On Holding Soars 12% After Crushing Q2 Sales, Raising Outlook Despite Tariff Headwinds

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On Holding (ONON) delivered a blowout second quarter that sent shares surging 12% premarket, pushing the stock back above the key $50 psychological level after a 25% slide in the weeks leading into the print. The rebound comes as a relief to investors who had been bracing for tariff-related headwinds. With roughly 90% of its goods sourced from Vietnam—now subject to 20% tariffs—concerns about margin compression and slower second-half growth were mounting. Instead, the Swiss sportswear brand posted robust sales growth, raised guidance, and reported resilient demand, prompting a rush back into the name.

For the quarter ended June 30, net sales climbed 32% year-over-year to CHF 749.2 million ($922 million), topping consensus expectations of CHF 705.3 million. On a constant currency basis, revenue jumped 38.2%, underscoring the brand’s global momentum. Adjusted EBITDA came in at CHF 136.1 million, up 50% from the prior year and ahead of forecasts of CHF 115.6 million, with margins expanding to 18.2% from 16% a year ago. Gross margin improved to 61.5% from 59.9%, aided by a higher direct-to-consumer (DTC) sales mix, operational efficiencies, and favorable foreign exchange.

The DTC channel was a standout, growing 47.2% to CHF 308.3 million, or 54.3% in constant currency, reflecting strong e-commerce traffic, increased transactions, and continued store expansion. DTC’s share of total sales rose to 41.1%, a second-quarter record, from 36.9% last year, aligning with management’s long-term ambition to have the channel outpace wholesale growth. Wholesale revenue also posted healthy gains, up 23.1% to CHF 441 million, driven by selective door expansion and sustained demand from key accounts.

Regionally, all geographies delivered double-digit growth, with Asia-Pacific once again the fastest-growing market. Sales in the region more than doubled, up 101.3% to CHF 119.2 million, led by strength in Japan and China. EMEA revenue climbed 42.9% to CHF 197.8 million, boosted by distributor network expansion and notable acceleration in France, Italy, and Spain. The Americas posted more modest—but still solid—growth of 16.8% to CHF 432.3 million, supported by continued consumer enthusiasm and robust performance across both channels.

By category, footwear remained the dominant driver, with sales rising 29.9% to CHF 704.9 million. Apparel surged 67.5% to CHF 36.7 million, while accessories more than doubled, up 133.3% to CHF 7.7 million. Management credited new model launches, successful franchise updates, and strength in key performance segments such as running, tennis, and trail for fueling the growth.

The strong quarter prompted On to raise its full-year outlook. Net sales are now expected to increase at least 31% in constant currency (previously 28%), translating to CHF 2.91 billion at current rates. Gross margin guidance was lifted to 60.5–61% from 60–60.5%, and adjusted EBITDA margin is now projected at 17–17.5%, the top end of the prior range. Importantly, these targets already account for the additional reciprocal tariffs implemented at the end of July.

CEO and CFO Martin Hoffmann addressed tariff concerns directly, noting that the company raised prices on July 1 to offset higher costs, with increases weighted toward the lifestyle segment to minimize potential demand impact in core running products. “So far, we don’t see negative impact from the price increases,” he told CNBC, adding that wholesale partners and consumers alike remain supportive. The company also pointed to the strength of its brand positioning and product innovation pipeline as factors that should help absorb cost pressures without sacrificing growth.

Currency fluctuations did impact profitability in the quarter, with the net loss widening to CHF 40.9 million from net income of CHF 30.8 million a year earlier, driven largely by foreign exchange movements between the Swiss franc and U.S. dollar. Adjusted EPS came in at a loss of CHF 0.09, compared to a profit of CHF 0.15 in the prior year, though management emphasized that underlying operational performance remained strong.

Investor sentiment ahead of the print had been subdued, with the stock under pressure on fears that tariffs, slowing macro conditions, and a potential second-half deceleration could derail the growth trajectory. Instead, the Q2 results reinforced the narrative of a premium athletic brand gaining global share, particularly in categories and geographies where incumbents like Nike have ceded ground. The DTC strength, expanding retail footprint, and accelerating Asia-Pacific momentum give management added confidence to guide higher despite an uncertain macro backdrop.

With shares reclaiming the $50 level, attention will turn to whether On can maintain this pace in the back half of 2025. The raised outlook suggests management believes it can, thanks to a strong order book, continued product innovation, and expanding brand awareness globally. For now, the market is rewarding execution that not only beats expectations but also reassures investors that the company can navigate tariff headwinds without losing stride.

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