On Holding AG — FY2023 Form 20-F
Business context and reporting period. On Holding AG is a Swiss premium sportswear company selling footwear, apparel and accessories through wholesale and direct-to-consumer (DTC) channels. This annual report covers the fiscal year ended December 31, 2023; it also provides unaudited results for the three months ended December 31, 2023 (Q4). Financial statements are prepared under IFRS in Swiss francs (CHF). On operates as one reportable segment.
Key financial results
| Metric | FY2023 | FY2022 | Q4 2023 | Q4 2022 |
|---|---|---|---|---|
| Net sales (CHF millions) | 1,792.1 | 1,222.1 | 447.1 | 366.8 |
| Gross profit (CHF millions) | 1,067.2 | 684.9 | 270.2 | 214.6 |
| Gross margin | 59.6% | 56.0% | 60.4% | 58.5% |
| Operating result (CHF millions) | 180.2 | 85.1 | 40.8 | 14.7 |
| Net income/(loss) (CHF millions) | 79.6 | 57.7 | (26.8) | (26.4) |
| Adjusted EBITDA (CHF millions; non-IFRS) | 276.9 | 165.3 | 71.9 | 61.8 |
| Adjusted EBITDA margin (non-IFRS) | 15.5% | 13.5% | 16.1% | 16.8% |
Revenue mix and growth
- FY2023 sales rose 46.6%. Wholesale increased 44.2% to CHF 1,120.3 million; DTC increased 50.9% to CHF 671.8 million, growing to 37.5% of sales from 36.4%.
- Q4 sales grew 21.9%. DTC rose 38.2% to CHF 206.6 million and represented 46.2% of sales; wholesale rose 10.7% to CHF 240.5 million.
- Footwear generated CHF 1,711.4 million, or 95.5% of FY sales. Apparel and accessories contributed CHF 68.9 million and CHF 11.8 million, respectively.
- Americas accounted for 64.9% of FY sales; sales there grew 52.2%. EMEA grew 29.2%, and Asia-Pacific grew 75.9%.
Cash, liquidity and obligations
- Cash and cash equivalents were CHF 494.6 million at year-end, up from CHF 371.0 million; net working capital, a company-defined non-IFRS measure, was CHF 496.2 million versus CHF 459.2 million.
- Operating cash flow was CHF 232.1 million, compared with an outflow of CHF 227.0 million in 2022. Investing cash outflow was CHF 47.1 million; financing cash outflow was CHF 21.8 million.
- The company reported no cash drawn under its CHF 700 million multicurrency credit facility, with an option to increase capacity by CHF 200 million subject to conditions. CHF 155.3 million of guarantees and letters of credit were rolled into the facility. The company reported covenant compliance.
- Year-end financial liabilities totaled CHF 243.7 million, primarily lease liabilities of CHF 228.9 million; the filing reports no drawn cash borrowings under the facility. Contractual obligations totaled CHF 728.9 million, including CHF 385.7 million in future lease commitments, largely for planned automated warehouses.
Material changes and management commentary
- FY gross margin improved by 3.6 percentage points, mainly because exceptional airfreight use ceased and freight rates declined versus 2022, with a further contribution from higher DTC mix.
- Despite higher operating result, FY net financial result deteriorated to a CHF 111.1 million loss from CHF 7.2 million, primarily due to CHF 111.4 million of foreign-exchange losses, particularly from CHF/USD movements. FY net income rose more slowly than operating result.
- Q4 operating result increased to CHF 40.8 million, but the quarter remained loss-making after a CHF 85.7 million net financial loss, largely from foreign exchange. An income tax benefit of CHF 18.2 million partly offset the pre-tax loss.
- Management expects continued investment in marketing, product development, people, inventory, distribution automation and retail expansion; it also expects absolute marketing expenses to rise. The filing provides no clear numerical FY2024 revenue or earnings guidance.
Risks, contingencies and unusual items
- Business is concentrated in footwear and depends on a premium brand, continued product innovation, discretionary consumer spending and effective expansion across markets and channels.
- Supply is concentrated: all products are made by third parties; 90% of footwear production in 2023 was in Vietnam and 10% in Indonesia. Five suppliers produced approximately 67% of products.
- Currency movements are a material earnings risk: 97% of FY2023 sales were denominated in currencies other than CHF. The filing’s sensitivity analysis indicates a 10% USD/CHF change would affect profit by CHF 71.2 million, excluding derivatives.
- Other exposures include freight and raw-material costs, tariffs and trade restrictions, supplier and logistics disruption, customer credit risk, cybersecurity and data privacy, intellectual-property claims, climate and sustainability expectations, and lease commitments.
- Management says a previously reported material weakness in financial reporting controls was remediated during 2023; management and the auditor concluded internal controls were effective at year-end. The auditor identified lease accounting as a critical audit matter because of judgments over lease terms and discount rates.
- The company reported no legal proceeding expected to have a material adverse effect and no material subsequent events. It does not expect to pay dividends in the foreseeable future.
Important facts for investors to verify
- How much of the sharp FY foreign-exchange loss is recurring or could reverse, and how currency hedging affects future results.
- Whether DTC growth, gross-margin gains and full-price selling can continue as the company expands stores and distribution capacity.
- Execution, costs and utilization of the Atlanta and Belgium automated warehouses, alongside CHF 385.7 million of future lease commitments.
- Inventory quality and valuation allowances, wholesale customer credit exposure, and the impact of the central European customer insolvency provision.
- Supplier diversification progress and the company’s ability to manage concentrated manufacturing, trade-policy and sustainability risks.
- Potential dilution and governance implications of share-based awards and the founder-controlled dual-class voting structure; founders held approximately 59.2% of combined voting power at year-end.