What inspires Americans about the Swiss brand?

The Swiss shoe manufacturer On continues to grow. In the last quarter, they increased their sales by 32 percent to 636 million francs, as the group announced on Tuesday. The gross profit margin exceeded 60 percent for the first time – more than ever since the IPO in New York in 2021.

The analysts congratulated the On management in droves when they asked them questions about the numbers on a conference call. However, investors were a little disappointed as On had almost missed the market’s profit expectations. On shares they lost some ground on the stock market. It is proof that economic success in America must always be earned anew.

America remains the most important sales market

In the medium and long term, the picture brightens considerably, as the On stocks have had a strong rally behind them. The shares have nearly doubled in value since the start of the year and are up more than 6 percent since last week.

On was only founded in 2010 and yet it already has a market valuation of over 16 billion dollars. A young Swiss company has not grown so quickly into a mature company recently; The fact is that it paid to be listed on the New York Stock Exchange, where investors have more experience with fashion companies.

To continue growing, the shoe manufacturer is currently investing a lot in brand management, expanding the product range and new stores, which have contributed significantly to growth in recent months over. The Chinese and Japanese markets are expected to help Asia become On’s second largest market, ahead of Europe. The growth in sales is very high at 79 percent compared to the previous year, but sales from Asia only contribute a little more than a tenth of the total.

America is the most important market for On. In this quarter, the continent contributed almost two thirds of the group’s sales with 396 million francs; an increase of at least 34 percent compared to the previous year. And although the shoe manufacturer says that it is growing rapidly in Canada and Brazil, the US still decides the success or failure of On.

Sport as a guide

On the one hand, On has established itself in the United States as a brand for ambitious (and wealthy) runners. The Olympic Games in Paris helped to strengthen this image as a driver of innovation. At the time, On introduced the new “Lightspray” technology, which he also showed to curious New York customers in a showroom at the beginning of November. A large part of the material of the shoes is directly sprayed, no parts need to be sewn. In the long run, shoes could be made much more local and personal than before.

Marathon runner Hellen Obiri, On brand ambassador, won the bronze medal in Paris wearing Lightspray shoes. She had already won the Boston Marathon for the second time this spring, which also gave her shoe and clothing sponsor a good shot.

On the other hand, On is even better at appealing to a young, fashion-conscious audience in the US than in Europe. The collaboration with the star actress Zendaya, which is expected to be in the long term, is intended to connect these customers even more closely to the brand. On is not the first sportswear manufacturer to be successful with lifestyle products; The yoga brand Lululemon and its main competitor Nike have already succeeded in this step.

But you always have to earn your success with this select group of customers. Nike, for example, had exceeded the capacity of its classes in recent years. People now have enough Air Jordans at home, and the manufacturer is left with ever-growing inventories. A new CEO is now expected to solve Nike’s sales and brand problemsbut he made it clear early on that this would take a few quarters of time.

Anyway, On doesn’t just want to hope to catch every lifestyle trend in the future. The range is being extended to include shoes for other sports. When asked by an analyst, CFO Martin Hoffmann emphasized that On’s growth was based on more and more products. “We’re now a Seven or Eight Trick Pony, we’re no longer a One Trick Pony. ” Sales of tennis shoes, for example, have grown particularly strongly at a still low rate. On also wants to present itself as an outdoor brand and get into the trail running shoe business.

Sportswear sales, which currently only account for a good 4 percent of group sales, are lagging behind the footwear industry. But generally skinny pants and shirts complement the range well. Ideally, the marketing dollars On uses for his running shoes can also raise awareness for his own clothing lines.

More shopping itself

To provide the main requests to customers – which in the end justifies relatively high prices for the shoes – On is also increasingly dependent on its own retail stores in the US. There are already eight, with locations in Austin and Chicago recently added.

On also opened their third store in New York City at the beginning of November. It will be a new flagship store and will be near the iconic Flatiron building on Fifth Avenue, the city’s most important shopping street.

On is in good company here – rival Hoka also has a store a block away, on the same street. The two new shoe manufacturers did not enter the “luxury lane”: the most famous section of Fifth Avenue, further north between 49th and 60th Streets, where Chanel, Tiffany and Co. customers.

But even though Fifth Avenue is full of tourists and Uber drivers, visitors to the On store at 21st Street still have a little more space on the sidewalk. The store can certainly be an advertising window to the world; The area around the Flatiron building is also on many tourists’ to-do lists.

Sales automation

In the spring, On was still struggling with the luxury problem in the US. Demand grew so fast that sales could not keep up. This problem was alleviated in the short term by making greater use of its warehouse on the West Coast and relying more often on air freight to get clothes to stores on time. But this is a temporary solution that would probably be too expensive in the long run.

On now wants to set up a fully automated warehouse in the existing warehouse on the east coast, in Atlanta. Martin Hoffmann said there are higher fixed costs involved. But the more Atlanta can handle, the more significant those costs will be. If the tests are successful, the shoe manufacturer will be able to handle increasing volumes here from 2025 and achieve the high growth that both the company’s management and investors expect from On.