All right. Well, welcome, everybody. I'm Jay Sole, UBS's Retailing Department Stores, and Specialty Softlines Analyst. It's great to be here at the ICR Conference. Super delighted to be able to introduce On Holding. To my right, Marc Maurer, Co-CEO, Martin Hoffmann, other Co-CEO of the company. We're gonna go through a little fireside chat here. The first question I wanna ask, just to jump right in, is that, there's some news today that Tiger Woods is leaving Nike, some speculation out there about what he might be doing next. Marc, do you wanna just address this real quick?
Yeah, first of all, happy New Year. Thanks for, for having us in Orlando. So we just flew, flew in from the snowy Swiss mountains into, into the not-so-snowy, into not-so-snowy Florida. And then, you know, we also heard the rumours. So, it's always interesting what's out there. We hope, Tiger finds a great new partner, it's not gonna be us.
Okay. Got it. All right, so thanks for clearing that up. All right, so Martin, I want to ask you the first question, and I like to start with the conclusion first, and then work backwards. You recently held your investor day, on which you updated your midterm trajectory. Can you walk us through the financial ambitions introduced there?
Yeah, very happy to do so, but maybe not jumping right into the number. So I think from being here last year to today, we made big, big steps forward on our journey to build the most premium performance sportswear brand. And we have seen an incredible year. We continue to see strong demand during the holiday season. Premiumness means full price sales, and so this is what we did also in the holiday season, maintaining a high share of full price sales, which will also be the base for hopefully another quarter of strong financial metrics, also on profitability and gross profit margin.
Basically what we see at the moment is strong demand for the brand across all our channels, offline, online, at our retail partners, at our own channels. This is the base for our aspiration that we have for the next three years. We outlined we want to double our sales for the next three years, meaning to achieve CHF 3.55 billion in 2026, combined with increased profitability to 18%+ adjusted EBITDA. All of this is driven based on a very strong gross profit margin of 60%+, which we are very close to already today, as proven in the last quarter. So it's a continued journey, it's what we call durable growth, so really combining strong sales growth with increasing profitability over time.
Great, thanks. Well, Marc, maybe I'll come back to you with the next one. If we just back up for a minute, you know, tell us how this company got started, and then maybe, you know, explain to us... You know, this company's had tremendous growth over the past decade-plus, you know, really a great success. Tell us what the keys have been.
You know, it got started with the same motivation that we still have today, which is, you know, we want to disrupt the industry, we want to disrupt how people move, we want to get more people out there moving in all kinds of forms. It started in the end with product innovation, which comes to life through our unique technology called CloudTec. I think over the past 10-12 years, the industry has done a kind of quite... has evolved a lot, and we were probably one of the key reasons for that. That makes us quite proud that we were able to have such an impact on the industry. But we're far from done.
When we think about how we can continue to evolve the product, when we think about the huge task that we have in terms of sustainability ahead of us, but then also how the technology that started in running can come to life in training, in tennis, in many different sports, then we feel the opportunity out there is still huge, and we're super excited to, you know, to continue for many, many more years to come and disrupt not only the running industry, but many other activities as well.
Great. Next question, can you tell us about the On brands? You know, it's perhaps some people in this room feel like maybe On is a casual brand, it's a brand maybe they see in the airport, maybe don't quite understand what the brand is. Tell us what, what is the On brand all about?
Yeah, it's a, it's a complex brand, which is the great opportunity because we are tapping into a much bigger market. The brand really stands for performance, design, sustainability, so this is the DNA of the brand, and performance is at the core. So we are a performance brand, we are born in running, and this is, for us, how we measure success: how many people are wearing our products to move? Which is in line with our mission to ignite the human spirit for movement. But because the product feels good, it looks good, and it's sustainable, it also addresses a huge lifestyle customer, community, which is, of course, something that is very much intended. At the same time, we need to balance both, both customer groups, and I think this is what we are, what we are seeing.
We see continued increase of our share on runners' feet if we count on the running routes all over the world. At the same time, we see a similar growth in basically the lifestyle adoption. But this is, for us, the opportunity to expand from that position, to expand into new product categories, into new kind of sports, but always with the same DNA.
Okay. I want to ask about the management structure of the company, because it's a little bit unique. But can you tell us about your unique management structure, having five founders and five leaders of the company, including both yourselves, three other people? And maybe put this into the context of Switzerland, because I think to some US investors, you know, having five leaders instead of one is a little bit unusual. But in Switzerland, where there's a federal council and a key branch of government where there's not a single president, but like, you know, seven joint presidents, it probably feels kind of normal to you guys. So maybe just tell us about your management structure and why it's very Swiss, and why it works for you guys.
Yeah. Yeah, so Switzerland, Switzerland has 7, so we only got 5, so we think we're pretty lean. No, it's interesting also how it has evolved, and I think when, when actually we did the IPO, we had to talk a lot about it and explain, explain it a lot. And now we get requests to speak about it because people start to appreciate and understand the uniqueness and the benefits it, it brings. And I think what, what, what it really brings is, you know, we are, we are that 5 different people that bring different skills and, the different element of creativity into the company. And if you want to... you know, we want to be successful in 20, 30, 40 years from now, and product and product innovation is an absolute key element in there.
How do you, at the same time, while you scale the company from an operational perspective, while you basically build out new retail stores, while you take the brand on a completely different level, keep the creativity in the product? And how do you keep on evolving the product engine? I think this is how we started to split up a bit more so the three founders that are not here are very much involved on the product side, and together with the team, really bringing that to the next level. And together and we, the five of us, basically can control the direction of the company through our B shares, which is super important.
Because, you know, we're building this for the long run, and we don't really care about the next 1 or 2 weeks, but we care about what's going to be the legacy in 20, 30 years from now. And I think the team has appreciated that, and it's evolved way beyond the five of us. On has a very strong management team, and we have, you know, super strong leaders in the different regions, in the product engine as well. It's a way more diverse team than the five original men that have kind of started it.
I think this is a journey that we will continue in order to make sure that in the long run, innovation and also the operational capability lies in the company and not with just one or two people, but On needs to continue to grow beyond one or two founders, or five, and that's what we're working on.
Got it. Understood. So maybe just to follow up on that journey that the company's on, and you talked about the importance of product innovation. You know, the question is, as you pursue that mission to, you know, celebrate to dream on and celebrate the human spirit and movement, you know, how are you going to accomplish it? Tell us how you build a great global athletic sportswear company. You know, like besides product innovation, what else—what are the keys to really, you know, becoming a, the company that you envision?
Yeah, there's a lot of pillars, and maybe we share a bit. So, it all started with what I mentioned already. We want to be the most premium performance sportswear brand, and in that, there are all the elements in there that we want to do. So talking about performance, as we said, it started in running. Running will be at the core, but we will be able, and we have proven that we can use our DNA to adapt into different kinds of sports. So we went from running into outdoors. We started in tennis, but we are basically at the very beginning. We are now entering into training, and then all of those sports also have a big lifestyle adaptation.
So talking about performance and growing our brand awareness around the core is extremely important. And even so, our market share here in the room is probably already quite high. Our brand awareness globally is still relatively small, and we have a big opportunity to grow that brand awareness. Now, if we then go into how do the premium products come to life in the distribution channel, then it's about where can we sell in a premium environment? And we have built premium distribution in most of our markets based on a multi-channel what we believe in, so really working with the best wholesale partners, but also our own e-com. But we see that our own retail becomes more and more important to accomplish basically and complete the premium distribution model.
It's even more important about important category that Marc has begun about apparel in the, in the future. So we will expand more into retail. We have proven that already. I mentioned earlier, just take our, London store. That store alone is actually the fifth largest country in Europe alone, so it gives you a bit of a, an idea of the magnitude of some of the retail stores that, that we are, that we are building. And, in China, we also already have 30 stores. China is pretty much a direct-to-consumer market. So that will be another big element for us.
... and you mentioned, I think, the, the, you know, sportswear is more than footwear, so apparel is very important to us. Also, accessories offers a lot of opportunities, and we're very excited that we're entering training as a new category. A lot of young people, the way they decide to move is in gyms, and it's growing very, very strongly, and it will be the first category that we're actually entering through apparel first and not footwear first. We're launching a footwear product next spring called the Cloudpulse, but the big opportunity comes from apparel. And so we feel confident with the product that's coming in 2024, but then also 2025. We are basically relaunching almost the whole apparel collection. We're introducing new fits, we're introducing new sizes into the market.
Demand from the wholesale partner has been very, very strong. And so this fits perfectly into the topic of not just building a footwear brand, but building a sportswear brand, and do that globally. So, On is present in over 60 markets, which is quite unique for the scales that we are, and in many of these markets, we are really at the very, very beginning. So if you look at France, Italy, South Korea, China, I think there's a lot of markets where we are really, you know, way below 5% market share. And I think this shows that we're building this out in the long term, and we're now seeding for additional growth opportunities.
Great. So maybe if we can dive in a little bit more into product innovation, because it's come up a couple of times in terms of how important it is. Yeah, maybe just tell us a little bit more about the product innovation pipeline and, and what the company is doing to invest in a continuous flow of new products.
Yeah, so let's probably start with spring, what's around the corner. So we'll introduce the Cloudmonster 2. So the Cloudmonster is one of our most successful franchises so far. We'll bring the Cloudmonster 2, we'll bring the Cloudmonster Hyper, and that we're very excited about. So really, and catering to the core runner, we'll update the Cloudrunner to the Cloudrunner 2, will also happen this spring. To the trail community, we'll introduce the Cloudsurfer Trail, which we're very excited about. We'll introduce the Cloudtilt that we pre-launched with LOEWE just a few months ago. So we'll introduce that purely on the On brand to the lifestyle community.
And then, a lot of—we spoke about the Cloud, Cloudpulse, and then a lot of apparel innovation coming, and I think this shows in action, the innovation engine that is at work. So... And you can expect more to come over, over, you know, the next 12-24 months. We're extremely excited about the Olympics, where we will very much focus around the fast products. So if you, if you now own our Cloudboom Echo, you'll have the opportunity to go to the next level. So the product that Hellen Obiri won the, the New York Marathon in, will be a—become available to a wider audience, and we'll also have a new upper, technology on there. So, so a lot is coming, and, and it's really on all fronts.
So it's on bottom units, it's on uppers, it's on manufacturing technologies, it's on the sustainability of materials, and, and all of that, obviously, also not only in footwear, but also on apparel. So, you know, some of you who were joining the Capital Markets Day a few months ago had the opportunity to get a sneak peek, and I think we'll wait for the product to drop, and then it speaks for itself.
Sounds good. Martin, you mentioned how the company has a huge opportunity to increase brand awareness on a global basis. What, what's the company gonna do this year to continue to strengthen the, the On brand name?
Yeah, so if you, if you think a bit where we, where we started, and On is a, is a brand that has grown through basically mouth-to-mouth promotion. It has grown through grassroots activities. And we have a big opportunity to communicate bigger, bolder brand messages in order to drive brand awareness. This doesn't come at higher cost, it just comes at shifting basically the, the, the marketing money that we have available, basically into more dedicated markets. So we will be much more vocal about, about our dream, Dream On, about the performance position, and the position of the brand as a head-to-toe brand. So this is, this is very important. The Olympics, as Mark mentioned, will be a big element of, of, of, of, on the focus next year.
So really being bigger in our brand messaging across all the different channels and funnels, so from upper funnel to lower funnel. We have always been very disciplined on spending in our performance engine on e-com. This will continue to be the case, which is also part of our long-term growth strategy. So we don't expect that our marketing spending as percent of sales is increasing, so it will stay between 11%-12%, but we will be able to build much bigger messages. This also comes with bigger assets. So we have proven that already in tennis, much bigger reach.
But if you look at how tennis, for example, is consumed today, then it's not so much about TV, it's a lot through social media, TikTok, Ben Shelton with putting down the phone. That went viral, and those are the things that we are looking towards. This is the kind of athletes that we want to work with. This is the amplification that is then happening, and in the end, this is driving many more impressions than traditional media.
... Got it. So we touched on innovation for 2024, marketing for 2024. What about the company's infrastructure? Can you just tell us a little bit about what the company's doing to just strengthen the infrastructure this year?
Yeah, so we're investing a lot in warehousing capabilities. So we're automating some of our largest warehouse in Atlanta, for example. We semi-automated the West Coast warehouse, we're automating a Luxembourg warehouse, and so on. So we're investing a lot in automation, which is a bit an extra lift now over the next 12-24 months, but then it should bring down basically cost per unit in terms of processing and so on, and also have a higher output basically per hour. And so I think a lot of investment goes in there. I think a lot of investment goes into retail stores. We spoke about it. It becomes a huge part of the infrastructure, and then a huge part goes into tech capabilities.
So, how can we, you know, take the e-com engine to the next level? How are we able to predict demand even better than we did in the past? So quite a lot into the technology, basically corner of the company.
Got it. So there's a lot going on, but if you could pick one thing that has you most excited for 2024, what would it be?
I think what, what Marc mentioned, just that building an, an retail company within the company is, is super exciting. We both have history in a retail company. That's where we met, originally. And, starting from how does, how does the retail culture fit into our culture, to all the capabilities that we need to build in order to maintain, retail stores and build retail stores all around the world? How do we elevate the, the, the, the, the, the cross-channel experience for our customers? So, that's a big project, but super exciting.
I'm extremely excited about Paris. Not actually just because of the Olympics, but because it's gonna be kind of the biggest consolidated moment for On in history, where we can basically bring product innovation, storytelling, athletes, and physical spaces, and events, and so on to life. You know, last Olympics, we were not a public company yet, now we are. So Paris is gonna be very, very important, and really looking forward to this summer.
Got it. Well, you know, I share your enthusiasm about the DTC stores, the store in Miami Design District store is a beautiful store. I was in Austin two weeks ago and saw the location where that store is going. It's a perfect spot.
Oh, so you have insights, eh? That's good.
It's gonna be exciting. Maybe last question, just on that Paris Olympics, because I know everybody's excited for the event in general. You know, the COVID kind of disrupted the Japan Olympics, unfortunately. Can you give us a little sneak peek what we can expect to see, like, in terms of, you know, athletes or teams or, you know, any little hint about what to get excited about, what to look for?
So, hopefully some very exciting product innovation beyond what we're capable of announcing today. Then hopefully some victories of our athletes. So I mean, we have the tennis tournament that will be played in Roland-Garros. Iga Świątek is clearly a favorite there. Ben will hopefully be playing. So then all the track athletes and the OAC team that will be competing in the marathon, that we're very much looking forward to. But then also really the physical spaces that we can bring to life. So On will have a big hub in Paris, where we'll showcase innovation and where we'll showcase the brand. And then probably lastly, we're kind of still sticking very much to our Swiss roots.
We are the official partner of the Swiss Olympic team, and we created their outfits. They, or, you know, historically, they've been very much red and white, as the Swiss national flag. We took a completely different interpretation at this, so will be interesting to see how the world reacts, and hopefully we can attract some eyeballs on that one.
Well, that sounds pretty exciting, so we'll definitely look forward to that. Well, Marc, Martin, I want to thank you both for doing this today. Really appreciate, again, to hear your insights, and thank you everybody for listening in.
Thank you so much.