00:00Shares of on-holding running higher after the Swiss athletic apparel brand raised its sales forecast for the year and delivered better than expected third quarter results.
00:09We had the chance to catch up with Martin Hoffman, on-holding CEO and CFO, about the regions where he's seeing the most growth and the strategy to keep the momentum going.
00:18Let's take a listen.
00:21Our strategy is to build the most premium global sportswear brand.
00:26And so what premiumness means is a feeling that a customer has towards a brand.
00:32So we are curating this feeling by investing in the product, in innovation, in quality, in design, by investing in the experience that you have when you come to our store, when you engage with us at community events, when you see how we are talking and working with our athletes, with our cultural influencers.
00:52And that really sets ourselves apart.
00:55And we are chartering our own way here.
00:58Instead of fishing all in the same pond, we are bringing new customers into the sportswear segment that have not been wearing sneakers before.
01:11And so this is driving the growth and this is driving the global momentum.
01:15Because we are so focused on that, this gives us full confidence for the rest of the year and for next year.
01:22You've positioned yourself as a premium product.
01:24And I was listening to the conference call.
01:26I lost track of how many times you used the word premium.
01:29You've passed on pricing with regards to tariffs to customers earlier this year.
01:33And you also made comments on the conference call that you feel you are in control right now of pricing.
01:39If economic conditions do soften, does that work against you?
01:43We're very much convinced that if you have desire in your product, then you can sustain a lot even in more choppy waters.
01:52And our focus is on the innovation of the product.
01:56And we have an amazing product pipeline also heading into next year with our Cloud Runner relaunching, our Cloud Monster coming new.
02:05And then we have Light Spray, which is really a revolution to the whole running industry.
02:10Not only how the shoe is manufactured, but much more lightness and the performance of the product.
02:17So there is a lot of desire that we are building for the brand that expands also from footwear into apparel.
02:24And with that, I think we are in a good position.
02:27And then we are a global brand.
02:29And you see the momentum that we are having in the Asia-Pacific region, where we have now really doubled ourselves.
02:34Do you have any more price increases planned in the future?
02:38How many more times can you pull that lever, so to speak?
02:41I think this is where we are in a great position.
02:44You see that in Q3, we had a record cross-profit margin of 65.7%.
02:50So what we have done is we have gained so many operational efficiencies in our business.
02:56And our premium business model puts us in such a strong position that we are gaining more cross-profit than we are losing towards tariffs.
03:06So we are in a position where we are in full control.
03:09We don't need to increase prices to offset that.
03:11We don't need to work with our factories on lower costs to offset that.
03:16We can really invest in what is driving the brand in the long term.
03:20And so for the moment, we don't have planned for price increases going into next year.
03:25But we are a premium brand.
03:27And so we are very much observing the market.
03:30And we are in a position that we can react.
03:32Well, we'll keep an eye on that aspect.
03:34I do want to go global here because you think about one of the reasons why you're seeing such a strong reaction in shares right now.
03:40It could be what we're seeing on the international landscape, particularly when it comes to the Asia-Pacific region.
03:46Revenue growth there jumped 109%.
03:49It's now almost 20% of sales.
03:52What is going right in Asia-Pacific?
03:54And what products are resonating there versus a more mature market such as the United States for on?
04:00I think if you go to shopping malls in Shanghai, in Singapore, in Bangkok, you experience a very premium shopping environment.
04:10And this is perfect for on.
04:12And we are really elevating the experience there.
04:16And the Asian customer is really looking for sports-inspired premium products.
04:22And on is in that center.
04:25And so we are seeing incredible demand from China to South Korea to Southeast Asia, as well as in Japan, where we just had the world championships.
04:35And this is a story that we see in Asia, but that continues basically into all other regions, but, of course, at different maturity levels.
04:44I am curious, Martin, about the diversification of your product offerings.
04:49That's a really nice sweater that you're wearing there.
04:51But I don't see them a lot anywhere.
04:53And I am curious as to when we start to see a more material push into apparel and when apparel starts to make up a bigger percentage of your total sales.
05:04Yeah, which is very much a part of our strategy.
05:06I mean, today, apparel is about 8% of our sales.
05:10So it's a very small part.
05:12It comes to life in our retail stores, where it already takes about 15% to 20% of sales.
05:20So it's definitely a category where we have a lot of belief in for the future.
05:26It's an additive category, so it really brings new customers into the brand.
05:31We see a lot of first-time buyers in the apparel category.
05:34But it's rooted in the same belief of really elevating the experience that you have with sports brands by apparel, investing into materials, investing into designs.
05:49And you have seen we have doubled our apparel sales in the third quarter.
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