On Holdings' stock jumps 6% as sales beat overshadows profit miss

By Ciara Linnane

Roger Federer-backed Swiss sneaker company backed its guidance for the full year

On Holdings Inc.'s stock reversed early losses to trade up 6% Tuesday, after the Swiss sneaker and sporting-apparel maker's second-quarter sales topped estimates and offset a small profit miss.

The company (ONON), backed by tennis legend Roger Federer, had net income of 30.8 million Swiss francs ($35.5 million), or 9 cents a share, for the quarter, up from 3.3 million francs, or 1 cent a share, in the year-earlier period.

Adjusted for one-time items, the company had EPS of 14 cents, just below the 15-cent FactSet consensus.

Sales rose to 567.7 million francs from 444.3 million francs a year ago, to beat the FactSet consensus of 561.6 million francs.

Chief Executive and co-Founder David Allemann said the company was excited about initiatives including a recent partnership with actress Zendaya and the opening of a Paris store.

On a call with analysts, executives talked up the company's latest innovation, its LightSpray sneaker technology that sprays thermoplastic onto a shoe form to create a lightweight shoe with no laces.

The technology was rolled out at the just-finished Paris Olympics, although shoes using the one-stop, robotic-arm manufacturing technology were worn by Boston marathon winner, Kenyan athlete Hellen Obiri earlier this year.

On is expecting the technology to eventually be used for mass-market products and not just for elite athletes.

The company backed its guidance for the full year for at least 30% sales growth on a constant currency basis.

"Considering the recent strength of the Swiss Franc and assuming spot rates persist at current levels for the remainder of the year, this implies reported net sales of at least CHF 2.26 billion in 2024 and the continuation of On's strong momentum in the second half of the year," the company said in a statement.

However, that was down from earlier guidance for 2.29 billion francs in sales.

The company will also work to advance a warehouse-automation project in the U.S., with a view towards scaling On's distribution capabilities in North America over the medium term, said the statement.

The company is building the warehouse in Atlanta, and is currently working out of a space that is not optimized, according to co-CEO Marc Maurer. The subsequent capacity constraints are leading to unreliable late deliveries and inventory shortages, he said.

"We are able to shift some of that capacity to our very well performing warehouse on the West Coast, but only to the extent that we have inventory there," he said, according to a FactSet transcript. "And so the impact on our business that we are seeing is both in direct-to-consumer and wholesale and it's a bit hard to quantify."

The company expects the warehouse to be working in the first half of 2025, he said.

The stock has gained 47% in the year to date, while the S&P 500 SPX has gained 12%.

-Ciara Linnane

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08-13-24 1247ET

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