ON Holding (NYSE: ONON) runs toward a robotic future

If you looked at ON Holding shares (NYSE: ONON) over the past year, you may have wondered how a maker of running shoes is performing more like a tech play, having rallied 104%. It’s starting to become clear why: the Switzerland-based company has been introducing new robotics set to reinvent the way shoes are manufactured, radically altering global supply chains and distribution networks along the way. 

Dubbed LightSpray, the technology uses an automated robot to fuse 1.5km of polymer filament onto a pre-made sole in a single step. The shoes—which resemble a futuristic, laceless sock—can be produced in three minutes, without humans, sewing or glue. While still in early stages of development, On has already delivered limited batches of the advanced sneaker, demonstrating how manufacturers can spin up a pair much closer to end consumers and possibly even on demand, in retail stores. The process could simplify the logistically complex supply chains that typically see merchandise produced in far-flung factories and then shipped to market in containers over vast distances; it also reduces dependence on third parties that can be subject to labor strikes or other quality concerns. 

“LightSpray is not just a marketing story,” On co-founder and executive co-chairman Caspar Coppetti said on a call with analysts on Tuesday after the company reported a record third quarter in terms of sales and profitability. “This has the potential to really disrupt the way footwear is manufactured…We can nearshore it and make it at comparable cost anywhere in the world.”

Coppetti hinted that the company has much bigger plans for the technology and wants to deploy it broadly for lifestyle consumers, in addition to everyday runners; it’s looking at developing complete production lines that can be fully automated. On says an initial performance model—which retailed for $330 before selling out—is supportive when worn, with the material having a “textile-like” feel that wraps around the foot.

“Don’t expect this to hit the market, on a meaningful scale, next year or the year after, but we’re really now exploring beyond just a performance product,” he continued. “We want to bring it to market, at scale.”

That’s exactly the kind of disruption that tends to attract investors seeking out exponential growth potential typical of cutting edge tech companies like chipmaker NVIDIA (NASDAQ: NVDA), whose shares have surged 202% over the past year. On has outperformed rising stars like Deckers Outdoor (NYSE: DECK), the maker of the popular Hoka brand, which has gained 71% over the same period. Legacy giants in the industry have fared much worse, with Nike (NYSE: NKE) declining 26%. 

While real disruption may still be a few years off, On said in its latest quarterly report that it had seen  “significant acceleration” of its direct-to-consumer business. Citing what it said was significant momentum ahead of the busy holiday shopping season, the company raised its full year guidance. The company said its brand awareness had surged in recent months after a strong presence at the Paris Olympics; in the US, that recognition doubled over the past year to reach 20% of consumers. 

“All of this confirms that our efforts are paying off,” Coppetti said.

On is known for its sleek designs and cloud-like soles popular with affluent customers, but it’s showing that it wants to be a tech-driven disruptor in addition to a sportswear and fashion designer. If LightSpray takes off and centers the company at the vanguard of robotic manufacturing and 3D-printing, investors may find themselves winning a marathon, and not just a sprint.