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On Holding (ONON) is trading flat after reporting an EPS miss with its Q3 report this morning. However, the Switzerland-based athletic footwear company was able to report strong upside revenue. Revenue rose 32.3% yr/yr to an all-time record CHF635.8 mln, which was a good bit better than expected. Importantly, Briefing.com named ONON as one of our 2024 Investment ideas in December 2023 at $27.86 and it has been a big winner (+80%) for us.

• The strong top line growth in Q3 was fueled by significant acceleration in On's direct-to-consumer (DTC) channel, which includes online and company-owned stores. DTC channel sales jumped 49.8% yr/yr (+50.7% CC) to CHF 246.7 mln. This represented 38.8% of total sales vs 34.3% a year ago. ONON cites continued exceptional momentum for the On brand, driven by significant increases in global brand awareness.
• Sales through its wholesale channel still make up the majority of sales and this channel performed pretty well. Wholesale channel sales increased by 23.2% yr/yr (+24.0% CC) to CHF 389.1 mln. ONON has expanded its wholesale footprint in a very controlled way. The vast majority of growth is driven by the strength of existing and new product franchises and ONON's ability to convert more shelf space with its expanded offerings in running and in its new categories.
• In terms of boosting global brand awareness, ONON said its presence at the 2024 Olympics helped. Stories have been amplified through traditional and social media. Also, partnerships with Zenadaya or SK clicks are reaching younger demographics, bringing in a new group of fans. ONON sees this reflected in its quarterly proprietary brand survey. In the US, awareness of the On brand has doubled since last year, now reaching close to 20%. In Paris, brand awareness almost tripled yr/yr.
• Innovation is also playing a role in ONON's success. The company describes its LightSpray technology as "groundbreaking" as it continues to turn heads. A robot fuses 1.5km of filament in a complex pattern onto a high-performance racing midsole, forming the complete shoe upper in a single, three-minute step with no glues and no seams, reducing waste and emissions. It's one of the lightest sneakers ever at a mere six ounces.
• During marathon week in NYC, thousands of people stopped by its On Labs pop up in Soho to see the spraying process in action. ONON is also excited about its all new Cloudsurfer next and the Cloudrunner 2, which are proving to have immediate blockbuster potential.
• ONON says it is heading into the holiday season with a lot of confidence to fulfill strong consumer demand for the brand in Q4. Due to the strong Q3 upside, ONON is raising its FY24 sales growth outlook to at least 32% CC. This embeds the expectation for an acceleration in constant currency sales growth rate in Q4, as well as an anticipated sizable FX headwind when converted to Swiss Francs in Q4.

Overall, we see this as a solid quarter for ONON, but investors are a bit letdown by the EPS miss. However, there were still some good things here. DTC sales really stood out with its sales growth rate more than doubling wholesale. The Olympics and its Zendaya campaign have really sparked brand awareness. ONON also is excited about its LightSpray technology and its Cloud line. Briefing.com is proud we named this one as a 2024 Investment idea. It reminded us of an early-stage Deckers (DECK), which has been given a jolt from its Hoka brand. 2024 has a been a good year for ONON's stock price.