On (ONON) Q2 2026 Earnings Call Transcript

On Holding reported Q2 net sales of CHF 850.3M (+21.6% at constant currency) led by DTC (+34.3% CC) which reached 45.7% of total sales. Profitability improved with gross margin up 390 bps to 65.4% and adjusted EBITDA margin at 19.8% (adjusted EBITDA up 30%+ CC YoY). Management reiterated FY26 guidance of low-20s constant-currency sales growth, raised gross margin to at least 65.0%, and kept adjusted EBITDA margin at 19.5%-20.0%, attributing the gross margin lift primarily to higher DTC mix amid deliberate moderation of wholesale sell-in to protect full-price integrity.

Analysis

The real signal is not the sales beat; it is that On is turning channel discipline into an earnings lever. By refusing to stuff wholesale, they are effectively sacrificing low-quality revenue today to preserve gross margin and protect the pricing architecture for the 2027 product cycle. That creates a near-term headline risk — reported growth will look slower in Q3/Q4 — but it also raises forward EPS visibility if DTC stays above the low-30% growth range and mix keeps shifting toward owned channels.

Competitive dynamics are becoming more interesting. On is winning where premium, younger consumers care about innovation and brand status, which is a direct threat to Nike, Adidas, and any multi-brand retailer dependent on promo traffic; the second-order effect is that specialty partners with cleaner inventories should see better sell-through economics while broad-line wholesale gets structurally less relevant. The upside case is that APAC/EMEA can keep absorbing the brand’s supply, but the U.S. wholesale reset is the swing factor for the next 1-2 quarters.

The contrarian view is that the market may be underestimating how long the wholesale drag can persist and overestimating how linear DTC can be from here. This is still a premium multiple stock, so if DTC moderates below the high-20s constant-currency pace or gross margin slips back under ~65%, the multiple can compress quickly even if earnings remain healthy. The cleanest falsifier is any sign that the U.S. channel reset stops being temporary and starts contaminating sell-through in EMEA/APAC or forces discounting into the holiday season.

Key Decisions for Investors

• Buy ONON on a 5-8% post-earnings pullback over the next 1-3 weeks; thesis is that the wholesale reset depresses reported revenue now but expands 2026-27 EPS quality via mix and pricing power. Invalidation: DTC growth drops below ~25% constant currency or gross margin guidance slips under 65%.
• Pair trade: long ONON / short NKE over 3-6 months to express share gain in premium performance running and younger consumer cohorts while hedging overall athleticwear demand risk. Best risk/reward if U.S. retail remains promotional and On’s innovation cadence keeps outpacing legacy franchise refreshes.
• Use ONON call spreads into the September Investor Day rather than outright stock if chasing upside from the 2027 pipeline; the event is a likely catalyst for multiple expansion, but the market may already be pricing in some of the brand heat. Falsifier: investor day sounds incremental rather than pipeline-expanding.
• Avoid chasing immediately after a gap-up; if the stock is up double digits on the print, wait for the first 2-3 sessions of digestion because the next catalyst path is guide clarity, not another beat. Re-enter only if wholesale weakness remains contained and DTC holds the current run-rate.