A strong earnings report lifted shares of the running shoe company.
Shares of On Holding (ONON 4.04%) were soaring this week after the fast-growing running shoe company posted better-than-expected results in its first-quarter earnings report.
According to data from S&P Global Market Intelligence, the stock was up 24.9% for the week.
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On is outrunning the competition
In a difficult environment for consumer discretionary goods like footwear and apparel, On continued to report strong growth and gain market share.
Revenue in the first quarter rose 20.9% to $559.8 million, which beat estimates of $548 million.
Revenue was up 29.2% on a constant currency basis due to the strength of the Swiss Franc, though that has weakened this year.
The direct-to-consumer (DTC) segment remained strong with DTC up 39%, or 48.7% on a constant currency basis, and now makes up 37.5% of total sales. It’s also a high-margin channel for On, bringing on a gross margin of 59.7%, up from 58.3% in the quarter a year ago and approaching its goal of being above 60%.
Performance on the bottom line was strong as well, as adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) increased 27% to $85.3 million, and adjusted earnings per share more than doubled from $0.17 to $0.36, which was well ahead of estimates of $0.15.
Co-CEO Martin Hoffman said, “The first quarter was a very strong start to the year and a further step in the execution of long-term strategy to be the most premium global sportswear brand.”
What’s next for On
On is chasing a massive addressable market as it challenges incumbents like Nike, and it’s showing no signs of slowing down.
The company reiterated its expectation for at least 30% constant currency growth this year, showing it expects revenue growth to accelerate through the year. On the bottom line, it sees gross margin reaching around 60% and EBITDA margin of 16% to 16.5%.
If On Holding continues to gain market share and maintain its strong revenue growth rate, the stock looks like a good bet to continue to move higher.
Jeremy Bowman has positions in Nike. The Motley Fool has positions in and recommends Nike. The Motley Fool recommends On Holding and recommends the following options: long January 2025 $47.50 calls on Nike. The Motley Fool has a disclosure policy.