On Holding AG raised its full-year outlook as second-quarter sales grew a better-than-expected 32 percent year-over-year and overall results handily topped Wall Street targets. During an analyst conference call, company officials stated that the continued momentum is being fueled by its success in developing distinct footwear franchises, traction gained in apparel and On’s growing appeal to lifestyle-driven and younger consumers.

ONON shares closed Tuesday, August 12, at $49.81, up $4.09, or 9 percent for the day.

Second quarter sales increased 32.0 percent year-over-year (y/y) and by 38.2 percent on a constant-currency (cc) basis, reaching CHF 749.2 million ($928 mm) and exceeding analysts’ consensus target of CHF 703.1 million.

Adjusted EBITDA reached CHF 136.1 million in Q2, up 49.9 percent year-over-year and comfortably ahead of the analysts’ target of CHF 114.6 million. Adjusted EBITDA margin to 18.2 percent, up 220 basis points year-over-year.

During an analyst call, David Allemann, co-founder and executive co-chairman, highlighted that the revenue gains were “broad-based,” with strength across all regions, channels and product categories.

In Footwear, Allemann said On is “building iconic franchises” with nine footwear franchises, led by the Cloudsurfer and Cloudmonster, and each contributing over 5 percent to its sales. He added, “That kind of balance is not an accident, it’s the result of a years-long focused strategy to build resilience into our portfolio.”

Allemann noted that apparel is growing “very fast” to help position On as a “full sportwear” brand. Relevance in its apparel category was bolstered by a showing during the recent Paris Fashion Week and its new apparel launch with actress Zendaya.

Allemann also pointed to On’s success expanding beyond running to trail, outdoor, tennis, and training, with the tennis opportunity boosted by recent wins by On athlete ambassadors Iga Swiatek at Wimbledon and Ben Shelton at the Canadian Open. He also highlighted the new training capsule with singer FKA Twigs.

However, he particularly highlighted On’s success as a lifestyle brand, merging sports and fashion, which is attracting new sets of customers, particularly Gen Z consumers.

“What we’re seeing is that we are no longer just for early adopters,” said Allemann. “We are now resonating with a much wider audience, from established runners to the very young.”

Channel Summary
The 32 percent top-line growth in the second quarter was led by On’s direct-to-consumer (DTC) channel, where sales vaulted 47.2 percent (+54.2 percent cc) to CHF 308.3 million, reflecting strong demand across all of On’s regions. As a result, the DTC share reached a new second-quarter high of 41.1 percent.

Martin Hoffmann, CEO and CFO, said on the analyst call that the DTC gains reflect “strength in both e-commerce and retail, which are continuing to work together to boost our global brand awareness and customer engagement. The strength in e-commerce was particularly evident with accelerated growth in both EMEA and the Americas, while the APAC region continued to deliver results that significantly exceeded expectations.”

Among its retail store base, flagship stores remain a key driver of gains. On’s Paris store on Champs-Élysées “continues its strong growth” since opening in July 2024, while the LA Abbot Kinney store near California’s Venice Beach saw the highest year-over-year growth in the Americas, supported by strong community engagement. Hoffmann said, “As LA prepares to host the 2028 Olympics, we are strategically increasing our brand exposure to capture the city’s rising buzz and excitement.”

Wholesale channel sales increased 23.1 percent (+28.8 percent cc) year-over-year to CHF 441.0 million, also reflecting “strong demand across all regions while we maintain our focus on a slow and controlled store rollout,” stated Hoffmann.

Hoffmann said, “We continue to build and scale relationships with premium distributor partners in select markets. The store we opened in Singapore with one of these partners marks a significant milestone, and we are excited to explore new markets in Southeast Asia and in the Middle East through this channel in the coming quarters.”

Regional Summary
Sales in the Americas, its largest region, increased 16.8 percent (+23.6 percent cc) year-over-year to CHF 432.3 million, driven by DTC. Hoffman said, “As a result of the ongoing strong demand for the brand and our significantly improved operational capabilities, our DTC channel materially outperformed in Q2. Selling into our wholesale partners was at a slower pace, given the timing of product launches, but sell-out rates with our key account partners reflected the same strong demand we saw with our DTC channel.”

EMEA (Europe, Middle East and Africa) region sales jumped 42.9 percent (+46.1 percent cc) year-over-year to CHF 197.8 million. The quarterly growth was the strongest for the region in the past two years, benefiting from steps to elevate the On’s brand perception. Said Hoffman, “We’re seeing this accelerated growth across both newer markets like France and Italy and established ones with the U.K. being a particular highlight, delivering extremely strong growth rates on an increasingly large sales base.”

The Asia-Pacific region again saw the strongest growth with sales catapulting 101 percent (+111 percent cc) year-over-year to CHF 110.9 million, marking its fifth straight quarter of triple-digit growth. Hoffman said Asia-Pacific’s results “continue to materially outpace” internal expectations. He said, “In all markets, the demand for our products is outpacing supply. In Greater China, net sales more than doubled, driven by over 50 percent same-store growth in our own retail stores, as well as higher growth rates in our e-commerce channels and the addition of powerful new retail stores. Our flagship store in Chengdu outperforms our expectations on all key retail metrics and will serve as a blueprint for our future retail expansion in this market.”

Category Summary
Shoes category sales increased 29.9 percent (+36.0 percent cc) year-over-year to CHF 704.9 million. Hoffman attributed the gains to its success in building several strong franchises with strength across performance and lifestyle styles. He said, “In performance, running, tennis and outdoor grew strongly, with the strongest growth in the Cloudsurfer and Cloudmonster. Our key lifestyle franchises, particularly the Cloud, Cloudtilt and Cloudzone, are resonating deeply with consumers, additionally amplified by our campaigns with Zendaya.”

Apparel category sales jumped 67.5 percent (+75.5 percent cc) year-over-year to CHF 36.7 million. Hoffman said, “We’re particularly encouraged by the deepening consumer engagement in this category. We are seeing a healthy year-over-year increase in repeat transactions. And importantly, also first- and second-time buyers are increasingly adding apparel to their baskets. This is a key indicator of our success in building a full sportswear brand and driving apparel adoption earlier in the customer journey.”

Accessories sales surged 133 percent (+143 percent cc) year-over-year to CHF 7.7 million.

Profitability and Expenses Summary
The 49.9 percent gain in adjusted EBITDA reflected both improving gross margins and expense leverage.

Gross margins improved 160 basis points to 61.5 percent of sales, benefiting from the increased DTC share, lower freight expenses, as well as a net foreign exchange tailwind from the further depreciation of the U.S. dollar during the quarter. Hoffman said, “We implemented selective price increases in the U.S. in early July, so these did not have any effect on our Q2 profitability.”

SG&A expenses, excluding share-based compensation, were reduced to 47.7 percent of sales in Q2, down from 48.6 percent in the same period last year, due to sales leverage.

Overall SG&A expense grew 25.6 percent to $368 million as On continues to invest in opening stores, its LightSpray robotics-driven production initiative, and strengthening IT and tech capabilities. Hoffman added, “At the same time, we saw ongoing benefits from operational efficiencies, particularly in distribution costs, which we now expect to continue throughout the rest of the year.”

On posted a net loss of CHF 40.9 million in the quarter, compared to a net income of CHF 30.8 million in the 2024 second quarter, due to foreign exchange losses of $139.9 million, versus a loss of $4.5 million a year ago.

Hoffman said the exchange rate of the U.S. dollar against the Swiss franc hit multi-decade lows at 0.79 in the quarter. He added, “As highlighted in the past, this effect is mainly driven by the valuation of our U.S. dollar-based assets, especially cash and cash equivalents at quarter-end exchange rates and does not impact or reflect the financial health of our business.”

Adjusted net loss was reduced to CHF 29.7 million from CHF 46.9 million a year ago.

On’s Expanding Appeal
Allemann noted that while “fundamentally a sports brand,” the cultural shift merging spots and fashion is supporting On’s positioning as a lifestyle brand, “unlocking a much larger addressable market.”

He added, “Our hugely successful collaboration with Loewe on the Cloudtilt, which sold out almost entirely within days, retailing at USD $590, perfectly illustrates this intersection. The seed for the most premium global multi-sports brand is planted.”

Allemann further noted that On’s brand strength is over-indexing with Gen Z consumers. He said, “In the U.S., we have previously shared that awareness has more than doubled in a single year, making On one of the top wanted athletic shoe brands among teens. They love the Soft Wins campaign with Elmo for the Cloudsurfer. We’re also seeing this broad appeal powered by diverse sports and franchises like the Cloud, which has grown from a running shoe into an everyday essential.”

He stated, “For us, it feels like we’ve reached a tipping point. We are converting broad communities who are buying On’s premium sports products again and again.”

“What’s truly unique is how we are reinforcing our position at the intersection of sport and lifestyle,” added Hoffman. “Our brand record shows we are the only brand growing our connection with both performance and lifestyle simultaneously, a rare position to be in that speaks to the strength and versatility of the On brand.”

Hoffman still noted that On is seeing strength across categories.

“This brand heat is spreading,” he said. “We are seeing great traction in tennis apparel and the new Cloudultra Pro and Cloudultra 3 are strengthening our connection with dedicated trail runners.”

He also said On is holding onto its strong appeal with runners, noting that running “remains the foundation of our brand, and it’s where our credibility is rooted.”  He said On’s proprietary brand tracker has shown a significant increase in the brand’s connection with runners and its performance credibility.

“We also grew overall brand awareness faster than any other brand in our category,” added Hoffman. “This momentum will carry forward with the launch of the Cloudboom Max next week. It’s our first super shoe built for the everyday runner, and many of our team members, including myself, will be wearing it in our fall marathons.”

Outlook
Hoffman said On is raising its outlook for the year due to the “strong performance in Q2, continued powerful momentum in the first weeks of Q3, a strong order book for the fall/winter season and the continued efficiency tailwinds driven by our focus and commitment to operational excellence.”

The updated guidance calls for:

  • Net sales: Expected to be up at least 31 percent year-over-year on a constant currency basis (previously up at least 28 percent). At current spot rates, On said this corresponds to reported net sales of at least CHF 2.91 billion (previously CHF 2.86 billion).
  • Gross profit margin: Expected to be in the range of 60.5 percent to 61.0 percent (previously 60.0 percent to 60.5 percent).
  • Adjusted EBITDA margin: Expected to be in the range of 17.0 percent to 17.5 percent (previously 16.5 percent to 17.5 percent).

Hoffman said the gross margin expectations are supported by the continued strength of the DTC channel, combined with a focus on full-price sales, favorable freight cost expectations, and positive foreign exchange rates. The outlook already includes the impact of a 20 percent incremental tariff on imports to the U.S. from Vietnam, rather than the 10 percent assumed in previous guidance.

Hoffman said he’s confident that On’s premium positioning and top-line momentum will help the company find ways to offset tariff costs.

Hoffman said, “Over the last years, we have done so many investments and upscaling of our abilities to drive more gross profit margin, which means innovation products that come at higher price points. It’s increasing our DTC mix, it’s economies of scale on our product cost, it’s supply chain optimizations. We have done price increases as of 1st of July in the U.S. We are well positioned. And we have not even yet spoken to our retail partners, our factory partners about mitigation efforts, which is still something we can do, but we haven’t needed it yet.”

Images courtesy On Holding AG