Shares of On Holding (ONON) plunged 19% on Tuesday after the premium sportswear maker reported second-quarter net sales that fell short of Wall Street expectations. The company also trimmed its full-year constant-currency sales growth forecast, citing higher U.S. tariffs and cautious consumer spending.
For the quarter ended June 30, On reported net sales of 850.3 million Swiss francs ($1.05 billion), missing the consensus estimate of 878.16 million francs. Adjusted earnings per share of 0.35 francs edged past the 0.34 francs analysts had projected.
Despite the overall miss, the company continued to see robust growth in key international markets. Asia-Pacific contributed more than one-fifth of total sales for a consecutive quarter, driven by strong momentum in Japan, South Korea, and Greater China. The apparel segment also stood out, with constant-currency net sales jumping 56.2% during the quarter.
However, these bright spots were not enough to offset softer overall revenue performance amid a challenging macroeconomic backdrop. The company's shares have now lost about a third of their value this year, as investors reassess growth prospects even as On continues to gain market share from larger rivals like Nike and Adidas.
Premium positioning over volume
Executives emphasized that On would maintain its premium brand image rather than resort to aggressive discounting to boost volumes. "We are not sprinting for short-term volume. We are deliberately engineering for the multi-decade value of a premium brand," co-CEO David Allemann said during the post-earnings conference call.
On raised its full-year gross profit margin forecast to at least 65%, up from its previous guidance of 64.5%. The company also widened its full-year net sales guidance to between 3.47 billion and 3.56 billion Swiss francs on a constant-currency basis.
However, the revised outlook calls for constant-currency sales growth in the low-20% range, down from its earlier forecast of at least 23%. That also trails the 24.7% consensus estimate cited by Citi. Based on current exchange rates, the projected sales range also came in below the market expectation of 3.56 billion francs.
Analysts flag slower growth
Citi analysts noted that management's decision to limit wholesale shipments to preserve full-price selling and prepare for future product launches could weigh on second-half sales and pressure the stock. Jefferies analyst Randal Konik cautioned that recent margin improvements may be difficult to sustain as revenue growth slows and inventories remain elevated, increasing the likelihood of downward earnings estimate revisions in the coming quarters.
The stock's decline mirrors broader market reactions to companies facing tariff headwinds and shifting consumer behavior. For context, Hims & Hers shares slid 7% on a wider Q2 loss despite a raised revenue outlook, while Monday.com shares fell 6% after its Q3 forecast missed estimates. In the broader tech sector, AMD shares dipped 2% on its Taalas acquisition as the AI race intensifies.
On's premium strategy may pay off long-term, but near-term headwinds remain. The company's ability to navigate tariff costs and consumer caution while maintaining its brand cachet will be key for investors watching its trajectory.
This article is for informational purposes only and does not constitute financial advice.
