Q1 2024 On Holding AG Earnings Call
Dennis: Good day, my name is Dennis, and I will be your conference operator. At this time, I would like to welcome everyone to the On Hldg AG first quarter 2024 results conference call. All lines have been placed on mute to prevent any background noise.
Good day My name is Dennis and I will be your conference operator at this time I would like to welcome everyone to the on holding AG first quarter 'twenty 'twenty four results conference call.
All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session to ask a question simply press Star then the number one onwards telephone keypad to withdraw your question Press Star One again I would now like to turn the conference over to Jared Peter head of Investor Relations.
Dennis: After the speaker's remarks, there will be a question and answer session. To ask a question, simply press star, then the number one on your telephone keypad. To withdraw your question, press star one again. I would now like to turn the conference over to Jerrit Peter, Head of Investor Relations. Please go ahead.
Jerrit Peter: Please go ahead.
Jerrit Peter: Good afternoon, good morning, and thank you for joining ONS' 2024 First Quarter Earnings Conference Call and Webcast. With me today on the call are Executive Co-Chairman and Co-Founder Caspar Coppetti, CFO and Co-CEO Martin Hoffmann, and Co-CEO Marc Maurer.
Afternoon, Good morning, and thank you for joining US 2024 first quarter earnings conference call and webcast.
Jerrit Peter: With me today on the call our executive co Chairman and co founder Tesla Petty CFO and co CEO, Martin Hoffman and co CEO Marc Mauer.
Jerrit Peter: Before we begin, I would briefly remind everyone that today's call contains forward-looking statements within the meaning of the federal securities laws. These forward-looking statements reflect our current expectations and beliefs only and are subject to certain risks and uncertainties that could cause actual results to differ materially. Please refer to our 20F filed with the SEC on March 12th for a detailed discussion of such risks and uncertainties. We will further reference certain non-IFRS financial measures, such as Adjusted EBITDA and Adjusted EBITDA Mark.
Jerrit Peter: Before we begin I would briefly remind everyone that today's call will contain forward looking statements within the meaning of the federal securities laws.
Jerrit Peter: These forward looking statements reflect our current expectations and beliefs, only and are subject to certain risks and uncertainties that could cause actual results to differ materially.
Jerrit Peter: Please refer to our 20-F filed with the FCC on March 12th for a detailed discussion of such risks and uncertainties.
Jerrit Peter: We will further reference certain non <unk> financial measures such as adjusted EBITDA and adjusted EBITDA margin. These measures are not intended to be considered in isolation or as a substitute for them. So that's one.
Jerrit Peter: Information presented in accordance with IRS.
Jerrit Peter: These measures are not intended to be considered in isolation or as a substitute for the financial information presented in accordance with IFRS. Please refer to today's release for reconciliation to the most comparable IFRS measures. We will begin with Caspar, followed by Martin, leading through today's prepared remarks, after which we are looking forward to opening the call for a Q&A session. With that, I'm very happy to turn over the call to Cas
Jerrit Peter: Please refer to today's release for reconciliation to the most comparable <unk> measures.
Jerrit Peter: We will begin with Casper, followed by Martin leading through today's prepared remarks.
Martin Hoffmann: After which we are looking forward to opening the call for Q&A session.
Martin Hoffmann: With that I'm very happy to turn over the call to Kasper.
Caspar Coppetti: Thank you for joining us today. Martin, Marc, and I are in great spirits as we had a fantastic start to 2024, with net sales of 508 million Swiss francs in the first quarter, which for the first time surpassed the half billion mark in a single quarter. We have continued to grow very substantially, just shy of 30% on a constant currency basis, and we have made great progress in every region, channel, and category. What makes us especially proud is that we are achieving this growth at an ever-increasing higher profitability.
Kasper: Thank you for joining us today.
Kasper: Marc Jean Marc and I are in great spirits, as we had a fantastic start to 2024.
Kasper: With net sales of 508 million Swiss francs in the first quarter on for the first time surpassed the half billion Mark in a single quarter.
Kasper: We have continued to grow very substantially just shy of 30% on a constant currency basis and made great progress in every region channel and category.
Kasper: Well it makes us, especially proud that we are achieving this growth at an ever increasing higher profitability.
Caspar Coppetti: Our gross profit margin of close to 60% in the first quarter underscores the power of our strategy to be the most premium global sports brand. Allow me to shine some light on the progress that ON has made in our core strategic area. And on, everything starts with running.
Kasper: Our gross profit margin of close to 60% in the first quarter underscores the power of our strategy to be the most premium global sports spreads.
Allow me to shine some light on the progress at honest made in our core strategic areas.
Kasper: Ed on everything starts with running the.
Caspar Coppetti: The lightning and rain strategy, winning on the race course with next-level innovation and gaining market share with everyday runners, continues to deliver for the On brand. Three weeks ago, Helen O'Biery won the marathon in Boston for the second time. The first woman in two decades to go back to back.
Kasper: The lightning and rate strategy. What are you on the race course with next level innovation and gaining market share with everyday Rutgers continues to deliver 40 odd brand.
Kasper: Three weeks ago, Helen they'll be everyone into marathon in Boston for the second time.
Kasper: The first woman in two decades to go back to back.
Caspar Coppetti: She was running in ON head to toe, including groundbreaking new footwear technology, which ON will reveal in Paris this summer. We would like to congratulate Helen and also thank our innovation team for the incredible work in developing the fastest race car. The RAIN element of the strategy means converting the credibility of our innovations and athlete successes to market share gains, with everyday runners enjoying their local running routes. In our new global run count, we are seeing very positive results across all regions, with market shares of more than 10% in cities such as Tokyo and Berlin, and across key cities in the US from Boston down to Nashville, and from San Francisco down to LA.
Kasper: She was running on head to toe, including groundbreaking new footwear technology, which on will reveal in Paris. This summer.
Speaker Change: We would like to congratulate Helen and also thank our innovation team for the incredible Burger developing the fastest reis products.
Speaker Change: There is an element of this strategy means converting the credibility of our renovations and athletes successes to market share gains with everyday runners enjoying their local running routes.
Speaker Change: In our new global run counts, we are seeing very positive results across all regions with market shares of more than 10% in cities, such as Tokyo, and Berlin and across key cities in the U S from Boston down to Nashville, and from San Francisco down Chile.
Caspar Coppetti: The market share gains are clearly driven by the success and fast adoption of our latest high performance running franchises, CloudMonster, CloudSurfer, and CloudRunner. We are also seeing a very positive effect from the local run clubs that we are organizing from our own stores, particularly in key cities like Tokyo, Berlin, and Los Angeles. Which brings me to an update on our own retail expansion, which is progressing well and delivering outstanding results. In Q1, we opened stores in Berlin and Portland, Oregon, which brings us to over 50 stores globally, 34 of which are owned and operated by On. Stores in Paris, the Champs Elysees, Milan, and Austin, Texas will open in the coming months.
Speaker Change: The market share gains are clearly driven by the success and fast adoption of our latest high performance running franchises cloud monster cloud surfer and Cod runner.
Speaker Change: Okay.
Speaker Change: We are also seeing a very positive effect of the local run clocks that we are organizing from our own stores, particularly in key cities like Tokyo, Berlin and Los Angeles.
Speaker Change: Which brings me to an update on our own retail expansion, which is progressing well and delivering outstanding results.
Speaker Change: In Q1, we opened stores in Berlin in Portland, Oregon, which brings us to over 50 stores globally 34 of which are owned and operated by on.
Speaker Change: Stores in Paris, Charles <unk>, Z, Milan, and Austin, Texas will open in the coming months.
Caspar Coppetti: On the wholesale side of the business, we continue our disciplined strategy of being very intentional in choosing the right partners and an adequate door footprint, with a clear focus on performance and yarn consumption. On our road to becoming the number one running brand, we continue to win market share in running specialty stores. Weldix Sporting Goods provides us with access to high school and college athletes, Juan resonates with particularly strongly.
Speaker Change: On the wholesale side of the business, we continue our disciplined strategy of being very intentional in choosing the right partners and adequate door footprint.
Speaker Change: With a clear focus on performance and young consumers.
Speaker Change: On our roads to becoming the number one running brand we continue to win market share in run specialty stores.
Dick's Sporting goods provides us with access to high school and college athletes.
Speaker Change: Who on resonates with particularly strong.
Caspar Coppetti: In Q1, we went live with Zalanda in our EMEA markets, an important digital marketplace in the region to connect the on-brand with additional younger consumers. Last but not least, we have also made strong progress on our parallel issues, through resizing our entire collection to fit more customers in a consistent way. We have significantly increased our addressable mark. Just a week ago, we introduced FKA Twigs as a new creative partner and the face of our upcoming training collection that will be launched in August.
Speaker Change: In Q1, we went live with sell out in the in our EMEA markets and important digital marketplace in the region to connect the on Brian with additional younger consumers.
Speaker Change: Lastly at least we have also made strong progress on our apparel initiatives.
Speaker Change: Through <unk>, our entire collection to take more customers in a consistent way we.
Speaker Change: We have significantly increased our addressable market.
Speaker Change: Just a week ago, we introduced FTAA tweaks as a new creative partner and the face of our upcoming training collection that will be launched in August.
Caspar Coppetti: Over the past weeks, we have also rolled out our first apparel collection in tennis, and fans can now wear the same key looks as seen on Ben Shelton and Iga Schwertek. In particular, apparel has shown extremely strong demand on our DTC e-com and our own retail channels, with apparel contributing around 25% of purchases at, for example, our Paris Saint-Germain store.
Speaker Change: Over the past weeks, we have also rolled out our first apparel collection of tennis and fans can now bear the same key looks as seen on bench Hilton San Diego should be a tick.
Particularly apparel shows extremely strong demand in our D to C E com and our own retail channels was apparel contributing around 25 of purchases at for example, our Paris San from that store.
Caspar Coppetti: You can tell that after such a strong start, we are very optimistic for the remainder of the year, with many more highlights to come, not least being the Olympics in Paris. Before I hand over to Martin for the financials, I would like to point your attention to next week's annual shareholders meeting. We are very excited that Laura Miele stands for election as an addition to our board of directors. As president of Electronic Arts, Entertainment, and Technology, we feel that LoRa can bring a lot of expertise, creativity, and technology insights to our board. We look forward to receiving your support for our election and the remaining motions proposed by the board.
Speaker Change: You can tell that after such a strong start we are very optimistic for the remainder of the year with many more highlights to come let Lee speak the Olympics in Paris.
Speaker Change: Before I hand over to Marc for the financials I would like to point your attention to next week's annual shareholders' meeting.
Speaker Change: We are very excited that lower Emilia stands for election as an addition to our board of directors.
Speaker Change: As president of electronic Arts Entertainment and technology, we feel that Laura can bring a lot of expertise creativity and technology insights to our board.
Marc Maurer: We look forward to receiving your support on their election and the remaining motions proposed by the board.
Marc Maurer: Over to your margin.
Martin Hoffmann: Thank you, Caspar, and hello, everyone. You summarized it very nicely.
Laura: Thank you Kasper and Hello, everyone.
Martin Hoffmann: We continue to rapidly and successfully execute on our vision and goals that we communicated during our investor day last October. At the same time, the passion, innovation, and entrepreneurial spirit in our team continues to create products, results, and impact that drive excitement far beyond the pure execution of the plan. You already mentioned Helen O'Biery, but other members of our growing athlete team are bringing home more wins and medals almost on a weekly basis, from a new mile record at the Penn Relays to Tadesse Abraham's impressive victory and Swiss record at the Barcelona Marathon. The Igor Svirintek and Ben Sheldon's respective tournament wins on clay in Madrid and Houston.
Margin: You summarized it very nicely, we continue to rapidly and successfully execute on our vision and goals that we communicated during our Investor Day last October.
Speaker Change: At the same time, the passion innovation and entrepreneurial spirit and our team continues to create products.
Speaker Change: And impact to drive excitement far beyond the pure execution of the planet.
Speaker Change: You already mentioned head on a PRA, but other members of our growing athlete team are bringing home more Vincent metals almost on a weekly basis.
Speaker Change: From a new my records at Penn released to the Taser Opera House impressive victory at Smiths record at depressed alone a marathon.
Speaker Change: The ESPN Tech and Perm Selden's respective tournament wins on play and metrics and to Houston.
Martin Hoffmann: Another example was our global meeting where we brought our teams together a few weeks ago to present our new products for spring 2025. Our team created a runway show that would have easily turned heads at any major fashion event and ignited an unimaginable level of energy for our future apparel business. This will certainly be felt by our wholesale partners when we share it with them in the coming weeks. The energy in the different teams shows the power of bringing together a diverse set of people, each with an individual mission, behind a common goal to display the ultimate embodiment of teamwork. Team, we are really grateful for all your great work.
Speaker Change: Another example of our global meeting, let me brought our teams together a few weeks ago.
Speaker Change: And our new products for spring 2025.
Speaker Change: Our team created a runway show the votes have easily turned heads at any major fashion event in ignite.
Speaker Change: Unimaginable level of NFC or future power business.
Speaker Change: This will certainly be felt by our wholesale partners when we share it with them in the coming weeks.
Speaker Change: The NFC and the different teams. So it's the power of bringing together a diverse set of people each business individually mission behind the coming call to display the ultimate embodiment of teamwork.
Speaker Change: Team, we are really grateful for all your Craig Burke.
Martin Hoffmann: With that, let me move on to providing a more in-depth review of our Q1 results. We had an exceptional Q1, which was ahead of our expectations. Caspar mentioned it, but it's worth repeating.
Speaker Change: With that let me move on to providing a more in depth review of our Q1 results.
We had an exceptional Q1, which was ahead of our expectations.
Speaker Change: Kept dimension it but it's worth repeating for the <unk>.
Martin Hoffmann: For the first time in history, we exceeded 500 million Swiss francs in net sales in a single quarter. A nice milestone. Net sales for the quarter reached 508.2 million Swiss francs, growing 20.9% year-over-year. As expected and discussed on our call in March, this includes considerable FX translation impacts from the conversion to our reported currencies with, on a constant currency basis, on the group by 29.2% in the first quarter of 2024. This growth is supported by the strong consumer demand that we have seen across all our channels and in the GOP.
Speaker Change: Time in history, we exceeded 500 million Swiss francs in net sales in a single quarter.
Speaker Change: A nice milestone.
Speaker Change: Net sales for the quarter reached $508 2 million Swiss francs growing 29% year over year.
As expected and discussed on our call in March. This includes considerable FX translation impacts from the conversion to our reported currency Swiss francs.
Speaker Change: On a constant currency basis grew by 29, 2% in the first quarter of 2020 for.
Speaker Change: This growth is supported by the strong consumer demand that we have seen across all our channels and geographies.
Martin Hoffmann: The majority of growth has again come from the strength of our direct-to-consumer channel, resulting in a significant increase over our D-to-C mix by almost 500 basis points, from 32.6% in Q1'23 to 37.5% in Q1'24. D2C net sales grew by 39% versus the prior year period, contributing 190.5 million Swiss francs to our top line. Currently neutral, growth was even higher than that, at 48.7%. We continue to successfully optimize and expand our digital ecosystem. Caspar has already mentioned the expansion of our digital marketplace at Zalando.
Speaker Change: The majority of growth has again come from the strength of our direct to consumer channel, resulting in a significant increase of our DTC mix by almost 500 basis points.
Speaker Change: From 32, 6% in Q1 dollars 23 to 37, 5% in Q1 24.
Speaker Change: <unk> net sales grew by 39% versus the prior year period, contributing $190 5 million Swiss francs, So our top clients.
Speaker Change: Currency neutral growth was even higher than that at 48, 7%.
Speaker Change: We continue to successfully optimize and expand our digital ecosystem.
Speaker Change: <unk> already mentioned the expansion of our digital marketplace. That's Alonso in.
Martin Hoffmann: In Q1, we also launched our first commercial app, which is now available across the globe and which will allow for the most intimate customer relationship across all of our digital outlets. The app serves as a key pillar in our digital strategy to further enhance the customer experience, offer more personalized offerings, and ultimately drive loyalty and deeper customer value.
Speaker Change: In Q1, we also launched our first commercial App, which is now available across the globe and which will allow for the most intimate customer relationship across all of our digital outlets.
Speaker Change: The <unk> is a key pillar in our digital strategy to further enhance the customer experience more personalized offerings and to ultimately drive loyalty and deeper customer value.
Martin Hoffmann: With that, we are also investing in our membership program. We have tripled the number of members in each of the past two years but still have a huge potential to increase the share and value of our customers that connect more closely with us through this channel. As our growing own retail network becomes a more important part of our D2C ecosystem, we have a strong focus on a seamless omni-channel experience across all customer touchpoints, consistently meeting the customer in whichever environment they are in. Wholesale growth also grew by 12.2% year over year, reaching 317.7 million Swiss francs in the first quarter. On a constant currency basis, wholesale growth was 19.8%.
Speaker Change: With that we are also investing in our membership broker we have tripled the number of members in each of the past two years, but still have a huge potential to increase the share value of our customers that connect more closely with us on through just chunghwa.
Speaker Change: As our growing on retail network becomes a more important part of our DTC ecosystem. We have a strong focus on a seamless omnichannel experience across all customer touch points consistently meeting the customer in whichever environment. They prefer.
Speaker Change: Also grew by 12, 2% year over year, reaching $317 7 million Swiss francs, and the first quarter.
Speaker Change: On a constant currency basis wholesale growth was 19, 8%.
Martin Hoffmann: As previously discussed on our last call, this slightly more modest Q1 growth rate in the wholesale channel was expected and very much in line with. In EMEA, the closure of a number of non-strategic doors allows us to focus on the premium performance position of. And number two, in Q1 last year, our wholesale revenues were helped by the initial sell-in into large new key account partners, which are now driving strong, controlled sell-out growth. The same overall dynamics discussed above are, of course, visible when considering our net sales performance by region. Storage in EMEA grew by 6.1% to reach 126.2 million Swiss francs in Q2. On a constant currency basis, growth was 10.4%.
Speaker Change: As previously discussed on our last call. This slightly more modest Q1 growth rate in the wholesale channel was expected and very much intentional.
Speaker Change: In EMEA the closer of a number of non strategic doors allows us to focus on the premium performance position of the brand and.
Speaker Change: And number two in Q1 last year, our wholesale revenues were helped by the initial sell in into large new key account partners, which are now driving strong controls sellout growth.
Speaker Change: The same overall dynamics discussed above are of course visible when considering our net sales performance by region.
Speaker Change: Starting in EMEA, which grew by six 1% to reach $126 2 million Swiss francs in Q1.
Speaker Change: On a constant currency basis growth was 10, 4%.
Martin Hoffmann: While the stock closures led to a temporary reduction of our wholesale sales in the Dove region, D2C growth in the respective markets has accelerated, and we continue to see strong growth in all other EMEA markets. The strength of our D2C business in EMEA continues to be exceptionally strong, and it strongly validates our strategic priorities in the region. This is evident from the very strong start we have had in our new retail store in Berlin but also significant traction and growth in some of our still nascent markets, such as France, Spain, and Italy, largely driven by our D2C challenge.
Speaker Change: While the store closures led to a temporary reduction of our wholesale sales and the Dutch reaching GTS CV growth in their respective markets has accelerated and we continue to see strong growth in all other EMEA markets.
Speaker Change: The strength of our DTC business in EMEA continues to be exceptionally and.
Speaker Change: Strongly validates our strategic priorities and to reach.
Speaker Change: This is evident from the very strong start we have had in our new retail store in Berlin, but also significant traction and growth in some of our still nascent markets, such as France, Spain and Italy.
Speaker Change: <unk> driven by our D to C Chandra.
Martin Hoffmann: Our America's business also started off strongly in Q1, and demand for the brand remained high. In comparison to a prior year period that was elevated as a result of the initial selling into some of our key accounts, net sales in the region grew by 22% year-over-year to $329.6 million. The underlying constant currency growth was 30.4%.
Speaker Change: Our Americas business also started off strongly in Q1 and demand for the brand remains high.
Speaker Change: Comparison to a prior year period that was elevated as a result of the initial sell in into some of our key accounts net sales into reach improved by 22% year over year to $329 6 million Swiss francs.
Speaker Change: The underlying constant currency growth was 34%.
Martin Hoffmann: While we again had quite significant FX translation impacts in Q1, we expect the translation impact to be less pronounced during the remainder of 2024 if the current US dollar-Swiss franc spot rate remains unchanged. Caspar mentioned the run account success in the U.S., in particular. We are very pleased to continue to observe increased brand awareness in our core communities, converting to high quality demand and exceptional sellout strength in our strategic focus area. While the vast majority of our America's business is from the United States, we continue to gain momentum in less than a month.
Speaker Change: But we again had quite significant FX translation impacts in Q1, we expect the translation impact to be less pronounced during the remainder of 2024.
Speaker Change: The quarter in U S dollar Swiss franc spot rate persists.
Speaker Change: Tessa mentioned <unk> success in the U S in particular.
Speaker Change: We're very pleased to continue to observe the increased brand awareness in our core communities converting to a high quality demand and exceptional sellout strengths in our strategic focus areas.
Speaker Change: While the vast majority of our Americas business is from the United States, We continued to gain momentum in Latin America.
Martin Hoffmann: Our sales in Brazil, for example, doubled compared to Q1 2020. We also see incredible momentum in the Asia-Pacific region, which, for the first time in our history, made up for more than 10% of our oil ball. Growth of 68% and 0.6% compared to the prior year period led to net sales of 52.4 million CHF in Q3. On a constant currency basis, growth was at an amazing 90.7% year-over-year. With the unprecedented demand levels across the region, it is difficult to call out a specific highlight. But if I had to pick one, it would be the acceleration we are seeing in Japan.
Speaker Change: Our sales in Brazil for example doubled compared to Q1 2023.
Speaker Change: We're also seeing incredible momentum in the Asia Pacific region, which for the first time in our history made up for more than 10% of our overall business.
Speaker Change: Growth of 68.
Speaker Change: 6% compared to the prior year period led to net sales of $52 4 million Swiss francs in Q1.
Speaker Change: On a constant currency basis growth was at an amazing 97% year over year.
Speaker Change: With the unprecedented demand levels across the region. It is difficult to call out the specific highlights, but if I had to pick one it would be the acceleration we're seeing in Japan.
Martin Hoffmann: If you've been to Tokyo recently and visited our store, you would know what we are talking about. The store alone has more than doubled net sales year over year, a true testament to the brand heat in the region and the success of our own retail execution. Turning to our Performance by Product category, net sales from shoes grew by 21% to 484.7 million Swiss francs in the first quarter. As we have already alluded to,
If you've been to Tokyo recently visited our store you wouldn't know what we are talking about store alone has more than doubled net sales year over year.
Speaker Change: A true Testament to that brand heat in the region and the success of our own retail executions.
Speaker Change: Turning to our performance by product category.
Speaker Change: Net sales from shoes grew by 21% to $484 7 million Swiss francs in the first quarter.
Speaker Change: As already alluded to there.
Martin Hoffmann: We're very happy with the fact that our performance running vertical has contributed to the maturity of year-over-year growth. The launch of CloudMonster2 has continued the incredible performance of this highly successful franchise. With the upcoming launches of the CloudRunner 2 later this week and the CloudSurfer Next in late summer, we have a strong pipeline of innovation to come in our running lineup that will allow us to continue to win markets. In our performance all-day category, the cloud tilt has exceeded our expectations, and demand is significantly higher than supply. Net sales growth in the parallel was 16.7% year over year, resulting in 19.7 million Swiss francs for the first quarter.
Speaker Change: We're very happy with the fact that our performance running vertical has contributed the majority of the year over year growth.
Speaker Change: The launch of the cloud Monster has continued the incredible performance of this highly successful franchise.
Speaker Change: With the upcoming launches of the cloud runner. Two later this week and the cloud server next in late summer with a strong pipeline of innovation to come in our running lineup that will allow us to continue to win market share.
Speaker Change: And our performance all that category the cloud tilt has exceeded our expectations and demand is significantly higher than supply.
Speaker Change: Nevertheless grows and the power of about 16, 7% year over year, resulting in $19 7 million Swiss francs for the first quarter.
Martin Hoffmann: The underlying demand was significantly stronger, exemplified by our DTC channels, where apparel grew at a much faster rate than shoes, albeit on a much smaller base. Also, as announced, we have updated the sizing on the majority of our collection to more consistently meet and deliver the right fit for our global customers. In the interest of having consistent sizing offers in store, we decided to take back some items from some of our wholesale channel partners, resulting in a one-time correction to our reported net sales.
Speaker Change: The underlying demand was significantly stronger exemplified by our DTC channels, where apparel accrue at a much faster rate than shoes, while bay off a much smaller base.
Speaker Change: As announced we have updated the sizing on the majority of our collection to more consistently meet and delivered a right fit for our global customers.
Speaker Change: In the interest of having consistent sizing offers in store, we decided to take back some items from some of our wholesale channel partners.
Speaker Change: Solving in a one time correction to our reported net debt figure.
Martin Hoffmann: With the high D2C demand and confidence in our new apparel product lineup, we expect growth rates to continue to accelerate significantly from here for the remainder of the year. By driving strong sales growth, we are also able to significantly increase our cross-profit. The higher net sales mix from the strong margin D2C business compared to the prior year, as well as the progress we made to manage our inventory more tightly, allowed us to reach a very strong cross-profit margin of 59.7%, up from 58.3 percent in Q1. Looking down the P&L, SG&A expenses excluding share price compensation were 48.8% of net sales in Q1, increasing slightly from 47% in the prior year period.
Speaker Change: With the high DTC demand and confidence in our new apparel product lineup, we expect growth rates to continue to accelerate significantly from here, but the remainder of the year.
Speaker Change: While driving strong sales growth, we're also able to significantly increase our gross profit margin.
Speaker Change: Higher net sales mix from the strong March in DTC business compared to the prior year as well as the progress we've made to manage our inventory more tightly allowed us to reach a very strong gross profit margin of 59, 7%.
Speaker Change: From 58, 3% in Q1 'twenty three.
Speaker Change: Looking down the P&L SG&A expenses, excluding share based compensation were 48, 8% of net sales in Q1, this year, increasing slightly from 47% in the prior year period.
Martin Hoffmann: The increase is primarily a result of higher marketing expenses as a percent of. While we had a relatively low investment level in brand building in Q1'23, we increased our investments in upper funnel brand building campaigns and partnerships in the most recent quarter. We view the strategic focus as very important to support the next growth and the long-term health and success of the organization. And you can expect to see even larger activations as we approach the Olympics and other big brand moments this year. The resulting adjusted EPDA margin for Q1 was 15.2%, up from 14.5% in the first quarter of 2020.
Speaker Change: The increase is primarily the result of higher marketing expenses as a percent of net sales.
While we had a relatively low investment level in brand building in Q1, 'twenty three we increased our investments in upper funnel brand building campaigns and partnerships in the most recent quarters.
Speaker Change: <unk> strategic focus is very important to support the next growth phase and the long term health and success of the upfront.
Speaker Change: And you can expect to see even large activations as we approach the Olympics and other big Brent moments this summer.
Speaker Change: Resulting adjusted EBITDA margin for Q1 was 15, 2% up from 14, 5% in the first quarter of 2023.
Martin Hoffmann: This number came in ahead of our expectations and puts us in a very good position heading into the remaining nine months of the year. As anticipated and communicated at our full-year results in mid-March, the reversal of the U.S. dollar-Swiss franc FX rate from its low point at the end of December means our U.S. dollar balance sheet assets were revalued at a significantly higher rate at the end of The result is a sizable unrealized FX gain in Q1 and supports a very strong and record quarterly net income of $91.4 million.
Speaker Change: This number came in ahead of our expectations and puts us in a very good position heading into the remaining nine months of the year.
Speaker Change: As anticipated and communicated that our full year results in mid March the reversal of the U S dollar Swiss franc FX rate from its low point at the end of December means our U S. Dollar balance sheet assets were revalued at a significantly higher rate at the end of March.
Speaker Change: The result is a sizeable unrealized FX gain in Q1 and supports a very strong and record quarterly net income of $91 4 million Swiss francs.
Martin Hoffmann: Which brings me to our balance sheet. Capital expenditures were 9.2 million Swiss francs in Q1'24, or 1.8% of net sales, even slightly down in absolute terms from the 9.7 million Swiss francs in the prior year period.
Which brings me to our balance sheet capital expenditures were $9 two months with strengths in Q1, 'twenty four or one 8% of net sales even slightly down in absolute terms from the $9 7 million Swiss francs in the prior year period.
Martin Hoffmann: As previously mentioned, this will begin to increase again in the coming quarters as a result of higher expenses in connection with our continued retail store role. On the inventory side, we continue to actively manage our inventory and decouple our inventory growth from our top-line expansion, which drives efficiency in our working capacity. Our inventory position has remained broadly stable versus the year-end and stood at 365.3 million Swiss francs at the end of Q1.
Speaker Change: As previously mentioned this will begin to increase again in the coming quarters as a result of higher expenses in connection with our continued retail store rollout.
Speaker Change: On the inventory side, we continued to actively manage our inventory and decoupled, our inventory growth from our top line expansion, which drives efficiency in our Bracken capital.
Speaker Change: Our inventory position has remained broadly stable versus two.
Speaker Change: Year end and stood at 365 3 million Swiss francs at the end of Q1.
Martin Hoffmann: Finally, as a result of our strong operating cash flow of 81 million CHF, we have further increased our cash position from 494.6 million at the end of 2023 to 584.6 million CHF at the end of Q1 2024. With that, I would like to look ahead to the remainder of the year. We are all extremely excited for the Summer Olympics, which are less than two months away. Taking place close to On's home, the road to Paris and the games themselves offer a great opportunity for us to build our credibility in and beyond the running world.
Speaker Change: Finally.
Speaker Change: As a result of our strong operating cash flow of 81 million Swiss francs.
Speaker Change: As far as the increased our cash position from $494 6 million at the end of 2023 to $584 6 million Swiss francs at the end of Q1 'twenty four.
Speaker Change: With that I would like to look ahead towards the remainder of the year.
Speaker Change: We are all extremely excited for the summer Olympics that are less than two months away.
Speaker Change: Taking place close to <unk> home to road to Paris, and the games themselves offer a great opportunity for us to build our credibility in and beyond the running road.
Martin Hoffmann: As mentioned, we are planning to open a second store in Paris, this time on the Champs-Élysées. During the Olympics, our two stores will serve as hubs for the running community to connect and move. Many of our athletes have already qualified or been nominated by their respective countries.
Speaker Change: As mentioned, we are planning to open a second store in Paris. This time on shops LLC.
Speaker Change: During the Olympics, our two stores smooth surface hubs for the running community to connect and move.
Speaker Change: Many of our athletes have already qualified or be nominated by their respective countries.
Martin Hoffmann: We expect over two dozen ON athletes to hit the starting lines across track, triathlon, tennis, and, of course, the marathon. And we are ready to support them with our fastest, most innovative, and most sustainable performance products. Until we get there, we will tell the inspiring stories of our athletes on their journeys towards what is, for many, the biggest moment in their careers. For Dominic Lubalu, a refugee from South Sudan, it is the heartwarming story of a multi-year fight for the ultimate goal of representing Switzerland in Paris this summer, and the legal battle to make it possible, which is still ongoing.
Speaker Change: We expect over two dozen on athletes to hit starting lines across trek triathlon tenants and of course the medicine.
Speaker Change: And we are ready to support them with our fastest most innovative and most sustainable performance products yet.
Speaker Change: Until we get there we will tell the inspiring stories of our athletes on toric journeys towards what is for many the biggest moment in decades.
Speaker Change: For Dominic Laboratory, a refugee from South Sudan.
Speaker Change: It is the heartwarming story of a multi year fight towards the ultimate goal to percent, Switzerland in Paris. This summer.
And the legal battle to make it possible.
Speaker Change: Which is still going on.
Martin Hoffmann: Outside of running, we will also continue to focus on further building On's brand awareness to allow us to reach new heights. To do this, we know we must scale existing and new audiences globally with large brand moments, which includes collaborating and partnering with meaningful individuals in the broader sports and fashion. One example is our recently announced collaboration with FKA Twigs that Caspar mentioned.
Speaker Change: Outside of running we will also continue to focus on further building on brand awareness to allow us to reach new highs.
Speaker Change: To do this we know we must scale existing and new audiences globally with large Brent moments, which includes collaborating and partnering with meaningful individuals into products sports and fashion space.
Speaker Change: One example is our recently announced collaboration with FK tweaks that Kasper mentioned.
Martin Hoffmann: And in a few weeks, we will announce a further big global partnership with an individual that will further build our credibility and awareness with our target. With everything else we have planned for the next few months, we are fairly certain that the world will be talking about ON more than ever before. Regarding our business and finances, we are optimistic and excited about our momentum and pipeline and what is in front of us for the rest of the year.
Speaker Change: And in the few weeks, we will announce a for us a big global partnership with an individual that will further build our credibility and awareness with our target communities.
Speaker Change: With everything else, we have planned for the next few months, we are fairly certain that both will be talking about on more than ever before us.
Regarding our business and financial outlook, we are optimistic and excited about our momentum and pipeline and what is in front of us for the rest of the year at the same time, we remain prudent in the way we plan for the future always taking into account the dynamic macroeconomic and consumer environment.
Martin Hoffmann: At the same time, we remain prudent in the way we plan for the future, always taking into account the dynamic macroeconomic and consumer environment. The continued high demand for the On brand across the globe and the strong order book for the second half of the year, however, give us a lot of confidence to reiterate our full year constant currency net sales growth rate expectation of at least 30%. Considering the FX movement over the past week since our full year reporting, this implies an increase to our reported net sales expectation from 2.25 billion Swiss francs to at least 2.29 billion Swiss francs at the current spot level.
Speaker Change: The continued high demand for the <unk> brand across the globe and the strong order book for the second half of the year, However, give us a lot of confidence to reiterate our full year constant currency net sales growth rate expectation of at least 30%.
Speaker Change: Considering the FX movements over the past week since our full year reporting.
Speaker Change: This implies an increase to our reported net sales expectation from two to 5 billion Swiss francs to at least 229 billion Swiss francs at current spot rates.
Martin Hoffmann: As you have also seen in today's release, we are retaining our cross-profit margin guidance for 2024 at around 60% and continue to expect an adjusted EBDA margin for the full year in the range of 16 to 16.5%. We dream on. We're ready to bring our own fire to Paris and beyond. It will be an exciting summer.
Speaker Change: As you have also seen in today's release, we are retaining our gross profit margin guidance for 2024 at around 60% and continue to expect an adjusted EBITDA margin for the full year in the range of 16 to 16, 5%.
Speaker Change: We turn them on.
Speaker Change: We're ready to bring our own fire to Paris and beyond.
Speaker Change: It will be an exciting summer.
Martin Hoffmann: We wish all of you a great time and look forward to welcoming you back in mid-August for our half-year-long reunion. With that, Caspar, Marc, and I would like to open up the session to your questions. Operator, we are ready to begin the Q&A session. At this time, I would like to remind everyone that in order to ask a question, simply press the star then the number one on your telephone keypad.
Speaker Change: All of you a great time and look forward to welcome you back in mid August for our half year one results.
Speaker Change: With that Casper and Bakken I would like to open up the session to your questions. Operator, we are ready to begin the Q&A session.
At this time I would like to remind everyone in order to ask a question simply press Star then the number one on your telephone keypad.
Dennis: For the first questions from the line of Jay Sole with UBS, please go ahead. Great, thank you so much.
Speaker Change: Our first question is from the line of Jay sole with UBS. Please go ahead.
Jay Daniel Sole: A lot of great information in the prepared remarks. Could you talk a little bit more about Asian growth? Martin, you mentioned Japan. There is a lot of momentum.
Jay Daniel Sole: Great. Thank you so much.
Jay Daniel Sole: So a lot of great information in our prepared remarks could you talk a little bit more about Asia growth. Martin you mentioned, Japan, a lot of momentum in Japan, but what about China and some of the other regions in Asia can you just talk about how the brand is building momentum in those other regions. Thank you.
Martin Hoffmann: Yes, welcome also from my side. Thank you for the question, Jay.
Martin: Yes, and welcome also from my side. Thank you for the question Jay.
Martin Hoffmann: So, I think we're very proud that for the first time, we surpassed the 10%, as we have already stated. I think it is an important landmark for us. And we also stated that we want to bring basically China alone to over 10% over the next years. And we feel we're well on track. So, China is going according to plan. We actually just launched a new live streaming studio.
We're very proud that for the first time with a path that the 10% as already stated I think it is.
Martin: <unk> is an important landmark proppant. We also stated that we want to bring in basically China alone and to over 10% over the next year and we feel we're well on track, though China is going according to plan, we actually just launched a new light reading studio.
Martin Hoffmann: It's taking more and more share from our D2C sales as well. So, we're really going with the market there and continuing to elevate the brand within the digital environment. We'll be at roughly 30 own doors, a little bit more by the end of the year.
Speaker Change: More and more share from our DTC sales as well.
unknown: Really going with the market there and elevate continue to elevate the brand within the digital environment.
elevate: We'll be at roughly 31 doors, a little bit more by the end of the year. So we're also continuing that expansion about demand is great. We're talking with one of the key.
Martin Hoffmann: So, we're also continuing that expansion. Demand is great, and we're talking with one of the key small partners as well about bringing a larger flagship store, so the first one in China, to life, which will be an important milestone for us.
Mall partners: Mall partners as well and bringing at larger flagship store. So the first one is on the slide.
It will be an important milestone for us and we're very happy with what we're seeing in China, Japan is extraordinary.
Martin Hoffmann: We're very happy with what we're seeing in China. Japan is extraordinary. It's well ahead of our expectations. We see a lot of tourism going into Japan as well. And there is a benefit from the currency that we're seeing, but not only our own store, it's doing really well, also our hotel doors, and D2C is ahead of the plan. And then also Australia, we're very happy with where we stand. So, Asia Pacific is really a super, super positive picture for us.
Mall partners: It's well ahead of our expectations and we see a lot of tourism going into Japan, as well and there is.
Speaker Change: Benefits from from that from the currency and that we're seeing that not only our own store.
Australia: Our wholesale doors in DC is that of the plan and then also Australia, there they're very happy.
unknown: And we refurbish them So Asia Pacific is really a super Super positive factor for us.
Terrific: Terrific and if I can ask one more you mentioned the cloud chart has exceeded expectations can you just talk about how the product assortment and the sales within the product assortment continues to diversify beyond the cloud and contact center other.
Terrific: Other styles can you just maybe give us an update on where that stands right now. Thank you.
Martin Hoffmann: Yeah, happy to jump in here. Look, diversification has been a big game for us for a long time. And we're actually very happy that we are able to diversify our software across categories. But then, within categories, we're not dependent on a few stats, almost to the opposite, where we're now actually focusing more on building franchises. If you want to be a little bit self-critical, you probably have too many product brands, and consumers cannot remember all of them.
Speaker Change: Yeah happy to jump in here.
Speaker Change: Sure.
Rajiv: Diversification has been a big gain for us for a long time and Rajiv very happy that we are able to diversify our assortment across categories, but then within category.
Rajiv: We're not dependent on a few cents.
Rajiv Kumar: Almost to the opposite where we are now focusing more on building franchises.
Rajiv Kumar: Lately.
Rajiv Kumar: Critical we probably have too many products brands and consumers.
Rajiv Kumar: Cannot remember all of them. So that's why we said we were in a for example in running push months franchise to run the franchise into the surgical franchise on the Alaska side, you mentioned, the pill that flipping blown away.
Martin Hoffmann: So that's why we said we wanted to, for example, in running, push the Monster franchise, the Runner franchise, and the Surfer franchise. On the lifestyle side, you mentioned the tilt, definitely being blown away by the response. We had an early indication of how good it could be with our living collaboration that focused on that. But if we had more product, we would definitely be able to sell even more. With that, we now have a really balanced portfolio.
Lilly: By the response, we had an early indication of how good it could be with ever Lilly collaboration that focus on that.
Speaker Change: But if we had more product.
Speaker Change: To sell even more of the pill.
Speaker Change: With that.
Lilly Collaboration: Lastly, we now have a really balanced portfolio and obviously cloud mobile and also larger franchise that order standouts.
Martin Hoffmann: Cloud Nova and also the Roger Franchise are other standouts to be mentioned. In the interest of taking as many questions as we can today, please limit yourselves to one question. For your next question from the lineup, Tom Nikic with Wedbush, please go ahead.
Lilly Collaboration: You mentioned.
Lilly Collaboration: In the interest of taking as many questions as we can today, please limit yourselves to one question.
Dennis: In the interest of taking as many questions as we can today, please limit yourselves to one question. Your next question from the lineup is Tom Nikic with Wedbush. Please go ahead.
Speaker Change: Your next question is from the line of Tom Nick <unk> with Wedbush. Please go ahead.
Speaker Change: Hey, thanks, everyone.
Tom Nikic: Thanks for taking my question.
Speaker Change: I wanted to ask about.
Speaker Change: Maybe.
Speaker Change: New channels of distribution.
Speaker Change: Foot locker JD sports et cetera.
Speaker Change: I know you mentioned briefly.
Speaker Change: Briefly in the prepared remarks, but just.
Speaker Change: How how.
Speaker Change: How is the brand performing in those new channels of distribution and can you just give us an update on the door counts for those retailers.
Tom Nikic: Yes, I want to basically take this question to one level higher as well to give everyone a bit of an overview of how our business is changing. I think what we're seeing is that with those key accounts coming on board, they're playing a more and more important role in our overall sales. And what we're very happy with is that we're able to sell the product that we want to sell in those stores. So if you look, for example, at DSG, one product is responding really, really well. And this is, in the end, what's also reflected in the runner's count that we already mentioned.
Speaker Change: Yes, so one I wanted to basically take this question to one level higher results give everyone a bit an overview of how our business is changing I think what we're seeing is that with those key accounts coming on board.
Speaker Change: Playing a more and more important role in our overall sales.
Speaker Change: But we're very happy with is that they are able to sell the products that we want to sell in those stores. So if you look for example at the achieved in one product is resonating really really well.
Speaker Change: It is India and what's also reflected on the wonders of accounts that we already mentioned.
Martin Hoffmann: So we're catering to, and we're learning to cater more to these bigger doors where we're performing very well. At the same time, we want to continue to be great partners with the field accounts and with front specialty. And so we're investing a lot in warehousing capabilities, in being able to fulfill reorders, which is very, very important for those businesses so that we can really have the product in the channel when the consumer wants it.
Speaker Change: We're catering and we're learning to cater more to this and Baker dorf better performing very well at the same time, we want to continue to be great partners with if the field accounts in different specialty and so we're investing a lot also in our housing capability on being.
Baker dorf: <unk> able to fulfill reorders, which is very very important for those businesses. So that we can really have the product in the channel when the consumer wants it and so we're right in the process basically, especially in the U S and seeing a little bit of that shift overall, the number is very very positive demand.
Martin Hoffmann: And so we're right in the process basically, especially in the US, in seeing a little bit of that shift. Overall, the number is very, very positive. So demand is extremely strong, and that's what you see reflected in the overall number. Now, very quickly, number of stores, DSG. We're currently at 220 doors. And by the end of the year, we'll be at 285. We will add those additional 65 stores as part of fall and winter 24, with the selling of the new. Your next question is from the line of Cristina Fernandez with Chelsea Advisory Group.
Speaker Change: Really strong and that's what you see reflected in the overall number.
DSG: With the number of doors DSG, we're currently up to 120 doors and by the end of the year, we'll be at 285.
DSG: And those additional 65 stores.
Alexandra Ann Straton: Are the fall winter 24, with the selling of the new collection.
Alexandra Ann Straton: Okay.
Cristina Fernandez: Your next question is from the line of Cristina Fernandez with the Chelsea Advisory Group. Please go ahead. Good morning.
Alexandra Ann Straton: Your next question is from the line of Cristina Fernandez with Telsey Advisory Group. Please go ahead.
Dennis: Please go ahead. Good morning. I wanted to see if you could talk about
Cristina Fernandez: Good morning, I wanted to see if you can talk about how the order books have been trending in the past couple of months since we last spoke particularly in the back half last call I think probably call you mentioned that given what the order book trend that there could be upside to the outlook for the year.
Cristina Fernandez: Is that still the case any color there would be helpful. Thanks.
Martin Hoffmann: Thanks, Cristina. Let me maybe go a level higher here, but I'll come back to your specific number.
Kristina: Yeah. Thanks, Kristina, let me maybe.
Kristina: The level of higher here, but come back to your tier specific number.
Martin Hoffmann: So, as we had mentioned in the prepared remarks, we really had a great start to the year, and especially our D2C channels have seen really strong growth globally. And at the same time, we were fully in a position to fulfill that demand from a warehousing inventory perspective. If you look at our Q1 results, they also strongly confirm the pillars of growth that we outlined at the investor day last, so from winning and running to the performance of our own retail stores to apparel.
Kristina Smith: So as we have mentioned in the prepared remarks, we really had a great start into the year and especially our DTC channel testing really strong growth globally.
Kristina: And at the same time.
Kristina: We were fully in a position to fulfill that demand.
Kristina: The balance of inventory perspective.
Kristina: If.
Kristina: If you look at our Q1 results. They also strongly confirmed the pillars of growth that we outlined at the Investor day last year.
Kristina: So from winning and running to the performance of our own retail stores to apparel.
Martin Hoffmann: And now, over the next month, we expect really big trend moments, and we are super excited about this. So if you look ahead into the next for the rest of the year, then really, that big bang in summer is our focus. So really, the month of June, July, and August around the Olympics, this is where we will focus also when it comes to our marketing budget. So it's less about Q2, and Q3.
Kristina: And now over the next months, we we expect really big trend moments and.
unknown: We are super excited about this so if you look ahead into the next for the rest of the year, then really that big Bang in summer is our focus so really the month of June July August around the Olympics. This level of focus on also when it comes to our marketing budget.
Kristina: So it's less about Q2 Q3.
Martin Hoffmann: It's really, during summer, our goal is to elevate the brand to a new level. If we look at how we started into the second quarter, then that start was good. So the demand for the brand remains high. Marc was just sharing that.
Speaker Change: Really during summer our goal is to elevate the brand to a new level.
Martin Hoffmann: So across all our different channels, and especially some key stars, but also Caspar, as mentioned earlier, they have very strong demand, partially even higher than before. And so if we now factor in also the transition that we are doing on the warehouse side, this puts us partially also in a challenging position to have the right product at the right customer at the right time. And this is clearly a focus for us in the weeks to come.
Speaker Change: If.
Speaker Change: If we look at how we started into.
Speaker Change: The second quarter than that that start with Scott.
Speaker Change: Demand for the brand remains high Markwest was just sharing.
Speaker Change: <unk> debt so across all our different channels.
Speaker Change: And.
Markwest: Especially some key staff, but also customer mentioned earlier they have.
Markwest: Very strong demand, partially even higher than expected.
Markwest: And so if we know fact I noted the transition that we're doing on the warehouse side.
Customer: This puts us partially also in a challenging position to have the right product at the right customer at the right time and it is clearly a focus for us in the in the weeks to come.
Martin Hoffmann: But if we look at our order book for the second half of the year, and that growth is beyond the growth that we have in our guidance, we expect strong demand to continue to grow and be there. And this is fully behind the guidance that we have given and confirms the strong outlook. Your next question is from the line of Aubrey Tianello with BNP Paribas. Please go ahead. Thanks for taking the questions. I wanted to touch on the Americas region.
Speaker Change: But if you look at our order book for the second half of the year.
Markwest: And.
Markwest: That growth is beyond the growth that we have in our in our guidance.
Markwest: We expect strong demand to continue to grow and be there and this is fully behind the guidance that we have given and confirms the strong outlook there.
Aubrey Leland Tianello: Your next question is from the line of Aubrey Tianello with BNP Paribas. Please go ahead.
Al <unk>: Your next question is from the line of Al <unk> with BNP Paribas. Please go ahead.
Al <unk>: Yeah.
Al <unk>: Thanks for taking my questions.
Al <unk>: I wanted to touch on the Americas region, and the strength you saw there in <unk> is there any more color you can provide on enel Americas performed in <unk>.
Al <unk>: Of the channels.
Al <unk>: Is there any change to what youre seeing or just how youre thinking about the Americas compared to a quarter ago.
Al <unk>: For the rest of the year.
Al <unk>: Yes.
Martin Hoffmann: So I think important for what Mark said at the beginning. We are seeing basically a change in how our business in the U.S. is built and what is the share of key accounts, what is the share of field accounts, and what is the contribution of key accounts also in the online business. And, As I shared, the demand for the brand across all the different channels remained super high. And this is, I think, the important piece that demand is there.
Al <unk>: So I think important for is what Mark said in the beginning.
Al <unk>: We we are seeing that basically it.
Mark Smith: Change in how our business in the U S has built and what is the share of key account what is the share of <unk>.
Speaker Change: The accounts.
Mark Smith: What is the contribution of key account holder in the online business.
Mark Smith: And.
Martin Hoffmann: And now we are fully focused on executing in this new environment and making sure that we bring the right product to the right customer through the right channel with the goal of growing our D2C channel stronger than our wholesale channel, as we outlined this at investor day. But really, we are very confident in what we are seeing in the US and some of the big brand moments that we have planned over the next month. They will further elevate our brand awareness in the US, especially. Your next question is from the line of Alex Straton with Morgan Stanley. Please go ahead.
Speaker Change: As <unk> shared the demand for the brand across all the different channels.
Speaker Change: Remains Super high end business.
Speaker Change: The important piece that the demand is there and now we are fully focused on.
Speaker Change: Executing in this new environment and to make sure that we bring the right product to the right customer through the right channel.
Speaker Change: With the goal of growing our D to C channel.
Speaker Change: Stronger than our wholesale channel as we outlined in the in the Investor day, but.
Speaker Change: Really we are very confident on what we are seeing in the U S and some of the big front moments that we have planned over the next month.
Speaker Change: Will further elevate our hour.
Speaker Change: And awareness in the U S, especially.
Speaker Change: Your next question is from the line of Alex Stratton with Morgan Stanley. Please go ahead.
Alexandra Ann Straton: Thanks, this is Chad Burnell on behalf of Alex.
Trevor: Thanks. This is Trevor now on for Alex Today, and can you first talk about what the cadence of sales was within the quarter and then any color on trends you saw in April.
Trevor: Yes.
Speaker Change: Yeah.
Martin Hoffmann: I think we so we already elaborated on on now in the last two in the last two comments really on how we're looking at the next couple of months really want to reiterate how important summer is for us I think we we're gonna we're focusing on bringing new partnerships to life we're focusing on the Olympics a lot and so we're not you know we're really not running our business on a month by month basis we're running it very long term and this summer is a very important and part of that where we aim to take the the brand to to a different level and I think the answer to q1 is then the same and I think we're reporting quarters on the month but basically we're very happy with with how the month has unfolded and it was a good January it was a great February it was a great March so and this has resulted in in the overall result it was not skewed towards a certain month or there's no trend or whatever that you could read into those numbers Your next question is from the line of John Kernan with TD Cowan. Please go ahead. Thanks for taking my question. Congratulations.
Trevor Today: I think we so we already elaborated on the on now in the last two in the last two commentary on how we're looking at the next couple of months really want to reiterate how important summary for US I think we got we're focusing on bringing new partnerships to life, we're focusing on the Olympics, a lot and sell them.
Not really: Not really not in running our business on a month by month basis, we're running at very long term anti summary, very important and part of that where we aim to take the brand to a different level and I think the answer to Q1 has been the same and I think can reporting quarters on the month, but basically they are very happy with how.
Speaker Change: The month has unfolded.
Speaker Change: The January it was a great separate with a great March though and this has resulted in the overall results, but not huge towards the 13 months or there's no trend or whatever that you could read into those numbers.
Speaker Change: Okay.
John David Kernan: Your next question is from the line of John Kernan with TD Cowen. Please go ahead.
Speaker Change: Your next question is from the line of John Kernan with TD Cowen. Please go ahead.
John David Kernan: Thanks for taking my question congrats on all the momentum.
John David Kernan: I just wanted to talk to you the gross margin outlook and when you.
John David Kernan: Gross margin is up about 800 basis points from Q1 2022, how should we think about the gross margin outlook for the remainder of the year and how is the flow.
John David Kernan: Cogs as we get into the back half of the year. Thank you.
John David Kernan: Okay.
Martin Hoffmann: Yeah, thanks for the question, Sean. We were always saying that our business has been operating on our target margin for quite a while already. But in the past, we had many times external factors that basically didn't allow us to report that full margin. And I think Q1 is now a further confirmation of that message.
Sean: Yeah. Thanks for the question Sean.
Speaker Change: We were always saying that our business has been operating on a target margin for quite a while already.
Sean Smith: But that in the past we had many times external effect, that's basically it didn't allow us to to reported for March and I.
Speaker Change: I think Q1 is no further.
Speaker Change: Confirmation of that message and.
Martin Hoffmann: And the upside from last year is clearly driven by the strong D2C performance and the higher mix from the D2C channels that we have. At the same time, as we mentioned on the call, we managed our inventory very successfully over the last 12 to 14 months. So we have less impact from that side, which also had an impact on our Q1 numbers last year. And so our guidance for the full year is to be around 60%.
Speaker Change: The upside from from last year is clearly driven by the strong DTC performance and the higher mix of from the DTC channels that we have been there.
Speaker Change: At the same time.
Speaker Change: We mentioned that on the call.
Speaker Change: We managed our inventory very successfully over the last.
Speaker Change: 12 to 14 months, so we have less impact from from that site, which also.
Speaker Change: Had an impact on our Q1 numbers last year and.
Speaker Change: So our guidance for the for the full year to be around 60%.
Martin Hoffmann: Our long-term goal is to be 60% plus, and I think we showed quarter over quarter that we were operating the business at that level. We have a very high share of full price sales. All our channels are contributing massively to the strong margin, also our new retail channel. So this is a validation of the premium position that the brand has.
Speaker Change: Our long term goal is to be 60% plus.
Speaker Change: I think maybe we show it.
Speaker Change: Quarter over quarter debt.
Speaker Change: We are operating the business on that level, we have a very high share of full price sales.
Speaker Change: All our channels are contributing massively to the to the strong March and also our new retail channel and.
Speaker Change: So this is a validation for the for the premium position that the front half.
Speaker Change: Okay.
Michael Charles Binetti: Your next question is from the line of Michael Binetti with Evercore. Please go ahead.
Speaker Change: Your next question is from the line of Michael Binetti with Evercore. Please go ahead.
Michael Charles Binetti: Hey guys, congrats on a great quarter. Thanks for all the detail on the strategy and the build-out and the long-term outlook.
Michael Charles Binetti: Hey, guys congrats on a great quarter.
Speaker Change: Thanks for all the detail on the strategy and the build out in the long term outlook I wanted to ask you I guess just one small question on the P&L is there any way you can help us size that.
Michael Charles Binetti: I wanted to ask you, I guess, just one small question on the P&L. Is there any way you can help us size the one-time pullback of apparel you mentioned in the management comments and the accounting for that, if that was contract revenue in the quarter? I'm just curious how to think about that.
Speaker Change: The onetime pullback of apparel, you mentioned in the management comments and.
Speaker Change: And the accounting for that.
Speaker Change: The contra revenue in the quarter I'm just curious.
Speaker Change: How to think about that and then could you speak to some of the things that we saw intra quarter there was some.
Michael Charles Binetti: And then could you speak to some of the things that we saw intra-quarter? There was some more volatility than we're used to in some of the near-term metrics around the distribution center, and some questions about that. How is the new distribution center operating? Are there still duplicative costs running in parallel as you continue to ramp that facility? Is there anything you'd call out as a normal cost to expedite deliveries early in the year? Or maybe even if you've seen some instances where you left demand unmet in the quarter?
Speaker Change: More volatility than we're used to in some of the near term metrics around the distribution center and some questions on that how many distribution centers operating are there still duplicative costs running in parallel as you continue to ramp that facility and are there is there anything you'd call out of the normal cost expedite deliveries early in the year.
Speaker Change: Maybe even if you've seen some instances where you left demand on net in the quarter.
Caspar Coppetti: Thanks for your questions, Michael. Let me take the first one on apparel. As you all know, apparel is a huge opportunity for ONM, and we've made great progress. One thing that was holding us back a little bit was that our sizing wasn't fully consistent with what other brands were doing in the market. So what we've done now in the first half of the year, and we'll see a little bit more of that in the second half of the year, we readjusted the sizing and the fit so that it's more consistent, and we're able to capture more, more body types and allow more consumers to come into the on brand also from an apparel side, and that's been very well received. And with that, we've Not-so-well-fitting product with a great fit.
Speaker Change: Thanks for your questions, Michael Let me take the first one on apparel.
Michael: As you all know apparel is a huge opportunity for on and we've made great progress one thing that was holding us back a little bit our sizing wasn't fully consistent with what other brands were doing in the market. So what we've done now.
Speaker Change: In the first half of the year, and we will see a little bit more of that in the second half of the year.
Speaker Change: We readjusted the sizing and the fit so that it's more consistent than we were.
Speaker Change: We're able to capture more.
Speaker Change: More body types.
Speaker Change: Now more consumers to come into the on brand also from the apparel side and Thats been very well received.
Speaker Change: And with that we've helped our retail partners to some degree to exchange.
Retail Partner: Not so well fitting product with great fitting product.
Caspar Coppetti: It's already paying off. We're seeing tremendous success, as you've heard in the remarks, on our own channels, be it our e-commerce or our own retail stores, where apparel has seen a very large lift. We're also seeing lower return rates, and we're seeing some stores still delivering 25% of their revenue. We're very happy about the progress we're making.
Speaker Change: It is already paying off we're seeing tremendous success as you've heard in the remarks.
Speaker Change: In our own channels E.
Speaker Change: Come on or our own retail stores for Arrow has seen.
Speaker Change: A very large list.
Arrow: Lower return rates.
Arrow: We're seeing some stores delivering 25% of furniture.
Arrow: Very happy about the progress we're making there.
Caspar Coppetti: Thank you, Caspar. And I think we shared the numbers in the last quarter, but our pre-book for apparel for the second half of the year is up more than 100%. So this also gives us a lot of confidence about the future product that's coming and how our retail partners are responding. Hey, on the warehouse side, I think the big change we're really going through is the automation of the Atlanta warehouse, which is an ongoing project.
Arrow: Thank you Kathryn and I think we share the number in the last quarter, but our on our pre books for apparel for the second half of the year and are up more than 100%.
Arrow: A lot of confidence.
Arrow: Into the future product that's coming in.
Arrow: Our retail partners.
Arrow: Good.
Kathryn: And on the warehouse side I think the big change really going through the optimization of the Atlanta are our highest which is an ongoing project and so they're very happy to be able to move into the new warehouse, so that double count the facility slowly ramping down and at the same time, we're now running on warehouse and automating the same buyer.
Caspar Coppetti: So we're very happy that we were able to move into the new warehouse. The double count of the facility is slowly ramping down. At the same time, we're now running a huge business out of one warehouse and automating the same warehouse, so this poses a huge challenge to the team, which they're handling very well. Otherwise, we wouldn't have been able to exceed or show you the numbers that we're showing for Q1.
Speaker Change: Also dispose of that.
Speaker Change: A huge challenge to the team, which demonstrating very well otherwise we wouldn't have been able to exceed.
Speaker Change: Or to show you the numbers that we're showing for Q1 and Luckily we have a great partner.
Caspar Coppetti: And luckily, we have a great partner on the US West Coast as well. And so we're balancing some of the order books with LAX. And so I think this is an ongoing process that's happening. On the gross margin, Martin said it, we're quite happy there's not a lot of extraordinary impact there. What might happen is that the product demand that we're seeing that is very, very strong and that we're trying to fulfill in the future might lead to a little bit of air freight, but nothing huge that we're expecting there.
Speaker Change: At the U S West coast as well and so we're balancing.
Speaker Change: The order book.
Speaker Change: Yes.
Speaker Change: And so I think this is this is Dan.
Martin: In an ongoing process that's happening on the gross margin and Martin said it.
Martin: We're quite happy there is not a lot of extraordinary impact there and what what might happen is that the product demand that we're seeing that it's very very strong they're trying to fulfill in the future might be a little bit of airfreight, but nothing huge that we're expecting there and I think outside of the U S.
Speaker Change: Our houses are on a very stable and <unk> area.
Ashley Anne Owens: Our next question is from the line of Ashley Owens with Key Bank Capital Markets. Please go ahead.
Caspar Coppetti: And I think outside of the US, the warehouses are running very stable and happy where we are. Our next question is from the line of Ashley Owens with Key Bank Capital Markets. Please go ahead. Hey, thanks for taking the question. So with new products.
Ashley Anne Owens: Your next question is from the line of Ashley <unk> with Keybanc capital markets. Please go ahead.
Ashley Anne Owens: Hey, Thanks for taking the question, so with new products and overall heavier release cadence.
Ashley Anne Owens: You touched on some of the bigger wholesale partners, but can you just talk about any progress you're seeing with Enbrel specialty and then I'll come back on <unk> for a second I think thanks, great color ways.
Speaker Change: Any plans to capitalize on the better than expected performance there.
Ashley Anne Owens: And the second yes.
Unknown Executive: Yes. So, I mean, luckily, you have more colorways available together with the Loewe collaboration. And so, if you want to upgrade your current cloud fields into a Loewe one, we highly appreciate it. And we will extend the line.
Ashley Anne Owens: Yes.
Speaker Change: So I.
Enbrel specialty: I mean, luckily more color ways available and together with the way the collaboration and one upgrade your current cloud sales into <unk> and we highly appreciate it.
I: And we will extend the line I think if you looked at how we launched product in the past, we always launched with the set of colors and then once deep bring today into the color options at the product gained momentum for us to manage our skus.
Unknown Executive: I think if you look at how we launched products in the past, we always launched with a set of colors and then went deeper into the color options as the product gained momentum to also manage our IT use. So definitely more and more color options that we're trying to And then on the run specialty and and on the field account, I think, again, also going back to some of the comments. When you look at those accounts, reorders and fillings are very, very important, which is a bit different from how key accounts are operating. And we are right now in the process of really expanding our capabilities to be able to fulfill those advance orders very, very quickly. And so that is definitely a challenge in Q1.
Speaker Change: The more and more color options that are attractively.
Ashley Anne Owens: And then on run specialty end and.
Ashley Anne Owens: And on the field accounts I think again also going back to some of the comments.
unknown: When you look at those accounts and Reorders and feelings are very very important and which is a bit different to how key accounts are operating.
Speaker Change: And we are right now in the process of really expanding and capabilities to be able to fulfill and both at once orders very very quickly and so that is definitely a challenge in Q1 and the reason why we need to do that is because demand is there. So we see that the cloud monster specifically is the retina.
Unknown Executive: And the reason why we need to do that is because demand is there. So we see that the Cloud Monster specifically is responding really, really well for the Cloud Monster franchise, growing over 30% with both products combined in one specialty. And we're seeing that we as a brand are continuing to gain share within one specialty overall. Caspar already mentioned that.
Ashley Anne Owens: Nathan we do really well for the club Monster franchise group grew over 30% and with both and products combined in one specialty.
Ashley Anne Owens: And we're seeing that we as a brand continuing to gain share and we didn't run specialty overall.
Ashley Anne Owens: <unk> mentioned that.
Nathan Monster: And what other brands are investing a lot into the channel which is great.
Unknown Executive: We see that other brands are investing a lot into the channel, which is great. I feel the channel is important to us, and we want to continue to improve it. And we continue to deliver amazing innovation, as you saw on Helen's feet, and we're confident this will continue to allow us to perform well in the future.
Speaker Change: The channel is important to us and we want to continue to elevate it and we continue to deliver amazing innovation at this angel and seed and we're confident this will continue to allow us to perform well in the channel.
Jonathan Robert Komp: Your next question is from the line of Jonathan Komp with Baird. Please go ahead.
Speaker Change: Your next question is from the line of Jonathan Komp with Baird. Please go ahead.
Jonathan Robert Komp: Yeah, hi. Good afternoon.
Jonathan Robert Komp: Yes, hi, good afternoon.
Martin Hoffmann: Just two questions. Martin, could I just ask for more color on how you're planning, really, as you finish Q2 and then into the second half, given you are assuming some revenue acceleration from the first quarter and you called out a dynamic environment? So just any more color on your planning there? And then, Caspar, more broadly, this is the first time you're engaging non-sports brand ambassadors. So could you give more color on the strategy there?
Jonathan Robert Komp: Just two questions Martin if I could just ask any more color on how you are planning.
Martin Hoffmann: Any thoughts on how you see that developing over time? And then your existing partnerships with Roger and others; any changes in the nature of those relationships or how you view some of the longer-standing brand ambassador relationships? Thank you.
Speaker Change: Really as you finished Q2 and then into the second half given you are assuming some revenue acceleration from the first quarter and you called out a dynamic environment. So just any more color on your planning there.
Kasper: And then maybe kasper more broadly.
Kasper: This is the first time, you're engaging non sports brand ambassadors. So just could you give more color on the strategy there and.
Kasper: Any thoughts on how you see that developing over time and then your existing partnerships with with Roger and others any any changes in the nature of those relationships or how you view some of the longer standing Brian brand ambassador relationships. Thank you.
Martin Hoffmann: Thanks, John. As mentioned, our focus is on the months around the Olympics. This is also where we allocate the strongest part of the marketing budget. So clearly, also when it comes to the performance of our e-com business, this is where we will fuel that performance the strongest. And so, rather than holding a little bit back before to really optimize the moment that we expect to have out of the great things that we are about to speak about.
Speaker Change: Thanks, John So.
Speaker Change: As mentioned.
Speaker Change: Our focus is on the on the months around the Olympics.
Speaker Change: Silverware.
Speaker Change: Allocates the strongest part of the of the marketing budget.
John So: So clearly also when it comes to the performance of our E Comm business.
Speaker Change #113: It's why we will fuel that performance the strongest.
Silverado: And and Silverado, holding a little bit back before to really.
Silverado: Optimize the moment that we expect to have out of out of the great things that we are about to speak about.
Martin Hoffmann: At the same time, as I mentioned, the order book with our wholesale partners is very strong, and we have great product launches still to come for the second half of the year and also for the rest of this quarter. And so this will be delivered as normal. And so this is driving the acceleration. We mentioned some of the impacts that hindered us from showing a stronger growth rate in the first quarter or the stronger base that was there from last year. And so this gives us the confidence that at least 30% guidance is basically the right one, being where the demand is at.
Silverado: Now at the same time.
Speaker Change #106: I mentioned the order book.
Speaker Change #105: Our with our wholesale partners is very strong.
Speaker Change #105: And we have great product launches still to come for the second half of the year and also for for the rest of this quarter.
Speaker Change #105: And so this will be delivered as normal.
Speaker Change #105: And so this is driving the acceleration.
Speaker Change #105: Mentioned some of the impacts that.
Speaker Change #121: Hindered us to show stronger growth rate in the first quarter.
Speaker Change #105: The stronger base that goes there from last year.
Speaker Change #104: And so this gives us the confidence that.
Speaker Change #108: At least 30% guidance.
Speaker Change #108: Is.
Speaker Change #114: It's <unk>.
Speaker Change #110: Basically the.
Speaker Change #112: Right, one being where the demand is at the moment.
Caspar Coppetti: And I, John, am happy to comment on the celebrity endorsement question. We really feel that the rules of engagement have changed between brands and celebrities. As we've shown with the Roger partnership, which we set up as a multi-decade partnership, the consumers are really asking why. It's not just marketing.
Nigel: Nigel Im happy to comment on the celebrity endorsement question.
Nigel: We really feel that the rules of engagement have changed between brands and celebrities.
Nigel: We've shown.
Rog: With the Rog partnership we set up as a multi decade partnership.
Speaker Change #123: The consumers are reacting y.
Speaker Change #115: Not just it's not just marketing.
Caspar Coppetti: What's deeper collaboration? So that's what we're looking for in partners. Now, we don't feel that our playing field should just be. There are other influences in culture and FK Twigs as an artist, she's a performer, she's a singer, she's a dancer, she's an incredibly fit person. We feel that she's a great match for the brand, and we'll use her to gain further ground in the training space. And, you know, those kind of partnerships are definitely something that you might see more of from on.
Speaker Change #118: What's the deeper collaborations so thats coupled with that's what we're looking for partners.
Speaker Change #118: No.
Speaker Change #107: We don't feel that our playing field should just be.
Speaker Change #109: Sports, there's other influences in culture and.
K: That's K tweaks as both.
K: She said performer she's a singer dancer.
K tweaks: She has a covenant fifth person we feel it is a great match for our brand and mobile user to gain further ground into the training.
K: Space.
K: And those kind of partnerships is that something that you might see more off from <unk> in the future.
Caspar Coppetti: Then to answer your third question in one question: thank you for asking the Roger question, very important for us and, I think, also for this call. So the partnership between Roger and On is extremely long term, and we're very, very happy with how it's shaping up. The Roger franchise has grown over 45% this quarter, so we're seeing that the partnership is working from a product perspective. Roger spends a lot of time here, and he's very, very committed to it.
Roger: Then to answer your third question in one question and thank you for asking the question and very important for US and I think also for this call. So the partnership between between Roger and on is extremely long term and we're very very happy in how it shaping up in the <unk> franchise has grown.
Roger: Over 45% this quarter. So we see that the partnership with working from a product perspective, what you spent a lot of time here and he is very very committed to it and at the same time. The partnership is very important for how we shape pennies and how we can use <unk> to influence.
Caspar Coppetti: Then at the same time, the partnership is very important for how we shape tennis and how we can use tennis to influence the all-day appearance of the brand as well. And you're all experiencing the successes of Eega and Ben; they wouldn't be possible without Roger. And tomorrow, we'll basically release the next set of athletes, together with Roger, and you'll see that many of those athletes are still in the very, very early stages of their careers.
Speaker Change #122: All the appearance of the brand as well.
Speaker Change #122: You're all experiencing the successes of Egon band it wouldn't be possible without broad trend Tomorrow will basically released the next set of athletes together with Roger and Youll see that many of those estimates are still in the very very early stages of their careers. So this shows again that were really in this for the long run so we're very happy to walk.
Caspar Coppetti: So this shows again that we're really in this for the long run. And we're very happy that Roger is committed for the long run. You all know that we cannot comment on short-term share sales speculation for anyone, but we're super, super happy where we are, and Roger is super committed to us. Your next question from the line of Anna Andreeva with Needham, please go ahead. Great, thanks so much and congrats on a nice quarter, and thanks for all the colors so far.
Speaker Change #129: <unk> committed for the long run you all know that we cannot comment on short term share sale speculation for anyone.
Roger: But we're super Super happy of where we are and rotary supercomputer.
Roger: Okay.
Anna A. Andreeva: Your next question comes from the line of Anna Andreeva with Needham. Please go ahead. Great.
Anna A. Andreeva: Your next question is from the line of Ana <unk> with Needham. Please go ahead.
Anna A. Andreeva: Great. Thanks, so much and congrats on a nice quarter.
Speaker Change #130: Thanks for all the color so far.
Anna A. Andreeva: I had a quick follow up on wholesale came in a little bit above expectations.
Speaker Change #126: The door closures during the quarter, what was the sales impact from the door closures.
Speaker Change #126: Would that come in in line with Glenn just curious are you seeing sales transfer elsewhere from that and just remind us how should we think about this impact to the second quarter.
Martin Hoffmann: Yeah, so the impact overall over the full year of the door closures in EMEA is roughly 10%. That's also stated in the last earnings call. It's a bit heavier in Q1 and Q3, as those are kind of the larger selling months for the account, so it's hovering in Q1. So it's a bit higher than 10% of the wholesale volume, so this is important that this 10% is always 10% of the wholesale volume in EMEA and not the overall one. So it's a bit heavier in Q1, will be a bit heavier in Q3, and then kind of slightly below 10% in Q2, and then way more down in Q4.
Speaker Change #126: Yes, so the impact overall over the full year of store closures in EMEA is roughly 10%, but also stated that in the last earnings call and it is a bit heavier in Q1 and Q3 as those are kind of the largest selling months.
Speaker Change #126: The account so February in Q1.
Speaker Change #126: So with a bit higher than 10% of the wholesale volumes and this is important this is 10%.
Speaker Change #126: 10% of the wholesale volume in EMEA and not the overall one.
Speaker Change #127: A bit heavier in Q1 will be temporary in Q3 and then.
Speaker Change #128: Kind of slightly below 10% in Q2 and way way more down in future years.
Martin Hoffmann: So this in Q4, totally in line with expectations, and what we're clearly seeing is that we are able to continue to build on as a performance brand in the channel that is serving a performance consumer. We're also able to bring in even younger consumers into the brand, so we started a partnership with Sports Direct in Europe to cater to the younger athletes, and that's working very, very well. So, for example, we were the number one running brand when we launched the brand at the London Oxford Street store of Sports Direct, and we're continuing to see on amongst the top two or top three brands in the doors where we're in.
Speaker Change #128: Q4 totally in line with expectations.
Speaker Change #128: And but we're clearly seeing is we are able to continue to build on our performance brands in the channel that are serving at performance consumer.
unknown: Also able to bring in even younger consumers into the brand and so we started a partnership with sports direct in Europe to cater to that.
unknown: There at least and that's working very very well. So for example, we were the number one running brand and when we launched branded London, Oxford Street and store a sports direct and we're continuing to see on amongst the top two or top three brands in the doors.
Speaker Change #128: And then we also launched with Orlando and so in Europe. We also already spoke about that in the prepared remarks.
Martin Hoffmann: And then we also launched with Zalando in Europe, so we also already spoke about that in the prepared remarks, and we're seeing very clearly that our own channel is profiting from some of the styles that are not available anymore in some of the comfort doors. Your next question is from the line of Janine Stichter with BTIG. Please go ahead.
Speaker Change #136: And we're seeing very clearly that our own channel profiting from from some of the sites that are not available anymore and some of the comfort to us.
Speaker Change #128: Okay.
Speaker Change #128: Your next question line of Jeanine Stitcher with BTG. Please go ahead.
Janine Stichter: Hi, Thanks for taking my question wanted to ask you about the stock why mouth I think you opened a larger.
Janine Stichter: Largest darfur now earlier this year in Portland, I, just wanted to know within the learnings were from that and if there's anything there that you are seeing that will incorporate Yankee sharpening. Thank you.
Martin Hoffmann: Thank you, Anne. We're super excited about the Portland M Store launch, which was a relocation from a smaller store that we had into a 315 square meter front of house store. So this is not the largest format that we have. For example, London is bigger, but then also our Paris store will be bigger. Milano will open this year with roughly 500 square meters.
Speaker Change #138: Yes, Thank you and we're super excited about the Portland and store launch, which was a relocation from a smaller store that we had into a 315 square meter from the outdoor. So this is not the largest format that we have so for example in London is speaker, but then also our.
Martin Hoffmann: So what it means is basically, we're looking at three different store types. We've got flagship stores, so you can look at Milano there, New York, Flatiron will open, and you have Champs-Élysées, so those are the largest formats. Then we have kind of medium-sized formats. So, for example, Paris Saint-Germain would be one, Austin is one that's opening, Miami is one, and then you have the smaller formats which are mainly relevant in China.
Speaker Change #140: Paris store will be bigger.
Janine Stichter: Milan will open this year with roughly 500 permit yourself what it means is basically we are looking at three different store types. We got flagship store. So you can look at Milano there in New York like Iron will open and you have shorter lease so those are the.
Speaker Change #133: Largest format than we got kind of medium sized formats. So for example in <unk>.
Speaker Change #132: <unk> will be will be one Austin is one that's opening Miami is one and then you have the smaller formats, which are mainly irrelevant in China. What we're seeing is that larger formats book well for on the brick wall. When they are in high Street locations because we can also attract.
Martin Hoffmann: What we're seeing is that larger formats work well for on. They work well when they're in high street locations because we can also attract tourists. So that's, for example, one reason why Japan is doing very, very well as well.
Speaker Change #143: Tourists and that's for example, one reason why Japan is working very very well as well and then we're also seeing that order to bring apparel to life, we need larger stores. So the collection is growing and we need to be able to bring the zoning to life that we have in the stores. According to the sports activity. So this is a change.
Martin Hoffmann: And then we're also seeing that in order to bring apparel to life, we need larger stores, so the collection is growing, and we need to be able to bring the zoning to life that we have in the stores according to the sports activities. So this is a change that's happening. This is a change that you're already seeing in Portland, and that's working very well. So we're very happy with the store opening and how our retail is. Your next question is from the line of Joseph Civella with True Securities. Please go ahead. Hey guys, thanks.
Speaker Change #134: That's happening this is a change that youre already seeing important.
Speaker Change #132: That's working very well so very.
Speaker Change #132: Very happy with the store opening and have owned retail is trending.
Speaker Change #132: Okay.
Joseph Civella: Your next question is from the line of Joseph Civella with True Securities. Please go ahead. Hey guys, thanks so much for taking the call.
Joseph <unk>: Your next question is from the line of Joseph <unk>.
Joseph <unk>: Hello with true Securities. Please go ahead.
Joseph <unk>: Hey, guys. Thanks, so much for taking the call.
Joseph <unk>: I just wanted to follow up on the earlier questions on the Americas business trends in <unk> is there any more color you can give on the DTC side, specifically and are you seeing any impacts to your DSD business as your wholesale segmentation kind of continues to evolve.
Martin Hoffmann: Yep, just reiterating what we said. It is important that the demand for the brand remains high in the geography because this allows us to use our channels in the right way and to make sure that they serve the customer in the best possible way while, at the same time, we are driving the highest margin for on out of this combined with durable growth. And so that stays high.
Joe: Yes, Joe.
Joseph <unk>: Reiterating what we said.
Joseph <unk>: Important is.
Joseph <unk>: The demand for the brand remains high in the in the geography.
Joseph <unk>: This allows us to.
Speaker Change #137: Use our channels in the right way and to make sure that they serve the customer in the best possible way.
Speaker Change #151: While at the same time, we are driving also the highest margin fall out of this combined with durable growth.
Martin Hoffmann: I mentioned we are holding back on some of the digital spending in the beginning of the quarter to really make use of the summer, then. But demand is strong, and it's absolutely the right decision that we took over the last two years to expand into those key accounts. They significantly elevated the brand in the region, they allowed us to reach the right customers, they were selling the right products, and, in the end, there is a mutual benefit for both channels. So, our retail and our e-com are supporting the wholesale channel, and the other way around. So we really believe in the strength of this multi-channel business model that we are having.
Speaker Change #137: And so that stays high.
Speaker Change #139: I mentioned, we were holding back on some of the digital spendings in the beginning of the quarter to really make use of the of the summer then.
Speaker Change #139: But demand is strong and.
Speaker Change #137: It's absolutely the right decision that we that we took over the last two years to expand into those key accounts.
Speaker Change #137: Significantly elevated the brand in the region they allow us to reach the right customers theyre selling the right products.
John Kernan: And in the end.
Speaker Change: There is a mutual benefit for both channels so our retail.
Speaker Change #141: Our E Comm is supporting the wholesale channel and the other way around so we really believe in the strength of this multichannel.
Speaker Change #144: Business model that we are having.
Dylan Cardin: Your next question is from the line of Dylan Cardin with William Blair. Please go ahead.
Dylan Cardin: Your next question is from the line of Dylan Cardin with William Blair. Please go ahead. Thank you. I'm just curious if there's any thought to the need to hedge currency. And if you could remind us,
Speaker Change #141: Your next question is from the line of Dylan Carden with William Blair. Please go ahead.
Dylan Cardin: Thank you I'm just curious if there's any thought of the need to hedge currency and if you could remind us what fluctuations in the U S dollar to Swiss franc.
Dylan Carden: How that flows through the gross margin in particular, given that I think your cost of goods primarily denominated in dollars.
Speaker Change: And then alright, and just in the interest of sort of setting expectations appropriately.
Speaker Change #141: Any way to quantify or speak to.
Speaker Change #141: The Big Bang, you've kind of called out as a big thing, but the lift that you are expecting in around the Olympics as it's embedded in guidance. Thanks.
Martin Hoffmann: The Big Bang is only a Big Bang if you don't talk about it before. We will keep this secret. Hedging is something that we'll be looking into. So I think we still have room to optimize the way we are handling our different currency flows and also optimize the impact and transparency on the impact on our financial results. This is why we are now also including constant currency in our official filings, which makes it easier to understand.
Speaker Change #147: The Big thing is only the big Bang if you don't talk about it before.
Speaker Change #141: We will keep that.
Speaker Change #145: Keep the secret.
Speaker Change #141: <unk>.
Speaker Change #141: Okay.
Speaker Change #150: The hedging is something that we'll be looking into so I think we still have room to optimize the way we are handling our different currency flows.
Speaker Change #146: And also optimize the.
Speaker Change: The impact and transparency on the impact on our on our financial results. But this is why we are now including constant currency also in and our official filings, which makes it easier to understand.
Martin Hoffmann: We think that the impact is most relevant on our net sales growth because this is where we see the strongest impact from just the high share of US dollar business that we are having. It's already much more naturally hedged when it comes to cross-profit and EBTA. So, for example, on cross-profit, the FX impact in the quarter was only 0.1%, so very marginal, and a similar picture on EBTA. But of course, when it comes to the balance sheet impact, this is where we can optimize our hedging policy.
Speaker Change: We think that the.
Unknown Executive: The impact is most relevant on our net sales growth because this is where we see the strongest.
Martin Hoffmann: Impact from just that.
Unknown Executive: High share of U S dollar business that we are having.
Speaker Change #149: It's already much more naturally hedged when it comes to cross profit and EBITDA. So for example on gross profit.
Speaker Change: The FX impact in the quarter was was only <unk>, 1%. So very March note and a similar picture on EBITDA.
Speaker Change: But of course when it comes to the balance sheet impact is this where we can optimize our hedging policy in the future.
Adrienne Yee: Your next questions from the line of Adrienne Yee with Barclays, please go ahead. Great, thank you.
Adrienne <unk>: Your next question's from the line of Adrienne <unk> with Barclays. Please go ahead.
Adrienne Yee: Great, thank you very much and congratulations on a great start to the quarter. My question is about inventory. It's extremely clean and lean, and that's great. We love to see that.
Adrienne Yee: Great. Thank you very much and congratulations on a great start to the quarter. My question is on inventory it.
Adrienne Yee: It's extremely clean and lean and that's great. We love to see that but really my question is how reliable and stable and set a global supply chain and how confident are you in case capacity for the back half of the year and potentially any impact on the big Bang.
Speaker Change #149: And then kind of my follow on to that really is.
Speaker Change: Can you just talk about generally the evolution and the diversification of their supply chain as you expand into other categories like apparel. Thank you very much.
Adrienne Yee: But really, my question is how reliable and stable is the global supply chain and how confident are you in taste capacity for the back half of the year and potentially any impact of the Big Bang? And then, kind of my follow-on to that really is, can you just talk about the evolution and the diversification of your supply chain as you expand into other categories like apparel? Thank you very much. Thank you.
Martin Hoffmann: So I'll take the big bang question first. I just received videos of the product leaving the factory for the product and for the big bang leaving the factories yesterday. So I think the supply chain is definitely ready for it. But hey, I think what we plan our supply chain for obviously the marketing activations that we have throughout the year and for the guidance that we're giving you. And there's absolutely no disruption right now, except you're all aware of some detours that some ships need to take that add one or two weeks to the supply chain. But other than that, it's very stable.
Adrienne Yee: Hey, Thank you so <unk>.
Bank representative: Bank question first.
Speaker Change: Received videos of leaving the product for the <unk>.
Martin Hoffmann: Product and for the Big Bang, leaving the factory yesterday.
Speaker Change: Hi chain is definitely ready for it.
Martin Hoffmann: But hey, I think what we plan our supply chain for obviously, the marketing activations that we have throughout the year and for the guidance that we're giving you.
Martin Hoffmann: Absolutely no disruption right now.
Martin Hoffmann: We're all apparel.
Speaker Change: Im detours that some ships need to take that.
Martin Hoffmann: Thats, one or two weeks into the supply chain, but other than that it's very stable.
Martin Hoffmann: We're happy with where we are from a factory output perspective, so we're very confident that we'll have enough products to satisfy the demands that are underpinning the guidance that we're giving. What we're definitely trying to chase is, and we spoke about that, I think we see higher than expected demand for certain products and for certain colors. So we're trying to capture that and bring that to the market by Q3. But there's always a little bit of a time lag for that to happen.
Martin Hoffmann: Happy with where we are from a factory output perspective, so we're very confident that in.
Martin Hoffmann: We will have enough products.
Martin Hoffmann: And to satisfy the demand.
Martin Hoffmann: Underpinning and the guidance that we're giving and what we are definitely trying to chase into it and we spoke about that we see higher than expected demand into certain product into certain colors.
Martin Hoffmann: So we're trying to capture that and bring that into the market by Q3.
Martin Hoffmann: And so there's always a little bit the timeline for that for that to happen and then we as we.
Martin Hoffmann: And then we explained in the LRP that we want to bring apparel to over 10% of the business, and we're really trying to establish the supply chain, or we have established a supply chain with factory partners that are able to bring the items that we want into different categories and to the market on time. And so we're quite confident there. And we're also really looking forward to being able to talk more about the innovation that Helen O'Berry was wearing when she was running Boston. So we'll talk more about that during the Olympics, and we feel this can have a positive impact.
Martin Hoffmann: As explained in the MLP that we want to bring apparel over 10% of the business and we're really trying to establish the supply chain, where we have established a supply chain and factory partners that are able to bring.
Martin Hoffmann: Since that we bumped into different category and to the market on time.
Helen O'Berry: And so we're quite confident in there and we're also really looking forward to be able to talk more about innovation that Helena Barry was both Varian and mentioned with running Boston and we'll talk about more about that around the Olympics and we feel that it can have.
Martin Hoffmann: <unk> had an important impact on how we looked at creating products for the future.
Samuel Marc Poser: Today's final question will come from the line of Sam Poser with William Trading. Please go ahead.
Martin Hoffmann: Today's final question will come from the line of Sam Poser with Williams trading. Please go ahead.
Samuel Marc Poser: Thank you for taking my questions. I guess I just have a couple of follow-ups. One, can you give us what the wholesale growth by region was? [inaudible] Can you also talk about sort of the European trend, less the You know, if the demand is so great, why is the impact of the Store closures as great as it is given that if the demand is sort of doesn't change when you close accounts, those cells should just move to other locations. How do you think?
Speaker Change: Thank you for taking my question.
Samuel Marc Poser: Yes.
Samuel Marc Poser: Have a couple of follow ups one.
Speaker Change: The horse can you give us what the wholesale growth by region was.
Samuel Marc Poser: Number two.
Samuel Marc Poser: Can you also talk about sort of the Europe trend less the.
Samuel Marc Poser: If the demand is so great why is the impact of the <unk>.
Speaker Change: Store closures as great as it is given the if the demand is sort of doesn't change when you close accounts.
Samuel Marc Poser: Sales should just move to other places how do you think about that.
Samuel Marc Poser: Okay.
Martin Hoffmann: So we, we cannot break down the channels into the different different regions. But.
Speaker Change: So we cannot.
Martin Hoffmann: The breakdown.
Martin Hoffmann: The channels into the different different regions.
Martin Hoffmann: But the.
Martin Hoffmann: Very clearly, in Europe, we have the impact of the store closures. What we also see in Europe, and we spoke about this on the last call, is the challenging environment that we see with some key account partners in Central Europe around the bankruptcy of the Ziegner Group. So chains like Sportscheck and Karstadt that are heavily impacted there with a high level of uncertainty, certain store closures that are confirmed. So that clearly impacts us; it impacts the customer.
Martin Hoffmann: Very clearly in Europe.
Martin Hoffmann: We have the impact from the store closures, what we also see in Europe, and we spoke about this on the last call already is.
Martin Hoffmann: This is a challenging environment that we see.
Martin Hoffmann: Some key account partners in Central Europe.
Martin Hoffmann: Around the bankruptcy of the of the senior group.
Martin Hoffmann: <unk> export checking and cashed out that are heavily impacted there.
Martin Hoffmann: With a high level of uncertainties certain store closures that are confirmed so that clearly impacts us it impacts the customer.
Martin Hoffmann: And so therefore.
Martin Hoffmann: The basically the network there to fulfill that demand is.
Speaker Change: This weekend wholesale and this is also why we see a very strong acceleration of our D to C business in that region and at the same time looking more into western Europe and southern Europe.
Martin Hoffmann: And so basically, the network there to fulfill the demand is weaker in wholesale. And this is also why we see a very strong acceleration of our B2C business in that region. And at the same time, looking more into Western Europe and Southern Europe, so Italy, Spain, France, the UK, they have really strong growth rates across both channels. So we have a functioning system of wholesale partners and our B2C outlets in order to capture that demand.
Martin Hoffmann: Spain, France U K.
Martin Hoffmann: There, we see really strong growth rates across both channels.
Martin Hoffmann: So we have a functional system of wholesale partners and our D to C outlets in order to capture that.
Martin Hoffmann: Demand.
Operator: Thank you all for joining the On Hldg First Quarter 2024 Results Conference Call. Thank you for joining. You may now disconnect.
Speaker Change: Thank you all for joining the on holding AG first quarter 2024 results conference call. Thank you for joining you may now disconnect.
Operator: [music].