Shares of athletic shoe challenger On Holdings AG(NYSE: ONON) rallied 13.4% in August, according to data from S&P Global Market Intelligence .
On held its second quarter earnings release on Aug. 13, displaying strong top-line growth that beat expectations. Coming off an exciting period in which the Summer Olympics began and On showed off a new shoe technology, management also reiterated a bullish outlook for the rest of this year.
Lightspray, Zendaya, and the Paris Olympics
In its second quarter, On grew revenue 27.8% to 567.7 Swiss Francs (CHF), which beat expectations, while adjusted (non-GAAP) earnings per share came in at 0.14 CHF, slightly missing expectations. Despite the "mixed" bottom line, management reiterated its guidance of 30% growth for the full year, which would imply some acceleration over the second quarter.
That enthusiasm likely comes from several new brand and distribution growth drivers rolled out in Q2. These include the company's new Lightspray technology unveiled in July, a long-term partnership with actress Zendaya announced at the beginning of June, and more store openings in Paris for the Olympics and Hong Kong during the quarter.
The company's Lightspray technology is a unique bit of technology. To make Lightspray sneakers, On manufactures the entire top of the shoe above the sole in a single-step robotic manufacturing process, with materials made from recycled plastic. The process enables the shoe to be ultra-thin and light, while reducing the company's carbon footprint by 75% for the shoe-top manufacturing process and eliminating the need for glue.
Of note, marathon runner Helen Obiri won the Boston Marathon in April wearing a prototype version of the shoe. So On management is likely encouraged there will be plenty of demand for this new high-tech runner.
On off to the races, but so is the stock price
On is certainly a new footwear stock to watch, with its innovation-forward ethos challenging the likes of Nike(NYSE: NKE) and other established brands. Of course, the stock is not cheap, trading around 80 times trailing earnings and 40 times forward estimates. However, if this stock dips for any temporary or market-driven reason, it's an up-and-coming consumer name that should be on any investor's watchlist.
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Billy Duberstein and/or his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nike. The Motley Fool recommends On Holding. The Motley Fool has a disclosure policy.
