On Holding (NYSE:ONON) shares plunged on Tuesday after the Swiss sportswear company reported second-quarter revenue below Wall Street expectations and lowered its full-year sales growth forecast.
Second-quarter earnings per share came in at CHF 0.31, ahead of the analyst estimate of CHF 0.29. Revenue increased 21.6% on a constant-currency basis to CHF 850.3 million, but missed the consensus forecast of CHF 881.4 million.
The revenue shortfall and softer outlook overshadowed the earnings beat, sending On Holding shares down nearly 22% in early U.S. trading by 09:45 ET.
Direct-to-consumer sales remain a major growth driver
Underlying demand remained strong in several areas of the business, led by On’s direct-to-consumer channel, where constant-currency sales jumped 34.3%.
The company said direct-to-consumer performance exceeded expectations across every region.
Asia-Pacific again represented more than 20% of global net sales, supported by momentum in Japan, South Korea and Greater China. Apparel was another standout category, with net sales increasing 56.2% on a constant-currency basis.
These growth areas were not enough to prevent overall quarterly revenue from falling short of market expectations.
On Holding improves margins despite U.S. tariffs
Profitability strengthened during the quarter even as the company absorbed higher U.S. import tariffs without including any benefit from tariff refunds.
Gross profit margin increased 3.9 percentage points year on year to 65.4%, while adjusted EBITDA margin improved to 19.8% from 18.2%.
Adjusted EBITDA reached CHF 168.1 million.
On also raised its full-year gross margin forecast to at least 65.0%, compared with its previous guidance of at least 64.5% and a consensus estimate of 64.4%.
The company maintained its adjusted EBITDA margin outlook of between 19.5% and 20.0%.
Full-year sales growth forecast lowered
The main pressure on the stock came from On’s revised revenue outlook.
The company now expects full-year net sales to grow in the low-20% range on a constant-currency basis, down from its previous forecast of at least 23% growth.
The new outlook also falls below the 24.7% consensus cited by Citi.
Based on current spot exchange rates, On expects full-year net sales of CHF 3.47 billion to CHF 3.56 billion, compared with a consensus forecast of CHF 3.56 billion.
“F26 sales guidance was lowered as mgmt deliberately manages wholesale sell-in to protect full-price integrity in a more promotional environment and make room for new innovations leading into F27. The 2Q sales miss and lowering of F26 sales guidance (weak implied 2H guidance) will likely put significant pressure on the stock today,” Citi analysts said.
Why On Holding shares are under pressure
The sharp decline in On Holding shares highlights the market’s focus on future growth rather than the company’s improving profitability.
Direct-to-consumer growth, expanding apparel sales and higher margins provide positive signals, but the second-quarter revenue miss and reduction in full-year sales expectations point to slower momentum than investors had anticipated.
The company’s decision to manage wholesale sell-in more carefully may help protect full-price sales and prepare the channel for new products heading into fiscal 2027. In the near term, however, investors will be watching whether strong direct-to-consumer demand and margin expansion can offset the weaker overall revenue trajectory implied by the revised guidance.
On Holding stock price
