On AG(ONON)2024-05-14 17:15Financial Data and Key Metrics - Net sales for Q1 2024 reached CHF 508 million, marking the first time the company surpassed the CHF 500 million mark in a single quarter [4] - Currency-neutral growth was 48.7%, significantly higher than reported growth [11] - Adjusted EBITDA margin for Q1 was 15.2%, up from 14.5% in Q1 2023 [14] - Gross profit margin improved to 59.7% in Q1 2024, up from 58.3% in Q1 2023 [38] - Operating cash flow was CHF 81 million, increasing the cash position from CHF 494.6 million at the end of 2023 to CHF 584.6 million at the end of Q1 2024 [15] Business Line Performance - Direct-to-consumer (DTC) net sales grew by 39% year-over-year, contributing CHF 190.5 million to the top line [52] - Wholesale revenues grew by 12.2% year-over-year, reaching CHF 317.7 million in Q1 [31] - Apparel net sales grew by 16.7% year-over-year, resulting in CHF 19.7 million for Q1 [57] - Footwear net sales grew by 21% to CHF 484.7 million in Q1, driven by strong performance in running shoes [56] Regional Performance - EMEA region grew by 6.1% to CHF 126.2 million in Q1, with constant currency growth of 10.4% [32] - Americas region grew by 22% year-over-year to CHF 329.6 million, with strong demand in the US and momentum in Latin America [54] - Asia Pacific region grew by 68.6% year-over-year, reaching CHF 52.4 million in Q1, with Japan showing exceptional performance [35][36] Strategic Direction and Industry Competition - The company is focusing on expanding its digital ecosystem, including the launch of a global commercial app [11] - On is gaining market share in key cities like Tokyo, Berlin, and Los Angeles, with market shares exceeding 10% in some regions [5] - The company is investing in apparel, with a new training collection set to launch in August and a focus on consistent sizing to increase the addressable market [6][57] - On is leveraging partnerships with athletes and celebrities, such as FKA Twigs, to build brand credibility and awareness [17][75] Management Commentary on Operating Environment and Future Outlook - Management expressed optimism about the strong start to 2024, with net sales exceeding expectations [10] - The company reiterated its full-year constant currency net sales growth expectation of at least 30%, with reported net sales expected to reach at least CHF 2.29 billion [41] - The upcoming Olympics in Paris are seen as a significant opportunity to elevate the brand and build credibility in the running world [66] Other Important Information - The company opened new stores in Berlin and Portland, bringing the total number of stores globally to over 50, with 34 owned and operated by On [28] - On is planning to open additional stores in Paris, Milan, and Austin in the coming months [28] - The company is actively managing inventory, with inventory levels remaining stable at CHF 365.3 million at the end of Q1 [15] Q&A Session Summary Question: Asia Growth and Momentum - The company is proud to have surpassed 10% market share in Japan and is on track to achieve similar results in China [20] - Japan is performing ahead of expectations, benefiting from tourism and currency effects, while Australia is also showing strong growth [21] Question: Wholesale Growth and Distribution Channels - Wholesale growth in Q1 was 12.2%, with a focus on key accounts like Dick's Sporting Goods, which is resonating well with younger consumers [31][82] - The company is expanding its presence in key accounts, with plans to increase the number of doors from 220 to 285 by the end of the year [93] Question: Gross Margin Outlook - The company expects to maintain a gross profit margin of around 60% for the full year, with a long-term goal of 60% plus [117] - The strong margin is driven by a high share of full-price sales and the premium positioning of the brand [117] Question: Apparel Performance and Sizing Adjustments - Apparel demand is strong, particularly in DTC channels, with growth rates expected to accelerate significantly for the remainder of the year [58] - The company has adjusted sizing to be more consistent with market standards, which has been well-received and is driving lower return rates [104][121] Question: Inventory and Supply Chain - The company is confident in its supply chain's ability to meet demand for the back half of the year, with no significant disruptions expected [163] - On is diversifying its supply chain as it expands into new categories like apparel [162] Question: Olympics and Brand Elevation - The Olympics are a key focus for the company, with plans to open a second store in Paris and leverage the event to elevate the brand [66][110] - The company is planning significant marketing activations around the Olympics to drive brand awareness [110]