Investment Rating - The report assigns a rating of "Outperform" for On Holdings AG, indicating an expected total return over the next 12-18 months that exceeds the relevant market benchmark [19]. Core Insights - For FY2025, On Holdings AG achieved record high revenue and gross margin, with net sales surpassing CHF 3 billion for the first time, reflecting a 30% year-on-year increase in reported currency and a 35.6% increase in fixed currency [2][8]. - The company raised its full-year guidance for 2026, projecting at least a 23% increase in net sales at fixed currency, with a compound annual growth rate of at least 30.5% from 2023 to 2026 [5][11]. - The DTC (Direct-to-Consumer) channel's share rose to 41.8%, up 110 basis points year-on-year, indicating strong growth across various regions, particularly in APAC [2][8]. Summary by Sections Financial Performance - In FY2025, net profit was CHF 203 million, down 15.9% year-on-year, while gross margin reached 62.8% and adjusted EBITDA margin hit a record high of 18.8% [2][8]. - For Q4 FY2025, net sales reached CHF 743.8 million, a 22.6% increase year-on-year, with a gross margin of 63.9%, up 180 basis points from the previous year [3][9]. Regional Performance - The Americas, EMEA (Europe, Middle East, and Africa), and APAC regions all showed robust expansion, with APAC being the standout performer, achieving a 70.8% increase in net sales in reported currency [4][10]. - By region, net sales in the Americas totaled CHF 434.3 million, up 12.8% in reported currency, while EMEA reached CHF 183 million, up 24.2% [10]. Product Categories - Multi-category expansion significantly contributed to performance growth, with apparel sales increasing by 75.5% and accessories by 135.1% on a fixed currency basis [2][8]. - Footwear net sales reached CHF 687.3 million, reflecting a 20.8% increase in reported currency, driven by high-performance running shoes and popular product lines [10].

Investment Rating - The report assigns a rating of "Outperform" for On Holdings AG, indicating an expected total return over the next 12-18 months that exceeds the return of its relevant broad market benchmark [19]. Core Insights - For FY2025, On Holdings AG achieved record high net sales exceeding CHF 3 billion, with a reported currency increase of 30% year-on-year and a fixed currency increase of 35.6%. The gross margin reached 62.8%, and adjusted EBITDA margin hit a historical high of 18.8%. However, net profit declined by 15.9% year-on-year to CHF 203 million [2][8]. - The company raised its full-year guidance for 2026, expecting net sales to increase by at least 23% at fixed currency, with a compound annual growth rate of at least 30.5% from 2023 to 2026. The gross margin is projected to rise to at least 63% compared to 2025, driven by brand appeal and operational efficiency [5][11]. Summary by Sections Financial Performance - In FY2025, net sales reached CHF 3.0 billion, with a gross margin of 62.8% and adjusted EBITDA margin of 18.8%. Net profit was CHF 203 million, down 15.9% year-on-year. Cash reserves exceeded CHF 1 billion, and inventory stood at CHF 419.8 million [2][8]. - For Q4 FY2025, net sales were CHF 743.8 million, a 22.6% increase year-on-year, with a gross margin of 63.9%, up 180 basis points from the previous year [3][9]. Regional Performance - The Americas, EMEA, and APAC regions all showed robust expansion. DTC channel sales grew approximately 20%, with APAC being the core growth engine, achieving a 70.8% increase in net sales [4][10]. - By region, net sales in the Americas totaled CHF 434.3 million, up 12.8% at reported currency. EMEA net sales reached CHF 183 million, up 24.2%, while APAC net sales hit CHF 126.5 million, up 70.8% [10]. Future Outlook - The company anticipates that DTC business will outpace wholesale business, with apparel sales expected to grow significantly faster than the overall level. The reported net sales target for 2026 is at least CHF 3.44 billion [5][11]. - The company expects a gross margin for FY2026 to hit a new record high, with an adjusted EBITDA margin forecasted between 18.5% to 19% [11].

Core Viewpoint - The article discusses the growth and strategic positioning of On, a high-end sports brand, emphasizing its unique market approach and innovative technologies that differentiate it from traditional competitors [6][8][12]. Group 1: Brand Positioning and Strategy - On has positioned itself as a high-end brand, maintaining pricing power and avoiding discounting strategies, which is reflected in its gross margin consistently above 60% [8][9]. - The brand does not offer "downgraded" versions of its shoes, focusing instead on maintaining a premium product line that appeals to both elite athletes and everyday consumers [9][10]. - On's apparel segment has seen significant growth, with a 100.2% increase in sales, indicating successful market penetration and the attraction of new consumer demographics [12][13]. Group 2: Market Performance and Growth - Over the past three quarters, On's global revenue has increased by over 30%, with the Asia-Pacific region experiencing growth exceeding 100% [6][8]. - The company aims for a revenue target of 3.5 billion Swiss francs by 2026, with China identified as a crucial market for achieving this goal [8][12]. - On's strategy includes a controlled expansion of retail locations, with plans to open only 20 to 25 new stores globally in the coming year, reflecting a cautious yet confident growth approach [8][12]. Group 3: Innovation and Technology - On's innovative technologies, such as the LightSpray™ manufacturing process, allow for efficient production and high-quality products, enhancing its competitive edge [10][18]. - The brand's commitment to athlete feedback and product innovation is central to its growth strategy, ensuring that products meet the needs of both elite and casual runners [17][19]. - The introduction of new products, like the Cloudmonster Hyper, showcases On's focus on expanding its technology application across different shoe categories [10][12].

Financial Data and Key Metrics Changes - The company achieved record net sales of CHF 794.4 million, growing 24.9% year over year on a reported basis and 34.5% at constant currency [17][30] - Gross profit margin reached 65.7%, an increase of 510 basis points year over year, while adjusted EBITDA margin was 22.6%, up 370 basis points year over year [25][26] - Adjusted EBITDA grew nearly 50% year over year, amounting to CHF 179.9 million [17][25] Business Line Data and Key Metrics Changes - Performance footwear net sales reached CHF 731.3 million, increasing by 21.1% year over year on a reported basis and 30.4% at constant currency [22] - Apparel category net sales reached CHF 50.1 million, an increase of 86.9% year over year on a reported basis and 100.2% at constant currency, with over 1 million apparel units sold in a single quarter for the first time [23][30] - Direct-to-consumer (D2C) channel net sales reached CHF 314.7 million, an increase of 27.6% year over year on a reported basis and 37.5% at constant currency [17] Market Data and Key Metrics Changes - Asia Pacific region delivered net sales of CHF 144.9 million, up 94.2% year over year on a reported basis and 109.2% at constant currency, now approaching 20% of total sales [21] - Americas net sales reached CHF 436.2 million, growing 10.3% year over year on a reported basis and 21% at constant currency [19] - Europe, Middle East, and Africa (EMEA) net sales reached CHF 213.3 million, up 28.6% year over year on a reported basis and 33% at constant currency [20] Company Strategy and Development Direction - The company aims to be the most premium global sportswear brand, focusing on brand awareness and premium positioning [12][52] - The strategy includes expanding the apparel business as a standalone growth pillar, with a focus on D2C channels and retail presence [15][42] - The company plans to double net sales by 2026, implying a 26% net sales constant currency CAGR over three years [32][33] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the brand's momentum and the ability to maintain premium pricing despite external challenges [30][66] - The company anticipates strong growth across all regions, with a focus on maintaining a full-price sales strategy during the holiday season [77][78] - The outlook for 2026 includes a constant currency growth expectation of at least 23%, supported by a robust product pipeline and strategic investments [31][56] Other Important Information - The company opened new flagship stores in key markets, including Tokyo and Zurich, which contributed to record sales [13][18] - The company is leveraging collaborations with cultural icons to enhance brand appeal among younger consumers [10][87] - The cash balance at the end of Q3 stood at CHF 961.8 million, reflecting strong operational cash flow management [28] Q&A Session Summary Question: Can you discuss the traction in apparel and its regional performance? - Management highlighted strong traction in apparel, accounting for about 8% of total business, with significant growth in running, training, and tennis categories [38][39] Question: How do you balance top-line growth with margin protection? - Management emphasized the importance of discipline in inventory management and maintaining a premium business model to protect margins while driving growth [45][46] Question: Can you elaborate on the 2026 guidance and growth expectations? - Management confirmed that the 2026 guidance is based on constant currency and reflects strong growth across all regions, with a focus on brand awareness and premium positioning [51][56] Question: What is the outlook for gross margin in Q4? - Management indicated that there is potential for margin upside in Q4, supported by operational improvements and favorable market conditions [60][61] Question: How is the company connecting with younger consumers? - Management noted successful collaborations with cultural figures and the launch of a kids line, which has resonated well with younger demographics [87]