On Holding Runs Towards its Goals

The company behind the commercial success

On Holding, the Swiss athletic footwear and apparel brand, has rapidly gained recognition on the global stage with its innovative products and performance-focused designs. Known for its "CloudTec" technology, On has attracted both casual runners and professional athletes, building a loyal customer base.

Following its successful IPO in September 2021, the company has continued to capture the attention of investors who want to invest into the booming sportswear market. The stock is know from investors looking for growth, financial health, and potential long-term success. In this article, we will explore the key factors driving On Holding’s stock performance and what investors should keep in mind when evaluating its future.

Company overview

Founded in 2010, On Holding specializes primarily in footwear, which constitutes the majority of its revenue. While shoes remain the dominant income stream, the company has successfully diversified its revenue sources. As of Q2 2024, the revenue breakdown is as follows:

• Shoes. 95.5% (down from 96.4% in the prior year)

• Apparel. 3.9% (up from 3.0% in the prior year)

• Accessories. 0.6% (unchanged from the prior year)

Notably, the apparel segment is experiencing significant growth, expanding at more than twice the rate of footwear, positioning it as a key driver of revenue diversification.

In terms of distribution channels, approximately one-third of On’s revenue comes from direct-to-consumer (DTC) sales, while the remaining two-thirds are generated through wholesale partnerships with retailers. Although the wholesale channel offers lower margins due to volume-based pricing, it remains a substantial revenue contributor. The DTC channel is growing at a faster pace, reflecting a strategic focus on higher-margin, customer-direct sales.

Geographically, the Americas, with the U.S. as the largest market, remain On's most significant revenue region. However, the Asia-Pacific (APAC) region, though currently the smallest, is the fastest-growing, highlighting the brand's global expansion potential.

The focus on brand recognition

On Holding is still a relatively small company, with a market capitalization of just over $10 billion and annual sales of approximately $2.2 billion, about 20 times smaller than Nike's. As a result, increasing brand recognition is a primary focus for management as they aim to expand On's global presence.

While brand awareness is growing, it varies significantly across different markets: 47% in Switzerland, 24% in Germany, 15% in Austria, 9% in the U.S., and 6% in both the UK and France, with 4% in Australia. For comparison, Nike’s brand awareness in the U.S. exceeds 90%, and Asics sits at around 60%, underscoring the substantial growth potential On still has to achieve.

This relatively low awareness translates directly into market share, which remains modest but shows room for expansion. On has strategically targeted key urban markets where running communities can help amplify brand visibility. In major U.S. cities, On’s market share is still developing, with 7% in New York, 9% in San Francisco, 12% in Dallas, and 15% in Miami. These figures demonstrate the brand’s early-stage positioning and the opportunity to significantly scale its presence in both existing and new markets.

On Holding is currently the fastest-growing major footwear brand, rapidly gaining market share on a global scale. With its current market share at around 1.5%, the brand is still relatively small compared to industry giants like Nike and Adidas, but its momentum is undeniable.

While On is still far from challenging the dominant players—Nike commands over 25% of the global footwear market, with Adidas following at 10%—its growth potential is significant. As the company continues to increase brand awareness and penetrate new markets, it has the opportunity to carve out a larger share of the global market.

Other growth drivers

In addition to brand recognition, On Holding has three key areas of focus to drive growth:

• Geographic expansion. On aims to broaden its global footprint through strategic partnerships with wholesalers and by opening more company-owned retail stores. With relatively few retail locations currently, this represents a significant growth opportunity. Expanding its physical presence will not only drive sales but also foster deeper customer relationships, enhancing brand loyalty and visibility in new markets.

• Innovation. Innovation is critical in the highly competitive footwear industry. On’s commitment to cutting-edge technology enhances product performance and strengthens its credibility and legitimacy as a premium brand. Continuous product innovation also serves as a powerful marketing tool, differentiating On from competitors and keeping the brand at the forefront of the industry. This innovation extends into the digital realm as well, with advancements including an app and a tailored customer journey. These digital enhancements are designed to offer a more personalized and seamless experience, further engaging customers and driving brand loyalty.

• Product range expansion. On is poised to capitalize on the faster growth of its apparel segment, which represents a major opportunity for diversification. Additionally, expanding into new footwear categories, such as tennis and other sports-specific shoes, can serve as key growth drivers. As On builds a stronger and more widely recognized brand, it will be better positioned to diversify into larger markets, expanding its total addressable market (TAM) and enhancing its overall growth potential.

On’s growth strategy, combined with a robust operational framework, including optimized distribution centers, improvements in supplier performance, and a strong focus on sustainability, should help the company improve net profit margins at a faster rate than revenue growth. However, this margin expansion may take time, as On reinvests heavily to support its ambitious growth plans. The company’s continued focus on efficiency and scalability, while balancing reinvestment, positions it for long-term profitability, but significant improvements in margins are likely to unfold gradually over the coming years.

Outlook