2024-03-13 08:45:06 ET
Summary
- On Holding AG delivered solid Q4 performance with strong growth in DTC and retail progress to drive gross margin improvements as well.
- EMEA wholesale figures impacted by door closures, which is part but not the whole story of Q1 deceleration which has spooked markets.
- Other fashion companies with similar geographies have disappointed in earnings, albeit outside of athletic footwear, leading us to worry about On Holding hitting the macro frontier sooner than hoped.
- While last year was still an open skies year, this year it may be getting closer to the macro realities, and can no longer drive growth expectations with just stealing share.
- Valuations are stretched, and if they don't create confidence about On Holding growth into 2026, where they'd finally be aligned in valuations with peers, prices could still decline.
On Holding AG ( ONON ) delivered a decent fourth quarter on the face of it, yet there were substantial declines in price on slower guidance for the Q1, despite FY guidance seeming to be kept on track. While the deceleration in Q1 is nothing compared to some of the other upper-premium/luxury brands in fashion, who are at a baseline more mature , we notice that disappointments have been common lately and On is included in that number. Other brands are citing quite definitively a slowdown in general consumption, with even luxury brand portfolios with excellent positioning expecting deceleration. This is something we worried about for On some years ago, when the economy had not yet proven its resilience in the face of rate hikes. It seems On should be able to continue to grow strongly, as it has much more scope for growth before it reaches a mature frontier where macro would have a more decisive impact. Moreover, On has several margin drivers in its favor, so on top of what we believe could be solid achievement on sales, margin lift should also continue....
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On Holding: Declines Echo Those Of Other Premium Fashion Stocks