On Holding, the renowned Swiss sports shoe manufacturer, has recently released its second-quarter results, showcasing a remarkable year-over-year sales increase despite a slight shortfall in earnings compared to market expectations. This juxtaposition provides an intriguing perspective for investors analyzing the company's performance while considering its growth trajectory. In a statement released early Tuesday, On Holding reported adjusted earnings of 0.14 francs ($0.16) per share for the June quarter, marking a significant increase from 0.04 francs in the previous year.
However, this figure fell short of the consensus expectation of 0.17 francs as polled by Capital IQ. Despite this earnings miss, the company achieved a notable 28% year-over-year increase in sales, reaching 567.7 million francs, thus surpassing analysts' predictions of 562.7 million francs. In response to these financial results, On's shares, which are listed on the New York Stock Exchange, experienced a more than 8% decline in premarket trading, reflecting investor reaction to the earnings report. The breakdown of revenue further illustrates the brand's robust performance in various segments.
The shoe segment alone saw revenue surge by 27% to 542.5 million francs, while apparel and accessories experienced impressive growth of 63% and 24%, respectively. The geographic sales distribution highlights the Americas, where net sales rose 25% to 370 million francs. Conversely, sales in Europe, the Middle East, and Africa increased by 22%, and an astonishing 74% growth was observed in the Asia-Pacific region, which recorded sales of 59.2 million francs. On ascertained that both direct-to-consumer and wholesale channels demonstrated similar growth trends, each rising approximately 28%, with direct sales reaching 209.4 million francs and wholesale sales hitting 358.2 million francs.
Additionally, the company reported an improvement in gross margin, elevating to 59.9% from 59.5% in the previous year's quarter. This uptick is attributed to a higher ratio of full-price sales and reduced freight costs, reflecting the management’s effective pricing strategies. Co-Chief Executive Martin Hoffmann expressed satisfaction regarding the company’s consistent performance, stating, "We are very pleased to see the ongoing strong momentum of the On brand across channels, regions, and products, as evidenced in our very strong results in the first half of 2024." This statement not only underscores the brand's sustained demand but also hints at promising prospects for the remainder of the year. Looking ahead, On Holding has maintained its 2024 guidance, projecting at least a 30% sales growth on a constant currency basis.
This forecast reflects the company’s ongoing brand momentum coupled with robust consumer demand observed throughout the first half of the year. The forecast suggests reported sales could reach a minimum of 2.26 billion francs based on current market rates, in line with the Street’s expectations of 2.3 billion francs. The company remains optimistic about achieving a full-year gross margin of around 60% while also estimating an adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) margin in the range of 16% to 16.5%.
In the face of fluctuating market conditions, these insights into On Holding's financial performance and strategic outlook underscore its robust positioning within the competitive landscape of the sports shoe market. Investors will be keenly observing the company's ability to navigate these challenges while capitalizing on its growth potential..