It all started with a shoe and soles made of garden hoses and led to a brilliant IPO. However, the Swiss company On Running is currently struggling with problems. Weight criticism of the shoes and factory closures in Vietnam. The share price has been on a downward trend for weeks. From Luca Bißmaier
It all started with a running shoe and a sole made of cut garden hoses. Due to Achilles tendon problems, the former world-class triathlete Olivier Bernhard developed an innovative running shoe. He glued cut garden hoses to the underside of the athletic shoe. The prototype should convey the feeling of walking on clouds. That is why the model should also be given the name “Cloud” of the same name.
Together with the marketing expert David Allemann and the economist Caspar Coppetti, Bernhard then founded the company On Running. Eleven years later, the story leads to a spectacular IPO in September 2021. Right at the Wall Street debut, On’s share gained 46 percent.
Roger Federer is invested
Roger Federer, one of the most famous tennis players in the world, invested in the sports shoe manufacturer as early as 2019. It should have been financially worth it for him. On Running’s IPO brought him over $ 746 million.
In addition to support from Federer, the company also relies on innovative marketing. On Running offers a subscription for its Cyclon model. The shoe can be returned after 600 kilometers and the manufacturer then recycles it. As a customer, you will then be sent a new pair of shoes. The subscription costs 29.95 euros in this country.
Criticism is getting louder
Nevertheless, there are also critical voices. According to an article by Schweizer srf (Swiss radio and television), the shoe is expensive and breaks quickly. On Running itself states that running shoes are always more expensive in Switzerland than abroad, and that the customer can be sure that a large part of the work takes place in Switzerland. The fact is, however, that only development, design and sales take place in Switzerland. The entire production is outsourced to Vietnam.
The current financial development should also be viewed critically. The company is currently valued at around CHF 8.5 billion, with sales of CHF 425 million last year. The net income was clearly negative at -27.5 million francs.
And the share also reacts. The share has lost over 23 percent in the past few weeks. The reason is in particular the closure of the Vietnamese factories. In 2020, 97 percent of all shoes were produced in Vietnam. On Running announced in a prospectus that these closings will affect the results and financial situation in 2021 and 2022.
The first analysts’ voices are also negative: the analyst Sam Poser of Williams Trading rated the share as selling on Monday. In addition to the factory closures, he cites the poor distribution decisions and domestic logistics problems as reasons. We recommend continuing to monitor current developments – especially the situation in the Vietnamese factories.
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