Here's Why Investors Should Retain On Holding Stock for Now

On Holding AG ONON is benefiting from its multi-channel strategy with strong growth fueled by a significant boost in its direct-to-consumer (DTC) channel, increased global brand awareness and recent operational improvements. Strategic partnerships have also played a key role in strengthening the brand and expanding its market presence.Shares of this Swiss-based sportswear company have gained 105.6% in the past year compared with the Zacks Retail - Apparel and Shoes industry’s 40.1% growth. The stock has also surpassed the broader Retail-Wholesale sector and the S&P's increase of 30.9% and 24.7%, respectively, during the same period. However, the competitive landscape and high marketing expenses are concerns. Image Source: Zacks Investment ResearchLet us delve into the factors that highlight why investors should retain this Zacks Rank #3 (Hold) stock.Growth Drivers for ONON StockOn's multi-channel strategy has been a key driver of its strong growth with the DTC channel seeing remarkable expansion. In line with its strategic ambitions, the DTC channel has notably outpaced the wholesale channel in 2024. In the first nine months of 2024, net sales increased 27.3% and 30.7% on a constant currency basis. The strong growth is fueled by a significant acceleration in On's DTC channel, which grew 39% year over year and 43% on a constant currency basis. This performance highlights the momentum of the brand, driven by growing global awareness and operational enhancements.The company also achieved its highest gross profit margin since its IPO in September 2021, reaching 60.6% in the third quarter of 2024, up 70 basis points year over year. This increase is largely attributed to growth in the DTC channel and a continued focus on full-price sales.The company’s focus on expanding its global presence and strategic partnerships has played a significant role in increasing market share and brand awareness. On has seen a surge in brand recognition, driven by a strong presence at the Paris Olympics, the success of its athletes, coverage of the company’s innovative LightSpray technology and long-term partnerships with influential personalities like Zendaya. This momentum is further supported by growth in the APAC region, strategic store openings in key cities and the continued success of On’s core running franchises, all reinforcing its long-term vision of becoming the most premium global sportswear brand.In the third quarter of 2024, the company opened several new stores in key locations, including its third New York City store and first stores in Austin and Chicago. The New York City Flatiron and Chicago stores are now the largest in the region. In EMEA, the company also opened a new store in Milan, expanding its retail presence in Western and Southern Europe. In the APAC region, the company opened its first store in Australia, located in Melbourne, along with five new locations in China.Factors Marring ONON’s ProspectsThe sportswear market remains fiercely competitive with established industry leaders holding a dominant share. Despite efforts to expand its product offerings and market presence, the company faces challenges in gaining significant long-term market share, particularly due to ONON’s reliance on niche innovations and unique approach.The company's heavy investment in marketing and brand partnerships, while boosting visibility, could pose risks if these efforts fail to lead to sustainable sales growth. Overreliance on celebrity endorsements and high-profile campaigns may result in inflated marketing costs, without delivering the long-term profitability needed to meet investor expectations. In the first nine months of 2024, marketing expenses increased 33.6% year over year, due to higher marketing spend on upper funnel brand-building initiatives and brand partnerships.Stocks to ConsiderSome better-ranked stocks from the Zacks Retail-Wholesale sector are:Chipotle Mexican Grill, Inc. CMG presently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.CMG delivered a trailing four-quarter earnings surprise of 9.8%, on average. The stock has surged 23.7% in the past year. The consensus estimate for CMG’s 2025 sales and earnings per share (EPS) indicates growth of 13% and 18.4%, respectively, from the year-ago period’s levels.  Brinker International, Inc. EAT presently has a Zacks Rank #2. EAT delivered a trailing four-quarter earnings surprise of 12.1%, on average. The stock has surged 260.3% in the past year.  The consensus estimate for EAT’s fiscal 2025 sales and EPS indicates growth of 9.6% and 45.4%, respectively, from the year-ago period’s levels.  Shake Shack Inc. SHAK currently carries a Zacks Rank of 2. SHAK delivered a trailing four-quarter earnings surprise of 18.3%, on average. The stock has gained 68.1% in the past year.  The Zacks Consensus Estimate for SHAK’s 2025 sales and EPS indicates a rise of 17.1% and 25.7%, respectively, from the year-ago period’s levels.7 Best Stocks for the Next 30 DaysJust released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."Since 1988, the full list has beaten the market more than 2X over with an average gain of +24.1% per year. So be sure to give these hand picked 7 your immediate attention. See them now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Chipotle Mexican Grill, Inc. (CMG): Free Stock Analysis Report Brinker International, Inc. (EAT): Free Stock Analysis Report Shake Shack, Inc. (SHAK): Free Stock Analysis Report On Holding AG (ONON): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks