On Holding Races Ahead: Strong Q4 Results Keep Momentum High

On Holding AG (NYSE: ONON) reported strong fourth-quarter earnings, exceeding expectations on both earnings per share (EPS) and revenue. The Swiss running shoe and apparel company delivered adjusted EPS of CHF 0.27, significantly outperforming analyst estimates of CHF 0.14. This marked a notable turnaround from the loss per share of CHF 0.08 reported a year ago. Revenue came in at CHF 606.6 million, representing a 36% year-over-year increase and surpassing the CHF 595.2 million forecasted by analysts.

Key Metrics and Performance Drivers

Beyond the top and bottom-line beats, On Holding delivered strong growth across several key financial and operational metrics. Gross profit increased 39% year-over-year to CHF 376.8 million, exceeding the CHF 367 million estimate, while the gross margin reached a record-high 62.1%, beating expectations of 61.7%. Adjusted EBITDA came in at CHF 99.4 million, up 38% from the prior year and ahead of the CHF 97.2 million consensus estimate.

Regional performance was mixed, with strong growth in the EMEA and Asia-Pacific regions offsetting a slight miss in the Americas. EMEA net sales reached CHF 147.4 million, well above the CHF 136.5 million forecast, while Asia-Pacific surged to CHF 74.1 million, surpassing estimates of CHF 61.1 million. Americas net sales, however, came in at CHF 385.1 million, missing the CHF 397.3 million estimate but still growing at a solid 34% year-over-year pace in constant currency terms.

Direct-to-consumer (DTC) sales were a standout, growing 43% year-over-year to CHF 296.2 million, outpacing wholesale sales growth of 29%. The shift toward DTC helped drive overall margin expansion, with the channel mix reaching 48.8% of total sales, an increase of 260 basis points from the prior year.

Comments on Tariffs and Supply Chain Strategy

On Holding provided some insights into the potential impact of recently enacted U.S. tariffs, though the company appears well-insulated from immediate disruptions. In its 20-F filing with the SEC, On Holding acknowledged that tariffs could pose a headwind but noted that its supply chain is well diversified. Approximately 90% of its shoes and 60% of its apparel and accessories are sourced from Vietnam, while only 7% of its apparel and accessories come from China. Notably, On does not source any of its footwear from China, nor does it source goods from Canada or Mexico, shielding it from the latest round of U.S. tariffs on those regions.

Guidance and Future Outlook

For fiscal year 2025, On Holding provided guidance that was slightly below expectations. The company expects net sales of at least CHF 2.94 billion, just shy of the CHF 2.96 billion analyst consensus. Adjusted EBITDA margin is projected in the range of 17% to 17.5%, in line with expectations. Gross margin is expected to be around 60.5%, slightly below the 60.7% forecasted by analysts.

Management indicated that 2025 is off to a strong start, with the company expecting higher revenue growth in the first half of the year compared to the second half. This optimism is largely driven by the timing of product launches, including the Cloud 6, which debuted in February. Given On's track record of conservative guidance, investors may be encouraged by the possibility of an upward revision later in the year.

Market Reaction and Stock Performance

Following the earnings report, ONON stock jumped nearly 7% in early trading before paring gains to 2.8%. Shares have been attempting to find support around the 200-day moving average after experiencing a steep decline in recent weeks. ONON stock hit a record high of $64.05 on January 31 but has since pulled back, declining 12.6% year-to-date through Monday’s close.

Despite the recent weakness, analysts remain optimistic about On Holding’s long-term trajectory. Raymond James reaffirmed a strong buy rating and a $68.00 price target, citing the company’s ability to consistently exceed revenue and profitability targets. On has a history of beating its own guidance, having outperformed initial forecasts for revenue growth, gross margin, and adjusted EBITDA margin in 2024.

Competitive Landscape and Industry Trends

The strong results come at a time when the broader athletic footwear and apparel industry is facing mixed demand trends. Competitors like Deckers Outdoor (DECK), which owns the Hoka brand, have seen significant stock declines in recent weeks, with DECK shares tumbling nearly 39% from their January highs. However, On Holding’s strong DTC growth, expanding gross margins, and continued brand momentum position it favorably in the current environment.

The company’s ability to capitalize on high-margin DTC sales, coupled with its strategic supply chain diversification, provides a competitive edge against industry headwinds. Looking ahead, key areas of focus for investors will include the reception of new product launches, the performance of On’s wholesale segment versus DTC, and any updates on potential currency headwinds or supply chain developments.

Conclusion

On Holding capped off 2024 with a strong Q4 performance, delivering record gross margins, robust sales growth, and an accelerating DTC mix. While 2025 guidance came in slightly below expectations, the company’s historical tendency to exceed forecasts provides room for upside. With continued product innovation, expansion in international markets, and resilience against tariff impacts, On Holding appears well-positioned for sustained growth in the year ahead. Investors will be closely watching the first half of 2025 to see if the company’s bullish outlook on early-year sales momentum holds up.