On Running S-1

Running meets style: On is in the midst of a cultural moment. Will it endure?

1/ Not a full S-1 tear down but @on_running will price IPO at ~$5.5B mkt cap. TLDR: Along with @hoka, takes advantage of Brooks supply chain woes + COVID running boom —> explosive growth. Following @Nike playbook to turn performance running heritage into a cultural phenomenon

2/ Whoever said physical product businesses can’t generate venture returns?! Eleven years after founding, @on_running did $315M in 1H 2021 sales (+85% YoY) while generating ~$30M in operating cash flow

3/ Note that On competitor @Hoka is growing even faster, doing $213M in its latest quarter (+95% YoY)

4/ While incumbent running market leader Brooks is no slouch (+27% YoY), On and Hoka’s supercharged growth can be traced to two phenomena.

5/ Back in 2019, Brooks moved DCs and faced severe supply chain challenges. According to industry sources I spoke to, specialty running stores filled the gap by widening distribution of @on_running and @hoka

6/ On the back of broader distribution came COVID and the running renaissance. 29% of current runners started running during the pandemic! https://www.poughkeepsiejournal.com/story/sports/recreational/2021/05/18/covid-pandemic-spurred-running-boom-runrepeat-research-shows/5136523001/

7/ Apparently, both @hoka and @on_running are still quite supply constrained at >85% YoY growth!

8/ So what's the future for@on_running and @hoka. In the 1980s, @nike had 95% share of performance running through the specialty store channel. That is almost zero today but @nike is the ultimate lifestyle brand.

9/ @on_running is following Nike’s path. Running shoe experts say running stores rarely recommend On, but people walk in to wear them with jeans. I heard On called “a fashion shoe masquerading as performance running.”

10/ @hoka has transformed from an ugly trail running shoe into a running powerhouse with great comfort and nice aesthetics. Likely to take the mantle from @brooks as category leader in running shoes in the specialty channel.

11/ See article here comparing @on_running @hok @brooks https://footwearnews.com/2021/business/retail/performance-running-market-boom-hoka-one-one-on-brooks-1203104227/amp/

12/ On is a poster child for multi-channel distribution. On is 37% DTC, >60% wholesale and recently opened a flagship store: “Our distribution strategy seeks to meet runners wherever they are.”

13/ Deckers owns both Hoka and Uggs and is valued at $11.5B. Hoka is 50% bigger and growing faster than On.

14/ Both Hoka and On clearly have a bright future. Is Hoka or On worth more in 5 years?