On Holding AG reported net sales increased by 53.7 percent in the fourth quarter ended December 31 and by 70.4 percent in fiscal year 2021. The Swiss running brand predicted sales would expand at least 37 percent compared in 2022

Martin Hoffmann, co-CEO and CFO, On, said: “A year is like a marathon race. The circumstances of the fourth quarter made the last miles even more challenging. But thanks to our whole team we were able to exceed our expectations for Q4 and to successfully finish the year with many new record numbers. Our financial results in the fourth quarter are further validation of the very strong, global demand for the On brand and our commitment to managing the company with a long-term, growth- and profitability-driven mindset. We achieved over 70 percent growth in Net Sales in 2021 while at the same time increasing our Gross Profit and adjusted EBITDA margin. We continued to see strong demand across all regions and product categories with North America and China showing exceptional growth rates. With 2022 now underway, we are even more confident and excited about the global growth opportunities and many new products that will allow our customers to move. Importantly, our production capacity in Vietnam has been back at 100 percent of the pre-lockdown commitments since December 2021. Overall, we are fast-tracking the capacity ramp-up plan this year, and leveraging our close relationship with all factory partners. This includes the expansion into Indonesia, where we just started production in a new facility to diversify our production network.”

David Allemann, co-founder and executive co-chairman, On, said: “Global consumer demand continues to drive On’s strong growth. On is carried by a rapidly expanding movement of millions who run, explore, travel near and far, lift their spirit and dream on. This allows us to make fast progress towards our long-term mission: to ignite the human spirit through movement. World-class Athletes continue to join On. We are honored to announce that two-time 5,000 meter World Champion Hellen Obiri is joining the On Athletics Club, our elite athlete team that is based and trained in Boulder, Colorado. At the same time, a record number of talent joined our team at On, as it surpassed the 1,000 team member milestone. Across the globe, people from over 65 nationalities and diverse backgrounds are the catalysts for relentless innovation and the unique culture at On.”

Key highlights for the fourth quarter of 2021 compared to the fourth quarter of 2020 include:

  • net sales increased 53.7 percent to CHF 191.1 million;
  • net sales through the direct-to-consumer (DTC) sales channel increased 76.7 percent to CHF 84.7 million;
  • net sales through the wholesale sales channel increased 39.3 percent to CHF 106.4 million;
  • net sales in North America and the Asia-Pacific increased 100.1 percent to CHF 133.4 million and 35.0 percent to CHF 10.6 million, respectively;
  • net sales from shoes, apparel and accessories increased 49.0 percent to CHF 179.7 million, 216.0 percent to 10.0 million and 164.9 percent to 1,384 million;
  • gross profit increased 74.0 percent to CHF 111.8 million;
  • gross margin increased to 58.5 percent from 51.7 percent;
  • net (loss) changed to CHF (187.0) million from CHF (2.6) million;
  • net (loss) margin changed to (97.8) percent from (2.1) percent;
  • adjusted EBITDA in the fourth quarter of 2020 and 2021 was CHF 11.2 million; and
  • adjusted EBITDA margin decreased to 5.9 percent from 9.0 percent.

Key highlights for the fiscal year 2021 compared to the fiscal year 2020 included:

  • net sales increased 70.4 percent to CHF 724.6 million;
  • net sales through the DTC sales channel increased 71.9 percent to CHF 275.8 million;
  • net sales through the wholesale sales channel increased 69.5 percent to CHF 448.8 million;
  • net sales in Europe, North America and the Asia-Pacific increased 38.8 percent to CHF 260.4 million, 96.8 percent to CHF 409.5 million and 85.8 percent to CHF 42.7 million, respectively;
  • net sales from shoes increased 68.1 percent to CHF 683.3 million, net sales from apparel increased 130.8 percent to CHF 36.3 million and net sales from accessories increased 57.2 percent to CHF 5.0 million;
  • gross profit increased 86.2 percent to CHF 430.3 million;
  • gross margin increased to 59.4 percent from 54.3 percent;
  • net (loss) changed to CHF (170.2) million from CHF (27.5) million;
  • net (loss) margin changed to (23.5) percent from(6.5) percent;
  • adjusted EBITDA increased 93.8 percent to CHF 96.4 million; and
  • adjusted EBITDA margin increased to 13.3 percent from 11.7 percent.

Key balance sheet highlights as of December 31, 2021 compared to December 31, 2020 included:

  • cash increased 620.5 percent to CHF 653.1 million, reflecting proceeds from our successful initial public offering in September 2021; and
  • net working capital was CHF 187.5 million which reflected an increase of 66.0 percent.

Outlook
On said in its statement, “We expect 2022 to be characterized by a significant expansion of our product offering in running, outdoor and lifestyle, which we call performance all day, through the launch of highly innovative and even more sustainable shoes, apparel items and accessories. O product offering expansion has been well received by our existing and new wholesale partners, reflected in very strong pre-orders for the first and second half of the year. Coupled with a significantly elevated customer base in DTC, we expect to reach a much larger global fan base, allowing them to move in On products and ignite the human spirit through movement. We further plan to bring a new level of brand experience to our fans through the expansion of our global network of flagship stores, by opening our first flagship stores in Europe and Asia outside China, while also increasing our presence in North America and China.

“Since December 2021, our production capacity has returned to pre-lockdown commitment levels given the easing of restrictions in Vietnam and reduced holiday schedule of our factory partners. We continue to fast-track the capacity ramp-up plan this year, leveraging our close relationship with partners which includes an expansion in Indonesia, where we just commenced production in a new facility.

“However, we expect that the following supply chain challenges in the fourth quarter of 2021 caused by COVID-19 will continue to have a short-term and transitory impact on our financial performance for the first half of the fiscal year 2022 through:

  1. increased use of expensive air-freight to rebuild inventory levels after production shortages caused by COVID-19 induced closures of factories in Vietnam; and
  2. higher sea and air-freight rates and warehouse labor expenses impacting gross margin and SG&A expenses. As a result, we still expect a headwind to our gross margins of approximately 700-800 basis points in the first half of 2022.

“Based on the elevated inventory position, we expect to be able to meet a higher share of the demand from our customers in the first half of 2022 and to drive higher growth than previously expected. At the same time, the current situation in Vietnam provides even more confidence to have the right products to return to hyper-growth in the second half of the year. Consequently, for the fiscal year ending December 31, 2022, we now expect net sales to exceed CHF 990 million, which represents year-over-year growth of at least 37 percent compared to 2021. Further, we expect that improved net sales will allow additional investments into the brand and the team while increasing both our adjusted EBITDA target to CHF 130m and our adjusted EBITDA margin to 13.1 percent.”

Photo courtesy On