Q3 2025 On Holding AG Earnings Call
Good afternoon and good morning to our investor community.
Thank you for joining ons, 2025 third quarter earnings conference call and webcast.
And CEO and CFO Martin Hoffmann.
Before we begin, I will briefly remind everyone that today's call will contain 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 annual report on form 20f for the 2024 fiscal year barred with the SEC on 4th March 2025.
For a detailed explanation of such risks and uncertainties.
We will further reference certain non-ifrs, 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 the financial information presented in accordance with IFRS accounting standards.
Please refer to today's release for a reconciliation to the most comparable IFRS measures.
We will begin with Casper, followed by Martin leading us through today's prepared remarks.
With that. I am very happy to turn the call over to Casper.
Thank you, and a very warm welcome. Everyone to our third quarter, 2025 earliest, call it is great to be back on this call with all of you and to give you an update on all's Global success,
Our mission to ignite the human spirit to a movement is resonating worldwide and across multiple categories.
This quarter’s performance is the direct result of our premium strategy in action, delivering incredibly strong growth and record profitability.
A commitment that runs from our products through our entire value chain.
And driven by our pursuit of operational excellence.
The spirit of On was everywhere this quarter.
From the crowds sliding up for the openings of our new source in Tokyo, Paletot, or Zurich, to the thousands of people who came to see how light spray products are manufactured during the Berlin Marathon.
Tours, athletes winning major titles across our entire portfolio of sports from track and field to trail running to Triathlon and tennis on strongly connected with audiences around the world.
The momentum there is extraordinary with a fourth consecutive quarter of triple-digit consequences.
in September Tokyo became our showcase as the city hosted, this year's World Athletics Championships,
Until you gain, the store is one of the crowned tools in our retail collection.
These successes matter.
And on is exceptionally, well, positioned.
The ultimate proof point for advanced footer technologies came 10 days ago when Helena Beer won the New York City Marathon against a stacked field of Olympic and world champions, breaking the 22-year-old course record by almost 3 minutes.
Pictures like these defined what we mean by "athletes first innovation."
our strategy is clear.
These are the engines that have won millions of fans and driven our significant sustained growth in the Run category.
2025 has been a testament to the strategy.
The successfully re-energized, the cloud Surfer franchise.
The newly launched clouds are for Max ranked among the top 5 selling models with key, run specialty Partners in its very first month.
We are already seeing a strong order book for the new Cloud Runner 3 and Cloud Monster 3 launching in Q1, while following to Q4, we'll see the launch of the new model, Crown Max. This showcases a significant lead in engineering and form innovations.
And on top of that, with the most groundbreaking technology, light spray will help redefine the category and elevate our entire running assortment.
In Spring/Summer 2026, we will bring this championship-level technology to everyday runners for the first time with the light spray Cloud. Monster hyper.
This is our Innovation process in action continuously and obsessively making the best possible products that push the limits of performance.
Of course, odds. Mishu goes far beyond Ronnie.
We are witnessing a unique moment where performance and Innovation are key drivers for fashion and the cultural side guest.
On is uniquely positioned to both drive and benefit from this trend.
This quarter our collaboration with Cinda introduced the cloud Zone, Moon lending on design Innovation was refined expressive Style.
In tennis, our partnership with Roger Federer has already connected the sport to a much broader audience.
This quarter, we've all come to the music artist Burna Boy for our tennis lifestyle brand, which is resonating strongly with the young demographic.
These cultural moments are accelerating our connection. And traction with young aspirational consumers, including teams, cementing on, as a global symbol of Modern Performance and style, that resonates deeply with both her and him,
To summarize, as ever honest carving its own path.
Our previous strategies are working, and we are executing on our mission with precision and discipline.
I'm a Relentless focus on Innovation as built the durable. Multi-dimensional growth engine.
An engine that is built for the long run.
Fueled power accelerated Global brand heat and awareness. The foundation for our next chapter of Premium growth is stronger than ever.
With that Martin Luther more on our strategic and financial highlights in the quarter and our significantly raised outlook for the year.
Thank you, Casper.
By staying true to our vision and executing this discipline, we are delivering remarkable consistent success.
This is expiring to experience.
Was on the road, the track, the trail or the court in the term, or in the streets.
whether on the feet or on the body,
1 has become a true toe to head partner and our customer's lives.
That connection makes our entire team, incredibly proud and grateful.
What sets us apart is our premium position.
The most premium Global sportswear brand.
Premium is an emotion formed in the minds of our fans.
We earn it by consistently exceeding. Their expectations in the moments that matter.
They know premium when they find it because they feel it.
This quarter Tokyo product Vision to life.
The atmosphere was Electric.
It was 3 years since my last visit, and in that time, the team has more than doubled in size and even further elevated how we show up in this vital Market.
What I saw in Japan was the clearest expression yet of ons premium strategy.
A brand that sees completely at home in a culture defined by craftsmanship, precision, and design excellence.
That Harmony is perfectly captured in our new flagship store in Jena.
it opened to record demand, delivering the highest monthly sales across our entire retail Fleet, in October
the space embodies What premium means for on
A formant elevated through design and delivered with care and consistency.
While Japan set the tone, the pro, the Asia-Pacific region demonstrated the sheer scale of what's possible.
Across China Korea and Southeast Asia. We are connecting with a new generation of younger deeply designed conscious customers.
We saw this again in Bangkok where our first store opened to the highest daily sales of any store opening in our history.
The global demand is a direct result of our customer strategy.
Our community is growing, but also deepening becoming more diverse, more active and more connected across all our verticals.
While friend awareness is accelerating the clearest metric of our success as loyalty.
Engaged friends are returning at higher rates and crucially buying a cross more categories, embracing the full press of our products universe.
Parallel is an important driver of this evolution.
Its fundamentally reshaping of people's View and enter our brand. It's becoming a key acquisition Channel. Attracting a growing share of first-time customers by also building lasting value. As a Peril Shoppers buy more frequently and with bigger baskets,
Importantly, we are not building a parallel as an add-on to our Footwear business.
but as a company within the company,
Serving the same communities, but with a unique product offering and customer experience.
As a result, a parallel is driving incremental, high-value growth across all our channels.
Operating at this level with such broad-based strengths, that's an incredible high standard and it requires Flawless execution.
This is where our focus on operational. Excellence and technology is delivering profound results.
We are transforming the way we work. We have structurally reduced lead times and enhanced how we plan and run the business.
With intelligent tools powering our integrated planning.
We are building a faster and more agile company. That is a stronger partner for suppliers retailers and consumers.
More and more AI becomes a core component to how we operate across all areas of the business and engage with our fans.
All of this is deeply rooted in our culture of innovation and excellence, and it's the daily passion of our amazing team that makes all of this work.
From the cheering Zone at the marathon in New York.
For the light, spray Innovation lab.
From Tesla shows to the shop floors of front specialty partners.
Their energy is, what sets us apart?
Thank you so much team.
Our incredible brand momentum and precise execution continued through Q3, delivering another exceptional set of results.
4.5% at concurrency.
This outstanding topline growth fueled record profitability.
Across profit margin of 65.7% and adjusted ebda margin of 22.6% and nearly 50% year-over-year adjusted ebda growth.
Our d2c Channel Once Again, delivered exceptional growth while driving Superior profitability.
Net sales, reached 3004.7 million with Franks. An increase of 27.6% year-over-year on the reported basis and 37.5% at constant currency.
Our success is driven by strong synergies between our e-commerce and Retail ecosystems.
Omni Channel customers are more loyal and deliver materially higher lifetime value, validating our seamless premium experience.
Experience is proud to live in our flagship stores.
A recent highlight for me was the opening of our new Zurich Flagship. A celebration of our Swiss Heritage in a stunning downtown location.
Alongside our new stores, our established Fleet continues to excel.
We saw standout contributions in Q3 from key locations, including C Street in Tokyo, Miami and it jumps Lisa in Paris.
Proving the productivity and longevity of our retail Investments.
Our brand strengths is mirrored in our wholesale Channel.
net sales reached 479.6 million, Swiss Francs increasing by 23.3% year-over-year on a reported basis and by 32.5% at constant currency,
This performance reflects sustained, elevated demand from our key account partners.
The enthusiasm for our future pipeline is clear.
Fall winter. 2026 selling has kicked off with ongoing strong momentum.
And our building order book for 2026 already, reflects our partners' deep confidence in our rentless Innovation, turning to our regional development.
in the Americas, net sales reached 436.2 million, Swiss Francs, growing 10.3% year-over-year on a reported basis and by 21% at constant currency
This quarter was a pivotal test of our premium strategy, as our U.S. price increases came into effect.
The results, confirmed our fuel.
Demand remained incredibly strong, our premium offerings clear, validation of our Brand's pricing power, and the impact of our full price strategy.
This gives us tremendous confidence heading into the holiday season, where our premium positioning and unwavering commitment to full-price selling will be a significant competitive advantage.
Europe, Middle East and Africa. Delivered an outstanding quarter with net sales, reaching 23.3 million Swiss Francs up 28.6% year-over-year on a reported basis and 333% at constant currency
Our performance highlights the Press of the Branded in the region.
We are seeing exceptional demand in the UK, which has firmly established itself as 1 of our largest global markets.
Incredible momentum in your markets like France and Italy and the sustained real acceleration and growth across the German speaking region.
Asia Pacific continues, its phenomenal growth, delivering, net sales of 144.9 million Swiss Francs.
Up 94.2% year-over-year on the reported basis and an incredible 109.2% at constant currency.
Apec is now approaching 20% of our total sales.
What was once a new frontier, has become a major engine for the brand.
The remarkable demand is broad-based with continued, triple digit growth in Greater China, South Korea, and Southeast Asia.
Amplifying the success. We see in Japan.
This, increasing Regional balance as a core strength, a direct reflection of our Global strategy and proof of our ability to drive high-quality growth across all markets.
Moving to performance by product.
Those remain our core engine of growth.
1.1% year-over-year on a reported basis and 30.4% at constant currency.
This excess confirms our expanding role in the lives of our fans.
Across every part of their day.
In performance, the cloud monster continues to win, new fans, and our latest Innovations. Like the Cloud Server, Max and cloudpool Max are off to exceptional starts.
Driving strong results in key sporting goods and run specialty distribution.
When, while in lifestyle, the cloud tilt, the cloud, and the Roger continue to see tremendous demand.
This combination of elite performance products and a distinctive hatch in the lifestyle segment is what sets us apart.
Our repair category is rapidly establishing itself as a significant Standalone, gross pillar.
Net sales reached CHF 50.1 million, an increase of 86.9% year-over-year on a reported basis and an amazing 100.2% at constant currency.
This performance was marked by a major operational milestone, as we solved over 1 million apparel units in a single quarter for the first time.
This success is rooted in a global and multi-channel expansion.
With a meaningful and balanced increase in apparel, share across all channels and regions.
Now, we will move down the P&L.
We delivered an outstanding 65.7%. Gross profit, margin up 510 basis points here over a year.
This result is materially ahead of our expectations and reflects the power and momentum of our premium brand position.
Yet, it is important to understand the components of this result, as it also includes some temporary and 1 of factors that should not be extrapolated.
First.
The quarter includes a positive 1-time adjustment of approximately 200 basis points.
This relates to lower than anticipated Freight, and other costs.
throughout half year 1, we saw these lower costs emerging
partly from successful negotiations and scale benefits.
Are we prudently continuing to accrue at our higher prior levels?
Now in Q3 we have confirmed these efficiencies are sustainable and are updating our cost assumptions.
This 1 time adjustment, therefore represents the release of those approvals related to the first half of the year.
The timing lag between our U.S. price increases and the full impact of additional U.S. tariffs led to a slightly positive margin affecting Q3, which should be considered a temporary benefit.
Third.
The current devaluation of the US dollar compared to the Swiss franc since early, April drives a positive cross profit margin impact of approximately 100 basis points.
Crucially.
even after accounting for these effects our underlying gross profit margin is significantly above our communicated, long-term Target
This is the result of the structural strength of our business and the great work of our team.
Our increasing DTC share our premium positioning durable, operational efficiencies and economies of scale.
These structural effects are expected to be sustained. I expected to be reflected in our future results.
We also delivered an outstanding Q3 adjusted ebda margin of 22.6% up. 370 basis points year-over-year corresponding to an absolute adjusted EPA of 179.9 million Swiss Francs.
Sgna excluding share based compensation was 47.1% of net sales in Q3 up from 46% in the prior year.
Reflecting a deliberate decision to invest in future growth through marketing and our Global retail expansion.
Importantly, we are funding these strategic Investments, largely through our operational efficiencies.
Our focus on Excellence, has structurally improved, our distribution cost Baseline, which continues to decline as a percentage of net sales.
This demonstrates, our flexibility to thoughtfully, reinvest in, I return, areas that fuel our long-term brand growth.
Detect negatively impacted sgna and ultimately, also, our adjusted epda margin.
Moving to our balance sheet.
We continue to demonstrate exceptional capital efficiency.
Capital expenditures were 20.5 million with ranks or 2.6% of net sales.
An improvement from 3% in the prior year.
As of the end of Q3, our inventory stood at 380.6 months, with Franks, as in Q2, inventory volume grew faster than value.
ensuring we are fully prepared for Q4 or reflecting our new operational efficiencies
The proof of this new efficiency is in the results.
Our cash conversion cycle improved again, year over year.
This discipline working Capital Management. Combined, with our strong operational performance, fuels substantial, operating cash flow of 157.3 million Swiss Francs in Q3
As a result, our cash balance crew substantially ending the quarter in an exceptional strong position at 961.8 million Swiss Francs.
Is that? Let's look ahead.
The consistent success, our strategic focus and exceptional. Execution has delivered throughout the year fuel our confidence to deliver a strong finish to the year.
Our brand momentum is undeniable, and the first weeks of Q4 have already shown our strategic gains.
Alongside major athlete victories.
Including solary loves.
Iron Man World Championship win in Kona and Jawa foncer becoming the youngest tennis champion at the Swiss indoors since 1989.
We have created moments that continue to elevate the brand globally.
We launched the cloud solo. Our first ever co-created product, with luiza and introduced a new capsule collection with sky-high Farms standard around the cloud 6.
We entered the GCC market with the opening of our first store in Riyad Saudi Arabia, just yesterday.
And opened our first store in Soul. Securing a beautiful Ultra Premium location in the yai Mall.
We are thrilled with our performance during Golden Beacon, China, and our global holiday campaign. The gifting movement is off to a great start, confirming our momentum as we head into the end of the year.
This is how our vision comes to life.
Winning and performance, elevating our brand, and showing up in a credible, consistent, and aspirational way for our ever-expanding communities.
Therefore, we are raising our 2025 guidance across all line items.
We now expect constant currency net sales to grow by 34% year-over-year, well ahead of our previous guidance of at least 31%.
At current spot rates our constant currency growth. Guidance implies reported net sales reached 2.98 billion Swiss Francs,
Alongside this topline race, we now expect the gross profit margin to be around 62.5%, a meaningful increase versus our previous guidance of 60.5% to 61%.
As outlined before, this new ambition reflects our commitment to full-price sales during the holiday season.
Sustainable structural efficiencies rooted, in our elevating premium, positioning economies of scale and increasing d2c share as well as the current ethics tariffs, and freight cost environment.
On adjusted ebitda the exceptional cross profit generation allows us to do 3 things at once.
Absorb materials for an exchange headwinds.
On our more Swiss franc, heavy cost base.
Simultaneously accelerates strategic investments into our friend technology and innovation pipeline.
And to raise our profitability for cost for the year.
We now expect an adjusted ebda margin of above 18%. A clear step up from our previous guidance of 17 to 17.5%.
Looking Beyond 2025.
The Proven impact of our strategic building blocks and Clarity of our long-term strategy providers with the Baseline for continued. Exceptional momentum.
Of our product pipeline validated by our existing order book.
Thriving. A trajectory. Well ahead of the targets outlined at our Investor Day in October 2023.
As you will recall, we communicated our goal to topple net sales by 2026 implying a 26% net sales, constant certainty gross kager. Over the 3 years
We are on track to complete the first two full years of our three-year plan with excess of 33% constant currency growth each year.
This sustained and material overachievement gives us the confidence and visibility to update our long-term outlook as we look ahead to the final year of our plan.
We now expect the 3-year constant currency kaker from 2023 to 2026 to reach at least 30%.
This implies at least 23% growth in 2026 based on our current outlook for 2025.
This isn't just about exceeding targets, it's a testament to the unparalleled momentum of our brand, the strength of our strategy, and the incredible dedication of our entire team.
We are not just meeting expectations. We are redefining what's possible in the sportswear Market.
As we look at our midterm profitability ambition, the significantly higher gross profit margin achievement expected for this year. Provides us with a strong Baseline and increased confidence in our ability to exceed our stated gross profit margin Target for 2026.
Despite the full impact of terrorists next year.
Importantly, this allows us to continue to invest meaningfully into the brand fueling our Global momentum, while driving even more progress around new technologies and AI.
And ultimately to build an even stronger foundation for continued growth.
In 2026 and Beyond.
In line with our established guidance Cadence. We will provide a formal guidance update in March when we share our Q4 and full year results.
To summarize.
We are thrilled with the continued strength of our brand.
We head into the holiday season with high momentum and conviction in our plan.
Which allows us to look beyond the immediate Horizon towards our next phase.
Why is we like to say to Dream On?
Again a huge thank you to our teams around the world, for their incredible execution and for making all of this possible.
And with that Casper and I are happy to take your question.
We are now opening the floor for question and answer session. If you'd like to ask a question, please press star, followed by 1 on your telephone keypad that star followed by 1 on your telephone keypad. Your first question comes from the line of Polo of City. Your line is now open.
Hey, thank you guys. Um curious if you could talk about the traction that you're seeing in apparel with any detail that you can give about regional acceptance of that product and curious how it's performing in DTC verse wholesale caps and then just within your Wholesale Doors. Can you talk about what percent uh, carrier apparel? Uh, and uh, any opportunity long term that you you think? Um, and when, when you think about the percent of accounts that carry your Footwear, what percent ultimately will cover, uh um, you know, include a power.
Thank you. Paul, for the question, we're we're very excited about the apparel performance. As you've, you've heard on the call, just now we sold over a million items. Now, in Q3 for the first time and the parallel access to see together account for about 8% of our total business, that's a new record and we're we're well on track of of hopefully getting uh, quickly into the double digits. Uh, there
Um, so traction is is really strong. Um, what drives this is, we're we're really executing on on all fronts. So on the distribution side, our own stores play a very important role because we need to be able to showcase the breadth and the beauty of this product. So, if you've been to any of our newly opened Flagship stores, you you'll see that come to life.
But we're also doing that for example at department stores wherever we have shop and shops. Um we usually lead with apparel and it's a great way to tell the Brand Story.
Down a bit into, you know, which parts of apparel are seeing the most traction. Happy to give you a bit of color there.
Um, we have an exceptional strong, uh, running training and Tennis business in apparel.
Um, and within running, we clearly see that whenever we do something from the performance side. So we work with our athletes and we bring some of these late latest material Innovations,
Uh, to broader audiences that resonates very well.
In in training, it's all about winning with her.
And so The Sweet Spot there, for on seems to be where we have.
Um, light resistance work. So you at the gym, or your your, um, in a in a class and on brings um,
Performance Innovation like sense. Tech that we're rolling out now across the lines, but we're also bringing in a bit, the more a elevated aesthetic that resonates with our affluent customer and then, of course, tennis, uh, maybe category we even a bit underestimated. Um, just the tennis look, but whether it's actually the performance here that our athletes are airing competition, like, show off, and they could, the Brazilians are crazy about it all the way to the lifestyle looks. And you've probably seen the, what we've done with Burner voyages now, um, bringing the tennis lifestyle, to wider audiences all these things resonate extremely well. Um, over time, we will definitely, um, attack in in additional categories. There, bring it in more to, um, movement and and stuff that can be worn every day or
Always was the Performance and Innovation Corps, and we also have a very strong checkered business. Um, that is mostly reflected in our outdoor and running collections.
Maybe just uh, at at a point here because I think it's very important for, uh, where we are taking our business model. Um, we set it on the call that really, the way we look at the parallel is, as a company and the company and it follows a slightly different distribution model approach. It will be much more deta to see Heavy which doesn't mean we are not working with with great wholesale Partners. As Casper just said, but retail will play a much stronger role in the physical presence of of apparel. And as a result, our apparel business is expected to drive all the superior margin profile um into the brand. Um, so we're not only adding additional customers but also additional profitability.
Thank you very much. Good luck.
Your next question comes from the line of J. Soul of UBS. Your line is now open.
Great, thank you so much. Um my question is just as you know, the growth was obviously very strong in the quarter. At the same time, the gross margin expanded a lot. Uh in the same time your inventory looks very lean. Can you just talk about the you know, how you balance, you know, driving Topline growth versus
You know protecting margins, your premium position, maintaining that scarcity model and you know just delivering you the in algorithm. They think it's right for the brand for the long term. Um, but also, you know, in a way that's, you know, is um, allows the company to grow without having any like, you know, operational issues. Thank you.
I mean, I think this is the, uh,
the result of the amazing work that the that the team is doing and that we really amplify capabilities in the in the organization across every part. And so we are really able to, um, manage all the 3 areas that that you mentioned in in in sync.
um,
I mean, I I think on, on on, on the, on the cross profit margin is just super important to to understand that.
The premium business that we are building is the driver behind the cross profit margin and of course building a premium business. Also requires incredible discipline in your inventory management, in order to protect the high share of full price sales. So this is the essence of of of what we are building and
Sustainable, and that's, that's I think, an, a great place to be given the, the, the environment around tariffs. So we are fully in control of our future. Um, we will digest our the tariffs and still be, uh, well above our long-term Target, and at the same time, um, we can reinvest into the business we can, um, we can invest into the brand into, uh, technology. But um, uh, we are fully in control on pricing on doing the right things and also investing into the product. So this is this is uh the the power of of of that premium position that that we are building.
Got it. Thank you so much.
You're in next.
Point of Alex trading Morgan Stanley, your line is now open.
Thanks so much for for all the caller today, guys, and, and nice results. Um, maybe just on the, the 2026 initial guidance at 23% rate was that a constant currency number? And then can you just elaborate a little bit more on on how you kind of get confidence there by region and channel? I'm just curious. If if any geographies or or channels or or categories should should decelerate more than others or or what the the kind of composition of how you're arriving, there is thanks so much.
Yeah, thanks for the question, Alex. Yes, it's a it's a constant currency. Um, number. Um, so also the 30% that we that we gave as a keer. Both are constant currency
I mean, I think it's it's important and we we had it in the script already to
To always be clear on.
What is our strategic aspiration? And
this is to become the most premium Global sportswear brand. And so the, the first focus of what we are building is is to increase our addressable Market.
I mean about 75% of the people in our markets, don't know about on. So increasingly brand awareness is a key first step.
But we are not using a shortcut approach to to to do this, but instead we are extremely conscious about the different communities and customer groups, we are targeting. So if you take burner boy and send deer, they speak to a Chansey customer if you take Helen up Barry. She builds credibility with all kinds of Runners. Joe, our FKA drives a hype in the brand, in in Brazil and I could go on for forever. But what is most important is that, that we are not fishing in the same Pond as everyone else instead?
1 is really expanding the market of sportswear, because in the end, our products, give our fans, an identity. That is really rooted in The Innovation and the design that we are bringing to the, to the product.
And and so we are bringing fans into our shoes and into the apparel that have basically not used sneakers or performance inspired, um, apparel before and and and so ultimately, we are becoming a bigger part of the life of of our consumers. And, and I think it's very important that this strategy is to set ourselves apart from everyone else in the industry. And it also clearly defines on what we are doing.
As a Next, Step going into into 26 when it comes to products, channels and regions. So there's out of that strategy. It's it's, it's very clear. Um, if you look on the product side, you can expect a firework of of, of innovation. Um, so we mentioned it on the call early. Next year, we will update 2 of our key franchises the cloud Runner, the cloud monster
Light spray will become big and it will really revolutionize running. And and then we still have a few surprises further down the road for next year and then you already see the success of a power. And, and how this is really incremental to the to the business.
Um, and in retail, um, we are continued to add about 20 to 25 doors on a, on an annual basis, as we have done this year, at the same time, we are heavily investing into our wholesale Partners. So really, if you will experience on in a physical space in the year from now, it will look very elevated to where it is today.
There.
And um, so I think this is, this is the confidence and um and the strategy that that is sitting behind um the Outlook and um the the strong increase that we have given on the 3 year plan.
That's a great caller. Good luck.
Your next question comes from the line of John, Kernan of TD Cohen. Your line is now open.
Good afternoon. This is Krista Zuber on for John, thanks for taking our questions. Uh just 1 on gross margin, you know, you raised the fiscal, 25 gross margin expectation. It kind of implies a modest expansion for 4 q against, you know, your toughest year ago compared can you walk us through the various sort of Tailwind, headwinds, that support the Outlook into 4 q, and, and separately? I think in the release, you mentioned, a favorable product costing benefits in 3, q and, and kind of what is the long term outlook for that line item? Thanks so much.
Yeah, it's a as I just said, I think it's super important to understand that. Um a big part of The Upside that we have seen in Q3, what a strong margin that we have seen in Q3.
It's really based on the power of the business model that we have built and we consider this to be long term.
Um,
If we look into Q4, I think there's, uh, still upside in, in the margin. Um, we we put some, some Prudence in here and then, um, going into into next year that sustained, um, uplift will still be there, um, and it will help us to more than offset, the additional impacts that are expected from the terrorists, um, to come into into the p&l. Um, and on top of that, we are benefiting from the current FX environment from the current Freight environment, uh, which will drive additional into additional margin into into the cross profit. Um, but really the important piece is that we have taken a big step. Uh,
Above our Target that we communicated by improving the business that we have built.
Thank you, your next.
Your next question comes from the line of Sam poser of William trading. Your line is now open.
Um, thank you guys for taking my question. Um,
Real quick. The you, you said it a conference that, you know, you said that the US, you know, that that you might, you know, tone down, the US growth, how much of what's going on right now, um, of sort of, with the, with the, um, really strong growth in in APAC, and and mea. Um,
How should we think about the U.S. and how much is that? Sort of, um,
More controlled growth. It sounds like you're going to do going forward, um, reflected in, um, in the gross margin and the outlook for the gross margin.
Thank you, Sam. That's a very thoughtful question. Look, executing a premium strategy, takes a lot of discipline.
Um, and and the comment that we've made repeatedly also on on these calls is that we're not chasing growth by adding.
Especially Wholesale Doors, that don't make any sense. We're also not chasing growth by discounting.
And yeah, I can maybe give you a bit of a call around the U.S. Um,
Um, we're very happy to see that the price increases that we've done. Now, in July of this year have been very well received and we see continued demand growth
Implying that our affluent consumers are not price sensitive. So I think that's, that's a very important. Um, fact, as, as a lot of people seem to be concerned about the Tariff impact,
secondly, um,
our Global brand tracker for the US shows that, uh, it's 1 of the reaches where we've been the most, um, awareness. And we're also gaining with relevant special with high income, uh, teams and affluent demographics, um, combined, with a high relevance in running. So, all the things we do around running, um, like Helen will be winning the New York City marathon these things. Um, translate into more demand from consumers and then and thirdly, um, as you have heard on the call,
Q3 saw less, uh, less seasoned sales. I mean, you always have a very small percentage anyway but we saw even less than we had last year and we're going into this holiday season with a full price strategy. So we have no discounts. I'm coming up.
A very price-competitive environment. Um, so we're really staying true to the discipline that the premium strategy demands.
Thanks. Then, when we think about your initial look at 26 and the raise of the 3-year plan. Um,
Is that?
With that sort of mean on an FX neutral basis, uh, that ongoing um,
you know, sort of
Ongoing double-digit growth in the US, but significantly, higher growth, in Asia and the MEA.
I mean, it will it it, uh, includes strong growth across all the different regions. Um, as I as I just said, um, a lot of the things that we are building, they will amplify, um, the opportunity that we have as a brand, the, the reach that we have as a friend, in in, in, in all the different regions. Um, so our assumption is based on a continued strong growth of the of the US. Um, and so it is on a on a continued strong growth of, of Europe and, and, and asia-pacific. I mean, just take a parallel. For example, this is a, this is a global story, uh, apparel is as much underpenetrated in the, in the US as it is in, in asia-pacific. And the growth opportunity is massive um, in in each and every region. Um, we will expand on retail in in, in all
The different regions and then um, at the same time we will not change the the philosophy that Casper just mentioned on expanding wholesale. So we still have about 60% of the key account doors, uh, from foot digs and, and Shady where on is not yet present. And, um, so that's a multi-year opportunity. Um, but again, very much with a focus on
Building the brand in a in a very meaningful and controlled way.
Thank you very much.
Your next question comes from the line of Wendy Lu of JP Morgan. Your line is now open,
A pack, uh, very impressive, uh, triple digit growth, you mentioned triple digit in, Greater China, South Korea. I was wondering if, uh, you could share how much that comes from space. This is, you know, same store, uh, sales growth or like, for like growth.
Uh, and then secondly, um, just uh, a quick um, clarification question. Uh, I think you had um uh, your race guidance in price mid 20s growth in in Q4 uh, we know the tough comes here, but I just wanted to wanted to uh, track. You know, what are the considerations behind this? Al
Look, which still looks, uh, pretty conservative. Uh, what are you seeing in each original Market? Uh, since October, thank you.
Okay.
Um,
I think in in, in, in Asia Pacific, um,
We, we talked about very different markets. Um, Japan is a market where we ended in 2015. Um, we have a strong presence with our wholesale Partners. Uh, we are very carefully expanding with, with additional retail stores as we just have opened the the 1 in, in Ginza
um,
but,
This is a, this is a Playbook of, of growing brand awareness and, and being where the customers is shopping. If we are looking in most of the other, um, regions and and I include China in that,
I think on is very much at the beginning of the journey. And, um, here we see, massive same stock growth and at the same time, we are extremely disciplined in opening additional Stores. Um, so the the 20 to 25 store numbers that I gave earlier, there was a global number. So it includes it includes China. Which means, um, we take the same approach as an ever as every other region, to very carefully. Go from 1 City, to the other, to build a brand in the right way and to really make sure that there's also strong performance credibility. And um I think that approach just
It's an environment where um, the demand for a premium sportswear brand is incredibly High and um and we could easily sell more product there. Um, but um we we see this as a multi-year journey
if we, I think, if we look into into Q4 and, uh, we, we already gave some some colors in the
It's always very important to to understand what does the holiday season mean for on, for us. The holiday season is a is a moment to connect with our friends about the right gear for the
For the season that we are in. Um, it's to shop for gifts, um, but it's absolutely not the moment for us to drive sales through discounts.
As Caspar said before, our commitment to full-price sales is...
First and foremost, the commitment to build the brand long term.
So, when we look into Q4, we had a very strong start into October, uh, and into into November
We spoke about China, um, single days for yesterday. Uh, 1111. And we have seen incredible momentum in in T-Mobile, uh, our traffic there has been up by by more than 250% and again, it's a full price environment. Um, we achieved our apparel Target, uh, much earlier than the end of of 1111
And if we are, if we're looking into into America's, we had a very strong holiday season last year, and we are now expecting that region to be in line or even slightly accelerated in terms of growth compared to what we had seen in in Q3. So there's a lot of momentum um, on a global level.
Great, thank you very much.
Your next question comes from the line of Audrey. Talio of BNP Paribas your line is now open.
Hey, thanks for taking the questions. I wanted to ask about profitability. Your Eva margin guidance for this year? Puts you a year ahead of schedule, uh, versus your 2026 Target.
How should we be thinking about the progression of ebit margin longer term? Now that you're surpassing some of these targets, uh especially Martin with your comment that there's structural Improvement on the distribution expense line? Thanks.
yeah, I think, um,
It's, it's, it's always, It's always important to, to recall. Uh, the philosophy that we have when it comes to managing our business around profitability. Um, so for us, it's a first and foremost about investing into the business investing into long-term growth, which means, um, investing into rent, building into building capabilities the team, um, technology and at the same time Drive additional, uh, profitability year by year,
And we we keep on doing this um unless there's a moment where our cells just exceeds expectations and we we can't invest into the business in a in a meaningful way. And this is a bit what we have seen now in in, in Q3 where um, where really sells came in much stronger than than expected and has driven together with a strong cross profit. Margin a high profitability. So our, our philosophy of approaching
That profitable growth has not changed and and so we will approach next year very much with the same mindset.
So, how can we invest into the brand? How can we maybe accelerate some of the dreams that we are having, um, that will continue to drive growth, well, beyond 26, um, uh, given the fact that we have a stronger cross profit, we have a solid, uh, sales Outlook. And uh, we have an improved this distribution line.
And at the same time, how can we, um, uh, drive drive drive profitability, uh, beyond the the Outlook that we gave 3 years ago. So, this is, this is the, um, the mindset that we approaching, um, 26 with. And then we will give an a precise Outlook Outlook in, um, in March
Very helpful. Thank you.
Your next question comes from the line of brick. Patel Raymond James. Your line is now, open.
Thanks very much. Um, you touched on the opportunity with the younger consumer. Can you expand on that? Like, what do you define as a young consumer and how big is that business today? And then, can you unpack your go-to-market strategy to acquire these consumers as we think about categories and geographies?
Really over the last I would say about, uh, 6 7 years. Um, we have gained a lot of traction with younger consumers, um, uh, the, you know, working with, uh, you know, the generational Talent like essay has, of course, helped a lot. And you've seen recently, we, we started a collaboration with Burna Boy to add something more on the, on the, you know, something that is appealing to to male, um, teams as well. Um,
So, you know, if you, if you, you know, going, uh, across a high school in the US, um, especially in a more affluent neighborhood, you'll see the cool kids varying on, right? That's a relatively new phone, that's not something. We're, we're chasing, it's not that, that we depend on the market, but it's, of course, um, very, um, inspiring that we we, uh, we're able to connect to this younger Target group. And, you know, this, this star group gives us a very long, a very strong LTV. You may have also seen that, we have launched a kids line,
Um, that is going phenomenally, well, uh, it's, it's really hard to keep it in stock, of course, um, for the small children. It's, it's the moms and dads buying the products. So we basically, um, uh, you know, leveraging that appeal. But then, uh, we have also a kids line. So, basically young teams, um, where we are also seeing very, very strong results.
Thank you.
And that concludes our question and answer session for today and also the conclusion of our session. Thank you so much for attending today's call. You may now disconnect goodbye.