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Business of Fashion
4 days ago
- Business
- Business of Fashion
Why Hoka Is Slowing and On Keeps Growing
In the race to become the next sneaker giant, Hoka's pace is flagging while On shows no signs of slowing. The two European brands are regularly mentioned in the same breath as the challengers shaking up the running market and putting a scare in behemoths like Nike and Adidas. Hoka was born in the French Alps in 2009, On in the Swiss Alps in 2010. Both are known for their distinctive midsoles — an exaggerated, stacked platform in Hoka's case, and an array of tubular segments in On's — and just as importantly, for their runaway growth over the past several years. But recently, their paths have diverged. Last week, Hoka-owner Deckers Group reported that Hoka's sales increased just 10 percent in the quarter through March 31, with growth in its direct-to-consumer channels of 23 percent. Those numbers would be welcome to many companies, but they signalled a significant deceleration from Hoka's typical growth rates, sending Deckers' stock down more than 19 percent since, as investors wonder whether the brand is losing momentum and seeing performance more typical of a mature brand. On, meanwhile, reported 43 percent year-on-year growth in the same period, beating Wall Street's expectations. Sales in its DTC channels grew 45.3 percent. Hoka and On's growth rate diverged this earnings season. (Lei Takanashi /Business of Fashion) 'Overall, Hoka has had tremendous growth, but there is increasing competition, and the need to constantly update and innovate is required to continue to maintain the growth metrics,' said Dana Telsey, chief executive of Telsey Advisory Group, which downgraded Deckers' stock after its recent results. The question now is whether the slowdown is temporary. Deckers' leadership attributed Hoka's results to slower acquisition of new customers due to macroeconomic uncertainty; high levels of promotion for outgoing product models as the brand introduces new ones; and shoppers opting to move towards wholesale accounts to try on and buy new products, which hit its DTC sales. It expressed confidence that performance will pick up as it moves through these issues. Both Hoka and On, however, are looking for their route forward as they strive to maintain their growth, and they could see different levels of success in their strategies. For Hoka, a brand that built its customer base around performance-running, it's working to reach a new lifestyle consumer, evident through actions such as its first luxury collaboration with Marni this year. For On, which has long-established wholesale relationships with fashion and lifestyle retailers around its CloudTec sneakers, as well as an ongoing collaboration with Loewe, the brand is shifting gears to emphasise more innovative performance-focussed products, like its Cloudboom Strike sneakers made with LightSpray technology that podiumed the Kenyan distance runner Hellen Obiri at this year's Boston Marathon. The Hoka-Marni Bondi 3LS was released on April 4 in four colorways. (Hoka) Victor Diaz, founder of the fashion-forward specialty running retailer Renegade Running, believes both brands have achieved recent wins with their respective strategies. Diaz currently finds that the best middle and long-distance elite runners today are running for On rather than Adidas or Nike. And when it comes to high-heat lifestyle sneaker releases, he believes Hoka has quickly come up to speed with collaborations and can rival larger brands such as New Balance. But On's current streak of innovation around supershoes could leave Hoka in the dust. 'Hoka hasn't crossed that threshold yet. They're still struggling to find their racing shoe or their fast shoe,' said Diaz. Strengths and Weaknesses Diaz said that Hoka and On are both strong brands that customers continue gravitating towards for different reasons. When it comes to who's currently winning in regards to selling high-priced innovation, he finds that his 25 to 35-year-old customer base is paying up for On's premium supershoes, such as its $330 Cloudboom Strike LS sneakers or its $220 Cloudmonster Hyper. Hoka has lagged behind on innovation in his view, and while it continues to resonate with trail runners, it's still catching up to On in the lifestyle market. However, he feels both brands are losing grip of a middle-market they once dominated and allowing larger players to grab a hold, pointing to shoes such as Adidas' Adizero EVO SL and Asics' Novablast. 'There are shoes [by Asics, Nike and Adidas] that just feel more lively than anything that Hoka and On are doing in that middle-range, $140 to $160 price point,' said Diaz. Hoka is hoping to reassert its grip with recent updates to franchises like the Bondi 9 and Clifton 10, but its rollouts for these products haven't gone as smoothly as planned. The brand has only had limited colour assortments upon release, while discounted pairs of older styles have remained widely available through wholesale channels, eating away Hoka's DTC sales. On, meanwhile, has been able to mitigate any competitive challenges with a more diversified offering that includes products for tennis, hiking and training. These categories also open up more avenues for future growth. 'New categories build a broader positioning for the brand as it grows into a perceived white space in the premium segment of the market,' wrote William Blair consumer research analyst Dylan Carden in a recent research note. 'Power of the brand in turn opens new categories, where the company will follow a similar playbook, building performance credibility from which it can offer broader lifestyle products.' Setting a New Pace But analysts who are still bullish on Deckers believe Hoka's slower growth this quarter wasn't about cooling demand. UBS analyst Jay Sole, for instance, said in a recent note that he anticipates Hoka's growth will improve with more colours arriving for its best-selling franchises, old products being cleared out and other new product launches coming down the pipeline. 'I'm not really seeing the demand erosion,' said Sam Poser, a Williams Trading equity analyst. 'My guess is in their next quarter, we're going to see some kind of a flip where the domestic DTC business in the US inflects positively and is better than wholesale.' Hoka is also gaining ground outside of the US as it builds awareness globally. Deckers shared on its recent earnings call that Hoka's international sales now represent 34 percent of its total revenue, with chief financial officer Steven Fasching adding that 'internationally [Hoka] would outpace what we're seeing in the US.' Deckers' chief executive Stefano Caroti shared that Hoka was 'moving up brand rankings' with specialty partners in the UK, Germany and Italy, and that it was 'increasing its partner footprint in key cities' in China. The brand is approaching international growth in a meticulous and cautious way by focussing on sell-ins rather than sell-throughs, according to Poser. And even with brands like Nike and Adidas putting out new running styles that are clicking with shoppers, Hoka remains a well-known — and trusted — name in the running world. 'Very serious runners, because of the risk of injuries, like to stick to products they already know,' said Cole Townsend, founder of the running-fashion newsletter and online directory Running Supply. For that reason, many runners will still gravitate towards Hoka for daily trainers. On, meanwhile, still has work to do to win over legions of more serious runners, though Townsend does believe the brand is making inroads with professional runners. Granted that lifestyle is a segment On has a stronger footing in, analyst Telsey believes that Hoka's authenticity and connection to customers such as Townsend will move them to try new offerings from Hoka, in running and beyond. 'They're going through a period of transition a bit given the new product that's being introduced,' said Telsey.
Fast Company
21-05-2025
- Business
- Fast Company
What you can learn from footwear's two-track race to net zero
When we talk about decarbonizing industries, footwear doesn't often steal the spotlight. Yet behind every pair of sneakers or boots is a complex web of supply chains, raw materials, energy consumption, and logistics. While our shoes leave physical footprints, they also leave behind a much larger, often invisible carbon and waste footprint. The footwear industry is estimated to be responsible for hundreds of millions of metric tons of CO₂e emissions each year—that's more than the emissions of some entire countries. And it's a sector undergoing massive transformation, fueled by a perfect storm of shifting regulation, growing consumer demand for transparency, and the urgent need to build climate resilience into business models. What's exciting is that we're finally starting to see momentum from both sides of the decarbonization equation: radical innovation and operational rigor. The innovation track: Rethink how shoes are made Innovation in footwear manufacturing has typically been focused on performance and aesthetics alone, but that's evolving. Today, some of the most forward-thinking brands are applying that same creative energy to impact, tackling not just how to build better shoes for us but also how to build them better for the planet. A powerful example of this is On. The brand's new LightSpray technology uses a world-first process that eliminates the traditional cut-and-sew approach to constructing shoe uppers. It reduces waste, energy, and materials, and, crucially, carbon. Using prospective life cycle assessment (LCA)—a highly scientific process that calculates the future environmental impact of a product or technology (based on projected data and scenarios)—it was found that LightSpray has the potential to reduce production emissions by about 75% compared to traditional techniques. So, what can we learn? This breakthrough matters not just for the brand itself, but for the entire industry. Globally, around 23.9 billion pairs of shoes are produced each year, and the majority of them still rely on traditional methods that contribute both to emissions and waste throughout the supply chain. Beyond footwear, what's most notable isn't just the number—it's the willingness to build sustainability into innovation at the R&D phase, not as a post-launch add-on. That's a shift in mindset that every industry can learn from. The infrastructure track: Build out data and processes that make change possible While innovation grabs headlines, what often moves the needle at scale is what happens behind the scenes. Infrastructure supports measurement, monitoring, and decision making. In footwear, where the indirect Scope 3 emissions coming from a company's entire supply chain typically account for up to 90% of total footprint, the need for accurate, granular data is critical. That's where brands like Axel Arigato are leading: not by launching one breakthrough product, but by laying the groundwork to reduce emissions across their entire value chain. Axel Arigato recently calculated its full corporate carbon footprint in addition to LCAs for over 270 of its products. This gives the brand visibility to identify impact hotspots and tools to make science-backed reductions—product by product, shipment by shipment, and decision by decision. The work enabled the brand to dive deep into understanding the impact of its products and business to a level of detail they have never gone into before. 'We have always strived to produce products that are less impactful on the environment, and we can now confidently measure this and communicate about it to our consumers,' says Albin Johansson, CEO of Axel Arigato. This kind of backbone work isn't all that flashy, but it is essential. Having a baseline understanding of the status quo enables all kinds of companies to move from ambition to action, and to do so in a way that's resilient to legal requirements like reporting, investor pressure, and consumers shifting their expectations. It can even help provide the confidence to communicate impact publicly, in a world where green claims are heavily scrutinized Taking a step beyond footwear The race to decarbonize isn't exclusive to footwear or the wider fashion industry. But it does cast a revealing lens thanks to its material-intensive, design-driven, and deeply globalized nature. With footwear revenue projected to surpass $472 billion by 2028 and sustainable footwear alone expected to nearly double to $18.25 billion by 2034, the stakes—and opportunities—have never been higher. Crucially, the industry is showing us what it looks like when innovation and infrastructure finally work together. Because, with net zero targets and legal requirements looming, one without the other isn't enough anymore. A revolutionary new process can't scale responsibly without solid measurement and validation. Just like a robust data system doesn't drive progress unless it's tied to product and design decisions. The future depends on both, and the businesses that are most future-proof are the ones willing to run down this dual track. So, whether you're in footwear or finance, the lesson here is clear: Lower impact is not about sticking to one strategy for reduction. It's a system-wide transformation that calls for imagination, precision, and bold partnership. Now, progress increasingly means fewer promises and more proof. And the sooner this double-edged strategy is scaled across industries, the better for our planet.
Yahoo
27-01-2025
- Business
- Yahoo
2 Top Growth Stocks to Buy Now to Start the New Year Off Right
Have you thought about your investing goals for this year? It's a good time to get into the market. The average bull market lasts nearly five years and posts an average cumulative total return of 178%, so if the current one turns out to be close to average, investors are about halfway through it right now. Investors building up their portfolios should be on the lookout for great growth stocks that have the potential to supercharge their returns. If you're looking for some candidates, consider On Holding (NYSE: ONON) and Toast (NYSE: TOST). If you have heard of or seen On's footwear, you probably know that this brand is capturing a lot of attention in the elite athleticwear market. Its sneakers have a distinctive look, with a sole constructed with holes and the recognizable On logo on the side. It's an expensive, premium brand that targets an affluent (and economically resilient) clientele. This cohort's wallets haven't been impacted as much as others' have, and they haven't stopped spending on their new favorite brand. On has expanded to a full line of activewear, but footwear remains its core product. The company recently rolled out a new innovation in its LightSpray shoes, which are literally manufactured by being sprayed onto a mold, and are meant to offer a new standard in comfort. On is building its global brand presence and has several celebrity endorsers like Iga Swiatek and Helen Obiri, as well as many local athlete ambassadors. It's still a relatively small brand in its space, with $2.5 billion in trailing 12-month revenue, but it's growing quickly. In 2024's third quarter, sales increased 33% year over year. Direct-to-consumer sales increased 50% in the quarter, growing to 38.8% of the total. The company is also becoming highly profitable. It has an industry-leading gross margin, which expanded from 59.9% in Q3 2023 to 60.6%, its highest since becoming a public company. It charges high prices for its premium products, and its loyal fans pay full price. On stock is up 108% over the past year, but don't let that deter you from buying today. There's so much more to expect from the company. The best restaurant stock to buy right now may not be a restaurant chain at all. It would be more accurate to categorize Toast as a fintech stock, but the company serves the restaurant industry. It offers a comprehensive and connected cloud-based platform for managing the operations of restaurants of every stripe, and clients are joining by the tens of thousands. The benefits are clear, especially compared to older modes of operation. Toast's platform streamlines complex restaurant management with fully integrated, end-to-end services. Supplier relationships, menus, and accounting are all linked, so that every move on any end goes into the system, and things like kitchen operations are immediately connected with ordering and payments. The platform is also powered by a machine learning model that provides data analysis and helps management make strategic decisions. But Toast thinks it's better than its real competition, too. It boasts 24/7 customer service for all pricing plans, and it claims that since it's built for restaurants and not other kinds of small businesses, it has a better and broader list of features for its target clientele. For example, it touts its wide assortment of digital ordering capabilities. The company has demonstrated robust growth as more restaurants come to recognize how this can save them time and money. Toast added 7,000 new locations in 2024's third quarter, a 28% increase year over year, bringing its total to 127,000. Its annualized recurring run rate was up 28%, and operating income switched from a $59 million loss in the prior-year period to positive $35 million in the most recent one. Free cash flow increased from $37 million to $97 million. Management estimates that it now has about 13% of the U.S. market share in its category, and it's growing its addressable market through global expansion and new feature releases. Toast stock is up 125% over the past year, but there's more to come for investors. Toast has a wide opportunity and leading position, and it's becoming profitable at scale. 2025 could be another solid year. Ever feel like you missed the boat in buying the most successful stocks? Then you'll want to hear this. On rare occasions, our expert team of analysts issues a 'Double Down' stock recommendation for companies that they think are about to pop. If you're worried you've already missed your chance to invest, now is the best time to buy before it's too late. And the numbers speak for themselves: Nvidia: if you invested $1,000 when we doubled down in 2009, you'd have $369,816!* Apple: if you invested $1,000 when we doubled down in 2008, you'd have $42,191!* Netflix: if you invested $1,000 when we doubled down in 2004, you'd have $527,206!* Right now, we're issuing 'Double Down' alerts for three incredible companies, and there may not be another chance like this anytime soon.*Stock Advisor returns as of January 21, 2025 Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Toast. The Motley Fool recommends On Holding. The Motley Fool has a disclosure policy. 2 Top Growth Stocks to Buy Now to Start the New Year Off Right was originally published by The Motley Fool Sign in to access your portfolio
