Olivier Bernhard, co-founder of On, emphasizes the importance of cherishing every stage of the journey in a recent CNBC interview. Despite facing challenges since its IPO, On reported a 35.7% revenue increase in Q4 2024 and is investing in innovative production technologies. However, potential tariffs under Trump’s administration pose risks to the U.S. market. On aims to target affluent consumers and plans strategic price increases while forecasting ambitious revenue growth for 2025.
“Don’t get too caught up in reaching the pinnacle. Embrace each step of your journey and savor every milestone along the way.” This philosophy, shared by On founder Olivier Bernhard in a recent CNBC interview, resonates across both the business and sports arenas.
Three years ago, Bernhard found himself navigating a challenging period with On, the company he co-founded in 2010 alongside Caspar Coppetti and David Allemann. Initially catering to a niche market with a dedicated following among runners, On experienced a phenomenal surge in demand during the pandemic, culminating in a successful IPO in New York in 2021.
However, since 2022, the company has faced challenges in maintaining its high expectations and adapting to its significant market valuation. Reports highlighted executive compensation and cost-effective production methods in Vietnam, despite the brand’s Swiss heritage. In early 2024, distribution issues arose in the USA, which constitutes more than half of On’s revenue.
On the Path to Success
Despite these hurdles, On has demonstrated resilience and is steadily approaching new heights. The sports shoe manufacturer recently reported impressive figures for the fourth quarter of 2024, showcasing significant growth.
Revenue soared to 607 million francs, reflecting a remarkable 35.7 percent increase compared to the same quarter last year, accompanied by a robust gross margin of 62.1 percent. Distribution challenges have been addressed, with a state-of-the-art automated warehouse in Atlanta set to enhance efficiency in the U.S. market, positioning On for sustainable growth.
Through high-profile advertising campaigns featuring celebrities like Zendaya, On has successfully captured the attention of Generation Z and is enforcing premium pricing strategies in its primary market, the USA. The company intends to secure its status as a premium brand through technological advancements, innovative designs, and effective marketing.
Co-founder David Allemann expressed optimism during discussions with analysts, stating, “We are confident that our brightest days lie ahead, and we are eager to embrace the next 15 years as we celebrate our anniversary.”
Navigating Trade Challenges Ahead
Yet, new challenges loom on the horizon, particularly those posed by Donald Trump’s potential tariffs on numerous trading partners. The American clothing and sports industry, heavily reliant on imports, stands to be significantly impacted. Nearly all footwear sold in the U.S. comes from abroad, mainly Asia. The U.S. Footwear Manufacturers Association, along with major brands like Nike and Adidas, has voiced concerns that these tariffs could drive up shoe prices.
The 20 percent tariffs recently imposed on Chinese imports are likely to hit lower-priced shoe brands the hardest, as production costs constitute a larger portion of their overall expenses. This could adversely affect low- and middle-income American consumers, who are currently cautious about spending.
While industry giants like Nike and Adidas have swiftly shifted production to Vietnam and Indonesia since the onset of Trump’s trade conflicts, many still relied on China for 20 to 30 percent of their production last year. In contrast, On focuses primarily on manufacturing in Vietnam and Indonesia, though Vietnam may also become a target due to its substantial trade surplus with the U.S.
In response to these challenges, On has stated, “We actively assess trade policies to ensure flexibility within our supply chain through diversified production across various countries.” The company is also investing in innovative solutions like Lightspray, a new technology aimed at revolutionizing shoe production.
With Lightspray, On envisions a future where shoes are produced on-site via a robotic spraying method, drastically reducing the need for extensive manufacturing facilities and potentially mitigating tariff impacts. Although it will take time to scale this technology, it represents a forward-thinking approach to production.
Should tariffs be imposed on imports from Vietnam, On is prepared to carefully consider all factors affecting pricing in the U.S. market, including production costs and market dynamics.
Targeting Affluent Consumers
During a recent analyst call, CFO and Co-CEO Martin Hoffmann outlined the company’s strategy, emphasizing planned price increases as a means to safeguard the brand’s value amid ongoing tariff discussions. On aims to position itself as a luxury provider, appealing to affluent consumers who may be willing to pay a bit more for their favorite running shoes or stylish sneakers.
However, the team in Zurich remains cognizant of the unpredictable nature of global trade. Hoffmann remarked on the macroeconomic landscape’s influence on On’s cautious planning for the latter half of 2025. Nevertheless, the company has ambitious goals, targeting annual revenue of 2.94 billion francs, representing a 27 percent growth from 2024.
Investors have responded positively to On’s fourth-quarter performance, which exceeded expectations, with shares climbing over 6 percent. Following Bernhard’s advice to “enjoy every level you reach,” On appears poised to navigate its path with renewed vigor and ambition.