Why On Holding Shares Are Dipping Today

On Holding AG ONON shares are trading lower by around 7% after it reported Q2 FY23 results. 

The company posted sales growth of 52.3% Y/Y (over +60% Y/Y in constant currencies) to CHF 444.3 million.

The sportswear firm registered an adjusted EPS of CHF 0.04 in the quarter vs. CHF 0.14 last year.

In USD terms, the company reported Q2 adjusted EPS of $0.04 missing the consensus of $0.13, and sales of $494.08 million, beating the consensus of $463.07 million. 

The company's net sales through the direct-to-consumer (DTC) sales channel increased 54.7% Y/Y to CHF 163.5 million on high-end-consumer demand, while net sales through the wholesale sales channel rose 51.0% Y/Y to CHF 280.8 million. 

Gross profit increased 64.4% Y/Y to CHF 264.5 million in the quarter.

The gross profit margin for the quarter expanded to 59.5% from 55.1% in the prior year period, reflecting the discontinuation of extraordinary air freight usage, which negatively impacted profitability in H1 2022.

Adjusted EBITDA stood at CHF 62.7 million, nearly doubling from CHF 31.4 million the prior year.

As of June 30, 2023, cash and equivalents stood at CHF 337.1 million.

"We are thrilled that we are visibly progressing further on our strategy and ambition to win credibility and market share in the performance space. In particular, we are extremely pleased with the feedback on our Cloudboom Echo 3, which was more broadly launched in Q2 and is our fastest long-distance running shoe yet. On the Tennis side, we saw Iga Świątek take the victory at the French Open at Roland Garros in early June – we are so proud to have kicked off On's presence on the grand slam courts with such an incredible and emotional debut," stated Martin Hoffmann, Co-CEO and CFO. 

Outlook: On Holding raised its guidance for FY23 sales. Revenues are expected to reach at least CHF 1.76 billion (vs. exceeding CHF 1.74 billion prior). It implies a full-year growth rate of 44% and an H2 growth rate of close to 30%.

On maintained its outlook for gross margin and adjusted EBITDA margin at 58.5% and 15.0%, respectively.

Price Action: ONON shares are trading down by 7.54% at $32.00 premarket on the last check Tuesday.