On the Move: Why the Roger Federer-Backed Sneaker Giant is Racing Beyond Footwear

In the world of performance sportswear, few brands have sprinted onto the scene with the velocity of On. The Swiss-engineered running shoe company, easily identified by its distinctive “cloud” sole technology, has transcended its niche origins to become a powerhouse on both the track and the stock market. Backed by tennis legend Roger Federer, On Holding AG (NYSE: ONON) has cultivated an almost cult-like following among athletes and fashion-conscious consumers alike. But the company’s ambition doesn’t stop at the finish line for footwear.

According to a recent report from the Financial Times, On is making a significant and strategic push beyond trainers, widening its focus to include everyday apparel and accessories. This isn’t just about adding a few t-shirts to the catalog; it’s a calculated pivot aimed at transforming On from a specialized footwear provider into a comprehensive global sportswear and lifestyle brand. For investors, business leaders, and anyone interested in corporate strategy, this move raises a critical question: Can On successfully replicate its footwear phenomenon in the hyper-competitive apparel space, or is it risking the very brand identity that fueled its meteoric rise?

This analysis will delve into the financial strategy behind On’s expansion, its potential impact on the company’s investing thesis, and the broader economic implications of a high-growth brand navigating a pivotal moment in its lifecycle.

From Alpine Trails to Wall Street: On’s Rapid Ascent

To understand the significance of On’s current strategy, one must appreciate the speed of its journey. Founded in 2010 by former professional athlete Olivier Bernhard and his friends Caspar Coppetti and David Allemann, the Zurich-based company was born from a simple idea: a running shoe that offered a cushioned landing and a firm take-off. The result was CloudTec®, the patented sole technology that became the brand’s visual and functional signature.

The company’s trajectory steepened dramatically in 2019 when Roger Federer joined not just as a brand ambassador, but as an entrepreneur and investor. The “Federer effect” provided a jolt of global credibility and marketing muscle that money alone couldn’t buy. This culminated in a blockbuster Initial Public Offering (IPO) on the New York Stock Exchange in September 2021. The IPO was a resounding success, raising over $746 million and valuing the company at more than $10 billion on its first day of trading. For the finance community, On became a case study in brand building and successful market entry.

Since then, the company’s financial performance has largely impressed Wall Street, with consistent, powerful revenue growth that has outpaced many established competitors. This strong foundation in footwear provides the capital and the confidence for its next ambitious chapter.

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The Strategic Pivot: Building a Head-to-Toe Ecosystem

On’s expansion is not a tentative step but a full-scale deployment into new categories. The push into apparel includes high-performance running gear, but more importantly, it extends to everyday “movement” apparel—versatile pieces like hoodies, pants, and jackets designed for a lifestyle that blends activity and leisure. This is complemented by a growing range of accessories, including bags, caps, and socks.

The strategic rationale is multifaceted:

1. Increasing Customer Lifetime Value (CLV): A customer who buys a $150 pair of shoes once every year or two is valuable. A customer who buys those shoes, plus a $100 jacket, $80 pants, and multiple pairs of socks, is exponentially more so. This move is a direct play to capture a larger share of their existing customers’ wallets.
2. Market Diversification: Relying solely on performance footwear, a market subject to trends and technological disruption, is a long-term risk. Apparel offers a massive, albeit competitive, new revenue stream that reduces dependency on a single product category.
3. Brand Reinforcement: A complete apparel line transforms On from a product into a full-fledged identity. It allows the brand to define a complete aesthetic, strengthening its position as a premium lifestyle choice and moving it deeper into the lucrative “athleisure” market.

Below is a look at how On is strategically expanding its product universe from its core offering.

Financial Implications and the Investor’s Viewpoint

For those engaged in investing and trading, On’s strategic shift presents both immense opportunity and significant risk. The company’s growth has been staggering. In its most recent earnings report, On announced a 29.2% increase in net sales for the first quarter of 2024, reaching a record CHF 508.2 million. This performance demonstrates powerful momentum, but sustaining such growth requires new avenues.

Apparel typically carries higher gross margins than footwear, which could significantly boost On’s overall profitability if executed well. However, it also requires substantial investment in design, supply chain logistics, and marketing—capital expenditures that could pressure short-term earnings. Investors will be closely monitoring key metrics:

• Apparel Sales as a Percentage of Revenue: Is the new category gaining meaningful traction?
• Gross Margins: Can On maintain its premium pricing and profitability in the apparel segment?
• Inventory Levels: A common pitfall in apparel is overproduction and the need for markdowns, which can erode margins and brand value.

The broader economy also plays a crucial role. On’s products are premium-priced. In an economic downturn, consumer discretionary spending is often the first to be cut. While its affluent core customer base provides some insulation, a widespread recession could test the brand’s pricing power, particularly for its non-essential apparel items.

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Future-Proofing the Brand: The Role of Technology

As On expands, its future success may depend on more than just product design. The integration of technology will be key, and this is where concepts from financial technology (fintech) and even blockchain could offer a competitive edge.

As a brand with a strong direct-to-consumer (DTC) channel, On is perfectly positioned to leverage fintech innovations. This could range from offering seamless global payment solutions and flexible “buy now, pay later” options to developing a sophisticated digital loyalty program that rewards customers not just for purchases, but for engagement and athletic achievements tracked via an app. This creates a powerful data loop and a stickier customer relationship.

Furthermore, in an era where consumers demand transparency, blockchain technology offers a compelling solution for supply chain verification. Imagine a future where a customer can scan a QR code on a pair of On shoes or a jacket and instantly see a verified record of its entire journey—from the sustainable source of the materials to the factory where it was assembled. This level of transparency could become a major differentiator in the premium market, justifying the price point and building unparalleled brand trust.

These technological integrations, while not the core business, are part of the modern banking and commerce infrastructure that top-tier global brands must master to win. They represent the next frontier in connecting with a digitally native consumer base.

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Conclusion: A Marathon, Not a Sprint

On is at a critical inflection point. The company has flawlessly executed the first leg of its race, building a globally recognized and beloved footwear brand with stellar financial results. Now, it’s embarking on the far more challenging second leg: transforming into a multifaceted sportswear giant.

The move beyond trainers is a logical and necessary step for a company with On’s ambitions. It unlocks enormous potential for growth and profitability. However, the path is fraught with challenges, from intense competition and the risk of brand dilution to the macroeconomic pressures on consumer spending.

For investors and market watchers, On’s journey offers a real-time lesson in corporate strategy and brand evolution. The company’s ability to infuse its apparel and accessories with the same magic of innovation and quality that defines its footwear will determine whether it joins the pantheon of sportswear legends like Nike and Adidas, or serves as a cautionary tale of a brand that sprinted too far, too fast.