"We did a lot of work on inventory last year... We entered into the year with an elevated inventory position in the aftermath of the pandemic," Hoffmann explains to Yahoo Finance. "What we did is we kept our inventory position stable while growing basically our sales by 55%. So we entered '24 with a much stronger inventory position which will allow us to control the supply into the channels."
Joining us now for more, we want to bring on the co-CEOs of On, Marc Mauer and Martin Hoffmann, both joining us here from the floor of the New York Stock Exchange. Marc and Martin, it's great to see both of you. Marc, let me start with you just in terms of what does this report tell us about the consumer trends that you are seeing right now and some of the trends that we could see here for the next couple of quarters?
And so we're very positive about that. And let's all remind ourselves that we are on a path to be the most premium global sportswear brand. And within that context, having demand above supply is very, very important to us. And this is where we are. This allows us to command superior margins. And so we're very happy with where consumer demand is and where we stand as a brand.
MARTIN HOFFMANN: Yeah, so running is at the core. So we were born in running. And this would be our most important category for us. We are very excited about the upcoming Olympics, having our own athletic club's team there competing on the track is expected to increase also our credibility in running, also with innovation stories that we will be bringing.
At the same time, we have expanded from running into outdoor into tennis into training, and then also into the everyday adaptation of this. And this is where we see a big growth in the market really at that merger of sports and fashion. And this is where we play, because we are a brand that stands for performance, for design, and for sustainability.
BRAD SMITH: OK, so this next question might be slightly inspired by me just finishing full swing on Netflix recently. But is golf next? It seems like that's a hot category. A lot of growth. It's easy to just make a perhaps spikeless On shoe. When golf?
MARC MAUER: Yeah, so we feel we have a lot of opportunity within the categories that we're in. So we will launch our first tennis capsule collection this spring around Roland Garros and Paris. We are also just entered tennis. Tennis, sorry, training with the Cloud Pulse. And within training apparel is very, very important. So this is the vast majority of the category. So we're continuing our growth journey there. And we feel this gives us ample room to grow. And maybe when we meet in two years from now, we have some other exciting news for you.
BRAD SMITH: Ooh.
SEANA SMITH: Marc, when it comes to and-- is run involved?
BRAD SMITH: No, no, no, no.
SEANA SMITH: All right, well--
BRAD SMITH: Just a treat.
SEANA SMITH: Tease ahead there, as we look ahead to what could be in the pipeline. Marc, one of the big issues, though, for investors right now, whether or not they own the stock, has been the FX headwinds, and exactly the pressure that that has put on your business. Do you see that at all easing in the coming quarters?
MARTIN HOFFMANN: So I think for all of us, it needs to be important that we grow our fundamentals. And this is all about selling more shoes and bringing more shoes and apparel items to our fans. So this is what drives us. And this is how we measure success.
Now yes, the Swiss Franc has gained in value against basically every other currency in the world. That's reflected. That's an impact that we are having. We start to be more transparent on the impact that we see, both in our guide that we set out now where we expect 30% constant currency growth.
And no one knows where the currency goes, but we are building a business in the long term. So our margins that we are communicating, also the increase now again to 16% to 6.5% EBITDA margin is independent of the FX environment. And so in the end, it's all about bringing more products to our fans.
SEANA SMITH: And Martin, bringing more products to your fans and also at the same time combating inflationary pressures from around the world, I'm curious what you're seeing from a global perspective, certain regions-- where are the standout in terms of that outperformance that you've seen this quarter?
MARC MAUER: So we're very, very happy with how Asia-Pacific is developing. So we're seeing super strong growth in Japan and China. We're very happy with some of the European markets. So we actually took a bit of a shift to even more performance-related channels. And so this is really working.
We're seeing e-com having very strong growth rates, especially in Germany and Austria, for example, UK is doing well. And then also, the US being the vast majority of our business. So we see that going forward, demand and what we have in terms of orders on the books-- it's well above our long-term growth expectations. So really, really positive.
And we can maintain and sometimes even increase our pricing level while keeping costs in all regions more or less constant. And this is then reflected in, as Martin already pointed out, in a better bottom line.
BRAD SMITH: Some of the retail partners are really cognizant of how they need to continue managing inventory right now to not get ahead of their SKUs right now. I wonder what you're hearing from some of your wholesale partners. Even though sales did increase 44.2% in this most recent quarter, what does that outlook look like?
MARTIN HOFFMANN: So we did a lot of work on inventory last year. Just to remember, we ended into the year with an elevated inventory position in the aftermath of the pandemic. And what we did now is we kept our inventory position stable while growing basically our sales by 55%.
So we ended '24 with a much stronger inventory position, which will allow us to control the supply into the channels. But we always had the right inventory. And this is very important for us. And this is also reflected in a high-- full price sales that we have seen in the holiday season. We just had too much inventory, but we always had the right inventory.
And our in-channel inventory, so the inventory that is sitting with our wholesale partner, was never inflated. We control this very tightly. And now, we're in a much better position to really control the growth as we promised it in the investor day.
BRAD SMITH: Just lastly while we have you here, I wonder, because we toss around this concept of innovation within footwear so much-- and it's really just easy to throw that word out there. What does innovation at this juncture for On look like? Because I imagine, a lot of your buyers out there, customers, potential buyers as well want to know what's going to make me feel comfy? What's going to make me feel cozier as I'm running, walking, prancercizing, whatever I'm doing out here in these streets?
MARC MAUER: Yeah, so I think innovation comes in many, many different forms, right? So if you are a really, really fast runner and you want to break your personal best, it's all about the form that you have and the carbon plate that you have. And for example, we just had to set a new course record on the Barcelona Marathon with our latest product, the Cloudboom Strike. And so this is then the innovation for the very fast runner.
At the same time, for many people, innovation might be comfort, right? So how can we make you feel more comfortable with footwear, but also with the apparel pieces that you wear? And then, an important element in that is, how is it more sustainable? So how are we evolving on our path to circularity, having a lot of recycled content in the product? And so when we look at innovation, we really start from the use case, and then bringing the best possible innovation to the different consumers in the use cases.