On Holding‘s stock fell more than 20 percent Tuesday following the firm’s second-quarter earnings release.
Shares of the Swiss company closed at $30.91 on the Big Board after second-quarter net sales of $1.05 billion fell short of Wall Street’s $1.08 billion estimate.
The revenue shortfall was due primarily to a decline in North America wholesale sales, which rose just 4.8 percent for the quarter ended June 30 versus analysts’ consensus projection of up 12.7 percent on a constant currency basis. The miss was offset by strength in the direct-to-consumer channel, due to new store growth and e-commerce sales, which was up 34.3 percent on a constant currency basis.
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Cofounder and co-chief executive officer David Allemann told investors that in the wholesale channel, the company was “intentional and disciplined” on managing the sell-in in part to “protect our margins. It clears the runway for an acceleration of our innovation cycle.”
The company is already into its third quarter, and some of the upcoming launches are slated for spring 2027. Those launches include the CloudSurfer and CloudFlow franchises, along with the additional scaling of LightSpray. The brand’s Cloudsurfer 3 is slated to launch in October at run specialty doors. Earlier in the year, the brand released its Cloudmonster 3 on March 5, followed the Cloudmonster 3 Hyper on March 19. It then released a limited edition of its LightSpray Cloudmonster 3 Hyper version in North America on March 5, followed by a full global launch on April 16.
But amid the slew of new releases, On cut its full-year 2026 revenue guidance to growth in the “low-20 percent range on a constant currency basis,” with DTC expected to strongly outperform wholesale in the second half. The “low-20 percent range” is down from prior estimates of growth in the range of at least 23 percent.
Drake MacFarlane, research analyst at data firm M Science, doesn’t see the wholesale pattern as temporary. “If it were a temporary blip in wholesale, I don’t think they would have guided down [for the full year],” he told Footwear News in a telephone interview. “I think the guide-down is what struck people the most, particularly given that management’s still talking about their product innovation and that the second half will be good, and so on and so forth. I think you can say that there was a bit of a disconnect between the commentary and the [full-year] guide.”
Jefferies analyst Randal Konik sees the U.S. business decelerating “significantly” in 2027, with the Americas set to go negative in 2027. That would translate to more “negative revisions ahead” as selling, general and administrative costs continue to rise. He also called out Allemann’s description of the wholesale pullback as “premium discipline,” pointing out that “softening U.S. sell-out in everyday running is a demand signal, not just a sell-in choice.” He has an “underperform” rating on shares of On.
Williams Trading analyst Sam Poser, who rated shares of On at “Hold,” said the big news in the quarter was the lowering of full year 2026 revenue guidance. “On is running out of new channels of wholesale distribution and expansion within current wholesale distribution, which is reflective of worse than expected sell-through rates in the Americas, representing over 53 percent of revenue, especially in the U.S.,” he wrote in a research note.
“The weakness in wholesale growth, primarily in the Americas, is likely to continue for some time. On management said that it is being proactive with product supply to the market to reflect the disappointing sell-through rates. While some actions to limit supply by On may be underway, our checks indicate that demand for On by wholesale accounts, especially athletic specialty accounts, is beginning to wane.”
Poser also said that while the company offered to open up some additional athletic specialty adjacent accounts, “the offer has not been met with open arms.” He sees the challenge in the wholesale business in the U.S. as one where it has failed to properly manage store level product distribution.
“It has been clear to us for some time that On looks at channel distribution with too broad a brush and does not take into account the subtleties of specific store locations with a retailers’ fleet,” the Williams Trading analyst concluded, adding that not all specialty running stores, sporting goods stores, athletic specialty stores and independent retail store locations serve the same consumer. That means that On’s management needs to analyze the difference in the businesses by location within its wholesale distribution, and use the data points to decide “who gets what shoes, rather than a large brush,” Poser said, adding that the “longer a brush is used, the more challenging On’s business will become.” He also said he wouldn’t be surprised if On loses market “share to Nike over the next six-to-nine months.”
Co-CEO Caspar Coppetti in a recent interview with FN said On, with running in its roots, is committed to run specialty stores and a new class of consumers that’s more intentional on where they spend their money.
Not everyone on Wall Street was down on On — a few market watchers saw some silver linings ahead.
Needham’s Tom Nikic recognized the wholesale caution, but noted continued strength in DTC. And he cited to strong sell-out rates in the wholesale channel across On’s EMEA — Europe, Middle East and Africa — and Asia businesses, led by strength in China and Japan.
“On was already in the ‘show me camp’ and this puts the company even more firmly in this position, as the market looks to gauge whether wholesale can reaccelerate as sell-throughs improve with new innovation and DTC can maintain the same robust pace of growth,” noted BTIG’s consumer retail and lifestyle brands analyst Janine Stichter.
She saw some signs of healthy growth, including DTC accelerating against the toughest compares of the year, better update on recent new innovations and commentary around a strong start to back-to-school, as well as her firm’s run specialty checks that corroborate management’s enthusiasm around its new foam technology.
“We believe ensuring a clean marketplace ahead of these pivotal launches is prudent, as we have observed in the past from other brands how excess channel inventory can cannibalize new launches,” Stichter concluded.
Both Nikic and Stichter have a “buy” rating on shares of On.
