On Holding Delivers Robust Q4 Sales & Outlook; Shares Gain 14%

Shares of On Holding AG (NYSE: ONON) gained almost 14% on March 18, after the company delivered strong fourth-quarter sales driven by robust demand across all regions, channels, and product categories.

Furthermore, the company updated its FY2022 guidance expecting its net sales to grow over 5x from 2021 levels.

Listed through an IPO in September 2021, On Holding AG, through its subsidiaries, provides footwear and sports apparel products, including ultralight and stretchable fabrics and accessories.

Q4 Numbers

Net sales jumped 53.7% year-over-year to CHF 191 million. The increase in revenues reflects a surge in direct-to-consumer business, which grew 76.7% along with a 39.% growth in Wholesale business. Further, gross margins improved 680 bps to 58.5%

However, the company reported a net loss of CHF 187 million during the quarter, which was significantly worse than the reported loss of CHF 2.6 million in the prior-year quarter.

FY2022 Outlook

Based on robust pre-orders as well as better visibility into the recovery of the supply chain environment, the company expects to meet higher than expected demand in the first half of 2022. Further, the company expects to return to hyper-growth in the second half of the year.

During FY2022, the company aims to achieve significant expansion of its product offering in running, outdoor and lifestyle, via the launch of highly innovative and sustainable shoes, apparel items, and accessories.

Likewise, the company now forecasts net sales of at least CHF 990 million, adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of CHF 130.0 million, with an adjusted EBITDA margin of 13.1%.

CEO Comments

On Holding CEO, Martin Hoffmann, commented, “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% of the pre-lockdown commitments since December 2021.”

He further added, “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.”

Wall Street’s take

Following the Q4 results, Stifel Nicolaus analyst Jim Duffy decreased the price target on On Holding AG to $41 (47.3% upside potential) from $51and reiterated a Buy rating on the stock.

The Wall Street community is cautiously optimistic about the stock, with a Moderate Buy consensus rating based on 3 Buys and 1 Sell. The average On Holding AG stock forecast of $35 implies 25.76% upside potential to current levels.

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