Swiss running shoe brand On Holding ($ONON) declined more than 9% on Wednesday after the company missed analysts’ estimates despite a boom in North American sales. On’s reported earnings of $0.07 per share fell short of analyst estimates of $0.12, leading the company’s stock to close at $18.40. On is down 48.1% since the beginning of the year, outpacing the 11% overall decline of the NYSE, where it is listed.
Despite the miss, On reported the third quarter of 2022 as the best in its 12-year history. The company said net sales increased 50.4% to $328 million, reaching $908.5 million on the year to date and outpacing its revised target of $1.15 billion. On saw a 57.1% growth in its North American regional sales, attributing the boom to new partnerships with Dick’s Sporting Goods and Nordstrom.
“We are extremely proud to have exceeded 1 billion Swiss Francs in net sales when considering the past 12 months leading up to Sept. 30,” Martin Hoffmann, co-CEO and CFO of On, said in an earnings call. Hoffmann attributed the overall increase in sales to the company’s omnichannel sales approach, including the new online re-sell platform Onward and the WeChat Mini Program in China that increased brand recognition in the region.
Meanwhile, due to unfavorable foreign exchange rates and higher air-freight costs, the company’s gross profit margin declined to 57.1% from 60.2% in the prior year period.
“The demand that we are experiencing has challenged our logistics network,” David Allemann, the company’s co-founder and executive co-chairman, said during the call. In August, temporary constraints and supply chain problems caused a higher order cancellation rate, he said. “In addition to that, the strength of the U.S. dollar in conjunction with the weakness of the euro in ratio to our reporting currency has a significant negative impact on our gross profit margin and our adjusted EBITDA margin,” Allemann said.
One of the company’s top investors is former professional tennis player Roger Federer, who invested $54 million into the company in 2019 and has been actively endorsing the brand since then. On Holding went public in 2021, raising $746 million.
“He has long been a partner, investor and co-entrepreneur of ours,” Allemann said. “Like many sports fans, we had heavy hearts when Roger announced his retirement from the professional tennis game.” However, he said, the company is delighted that Federer will now spend even more time on expanding On’s tennis business.
The Swiss company said it is going into the fourth quarter with a robust inventory position after supply shortages and factory closures in 2021 that impacted the first half of 2022 have been normalized. On Holding is increasing its net sales outlook for the year ending Dec. 31 by $26.5 million to $1.3 billion, a year-over-year growth of 55% compared to 2021.
On Running started in 2008 after professional athlete Olivier Bernhard and his friends Allemann and Caspar Coppetti decided to design the perfect running shoe. The company was formally established in 2010 in Zurich. On shoes are sold in 50 countries and over 8,000 retail locations.