On Holding (ONON), the company behind the popular On running shoe brand, outpaced Q1 estimates early Tuesday. ONON stock, which has nearly doubled in 2023 set the pace for the footwear industry’s impressive performance, fell modestly Tuesday morning.
The Swiss performance-shoe maker went public at 24 per share in September 2021 and is backed by tennis champion Roger Federer. The company is a rising star in the industry. Sales bolted 55% to more than $1 billion in 2022, boosted by the reinvention of its popular Cloudmonster, Cloudrunner and Cloudgo brand performance trainers.
“On’s rally is being driven by the brand’s strong momentum and product acceptance by consumers,” Cristina Fernandez, managing director and senior research analyst at Telsey Advisory Group, recently told IBD.
The shift toward casual footwear during the coronavirus pandemic helped sales, but innovation and bringing a new product to the market have really fueled On’s success, according to Fernandez. “Consumers were ready for something different,” she said.
After rolling out new products over the past year, On has a bigger presence at its retail partners and is taking share from other players, Fernandez said.
Rivals Crocs and Skechers both topped quarterly estimates for their respective reports in late April but shares fell on weaker-than-expected outlooks for Q2.
The company reports results in Swiss francs. On earnings tripled to 0.15 per share CHF adjusted on a 78.3% revenue increase to 420.2 million CHF. In U.S. dollars, earnings spiked to 17 cents on $470.6 million in sales.
Analysts polled by FactSet expect adjusted earnings to double year over year to 0.10 CHF. Sales were seen spiking 61.4% to 380.57 million CHF. In dollars, FactSet analysts expected earnings of 13 cents per share on $426 million in revenue.
On Holding maintained its gross profit margin projections for the year, expecting it to reach 58.5% in 2023 from 56% last year.
The company raised its net sales outlook to at least 1.74 billion CHF, up slightly from its March forecast of 1.7 billion CHF. In dollars, the performance shoe maker expects sales of $1.95 billion, up from $1.36 billion last year.
The raised revenue guidance largely reflects Q1’s outperformance vs. a higher forecast for the rest of the year.
On Holding averaged a massive 269.5% earnings growth over the past four quarters on an average 66% leap in sales leading up to the release.
Shares retreated 6% to 31.41 early Tuesday after stumbling 2.2% premarket following results. ONON stock rose 1.7% to 33.44 Monday leading up to the report.
ONON stock bolted 78% so far this year. Shares are trading above the profit-taking zone for a cup-with-handle base after breaking out on March 24. On Holding stock has been finding support near its 21-day moving average for several weeks.
On Holding ranks second in the Apparel-Shoes & Related Manufacturing group according to the IBD Stock Checkup. It trails clog-making competitor Crocs (CROX) and leads Deckers Outdoor (DECK), which makes the increasingly popular HOKA brand, and Skechers (SKX).
On Holding has a perfect 99 Composite Rating, which combines various technical indicators into one easy-to-read score. The stock has a 97 RS Rating and its relative strength line is just shy of recent highs. Shares have an 80 EPS rating.
You can follow Harrison Miller for more stock news and updates on Twitter @IBD_Harrison.
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