Is Rapid Apparel Growth the Next Catalyst for On Holding?

On Holding AG’s ONON apparel business experienced significant growth in the third quarter of fiscal 2025, with net sales soaring 86.9% year over year to CHF 50.1 million. On a constant currency basis, the growth was even more impressive at 100.2%. This shows that the increase in net sales was driven by demand rather than foreign exchange effects. The strong performance indicates that the company's multi-dimensional growth strategy is succeeding beyond its core footwear segment.

Management emphasized that the apparel share grew across both direct-to-consumer and wholesale channels and across all major geographic regions, demonstrating that the category is resonating globally. Apparel is quickly becoming a vital part of the business, with sales penetration rising to 6.3% in the third quarter from 4.2% a year earlier.

Performance Running and Performance Training verticals were cited as the main contributors to the quarter’s apparel growth, supported by growing consumer adoption and increased purchase frequency. Management describes apparel as a “company within the company,” highlighting its strategic relevance and role in attracting first-time buyers, who often expand their purchases into other categories.

This success confirms that the brand is strengthening its connection with customers through this burgeoning apparel segment. Management noted that for the first time in the third quarter, they sold more than one million apparel items. The expansion of the apparel business is crucial to achieving the vision of becoming a true toe-to-head partner for consumers. The ability to attract fans into this product category, including those new to performance-inspired apparel, affirms the brand's broadening appeal.

What the Latest Metrics Say About ON Holding

ON Holding, which competes with Deckers Outdoor Corporation DECK and Wolverine World Wide, Inc. WWW, has seen its shares rally 17.8% in the past month compared with the industry’s rise of 19.3%. Shares of Deckers and Wolverine have jumped 25.3% and 23%, respectively, in the aforementioned period.
 

From a valuation standpoint, ON Holding trades at a forward price-to-earnings (P/E) ratio of 28.93, higher than the industry’s 18.32. ONON carries a Value Score of F. ON Holding is trading at a premium to Deckers (with a forward 12-month P/E ratio of 15.13) and Dollar General (19.60). 

The Zacks Consensus Estimate for ON Holding’s current financial-year sales implies year-over-year growth of 41.2%, while the same for earnings per share suggests a decline of 12.7%.
 

ON Holding currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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