On Holding AG’s ONON shares tumbled $7.87, or 20.3 percent, to $30.91 on Tuesday, August 11 after the company reported sales in the second quarter missed analyst estimates and the company lowered its outlook for the year due to weak sell-throughs in its U.S. Wholesale channel. On an analyst conference call, ONON executives stressed the company’s commitment to innovation and full-price selling will revive wholesale growth.

For the year, On now expects sales to climb in the low-20 percent range on a constant-currency basis while previously expecting sales growth of “at least 23 percent” on a constant-currency basis.

On still kept its earnings guidance for the year, calling for adjusted EBITDA margin in the range 19.5 percent to 20.0 percent as it raised its expectations for gross margins to at least 65.0 percent, up from at least 64.5 percent, to offset the sales shortfall.

The higher gross margins reflected a stronger-than-expected performance by the DTC channel, which grew 34 percent in constant currencies in the quarter. By comparison, wholesale revenues increased 12.7 percent on a constant-currency basis.

On’s management cited DTC’s strength as evidence of the strength of On’s brand.

Caspar Coppetti, founder and co-CEO, said on the analyst call, “In D2C, we are seeing strong growth ahead of our expectation in each region. It is really a positive momentum that is driven by overall brand heat and brand demand.”

David Allemann, founder and co-CEO, said DTC represents the “most premium expression of our brand” and the DTC sales gains were “driven by deep, top-of-head consumer demand across all regions, with On’s brand awareness increasing to 30 percent as a whole new generation of fans discovered the brand.”

Allemann added, “We are proving that a brand can achieve global scale without eroding premium positioning or margin ambitions. We do not create exclusivity through artificial scarcity or hype. We scale by bringing superior technology, engineering, unique design, and cultural relevance to millions of consumers, capturing market share while fiercely protecting our margins.”

However, most of the analysts’ questions on the call explored the below-par results in Americas’ wholesale channel, with management indicating the wholesale sell-throughs in other regions are on plan.

“In wholesale, the sell-out of some of our everyday running franchises tracked below our ambitions in a highly promotional multi-brand marketplace, particularly in the Americas,” said Allemann. “Clearly, this is something we are not pleased with.”

Asked about the variation between the performance of DTC versus wholesale, Coppetti said DTC benefits from having a “very, very loyal customer” and it’s also attracting many younger consumers with one-third of DTC customers under the age of 34. He added, “It’s also a next generation that is coming to us. Of course, they’re coming to us as a premium brand and they’re not looking for price, but they’re looking for innovation, they’re looking for cultural relevance. That’s the primary driver in that channel.”

By comparison, On faces more price-driven competition at the wholesale level. Coppetti said, “In a wholesale channel, of course, you’re more exposed to a very promotional environment. It’s more of a choice that you have. That’s why we feel we have a very strong consumer. We have higher awareness now, 30 percent. We have a young new cohort coming to us, and that’s what drives the DTC growth that you have seen at more than 34 percent.”

On’s management was also faced with questions about its decision to reduce sell-ins into U.S. wholesale in order to avoid inventory build-up and related markdown pressures. The lean inventory stance is expected to support the launch of new products.

On the call, officials highlighted upcoming launches of the CloudX 5 with CleanCloud, Cloudboom Strike 2, Cloudsurfer 3, Cloudsurfer Max 2 and a broader refresh of its everyday running line. Frank Sluis, on his first quarterly call as the company’s CFO, said, “This is the fastest accelerated rollout of product that we ever have.”

Regarding the strategy to limit sell-ins to the Americas wholesale channel, Sluis said, “With sellouts softer in some of our everyday running franchises in a highly promotional environment, we chose to hold back sell-in rather than ship volume that would build inventory in the channel and put our full price integrity at risk. It costs us some wholesale growth, but it protects our partners’ inventory health, our premium positioning, and ensures the best position for launching what we believe are outstanding innovations in 2027.”

Allemann stated, “We choose not to build in-channel inventory that could compromise our full price integrity. This commitment, discipline, and focus on driving high-value accretive growth will continue into the second half of the year and be evident in our premium financial profile.”

Looking ahead, Sluis said On expects “very strong momentum” within DTC channels in the back half of the year. With the actions taken to reduce wholesale sell-ins of everyday run styles in the Americas wholesale channel continuing in the third quarter, third quarter growth is projected to be lower than the fourth quarter.

Asked whether more moderate wholesale growth should be expected going forward, Sluis said the slower growth will be “transitory,” with wholesale gains expected to revive with upcoming major launches including the Cloudsurfer 3 reaching wholesale in January, followed by the Cloudsurfer Max 2 in April and a relaunch of the Cloudflow. He said, “We want to make sure that marketplace inventory levels are healthy, so that the innovations can actually land well at the back end of this year and also in 2027. That is why we do this precisely, to make sure that the long-term trend in wholesale continues to also be strong.”

Second-Quarter Performance
In the quarter ended June 30, On’s sales climbed 13.5 percent year-over-year in the quarter, or 21.6 percent on a constant-currency (CC) basis, to CHF 850.3 million (~$1.08 bn), missing the CHF 881.4 million consensus estimate.

On reports its results in the Swiss franc (CHF) currency. The average conversion rate used by SGB Executive for the second quarter was 1 CHF = $1.265 per data published by X-Rates.

Net income totaled CHF 105.0 million, or CHF 31 cents a share, against a loss of CHF 40.9 million, or CHF 12 cents, a year ago. On an adjusted basis, earnings increased to CHF 117.6 million, or CHF 35 cents, from a loss of CHF 29.7 million, or CHF 9 cents, and ahead of analysts’ consensus target of CHF 34 cents.

Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) climbed 23.5 percent to CHF 168.1 million from CHF 136.1 million.

Gross margins increased to 65.4 percent from 61.5 percent. Sluis said the gross margin improvement reflected “strong DTC momentum, disciplined execution, and continued operating efficiencies. Together with a favorable freight mix and some positive foreign exchange effects, those efficiencies let us fully absorb external pressures, including higher U.S. import tariffs, and still expand our gross margin. To be clear, these numbers do not include any tariff refunds, which we anticipate are likely to come throughout H2.”

Performance by Channel

DTC increased 26.0 percent (+34.3 percent CC) to CHF 388.4 million.

Wholesale channel net sales increased 4.8 percent (+12.7 percent) to CHF 461.9 million. On said DTC outperformed Wholesale in every region.

Sluis said e-commerce growth exceeded On’s expectations in every region. He added, “Last quarter, we spoke about deliberately widening the conversation to new communities. We continued to pursue this strategy, and the signals of our commitment to this approach are encouraging. Those newer visitors are already moving deeper into the journey, evidenced in increased engagement, and we did it while driving a further increase in full price share year-on-year.”

He said On’s stores “also performed very well,” with continued strong growth both in new doors and comp sales.

Allemann said On’s Champs-Élysées flagship was the “strongest performing store globally this quarter, driving exceptional growth in traffic, conversion, and average item values. In Stockholm, our new flagship in the historic Golden Triangle has been open just two months and is already performing at twice our expected level.”

Sluis added that On’s two Tokyo stores both “continue to perform exceptionally with no signs of cannibalization, clearly telling us that with the right format in the right location, we have real room to expand, even in cities where we are already present, and at very attractive economics. Our retail KPIs continue to strengthen from an already high base, proving the incredible value of our deepening consumer connections.”

Performance by Region

In the Americas, sales grew 4.5 percent (+13.0 percent CC), reflecting the softer growth at Wholesale. Within DTC, momentum reportedly accelerated in both North America and Latin America.

Sluis said the North America region continued to attract younger consumers, with the share of e-commerce customers under 24 up by more than a third versus the first quarter. He added, “I find it really exciting because it means we are attracting the next generation of On consumers without discounting our way to them. Our stores in the region performed well, too, particularly Miami and our New York Flatiron flagship, with higher average basket sizes reflecting the resonance of our premium offers, including a strong performance of our Loewe and Zendaya launches.”

Sluis called EMEA a “real standout,” with sales up 20.5 percent at constant currency and 15.4 percent on a reported basis. He noted the EMEA’s performance arrived despite going against a 46.1 percent gain on a constant-currency basis in the year-ago quarter. Sluis said, “DTC growth was in excess of 20 percent at constant currency across every single sub-region, including DACH. The performance in Southern Europe was again exceptional, with France, Spain, and Italy all tracking comfortably ahead of our expectations and building real momentum on an ever larger base.  Our retail presence in these markets also goes from strength to strength, with standout performances of our stores in Madrid and Milan.”

In the APAC region, sales grew 54.7 percent at constant currency and by 43.1 percent on a reported basis, with broad-based strength across the region making this another quarter of 20 percent global share. Said Sluis, “Japan and Korea continued to perform exceptionally well, as did Greater China. This market exceeded our expectations in every channel, with a great contribution from our stores and particular strength on Tmall, despite our choosing not to participate in promotional activity.”

In the quarter, On opened its first store in Macau, which is already matching the strong momentum of its Hong Kong locations. Said Sluis, “With the widest assortment in the region, the store achieved above average conversion, reinforcing our conviction in the potential of larger format stores across the region.”

Performance by CategorySales from shoes were up 18.9 percent at constant currency and by 10.9 percent on a reported basis.

Sluis said, “In performance running, the Cloudmonster 3 Hyper delivered strong sell-through and continues to be widely praised by retailers and consumers alike. We continue to scale LightSpray, which already contributed quite meaningfully to our performance running vertical this quarter, despite being still early in the scale-up journey.” He added that following its introduction at the recent inaugural Global Run Summit in Paris, spring/summer 2027 orders for Cloudsurfer 3 from attending retailers doubled after the event.

In lifestyle footwear offerings, the Cloudtilt saw strength across all versions, including the Remix, “which is resonating exceptionally well with the young male consumer,” said Sluis. Training was “also a highlight,” in footwear, with Cloudpulse and CloudX “both growing strongly.” In tennis footwear, “momentum continued to build on and off court through the Roger franchise, fueled also by our athletes’ performances at Wimbledon and Roland Garros,” according to Sluis.

Apparel sales grew 56.2 percent at constant currency and by 47.7 percent on a reported basis. Said Sluis on apparel, “Performance running remained the anchor, supported by our established collections, the expansion of Volt, and a highly successful limited drop with Erewhon. The Tennis Court collection “delivered excellent growth and sell-through, taking a meaningfully larger share of our apparel business. The co-created Zendaya collection significantly exceeded expectations. In the U.S., every style beats our forecast by triple digits.”

Updated Outlook

  • Net Sales: Expected to grow in the low-20 percent range on a constant currency basis, up from “at least 23 percent” under previous guidance. The DTC channel is expected to “strongly outperform” wholesale in the second half of the year. At current spot rates, this implies absolute net sales of CHF 3.47 billion to CHF 3.56 billion, up from CHF 3.01 billion in 2025..
  • Gross profit margin: Expected to be at least 65.0 percent, up from 64.5 percent previously, reflecting DTC momentum.
  • Adjusted EBITDA margin:  On continues to expect adjusted EBITDA margin in the range 19.5 percent to 20.0 percent.

Image courtesy of On Holding