Swiss sportswear brand On Running delivered a quarterly report that caught the market's attention. Its Q1 gross margin climbed to an all-time high, a metric that directly reflects the early success of the brand's channel and category restructuring.
Behind the Gross Margin Record: DTC and Apparel as Twin Engines
The gross margin improvement is no coincidence. In Q1, the share of direct-to-consumer (DTC) sales continued to expand, as this channel typically enjoys higher profit margins by bypassing wholesale intermediaries. Meanwhile, the apparel category outperformed, growing at a pace that surpassed the core footwear segment. Since apparel generally carries higher margins than footwear, its expansion naturally boosted overall profitability. For the industry, this signals that while most sportswear brands rely on footwear for volume, apparel is becoming a critical lever for profit optimization.
The Americas' Temperature Gap: Why Is the Growth Engine Slowing?
Despite strong global numbers, the Americas region sounded a cautionary note. As a key market for On, its Q1 growth rate lagged behind the company's overall pace, revealing signs of stagnation. The underlying reasons are twofold: first, the Americas market is fiercely competitive, with entrenched local giants like Nike and Under Armour, making customer acquisition for newer brands more costly. Second, On's running shoe category in the Americas has entered a relatively mature phase, while newer categories like apparel remain underpenetrated, requiring time for channel distribution and consumer education. This reminds all cross-border sportswear brands that the dividends of a single category or channel eventually hit a ceiling, and regional market cultivation demands multi-category synergy.
Conduction Effects on the Textile Supply Chain
On's strategic shifts are sending clear signals up the textile supply chain. First, a stronger DTC model demands greater supply chain responsiveness and flexibility—small batches, multiple runs, and quick turnarounds are becoming the norm. Second, the expansion of the apparel category directly drives demand for functional fabrics, particularly lightweight, breathable, and quick-dry high-performance knits. Textile clusters in China, such as Shengze and Keqiao, can better position themselves to enter the supply chains of premium sportswear brands by building technical advantages in these niche fabrics.