Wholesale Weakness Weighs on On Holding Despite Strong DTC Growth

Strong Margins Fail to Offset a Slower Sales Outlook

On Holding (ONON) reported second-quarter net sales of CHF 850.3 million, up 13.5% year over year and 21.6% on a constant-currency basis. Direct-to-consumer sales accelerated sharply, profitability improved, and net income reached CHF 105 million.

Those gains were overshadowed by weaker wholesale growth and a reduction in the company's full-year revenue outlook. Revenue missed the CHF 881.4 million consensus estimate cited in the provided reports, while On now expects full-year constant-currency sales growth in the low-20% range rather than at least 23%. ONON shares fell more than 19% following the report.

Key Points

• On Holding Q2 net sales increased 13.5% to CHF 850.3 million, or 21.6% on a constant-currency basis, but fell short of analyst expectations.
• Direct-to-consumer sales surged 34.3% on a constant-currency basis while wholesale increased 12.7%, highlighting a widening gap between the two channels.
• On lowered its full-year constant-currency sales growth outlook to the low-20% range but raised gross-margin guidance to at least 65% and maintained its 19.5% to 20% adjusted EBITDA margin target.

Direct-to-Consumer Growth Drives On's Q2 Expansion

On Holding continued to generate strong underlying growth during the second quarter, but the composition of that growth became increasingly important to the earnings reaction.

Net sales increased 13.5% year over year to CHF 850.3 million and rose 21.6% on a constant-currency basis, which removes the impact of exchange-rate movements. The result nevertheless came below the CHF 881.4 million consensus estimate cited in the provided reports.

Direct-to-consumer, or DTC, remained the strongest part of the business. Sales through On's own stores and digital channels increased 26% to CHF 388.4 million and climbed 34.3% on a constant-currency basis. DTC reached 45.7% of quarterly net sales, a second-quarter high for the company.

The strength extended across regions, with On saying DTC performance exceeded expectations in every region.

Geographically, Asia-Pacific delivered the fastest reported growth. Sales increased 43.1% to CHF 170.5 million, supported by momentum in Japan, South Korea and Greater China. EMEA sales rose 15.4% to CHF 228.2 million, while the Americas increased 4.5% to CHF 451.6 million.

Product diversification also continued. Footwear remained by far the largest category, with sales rising 10.9% to CHF 781.6 million. Apparel grew 47.7% to CHF 54.2 million, while accessories increased 88.3% to CHF 14.5 million. On a constant-currency basis, apparel growth reached 56.2% and accessories more than doubled.

Why Did ONON Stock Fall After Earnings?

The sharp move in ONON stock reflected weaker-than-expected overall revenue and the company's more cautious full-year sales forecast rather than deteriorating profitability.

Wholesale was the primary area of weakness. Sales through the channel increased only 4.8% to CHF 461.9 million, or 12.7% on a constant-currency basis. Wholesale remains larger than DTC, making slower growth in the channel meaningful for On's consolidated sales performance.

The company said sellout of several everyday running franchises was below its ambitions in a highly promotional multi-brand marketplace, particularly in the Americas.

Rather than pursuing additional volume through promotions or greater wholesale inventory, On said it is deliberately managing wholesale sell-in to protect full-price integrity. Management also wants to maintain a cleaner channel ahead of upcoming product introductions extending into 2027.

That discipline contributed to a reduction in the company's 2026 sales outlook. On now expects full-year net sales growth in the low-20% range on a constant-currency basis, compared with its previous forecast for growth of at least 23%.

At current exchange rates, that translates into expected full-year net sales of CHF 3.47 billion to CHF 3.56 billion.

The combination of a quarterly revenue miss and lower full-year sales expectations overshadowed an earnings beat. Second-quarter EPS was CHF 0.31 compared with the CHF 0.29 analyst estimate cited in the provided reports.

Margin Expansion Signals a More Profitable Sales Mix

While sales expectations weakened, On's profitability moved in the opposite direction.

Gross profit increased 20.6% to CHF 555.7 million, while gross margin expanded to 65.4% from 61.5% a year earlier. The 3.9-percentage-point improvement came even as On fully absorbed higher U.S. import tariffs without including potential tariff refunds.

The company attributed the improvement to its higher DTC mix, operational efficiencies and full-price discipline. Selling more products directly allows On to retain more of the retail economics while maintaining greater control over pricing and merchandising.

Adjusted EBITDA increased 23.5% to CHF 168.1 million, while adjusted EBITDA margin improved to 19.8% from 18.2%.

Net income reached CHF 105 million, representing a 12.3% net income margin, compared with a net loss of CHF 40.9 million in the year-earlier quarter.

On also increased its full-year gross-margin forecast to at least 65%, up from at least 64.5%, while maintaining adjusted EBITDA margin guidance of 19.5% to 20%.

The balance sheet strengthened as well. Cash and cash equivalents reached CHF 1.21 billion at the end of June, up 18% from CHF 1.02 billion at the end of 2025. For the first six months of the year, operating activities generated CHF 255 million in cash compared with CHF 89.1 million in the prior-year period.

What It Means for Investors

On Holding's Q2 results present a clear split between sales momentum and profitability.

The weaker side of the report was concentrated in wholesale. The channel remains larger than DTC, and slower wholesale growth contributed to both the quarterly revenue miss and the company's decision to lower its full-year sales growth outlook.

At the same time, On's direct business continues to expand considerably faster. DTC grew 34.3% on a constant-currency basis and reached 45.7% of quarterly revenue. That shift helped gross margin reach 65.4% and adjusted EBITDA margin rise to 19.8%.

Management is effectively choosing to protect pricing and limit wholesale inventory rather than maximize near-term volume in a promotional environment. That approach is supporting margins but is also contributing to slower near-term sales growth.

The company's product pipeline adds another factor to watch. On has introduced the Cloudboom Strike 2 and plans to debut its SURREAL superfoam in the Cloudsurfer 3 later this year, while LightSpray is being expanded into additional core franchises. The company said its wholesale strategy is intended in part to create a cleaner runway for upcoming innovations heading into 2027.

For ONON stock, the key issue following Q2 is whether continued DTC strength, international expansion and margin improvement can offset the slower wholesale trajectory reflected in the revised outlook.

Conclusion

On Holding's second-quarter report showed that the brand continues to grow rapidly in several important areas. Constant-currency revenue increased 21.6%, DTC sales climbed 34.3%, Asia-Pacific expanded 54.7%, and gross margin reached 65.4%.

But the market reaction centered on what fell short. Overall revenue missed expectations, wholesale growth lagged the direct business, and management reduced its full-year sales growth forecast to the low-20% range.

The nearly 20% decline in ONON stock underscores the market's focus on the slower revenue trajectory despite improving profitability. The next phase of the company's performance will depend on the balance between disciplined wholesale management and continued strength across DTC, international markets and new product launches.

FAQs

Why did ONON stock fall after Q2 earnings?

ONON stock fell after On Holding reported quarterly revenue below analyst expectations and lowered its full-year constant-currency sales growth outlook to the low-20% range from at least 23% previously.

How did On Holding's direct-to-consumer business perform?

On Holding's direct-to-consumer sales increased 26% to CHF 388.4 million and grew 34.3% on a constant-currency basis. DTC represented 45.7% of quarterly net sales.

Why was wholesale growth weaker at On Holding?

Wholesale sales increased 4.8%, or 12.7% on a constant-currency basis. On said it is deliberately managing wholesale sell-in to protect full-price integrity in a promotional marketplace and maintain a clean runway for upcoming product innovations.

Did On Holding's profitability improve in Q2?

Yes. Gross margin increased to 65.4% from 61.5%, while adjusted EBITDA margin rose to 19.8% from 18.2%. Adjusted EBITDA increased 23.5% to CHF 168.1 million.

What is On Holding's full-year 2026 outlook?

On Holding expects constant-currency net sales growth in the low-20% range, gross margin of at least 65%, and an adjusted EBITDA margin between 19.5% and 20%. At current exchange rates, expected net sales are CHF 3.47 billion to CHF 3.56 billion.

This article was created with AI assistance and reviewed by an editor. For details, please refer to our Terms of Use.

Go Beyond the Market Brief with Market Edge

Follow SharperTrades’ complete approach to trading and investing, combining active trade opportunities through Block Orders, long-term research through Stock Investor, and structured market education through the Swing Trading Masterclass. Try Market Edge for $19 your first month →

Explore Research with Stock Investor

Stock Investor is SharperTrades’ platform for long-term investing research and portfolio management. Members receive research reports, portfolio updates, conviction tracking, and in-depth analysis designed to support disciplined investment decisions.

Explore Active Trading & Income Strategies

Block Orders tracks institutional activity and highlights active trade setups and price behavior across long and short opportunities.

For options-focused traders, Essential Option Income provides a structured approach to options income strategies, while Pro Option Trader offers a broader range of options strategies and trade opportunities.

Think More Clearly with SteadyCapital

SteadyCapital is SharperTrades’ decision-support system for long-term investors, built around the SteadyCapital Method™. Review investment ideas, challenge assumptions, evaluate valuation and risk, compare companies, and think through important buy, hold, add, trim, or sell decisions before you act.

Risk Disclosure

All content is provided for educational purposes only and does not constitute investment advice. Trading involves risk, and past performance is not indicative of future results. Please review our full Risk Disclosure for additional information.