Every day, the frequency of people I see wearing On running shoes grows. Observations like these are what later become signs of a great stock idea. The last time I've seen a similar phenomenon was when I saw the number of $TSLA
vehicles grow from being a needle in the haystack back in 2012 to becoming a common sighting in 2016. The growing popularity of On running shoes is why I'm starting to think of the brand as the "next Nike".
As I've written in a previous memo,
the success of $ONON
can be attributed to its reliance on third party retailers like Nordstrom $JWN
and Dick's Sporting Goods $DKS
. Aspects of On Holdings make me think that it will see itself becoming a fantastic investment like Lululemon $LULU
and avoid the terrible fate of Under Armour $UAA
. At the same time, only time will tell if they can continue their success.
When researching commonalities between On Holdings today and Nike back in the late '60s and '70s, here are the commonalities that I've found:
- Both companies relied on third-party retailers for growth during their early years (yes, $NKE went from selling their shoes in small third-party shoe stores to selling shoes online and in their own stores)
- Both rely on phenomenal brand ambassadors (for On, it's Roger Federer; for Nike, it's Michael Jordan)
- Both companies were founded by athletes wanting to improve athletic performance through footwear (for Nike, it's to make shoes lighter and more comfortable; for On, it's to create a better cushioning system)
- Both companies have distinctive logos that stand out in the market
- Both companies have a strong focus on innovation and technology in their products (for NIke, it's Air Max; for On, it's CloudTec)
- Both companies have loyal fan bases and high brand perception among consumers, especially in running and streetwear segments (yes, On has both the loyal fan base and high brand perception among consumers)
Only time will tell if On can replicate the success of Nike.