On Holdings: Maintaining Pace

"The Most Premium Brand In Sports"

Note: Thursday’s post will be an update on Netflix (NFLX)

From “Running On Clouds” (July 2024):

“We’re at a moment where large and well established brands, most notably Nike, have lost some standing relative to emerging competitors… Under Armour is a cautionary tale of what On Holdings (ONON) must avoid to live up to their long-term ambitions for the brand… [Revenue growth targets] cannot take precedence over sustained brand health. This is a difficult balancing act, one that we have seen industry peers struggle to navigate.”

In the two years since the initiation was published, On has kept making progress in its key category - running shoes - which accounts for >80% of its revenues. This is the primary driver of FY26e revenues of ~3.5 billion Swiss francs (CHF), or ~$4.3 billion at current exchange rates – nearly 5x larger than On’s revenue base five years earlier. Over that same period, annual Footwear revenues at Nike increased by ~5% cumulative, to ~$29.5 billion.

In the most recent quarter, On reported mid-20’s (%) constant currency revenue growth, led by strength in Asia-Pacific (APAC) and mid-50’s (%) CC revenue growth in the Apparel category - as co-CEO Caspar Coppetti put it on the quarterly call, “continuing our strategy of growing from toe to head”.

APAC, led by China, is becoming an increasingly important geography for On: as shown below, the region accounted for more than 20% of On’s Q1 FY26 revenue mix, compared to a mid-single digit percentage in FY22.