[City, State] – [Date] – Swiss performance wear company On has announced a significantly strong first quarter, exceeding expectations with robust growth across its direct-to-consumer (DTC) channels and a remarkable surge in apparel sales. The positive financial results, revealed during the company’s latest earnings call, signal a company in robust health, even as it navigates a notable executive transition.
The performance, characterized by a powerful surge in DTC engagement and a significant outperformance in wholesale, has led On to raise its financial guidance for the year. This strategic upward revision reflects confidence in the company’s continued momentum and its ability to capitalize on emerging market trends.
DTC Dominance and Apparel Ascendancy Fuel Q1 Success
In his final earnings call with the company, co-founder and outgoing CEO David Hoffmann painted a picture of a company "stronger than ever." He specifically highlighted the direct-to-consumer (DTC) channel as the primary engine of this strong quarterly performance, with wholesale operations also exceeding internal projections.
"The company is stronger than ever," Hoffmann stated during the call, underscoring the positive trajectory. "In particular, he said DTC channel growth led the strong quarterly performance, while wholesale outperformed expectations."
A key driver of this success has been the burgeoning popularity of On’s apparel offerings. Apparel sales have emerged as a potent gateway for consumers to engage with the brand, with net sales in this category experiencing an impressive 45.1% uplift for the quarter. This surge in apparel demonstrates a successful diversification beyond the brand’s foundational strength in footwear.
While footwear remains On’s largest division, it also posted healthy net sales growth of approximately 12%. The accessories segment, though currently the smallest contributor to revenue, exhibited the most explosive growth, with net sales soaring by an astounding 70.7%. This widespread growth across all product categories underscores the brand’s expanding appeal and market penetration.
Hoffmann elaborated on the strategic emphasis on DTC growth, stating, "What’s embedded in our guidance is a continued very strong growth of our DTC channel, similar to the strong growth rate that we have now seen in the first quarter. So that implies a slower growth on wholesale compared to that strong growth in DTC, which basically ultimately leads to the continued share gain of our DTC business. We have a lot of innovation coming early ’27. And so we want to be cautious that we start into that firework of innovation with clean inventory levels in our wholesale partners." This statement reveals a deliberate strategy to prioritize DTC, ensuring optimized inventory management for future product launches.
Expanding Brand Reach: Younger Audiences and New Demographics
The company’s growing brand awareness, particularly in the United States, has now surpassed the 30% threshold, indicating a significant increase in consumer recognition and engagement. This expansion is not merely about increased visibility but also about attracting new customer segments.
Caspar Coppetti, co-founder and incoming co-CEO, shared insights with analysts regarding the drivers of this enhanced engagement. He pointed to a notable uptick in interest from younger demographics and a significant increase in female customers. These gains are, in part, attributed to the brand’s strategic collaborations, most recently with acclaimed actor Zendaya on a co-created collection. This initiative appears to have resonated strongly with the target audiences, broadening On’s appeal beyond its traditional core customer base.
"We still have a long way to go in terms of growth," Coppetti remarked, "But what we’re really seeing and what we’re particularly excited about is that we’re not just repeating our running customers, but we’re actually reaching new audiences." This statement highlights a crucial shift from customer retention to customer acquisition and market expansion.
David Allemann, another co-founder and incoming co-CEO, echoed Coppetti’s sentiment regarding the strength of the DTC channel. He further revealed that the DTC segment now accounts for over 10% of the company’s apparel share, a testament to its growing importance.
"So a lot of these young consumers that are coming into our e-com, that are coming to our stores, are actually apparel-first consumers, which is amazing, and we’re sure that they’re going to expand to footwear as well," Allemann noted during the call. This observation suggests a promising future for cross-selling opportunities, as apparel-first consumers are likely to explore and embrace On’s footwear offerings.
Financial Outlook Strengthened Amidst Executive Reshuffle
In response to its stellar first-quarter performance, On has proactively revised its financial guidance upwards. The company now anticipates its gross profit margin to reach at least 64.5%. Furthermore, its adjusted EBITDA margin is projected to fall within the range of 19.5% to 20%. The net sales outlook remains robust, with an expectation of "at least 23%" growth.
Coppetti provided crucial context for this revised outlook, informing analysts that, "this outlook assumes 20% incremental tariff rates from Vietnam and excludes any potential refunds." This forward-looking statement acknowledges potential cost fluctuations while maintaining a strong growth forecast.
This period of financial strength and optimistic forecasting is occurring against the backdrop of a significant executive transition within the company. In March, On announced the impending departure of David Hoffmann, a move that coincided with a broader reshuffling of its leadership team. David Allemann and Caspar Coppetti are set to assume the roles of co-CEOs and board co-chairs, a strategic move designed to foster continued collaborative leadership. Co-founder Olivier Bernhard will remain actively involved as a board executive, providing continuity and strategic guidance. Scott Maguire, previously the chief innovation officer, has been promoted to the key positions of president and chief operating officer, further solidifying the operational leadership.
Earlier in the year, the company also welcomed Frank Sluis as its new chief financial officer. Sluis stepped into this critical role, taking over from Hoffmann, who had held the CFO position for 13 years, even during his tenure as CEO. This appointment signals a clear division of responsibilities and a strategic alignment for future financial stewardship.
Strategic Implications and Future Trajectory
The strong first-quarter results and revised financial guidance underscore On’s ability to execute its growth strategy effectively. The company’s dual focus on strengthening its DTC presence while strategically managing its wholesale partnerships appears to be yielding significant dividends. The emphasis on DTC allows for greater control over brand experience, customer data, and ultimately, profitability.
The notable surge in apparel sales signifies a successful diversification strategy. By attracting consumers through its apparel offerings, On is creating new entry points into the brand, paving the way for increased adoption of its core footwear products. The successful engagement with younger audiences and new demographic segments, particularly women, through collaborations like the one with Zendaya, indicates a forward-thinking approach to brand building and market expansion. This broadens the company’s addressable market and reduces its reliance on a single customer profile.
The planned executive transition, with Allemann and Coppetti stepping into co-CEO roles, suggests a commitment to maintaining a collaborative and agile leadership structure. This move, coupled with the appointment of a dedicated CFO and a strengthened COO role, positions the company for continued operational excellence and strategic execution.
The cautious approach to managing wholesale inventory ahead of future product launches demonstrates a commitment to sustainable growth and avoiding potential overstock situations that could impact profitability. By ensuring clean inventory levels with wholesale partners, On is setting the stage for a successful rollout of its upcoming innovations.
Looking ahead, On’s ability to sustain its DTC growth momentum, further penetrate new consumer segments, and successfully launch its planned innovations will be critical to its continued success. The company’s strong financial performance and strategic leadership adjustments suggest it is well-positioned to navigate the competitive landscape and capitalize on future opportunities in the performance wear market. The coming quarters will be closely watched to see how effectively the company translates its current momentum into sustained, long-term value creation.
