter jumped 53.7 percent to 191 million Swiss francs, or $204.8 million, a 54 percent increase over the fourth quarter of the prior year, and were up 70.4 percent in the full year to 724.6 million Swiss francs, or $776.9 million, with the direct-to-consumer channel up 76.7 percent and wholesale increasing 39.3 percent.
The momentum is expected to continue into this year. On is now projecting net sales will exceed 990 million Swiss francs in 2022, an increase of at least 37 percent compared to 2021, a figure above analyst expectations of 970.2 million Swiss francs.
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Although the company’s losses continued to mount, hitting 187 million Swiss francs, or $199.4 million, up from 2.6 million Swiss francs, in 2021, Wall Street shrugged that off as the cost of such swift expansion, with the stock trading up over 9 percent during the day.
Looking ahead to this year, David Allemann, cofounder and executive co-chairman, said On will continue to roll out stores around the world, add a number of footwear models and increase its reach in apparel.
What it doesn’t expect to do, however, is launch an aggressive collaboration program — that in spite of the successful introduction of a co-branded collection of footwear and apparel with Loewe. The collection is already nearly sold out after its launch on March 9 at Loewe stores and online, with particular strength in Asia, Allemann said.
“We’ve done almost no partnerships in the past,” he said. “We always follow our own path.” But when Loewe’s creative director, Jonathan Anderson, approached him two years ago and said he was a big fan of On’s shoes and proposed working together, Allemann decided to make an exception.
He said the two companies collaborated to co-develop the product and the result — reimagined versions of two shoes as well as 13 complementary ready-to-wear pieces — felt “organic and original.” It also plays into Allemann’s belief that “performance is taking over fashion. When you look at the archetypes that were in fashion 20 years and the archetypes today, they’re very different, with sneakers for all brands, hoodies for all brands, track pants and so on. We feel because we’re coming from run culture and the outdoors, we have deep understanding of the whole function. We can bring that to a wider application.”
He said that while it’s likely On will continue to work with Loewe in the future, “it’s not that On is jumping into all sorts of collabs, but it’s important that we do things where we learn something and this felt very natural.”
But while luxury collaborations may not be a priority, Allemann did point to six new footwear models that will be introduced this year. They include the Cloudmonster, On’s version of a highly cushioned shoe that will be introduced on March 31, and the Cloudvista, a shoe targeted to gravel roads and tracks. He also mentioned the planned relaunch of the Cloud, which features 44 percent recycled content.
Apparel is currently growing nearly twice as fast as shoes, he said, and the company will capitalize on this by adding new pieces to the assortment this year. Among the extensions will be pieces designed for the outdoors and movement space, or “everything that empowers you to go out and experience nature and move,” he said.
Overall, apparel is “resonating well across the globe,” he added, and in the company’s stores in Asia, the category accounts for 25 percent of sales. “On is becoming a global premium sports brand beyond a pure running brand,” he said.
Turning to retail, Allemann said the company currently operates a flagship in New York and eight stores in China, all of which were profitable within nine months of opening. Shortly it will open its first flagship in Toyko, as well as a large space in London that will three times the size of On’s 1,630-square-foot New York City store that will open this summer. They will join a store in the brand’s hometown of Zurich as well as units in Los Angeles and Miami, he said.
Overall, 2021 was the strongest year in On’s history, Allemann said on the investor earnings call Friday morning. And despite the larger losses, he pointed to a “significant jump” in gross margin and adjusted EBIDTA.
The company did acknowledge the “uncertainties of the global pandemic and supply chain restrictions in the last two years,” and a temporary production shutdown in Vietnam, but despite these challenges, On has managed to fulfill higher consumer demand with “better-than-expected product availability,” he said.
In North America, sales have doubled since the initial public offering, with 92 percent growth in running specialty stores in the U.S. along with an 85 percent jump in its own e-commerce sales. The company was also strong in the U.K., where sales rose 75 percent last year, and in Asia Pacific, where sales increased 35 percent.
Overall, e-commerce accounted for 36 percent of overall sales for the company in 2021, he said. But relationships with its wholesale partners continue to be paramount. He pointed to REI, which prelaunched the Cloudultra trail running shoe, as “a huge win,” and pointed to Nordstrom, which will add another 20 in-store shops-in-shop to its stores. In Europe and the U.S., the brand will expand in both Foot Locker and JD as it seeks to attract a younger customer and will move into Dick’s Sporting Goods with “pilots” of On-branded spaces within some key doors this summer, including the retailer’s new Public Lands division, which is more targeted to the outdoor consumer.
Allemann also pointed to the company’s new training facility, On Athletics Club, based in Boulder, Colo., as a win for the brand, and said that two-time, 5,000-meter world champion runner Hellen Obiri has signed on as an ambassador. He said the company will establish OACs in Europe and Oceania this year as well.
On was founded 12 years ago by former professional triathlete Olivier Bernhard, who approached his friends Allemann and Caspar Coppetti about reengineering a running shoe to create a different sort of running sensation. The concept he was seeking was a cushioned landing and explosive takeoff, or what they describe as “running on clouds.”