Q4 2024 On Holding AG Earnings Call
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Thank you for standing by. Thank you for standing by.
Gilles: Thank you for standing by. My name is Jail and I'll be your conference operator today. At this time, I would like to welcome everyone to the on holdings AG, Q4, and fiscal year 2024 results call. All lines have been placed on mute to prevent any background noise. [inaudible]
Gilles: Good afternoon, good morning to our investor community. Thank you for joining on 2024, 4th quarter, and full year earning a conference call and webcast With me today on the caller on Executive Code Chairman at co founder David Allemann, CFO and co-CO, Martin Hoffmann and co-CO, Marc Maurer Before we begin, I will briefly remind everyone that today's call will contain forward-looking statements within the meaning of the federal security laws and that today's call will contain forward-looking statements within the meaning of the federal security law and that today's call will contain forward-looking
Gilles: Please refer to our 20th solid at SCC earlier this morning for a detailed discussion of such risks and uncertainties.
Gilles: We will further reference certain non-IFRS financial measures such as Adjusted EPA, Adjusted EPA Margin. These measures are not intended to be considered in isolation or as a substitute for the financial information presented in accordance with IFRS.
Gilles: Please refer to today's release for reconciliation to the most comparable IFRS measures.
Gilles: We will begin with David followed by Martin, leading through today's prepared remarks, after which we are looking forward to opening the call for a Q&A session.
Gilles: With that, I'm very happy to turn over the call to David.
Speaker Change: Thank you everyone for joining us today and welcome to our fourth quarter and full year 2024 results call.
Speaker Change: This is an exciting moment for us as ON is celebrating its 15th anniversary this year. On January 6th, 2010, my co-founders, Olivia Bernhardt, Caspar Coppetti, and I found it on on a cold winter day in Switzerland.
Speaker Change: This was in the morning. In the afternoon, I boarded a plane to Asia to oversee the production of the on-cloud server model our first two. We just got started to dream on.
Speaker Change: Looking back, 0 to 1 was a tough race. If you have not been possible without an incredibly talented and optimistic team that together with our founders made on-grow into the global sportswear brand, it is today.
Speaker Change: Our gratitude goes to this highly spirited sports team. While every single year has been a new adventure, 2024 was particularly defining as we solidified our global brand presence.
These trends translates to the growth we have publicly committed.
Speaker Change: One and a half years ago, we shared our strategic direction for the three-year timeframe from 24 to 26 with you.
Speaker Change: On strategic ambition to grow into the most premium global sportswear brand and the financial ambition to achieve a 26% net sales caker, a cross profit margin of north of 60%, and an adjusted EVATA margin of over 18%.
Speaker Change: Looking at 2024, unsreel to report that we are cracking very well and exceeding our expectations
Speaker Change: With a very strong constant currency growth rate of over 33%, we have reached 2.3 to billions
Speaker Change: This includes an expansion of our D2C share by more than 3 percentage points, extending our superpower to connect deeply with our fans through our own channels.
Speaker Change: It has further supported premium margins with cross-profit margin reaching 60.6% and an adjusted EBTA margin of 16.7% validating our past towards our midterm targets.
Speaker Change: To me now, in 2024, unexperienced a new level of global brand love from its community.
Speaker Change: On its resonating with millions of consumers across more than 80 countries on all continents.
Speaker Change: Our collaboration with Roger Federer, Sandaya, SK Twix, and On's presence, as one of the most talked about brands in Paris last summer, has propelled On's global brand awareness and earned it to prestigious brand of the year award by Footvenius
Speaker Change: Above all, we are truly humbled by the immense love consumers have for us, the strong engagement and the countless on-fans we all encounter everywhere, running on trails in cities and while traveling.
Speaker Change: The boost in brand strength, even overindexes on chancey consumers, their awareness in the US more than doubled in one year and has elevated on to one of the top most wanted fall through brands among teams in the US.
Speaker Change: No wonder that on ranks amongst the hottest brands in our industry on social media.
Speaker Change: We manage our brands rather change three areas, premium product offerings, strategic partnerships and an impactful presence in global markets.
First, premium product brands. [inaudible]
Speaker Change: To build our parent brand on, we're supporting it with a family of product offerings and brands.
Each with their own personality and purpose. [inaudible]
Speaker Change: Take the cloud monster, the cloud surfer, the cloud runner, and the iconic cloud.
Speaker Change: These aren't just shoes, they're brands in their own right, allowing us to connect with diverse communities and tastes, building lasting loyalty to a franchise, even as our products innovate and evolve.
Speaking of the cloud, we just soft-launched a cloud six [inaudible]
Speaker Change: It's a refresh of an icon, keeping its signature comfort, versatility and functionality. The cloud has grown from a running shoe into an everyday essential and one of our most beloved franchises.
Speaker Change: It's become synonymous with all, strengthening our overall brand. And with the full release, just days away, we're already seeing strong momentum.
Speaker Change: Or take the emerging light spray franchise as an example of a product range brand that will support the innovation positioning of the main on-brand. In other words, only spilling a portfolio of strong product brands that support on as the parent brand.
Second, Strategic Partnerships,
Speaker Change: We're building the law for the on brand through lasting partnerships with exceptional talents and brands.
Speaker Change: As you know, it started with Roger Featherer training on as a partner over four years ago [inaudible]
Speaker Change: Sandeja is now the voice of the next generation and of On. Brand moments like the Ertan is match between her and Roger, a film highlighting our brand promise to Dream On, and product campaigns has been incredible so far.
Speaker Change: And you're only seeing the beginning of this partnership. They're in Forty-Longevo [inaudible]
Speaker Change: Then think about on collaboration with FK Thics around the superpower of sport combined with cultural influences. It's scaling our training vertical.
Speaker Change: The marriage between sports and culture has created a unique phase for powerful collaborations, like the multi-year partnership between Leube and On. It's clear, meaningful and lasting partnerships filled lasting brands.
Third, high impact presence in global markets. [inaudible]
Our world is more fragmented. [inaudible]
Speaker Change: Life moments and society transcending topics that once united us has become rare and golden. It's harder to combine these universal experiences that connect generations and cultures on a massive scale.
Speaker Change: On his navigating the noise and distraction with more interest visibility, but with creativity, relevance, and the right strategy.
Brands that caught through are more valuable than ever [inaudible]
Speaker Change: We have two key priorities for penetrating global markets, life sports moments, and premium retail stores.
Speaker Change: First, life sport moments. Sport creates some of the last and rare life moments that inspire conversation across society.
It turns sense generations, cultures and backgrounds
Speaker Change: It's their family's gather, nations rally, and the world watches as long [inaudible]
Now Fetchy and Luxury brands are catching up. [inaudible]
Speaker Change: The recognizing the power of sports and diving into the arena hatch first [inaudible]
Speaker Change: From the Paris Games to sponsoring major events like football and Formula One, they're all lying for a piece of the action, and that's very real coming. Only the premium sports brand perfectly positioned at the intersection of performance and cultural relevance. [inaudible]
Speaker Change: They're not just riding the wave, they're at the heart of it. [inaudible]
Speaker Change: On leverages these insights to cleverly build brand strength and achieve exceptional results.
Speaker Change: Take for example our recent Super Bowl as featuring Elmo and Roger Federer, captivating millions of Americans and bring on to the center screen.
Speaker Change: Through a playful conversation about our logo, the two literally put the name of our brand into everyone's mouth and on America's most watched morning show.
Speaker Change: Elmo perfectly embodies our core value of positive spirit and bridges generations. Rotchend Elmo launched a broader campaign centred around softness and our new cloud server tool.
Speaker Change: In a world obsessed with pushing limits, we encourage runners to embrace soft wins and community.
Speaker Change: In running the Onyplatics Club and its athletes put training together and winning on full display. These personalities inspire on score community.
Speaker Change: A few weeks ago, the beloved US athlete, Jared Nyugu, set a new girl record for the vanemaker mile at the Milrose Games. His smile and his win lit up the live broadcasts and social conversations.
Speaker Change: Our approach to tennis involves creating brand moments around major sporting events and exceptional athletes.
Speaker Change: The spreadsheet allows us to engage with the wide audience both young and older. As the upcoming Miami Open, we're hosting the second edition of our own Clubhouse Night. We're hosting the second edition of our own Clubhouse Night.
Speaker Change: This event celebrates tennis at intersection of performance and culture. Setting the vibrant heart of Miami, it plans sport, club culture and community, creating a unique and immersive experience.
Speaker Change: You'll see Ben Shelton play again throughout von Zecker on the court, an exciting match set to the polls of world-class DJs at John Clubhouse nights.
Speaker Change: The massive awareness grows with the young community serves as proof that on is scaling the brand with life moments in sports that can reach across generations.
Speaker Change: Second, Premium Retail Stores. We are grateful for our online success, but we know the power of major city centers.
Speaker Change: They're the heart of nations and communities. They live in our global consciousness.
Speaker Change: This is my first point, is that we believe in physical on-stores, not just for sails, but to give on a peril abroad a presence and to build a beloved brand in the minds of communities.
Speaker Change: We're going beyond the traditional sports brand, creating premium story experiences that challenge the norm. In 2024 we launched 19 new retail stores in iconic locations.
Speaker Change: Think Charlotte is in Paris, Victoria Emanuele in Milan, Ross Street in Chicago, and Temporium, Melbourne.
Speaker Change: These aren't just stores, they're brand building hubs, essential for our growth, and it's working. In cities like Paris and Milan, we've seen a significant increase in regional awareness proving that a physical presence drives digital momentum.
Speaker Change: At the same time, we're also building retail presents in your markets with our first distributualized retail stores opening in Santiago de Chile and Jakarta just a few months ago.
Speaker Change: A physical store act as a flag in the ground, a linchpin for emerging markets for all. In 2025, we're looking forward to expanding our presence further in other parts of Southeast Asia as well as the Middle East.
Speaker Change: My second point is that building partnerships with premium wholesale remains a priority for all. Our partners have been instrumental in building the on-brand.
We have been very careful about growing our wholesale network.
Speaker Change: This deliberate approach has left us with plenty of room to grow our business and brand awareness with the right partners.
Speaker Change: A recent example, the Street Facing on Chopin Chop itself reaches, is attracting lots of eyeballs for on a pearl.
Speaker Change: This leads me to my third point, the connection between scaling a parallel and physical retail, powered by our retail expansion 2024 mark the significant year for arms apparel business with elevated collections and brand building campaigns sentient around Zendaya and training.
Speaker Change: For prior theory research reveals that these efforts have significantly increased consumer perception of home as a head-to-tone sportswear brand.
Speaker Change: The expansion of on-stores is elevating the visibility and growth of the power category for on to an X level.
Speaker Change: In 2025, we will continue to drive a perilous first category such as training. Our latest training collection was launched in January with the body's art campaign featuring SK Twix to enhance our brand presence in change.
Speaker Change: The campaign highlights our approach to training a pearl by showcasing an artist who integrates high performance movement with music, arts and culture.
Speaker Change: So, bottom line, showcasing young brands had to tow in landmark stores in major cities and in live sporting events remains a key to brand growth
Speaker Change: To wrap up my opening remarks today, strong brands stand the test of time, which is what we're building at all. A premium global sports fair brand with long-term value and resilience.
Speaker Change: Our 2024 financial results exceeded our expectations, filling us with confidence and excitement for the future.
Speaker Change: We believe that the best days are ahead of us, with our exceptional team, strong innovation and globally relevant brand, we're ready to take on the next 15 years.
Speaker Change: You're incredibly grateful to our amazing community of on-fans for their love, support and loyalty.
Speaker Change: I would like to thank you all for your support, your probing questions, your insights, elevate our thinking.
Speaker Change: And with that Martin, on to the next 15 years and over to you.
Martin Hoffmann: Thank you, David. I can't wait to celebrate our 15th birthday with our team in a few weeks.
Martin Hoffmann: Before talk about our plans and the outlook for 2025, let me expand a bit more on 2024.
Martin Hoffmann: 2024 has been the first year of our three-year strategic roadmap that we had presented at our invested day in October 2023.
Martin Hoffmann: During this first year, we have made tremendous progress along each of our strategic building blocks.
Martin Hoffmann: And we have proven that each building clock will elevate the on-brand over the next years and towards our mission to beat the most premium club of sports we've read.
Martin Hoffmann: Our financial results are clearly validating our financial aspirations for 2026.
And at the same time, [inaudible]
2024, already allows us to start dreaming on beyond 2020. [inaudible]
Martin Hoffmann: At the core of our strategy is to win in the running community
Martin Hoffmann: During the last 18 months, we have introduced an explosion of new highly innovative products.
Martin Hoffmann: We have built new levels of credibility through the wins of our athletes and our presence at the largest running events.
We have reached millions of new and existing fans.
Martin Hoffmann: Our top three running franchises, Club Monster, Club Surfer, and Club Runner have grown between 60 and 140% during 2024.
We reached more younger customers.
Martin Hoffmann: than ever before. The share of products sold to customers 35 and younger has increased between 6 and 8 percentage points for these three franchises.
Martin Hoffmann: After tennis, running had seen the strongest cross of all communities.
Martin Hoffmann: 2024 has been a breakout year for our new verticals, tennis and training, establishing on as the brand of choice for consumers seeking the unique combination of performance, design and sustainability beyond our running core.
Martin Hoffmann: Our ambition to be a true head-to-toe sportsman friend is solidified in the fact that we have reached more than 100 million Swiss ranks in net sales from Paris.
Martin Hoffmann: In 2024, we renewed the vast majority of our products, expanded our product offerings across running tennis and training.
Martin Hoffmann: We introduce different fits and elevated the consistency of our sightseeing.
Martin Hoffmann: And we significantly invested into our capabilities to try self-growth in selected key accounts and our D2C channels.
Martin Hoffmann: Vylova, a parallel net sales on a constant currency-based crew 51% in 2024.
Apparently, our D2C channel's crew by 67% [inaudible]
Martin Hoffmann: resulting in a significantly higher D2C mix compared to our footwear category. [inaudible]
Martin Hoffmann: With that, a parallel setup to drive strong growth combined with a strong margin profile going forward.
Martin Hoffmann: Our success in the Paris directly correlates to our successes in our own retails that David already spoke about.
Martin Hoffmann: We are now operating in more than 10,000 square meter retail space and during 2024 with that validated that own retail will not only allow us to drive growth around the world, but also drive an even higher share of more premium products.
Martin Hoffmann: Alongside retail, we also continue significant investments into our multi-channel distribution.
Martin Hoffmann: including but not limited to customer data insights, AI-driven automation, online marketplace management and omnichamal experiences.
June 2024, we became an even more global brand.
Martin Hoffmann: Executing towards our aspiration to grow China to 10% of ourselves beyond 2026.
Martin Hoffmann: We expanded our brand and distribution networks throughout the country, elevated the team and started to develop more China-centric products.
Martin Hoffmann: And last but not least, we took big steps forward on our mission to be an industry leader in sustainability.
Martin Hoffmann: We will share more in our Impact Progress report which will be published in a few weeks.
Martin Hoffmann: All of the incredible work our team has done across brand product and execution is reflected in the outstanding full-year financial performance.
Martin Hoffmann: Lending ahead of our latest outlook provided in November across all measures.
Martin Hoffmann: With the constant currency growth rate of 33.2%, we close the year at 2.3, 2 billions with strength.
Martin Hoffmann: Our Cross-Profit March reached 60.6% reflecting our premium brand positioning and dedication to full price growth.
And we've reached an adjusted EBDA margin of 16.7% [inaudible]
Martin Hoffmann: Showcasing our commitment to durable growth, while investing for success in the long term.
Martin Hoffmann: With this, we've also proven the ability to drive significant positive cash flow.
Martin Hoffmann: Increasing our cash position to close to 1 billion Swiss francs at the end of 2024 .
Martin Hoffmann: Looking at Q4 and isolation, we see the foundations we have built coming into effect.
Martin Hoffmann: allowing us to achieve the strongest quarterly growth rate of the whole year.
Martin Hoffmann: We converted on the incredible friend momentum, benefiting from the increased friend awareness and continued acceleration coming out of the summer and the third quarter.
Martin Hoffmann: Importantly, we were in a position to execute operationally across the entire supply chain to fulfill the strong demand while remaining disciplined to protect the high share of full-price cells.
Martin Hoffmann: Nezelz, crewed by 35.7% on a reported basis in the fourth quarter, and even 40.6% on a constant currency basis.
Reaching 606.6 million Swiss francs. [inaudible]
Martin Hoffmann: We had ended the holiday season with the ambition to drive significant growth through our own channel.
Martin Hoffmann: Both our online and retail formats drove record traffic and highest-ever quarter-litre transaction volumes, resulting in an overall record-dTC share of 48.8 percent.
and 296.2 million Swiss francs.
significantly higher than any previous quarter in our history.
Martin Hoffmann: Crosen our D2C channel versus the prior year was 43.4% on a reported and 48.2% on a constant currency basis.
Martin Hoffmann: Paul said Group by 29.1% on a reported basis, and 34.2% on a constant currency basis.
Francis, Q4, reaching 310.4 million Swiss ranks. [inaudible]
Martin Hoffmann: This growth continues to be driven by our selective expansion with key accounts like Dicks, Chati, and Footlogger, as well as the expansion of shell space and market share with many of our existing cartons.
Martin Hoffmann: While our own channels were able to capture a record high share of demand in the overall marketplace, we are thrilled that our partners similarly saw exceptional sellout growth during the holiday season.
The further validation for the print momentum we are seeing.
Let me now move on to the development by region. [inaudible]
Martin Hoffmann: net serves in the America Group at 28.1% in Q4 and 33.9% on a constant currency basis.
reaching 385.1 million Swiss francs.
Martin Hoffmann: The print building effort outlined by David have led to visibly increasing traffic and very strong performance in both channels.
Martin Hoffmann: And we continue to be incredibly happy with how our control holds that expansion supports on its reach and accessibility in the region.
Martin Hoffmann: At the same time, we observe a meaningful acceleration and contribution from high-growth markets in Latin America.
Martin Hoffmann: Our largest market in the region, Brazil, more than double net sales compared to the prior year.
Martin Hoffmann: Some might say this is a result of the trial from Sega Effect, the latest Brazilian superstar and member of the on-tennis roster.
with particularly strong growth visible in the apparel business.
Martin Hoffmann: Inemia, Hugh Foremark, the final quarter of lingering year-over-year impacts from the strategic store closures at the end of 2023.
Martin Hoffmann: We are therefore thrilled to see the significant acceleration in the near, in the quarter, showing the potential of the region to contribute even more strongly to our cross paths going forward.
Martin Hoffmann: Net sales reached 147.4 millions with ranks in Q4, growing by 31% year over year, and 33.1% on a constant currency basin.
Martin Hoffmann: The growth of something is supported by exceptional growth in some of our more nascent markets in southern Europe , particularly in front of Italy, where the retail stores in Paris and Milan have created a noticeable halo effect.
Martin Hoffmann: APEC reached net sales of 74.1 million Swiss francs in the fourth quarter, representing a reported growth rate of 117.5%.
Martin Hoffmann: On a constantly currency basis, Cross was even stronger at 124.6% [inaudible]
Martin Hoffmann: The incredible cross is visible across the entire region, with Japan and China continuing to be the key drivers in the region.
Martin Hoffmann: From a smaller base, South Korea, Australia, Hong Kong, as well as markets in Southeast Asia are accelerating significantly and further contributing to the broad-based momentum and success.
Martin Hoffmann: The standard moment for Q4 was the opening of our second Hong Kong story in November .
Martin Hoffmann: quickly growing to be on par with our first location and ranking among the top performing stores in our global portfolio.
Martin Hoffmann: In December , we also kicked off a friend campaign in connection to Luna New Year in China, introducing a limited edition collection celebrating the year of the snake.
Martin Hoffmann: The lineup featured fresh colorways and designs in a parallel alongside regional favorites like the Cloud X4 and Cloud Tilt and has shown strong sell through well into 2025.
Turning to performance by product
Martin Hoffmann: Thank you for net sales from shoes, Group by 33.6% up to 568.8 million Swiss ranks.
Crows continues to be driven by our performance running product.
Martin Hoffmann: As touched on earlier, 2024 has been the year of deepening our focus on key franchises.
Martin Hoffmann: This clearly paid off in Q4 with the Club Monstern-Closfer contributing significantly to the cross.
Martin Hoffmann: Running is an hour DNA and we are extremely excited to continue to drive our market share with the great product lineup in 2025 kicked off by the cloud server to launch a couple of weeks ago.
Speaker Change: As you heard from David, we're also extremely excited to further elevate our most iconic all-day silhouette with the launch of the new Cloud6.
Speaker Change: After a period of successfully focusing on the diversification of our product portfolio and expanding our performance running share.
Speaker Change: The latest iteration of this classic all day franchise will return to being a significant contributor to growth in 2025 and beyond.
Speaker Change: While the full scale launch will happen in a few days, demand from our partners over the past months has been amongst the highest we have seen yet.
Adoption is definitely not just about choose anymore. [inaudible]
Speaker Change: A parallel group by a very strong 77.5% in the fourth quarter, reaching 32.6 million Swiss [inaudible]
Speaker Change: In a D2C heavy quarter, this resulted in an uphoud share of over 5% of net sales.
Moving down the piano Now
Speaker Change: Reflecting the record-high D2C share, the premium position of the brand, and our disciplined full-price approach, and favorable ethics developments, we reached the highest cross-profit of marching in our history.
62.1% in Q4, Mark the 170 basis point increase here or here. Thank you.
Speaker Change: Bring us to an exceptional 60.6% for the full year and well ahead of our midterm ambition.
Speaker Change: SNA Expenses, excluding Sherbet's compensation, were 50.5% of net sales, up from 48.9% in the same period last year.
Speaker Change: In order to drive even more print momentum into 2025, we invested a higher share of net sales into upper funnel marketing campaigns.
which is the primary driver for this increase. [inaudible]
Speaker Change: In addition, we continue to invest into light spray as well as our IT and tech capabilities.
Speaker Change: We also saw a structural shift from selling expenses into GNA as a result of the consolidation of some of our technology teams and resources into a centralized cross-channel setup.
The residing Q4 adjusted EBDA in motion was 16.4% [inaudible]
Speaker Change: For the full year, we were able to drive a stronger adjusted EBDA margin of 16.7 percent up from 15.5 percent for the full year 2023 and well ahead of our latest guidance in November .
Speaker Change: We are very happy with our strong operational profitability, also visible in a very strong net income levels.
Speaker Change: First is supported by the strengthening of the US dollar versus Swiss rank throughout the fourth quarter, and the resulting favorable foreign exchange gain of 38 million Swiss ranks in our net financial results.
Net income in the quarter reached 89.5 million Swiss Rakes. [inaudible]
Moving on to our balance sheet.
Speaker Change: We slightly increased the level of capital expenditure to 2.8% of net sales in 2024 compared to 2.6% in 2023.
This was largely assault of our ongoing retail expansion. [inaudible]
One position I'm particularly proud about is networking capital. [inaudible]
Speaker Change: As percent of net sales, networking capital improved from 27.7% in the prior year to 21.5% in 2024.
Speaker Change: This is the reflection of our culture of innovation and excellence and the ability of our team to try financial strengths across the B&L and balance sheet.
Speaker Change: We achieved an operating cashflow of 510.6 million Swiss francs, more than doubling gear over year.
Speaker Change: And as a result, our total cash balance put at 924.3 million Swiss ranks at the end of the year. To keep the country up from 494.6 million Swiss ranks at the end of 2023.
Speaker Change: In summary, 2024 marked a truly exceptional year for on, and one that we will not forget anytime soon.
Speaker Change: Most importantly, it offered numerous proof points that our core strategic building blocks are paying off.
Speaker Change: Validating the ongoing path towards our vision to be the most premium global sportswear print built on innovation, design, and sustainability.
Speaker Change: All of the achievements and unique moments in 2024 give us an incredible amount of energy for 2025.
Speaker Change: As we enter into the second year of our dream on 2026 strategy, we're excited to pick up from the foundations built in 2024 and to build on the broad-based momentum our team has generated.
Speaker Change: You can expect another year with thick and bold ambitions to tell our story and continuously expand our reach across new and existing communities worldwide.
This will include a strong lineup of new product launches.
as we take running to the max. [inaudible]
Speaker Change: In the second half of 2025, Fence will be wowed by the launch of the Cloud Boom Max
The first super shoe for the everyday runner.
Speaker Change: The year will see continued collaborations with talons to inspire across generations, include the launch of the day as first co-created footwear and the peril.
Speaker Change: As we build our presence in new markets, as we build our physical spaces to deepen brand connection and expand globally with elevated tech-help-ed capabilities, we are driving an even more premium experience at every touchpoint.
Speaker Change: Our focus will be on building the foundation for rapid scale-up and long-term profitable growth of the light spray innovation.
Speaker Change: In spring, we will ramp up our production capabilities in Zurich by building a more-scaled production facility in South Korea.
An additional focus for 2025 will be on operational excellence. [inaudible]
Speaker Change: investing into our infrastructure to set ourselves up for long-term growth and success.
Speaker Change: We experienced some challenges in 2024, in particular in the first half of the year.
which did not allow us to reach our full potential. [inaudible]
Speaker Change: We are progressing well on the fully automated warehouse solution at our Atlanta facility.
Speaker Change: and continue to expect the solution to go live towards the end of the first half 2025.
Speaker Change: While we expect a transition period and potential for incremental costs during that rent buff phase, this continues to be a key cornerstone of our ability to operate at much higher volumes in the future.
Generating the economies of scale over time [inaudible]
Speaker Change: With that in mind, I'm happy to move to our financial outlook for fiscal year 2025.
Speaker Change: A statement pointed out, in 2024, we have tracked ahead of our planned 26% three-year net sales
Achieving 33% constant currency growth rate for the year. [inaudible]
including a particularly strong second half of the year 2024.
and a strong start into 2025. [inaudible]
Speaker Change: We expect to continue to outgrow our three-year plan and to grow ahead of the 26% growth algorithm for 2025.
while compounding at the higher base. [inaudible]
Speaker Change: For the fall year 2025, we expect to achieve a constant currency growth rate of at least 27 percent.
Speaker Change: At Current Spot Rates, across all currencies, we do not expect a sizable FX impact, and therefore a distance laid to an outlook of at least 2.94 billion Swiss francs for the year.
Speaker Change: On a quarterly base, Assuming current rates, we expect some top-line FX tailwinds in Q1 and Q4, and some headwinds in Q2 and Q3.
Speaker Change: Why we do not provide quarterly guidance? I will point out that we expect a slightly higher half year one cross rate versus the second half of the year 2025.
Speaker Change: This outlook is based on the impact of the operational disruption that we had in half year 1224, as well as the initial selling of our largest franchise, Cloud 6 in Q1.
We currently anticipate a cross-profit margin of around 60.5% [inaudible]
Ahead of our midterm ambition of 60% plus. [inaudible]
Speaker Change: This already implies an anticipated headwind to our report across profit margin from the current US dollar to Swiss Frank FX levels.
Speaker Change: which is expected to offset a further margin improvement driven by the continued expansion of ROD to C channel, as well as the ongoing premiumization of our brand.
Speaker Change: Throughout 2025, we continue to invest to try for long-term, durable growth.
Speaker Change: While we expect to further increase our adjusted EBDM margin to 17 to 17.5% [inaudible]
Speaker Change: And with that, to validate our 2026 target of 18% plus [inaudible]
Speaker Change: A huge thank you and congratulations goes to our team for another incredible year.
15 years and counting. [inaudible]
and for the opportunity to think bigger than ever before.
Speaker Change: Thank you all for being a part of our journey and we look forward to further partnering with you during 2025 and beyond.
Let's dream on.
Speaker Change: With that, David Margantai would like to open up the session to your questions. Operator, we're ready to begin the Q&A session.
Speaker Change: Thank you. The floor is now open for questions. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again.
Speaker Change: If you are called upon to ask a question and are listening via a lot speak on your device, please pick up your handset and ensure that your phone is not on mute when asking your question.
Speaker Change: We do request for today's session that you please let yourself to one question.
Speaker Change: Your first question comes from the line of Aubrey Tianello of B&B Parabas. Your line is open.
Aubrey Tianello: Hey, thanks for taking the questions and congrats on the results.
Speaker Change: I wanted to touch on Cloud 6. Martin, you mentioned it returning to being a significant contributor to growth in 2025.
Speaker Change: Could you maybe elaborate on that point a bit in terms of some of the segmentation work you've been doing there and the difference between the launch this year compared to the cloud five launch in 2022. Thanks.
Speaker Change: Aubrey, this is David. I'm happy to take this question. So, you know, the cloud has become an iconic staple that resonates across generations. And I'm happy to take this question. And...
Speaker Change: We've also seen that the cloud is increasingly resonating with a young consumer as a new teleterren part of their uniform, so it's back to that basic staple, and we're actually going to celebrate this in the cloud six campaign that starts in the next week's.
Speaker Change: So, if you look back in a shoe history, comfortable, easy slip-in shoes have a history of becoming internal plastics.
Speaker Change: And that's what we're really focusing on. So we see an incredible mind to my right now, as Martin mentioned before, from our retailers and also kind of early science before actually the launch in the next two days.
Speaker Change: Thank you. Your next question comes from line of Jay Sole of UBS. Your line is open.
Jay Soule: Great, thank you so much. Martin, my question is on the guidance, the full your guidance for sales.
Speaker Change: You give us an idea of how you're thinking about growth by region and then just secondly you mentioned you expect the first half a year to be stronger than the second half, you know there's a lot of talk that the overall consumer environment in the US has been a little bit weaker since the since the end of 2020 course and see in the holiday season maybe because of weather or whatnot, but have you seen that and you talk about generally what you see in the US you know so far here in Q1. Thank you. Thank you very much.
Speaker Change: Yeah, thanks, Jay. So let me elaborate a little bit on the full year journey and then Marc will dive a bit into the region including what we currently seeing on the demand side.
Speaker Change: So, as I pointed out in the remarks earlier, we come out of an incredible 2024 with a lot of momentum, and we have already seen two very strong months across both channels.
Speaker Change: So we also said that we expect slightly stronger growth rates in half year one compared to half year two so now based on
Speaker Change: The first two months and the strengths that we have seen there, we expect our Q1 gross rate.
somewhere in the low to mid 30s.
and David Allemann .
Speaker Change: And we really expect that our D2C share remains at a similar level than in Q1 last year which implies that our wholesale channel will grow very strong which is
Speaker Change: driven by the launch volume of the Cloud 6, but also many other models.
Speaker Change: And we are seeing a significant cell in volumes there. And at the same time, we continue to see very strong demand in our D2C channels. And so we also expect that D2C continues to grow strongly.
Speaker Change: If you look at the rest of the year, we imply a certain level of prudency in our guidance given
Speaker Change: The macro economic environment, the discussions that we are seeing there and the uncertainties that comes from it.
Speaker Change: At the same time, if we look at our pre-orders that we have already for Spring Summer and for Fallwinder
Speaker Change: They point out two strong growth rates and currently their growth is above what is implied in our guidance, but as said, given what we are seeing on the macro side, we want to stay prudent here.
Speaker Change: Well, let me dive a bit into the reach and probably very much come from from our
Speaker Change: Long-term strategy that we already elaborated on a lot. So I think what's very important for us is that we're staying true to our strategy to be the most premium global sports fair brand.
Speaker Change: Who did in performance design and sustainability? And this is truly resonating with our consumers. I think we are less...
Speaker Change: And we're able to capture basically the potential that comes from our very unique position that we've created over the last years.
Speaker Change: So that has been now reinforced by a doubling of brand awareness, almost all-reaching, so we spoke about it in the last earnings call. We're seeing it in Asia Pacific, we're seeing it in Europe , not exactly double, but at the higher level already, and we're seeing it in the US and then.
Speaker Change: It's reinforced by the product launches and innovation stories that were able to tell and it's reinforced by the retail expansion.
Speaker Change: They were very much focusing on and so this causes a lot of positivity now already coming from Q1 but then also looking into Q3 and Q2, Q3 and Q4 [inaudible]
Speaker Change: When you look into the region specifically, Asia Pacific is very, very strong, you saw our Q4 growth rate of over 100%.
Speaker Change: Very positive outlook on the pre-orders, super strong demand going into our own retail stores, also outside of China. We're looking forward to opening, for example, Tokyo Ginza, which is very important for us in Q2, Q3 this year.
Speaker Change: in Europe and the Middle East were specifically proud of the growth that we're seeing in countries like Paris and Italy, where we've focused a lot.
Speaker Change: So countries that have historically been relatively small start to game traction and start to contribute significantly
Speaker Change: And then in the US, I think it's very much a continuation of the grand awareness journey that we're on and we're looking forward to bring many more stores to the US consumer, own retail stores over the next 12 months.
Speaker Change: And to continue to focus on a very strong full price elsewhere, which you also saw as part of our two four numbers and results in the growth margin that you're seeing right now.
[inaudible]
God, I think I used so much.
Speaker Change: Thank you. Your next question comes from the line of James Duffy of Stiefel, the line is open.
Speaker Change: Thank you, hello David, Marc, Martin, Kompmann to the team on the inventory and working capital management.
Speaker Change: We're very interested in the investments in consumer insights and some of the data you shared on uptake with younger consumers, the metric on increased uptake of running franchises from consumers under 35 is really encouraging. Thank you very much.
Speaker Change: Can you speak to where you stand with respect to more youthful penetration and distribution of marketing strategies in 25 and 26 to continue that development? What?
Speaker Change: Very happy to do that, James. So, as you mentioned, we have seen a very, very strong acceleration of brand love for on a global level across Asia countries. And that has been especially true among chancee, various, various actually doubled in the US.
Speaker Change: and increased by more than 50% on a global level, so very strong momentum and followership in use, and of course then as a result of that on social media as well.
Speaker Change: We credit that to our strength of blockbuster partnerships with San Diego FK Twix.
Speaker Change: with Roger Federer and a whole roster of young tennis players.
Speaker Change: Ben Shelton, for example, and you've got CLP, well I won't take it. [inaudible]
Speaker Change: But then also, we feel that life sports moments now, now you have seen at the Super Bowl, Elmer and Drottler talk about, talk about Allemann, the name of Allemann, the cross-generation.
Speaker Change: And the upcoming Coppiles nights, track nights that are very much geared at the young community.
a young athlete team of the Onetech Athletic Club.
Speaker Change: So all these lies moments which are also heavily discussed and on social media play into that
or their list.
Speaker Change: So, these are lasting partnerships, it's not speed dating, so we're really creating cultural elements for younger democratically years to come.
Speaker Change: And I probably also have to mention the on-store expansion that Marc touched on, just kind of the consciousness of city centers, New York, LA, Miami, London, Milan, Paris, Berlin, Tokyo, Hong Kong, Shanghai, this is...
Speaker Change: Something that really taps into the minds of young consumers as well and creates a lot of.
Brand Visibility, so all of this. [inaudible]
Speaker Change: is contributing to all the global law friends across more than 80 countries. And as you know, brand law not only drives loyalty within now existing consumers, but it of course also adds a lot to referral, which happens especially within your consumers.
Speaker Change: What we're doing is we're trying to be very intentional with how we bring product, brand, and channel together to reach the communities that we want to reach and eventually drive an even younger consumer into our products. And so one example is if you take
Speaker Change: and a launch of a lower profile silhouette like the cloud zone, then the question is who is the perfect partner we want to launch this product with and what are the right channels to launch this product with and so I think what you can expect over the next. And so I think what you can expect over the next.
Speaker Change: 2-3 years is beyond just brand builds to really with the product that we create to bring that together with the right authenticator with this young community and then use the channels that have the credibility to cater to that younger community.
Speaker Change: Or the one coming from my side on the numbers side. If you look into 2024.
Speaker Change: The power of the business model that we are building really comes to shine. So we have...
Speaker Change: Achieved very strong growth. We have achieved profitability ahead of our expectations.
Speaker Change: And at the same time, we have invested into print building and marketing.
Speaker Change: at the highest level of the last three years and so this clearly shows [inaudible]
Speaker Change: that the premium position and the margin that we are driving allows us to continuously invest into building the brand forward. So there is a higher share than last year that went into upper funnel investment along the strategies that David and Marc were talking about. Let's go ahead and see what we are going to do.
Speaker Change: So this was not sport volume, but it was really upper funnel investment into the future and I think this is the direction that we are going and where we also commit ourselves towards the future and which will drive gross beyond 26 [inaudible]
Thank you so much.
Speaker Change: Your next question comes from the line of Alex Stratton of Martin Stanley. Your line is open.
Speaker Change: Great. Thanks so much for taking the question. Congrats on another great quarter and year. I wanted to focus on a full year apparel hope.
Speaker Change: Great momentum in 24 out of that category, and I think that the assortment will be fully repositioned here in 25 25.
Speaker Change: So, how do we think about that growth in 25? Is it distorted any geography? And then bigger picture, how do you think about a peril, and what it can be as a percentage of total revenue over time? And also on kind of point of differentiation in that category. Thanks so much. Thank you very much.
Thank you Alex, and...
Speaker Change: I think we're very proud that for the first time we've broken $100 million in the parallels at the same time, the growth potentially is still so big, so that numbers should be much, much bigger in the future. We communicate that in the long term, we want to bring a parallel to 10% of our revenues. I think this is the journey that we're on.
Speaker Change: What you can expect to see on how to get there is...
Speaker Change: Basically, regions that have an stronger own retail presence will, in percentage of overall revenue, will potentially overperform on apparel, because you see a very strong correlation between apparel success and own retail doors. So, we often spoke about an apparel share of above 20% in our own retail doors. [inaudible]
Speaker Change: What you can also expect to see is a lot of investment that goes into our e-commerce engine, so that we are able to communicate our apparel collections in the best possible way. You still feel we have a lot of potential to...
Speaker Change: bring the offering in the most commercial way to our consumers. So there's a lot of focus going on elevating our apparel share on Econ. And then I think the last thing that...
that you can also, you will also see is that...
through more focused and streamlined approach on the collections.
Speaker Change: We should see a higher, basically, cells who share on specific items, which leads to an overall acceleration. So we feel...
Speaker Change: Right now, the offering is still a bit too broad, and we want to streamline that, when I continue to work on the consumer promise, and that should overall result in an even stronger self on some of the items, and with that you'll see an overall acceleration of the occurrence.
end of the program.
Speaker Change: Alex Robles also to connect back to our marketing approach. You will also see that we connect our apparel and push much more to some of our most important partnerships.
Speaker Change: So you're going to see the first co-created edit in a parallel recent day, you've seen the body's art campaign that we built around SK Twix, so we really use these amazing ambassadors.
Speaker Change: for pushing our apparel growth. And so I think that's going to be important as well for the future of apparel that apparel really has a voice at all.
Thanks so much, good luck [inaudible]
Speaker Change: Your next question comes from the line of Jonathan Komp of Barrett, your line is open.
Jonathan Komp: Yeah, hi, good afternoon. Thank you. I'm Martin. Could I follow up on that? The outlook? Yeah, thank you.
Jonathan Komp: I know you're building in plant efficiencies. Could you just talk about...
Speaker Change: You know how you're planning the business and where you expect to see efficiencies that are helping to fuel the marketing plus margin expansion. And then maybe just a bigger picture question, Titan, with the payroll, but some of your other initiatives as you think about the long term objectives. Thank you very much.
Speaker Change: To reach you, 10% of revenue or more apparel, DTC, retail, China. How are you tracking overall to those longer-term objectives? Thanks again.
Thank you very much.
Speaker Change: Good, Hachon, let me start with the first part, Mark takes the second part
Speaker Change: So, in 25, we expect leverage in our GNA line which we currently see as the key driver to reach that range of 17 to 17.5% just as EBDA margin.
Speaker Change: We spoke about our warehouse automation project in Atlanta, and we spoke about the...
Speaker Change: The headwind that we expect during the first month of operation operating that warehouse from the fact that we simply have a high fixed cost space and over time move volume into that warehouse.
Speaker Change: So depending on the on the scale up of that solution, we will see benefits on the distribution side as well already in 25 compared to the full year 24 picture or that maybe comes in a little bit later in in early 26. Thanks.
Speaker Change: So that will be a key driver of where do we end up in the range of our profitability target.
Speaker Change: And at the same time, we want to keep the marketing spendings on a high level, so in the range of 11 to 12 percent, in order to continue to invest into the business going forward, continue into a...
Speaker Change: The younger areas that you just spoke about, so a parallel retail, but also in our key markets and continue to try to find awareness there.
Speaker Change: On the more long-term 10% targets, I think that the reason also why we stated it together is because they are strongly interlinked, right? So I think
Speaker Change: How we tell how apparel and how China evolves is all connected when we look at apparel.
Speaker Change: We're probably slightly behind somewhere we would have wished to stand today, but at the same time we feel we very much know what are the key elements to accelerate. I think we spoke about the acceleration that we expect, so really linking back to the answer we already gave the Alex question. [inaudible]
Speaker Change: Allocate the right retail locations over time and want to make sure that we have enough space to bring the apparel collections in the right way to our consumers.
Speaker Change: On retail, I think we're super happy where we stand. It's really a question of
Speaker Change: How fast do we get access to which locations? Overall, we want to have bigger spaces than we have today, so you can expect an over-coportional, clear-me-through growth versus door growth over the next years to come, but we're super happy. Where we stand and how profit to put the channel is for us.
Speaker Change: And on China, we're currently standing at 58 doors to give you an example by the end of 24 so that's 30 own retail and 28 franchise doors.
for growing that to roughly
Speaker Change: for the own retail and roughly 40 franchises or so to 80.
Speaker Change: And these doors will be bigger than what we have today. We're opening two flagship locations in Chengdu and Chengchen this year.
Speaker Change: And so I think what you can expect to see is that in China, the consumer demand and the awareness that we're creating.
Speaker Change: Will be able to be captured in a better way through more point of sales that speak to the consumer in a more authentic way. And so...
Speaker Change: Very, very, very happy with Firmard Airsoft, I think, overall.
Speaker Change: Are we doing the right things? And are we really tracking on the initiatives that we set out as part of our LOP? And very happy to note that on retail and on China we're definitely on track, on a parallel we're slightly behind but we're very hopeful and positive on the few travel. [inaudible]
That's very helpful, thank you.
Thank you very much.
Speaker Change: Your next question comes from a line of Anisha Sherman of Bernstein. Your line is open.
Anisha Sherman: Thank you so much. So I appreciate you're not giving quarterly guidance, but
Anisha Sherman: I wonder if you could give some more specific color on the cadence through the year of some of the headwinds you've faced.
Anisha Sherman: Last year, so there was some European store closures, there was some marketplace allocation ships, there was supply chain disruptions in North America. Did you give a little color on the relative size of these headwinds and also the cadence where they all H1 weighted, which should help us model out the relative growth this year? Yeah, yeah, yeah, yeah.
Anisha Sherman: And then I have a quick follow-up on door growth. You mentioned retail door growth, but-
Anisha Sherman: For wholesale, last quarter you talked about five to six percent door growth over the coming year. Is that still your view into FY 25?
And is that true across regions? Thank you.
Speaker Change: I'm very quickly going to take the wholesale question and then Martin is going to take the other one.
Speaker Change: So, yes, it's still true, so we ended last year at 10,700 wholesale doors.
Speaker Change: And we are looking into expanding debt to roughly 11,300 toll-filled doors.
Speaker Change: So, so we're very much in line with what we've communicated.
Speaker Change: Very importantly, so you can expect to see additions with some of the key accounts that we're already working with, so you look at Foot Locker, you look at...
Speaker Change: The supporting goods you look at JD, we're very much looking forward to really start a partnership with Snipes as well especially in Europe .
Speaker Change: So it will be a set of departments that we're already working with, but to slightly some additional doors with these existing partners and Martin will take your other questions.
Yeah, so it's...
Speaker Change: For us the focus is executing on our three-year plan and we put the numbers that we have given, we are clearly tracking ahead of that three-year plan.
Speaker Change: Let's go on the oval supply of products or customers, more so on the channel mix, so probably DTC was impacted in the second quarter.
And so we expect, therefore...
Speaker Change: and positive effect there on the growth rate. But really, far as it's about the execution for the rest of the year and focusing on that and less on the quarters and at the same time as that hour.
Speaker Change: Our pre-orders indicate strong growth across the whole year and at the same time we want to stay prudent in the light of the uncertainties that are there.
Speaker Change: Thank you. Your next question comes from the line of Cristina Fernndez of Tully Advisory Group. Your line is open.
Good morning and congratulations on a strong finish.
Christina Fernandez: I would love to get your thoughts in general on the competitive landscape for 2025.
Christina Fernandez: How it compares to recent years, and in particular, some of the bigger brands are looking to…
Christina Fernandez: William Begerade, they're running French like this and penetrates further or go back to the specialty running channel so your thoughts there would be appreciated thank you.
Thank you, Cristina, for the question, I think. [inaudible]
Christina Fernandez: We're very aware of the competitive landscape and we observe how our fellow kind of competitors are looking at their innovation pipeline and how they're working with the whole department. What's important for us is that, and I think we are already...
Christina Fernandez: I'm trying to highlight that at the beginning of this Q&A. We feel that on is in a very different position than many of our competitors because we are more premium which allows us to capture different price points. [inaudible]
Christina Fernandez: And allows also within the channel partners that bring to capture a very specific consumer segment in this channel partners, we feel.
Christina Fernandez: We're bringing innovation to the market that's very much rooted in performance, design, and sustainability. And if you look at the product like Light Spray, we feel it's very differentiated to what some of the other brands had.
Christina Fernandez: And with that, it allows us to tell very differentiated stories together with our athletes and influencers that we're working with.
Christina Fernandez: As a result of that, we can capture a lot of our consumers through our own channels as well, so you saw that reflected in our Q4 numbers.
Christina Fernandez: What we currently see also looking at at 25 is that that strategy is being appreciated and it allows us to not play in the field of where all the other are playing but capture a different consumer with a higher margin profile.
Christina Fernandez: Thank you. We have run out of time to take any further questions so that concludes our Q&A session. We thank you for your participation. This now concludes today's conference call. You may now disconnect. Thank you very much.
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