On Holding lifts margin target, but sticks to sales outlook as shares slip

The numbers that moved the market

On lifted its full-year gross margin goal to 67.5%, helped by tariff rebates booked in the third quarter. Stripping out that item, the margin would be 66%, which the company said is a touch above its earlier outlook and what analysts were modeling.

The tariff refunds totaled about 52.6 million francs and followed a US Supreme Court ruling that struck down portions of tariffs from President Donald Trump's tenure. Adjusted EBITDA reached 257 million Swiss francs in the quarter, topping expectations.

Sales guidance did not budge. Management kept its constant-currency growth goal in the low-20% range and guided net sales to 3.47 to 3.56 billion Swiss francs by year-end at current exchange rates, in line with consensus. The company also expects momentum to pick up during the holiday season.

What analysts and executives said

"Profitability was the standout," wrote Cristina Fernandez of Telsey Advisory Group, who said investors will want more detail on what else could push margins higher. Jefferies analysts led by Randal Konik countered that "The quality of the quarter was weaker than it looks," noting the earnings beat "leans on one-time tariff refunds."

Co-founder and co-chief executive Caspar Coppetti said the team pulled back digital ads in regions heavy on markdowns and moved some store openings into the fourth quarter. "We lead with innovation, not with a commodity or an archive style," he said.

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Products, channels, and demand signals

Direct channels - online and owned stores - delivered about 42% of third-quarter revenue, shy of the 45% analysts expected, while wholesale outperformed. Zurich-based On said its product pipeline is limiting the need for markdowns, highlighting rising interest in the $170 Cloudtilt sneaker and the Cloudsurfer 3 running shoe, which debuted in limited quantities in October and will be more broadly available from January with the brand's newest cushioning foam.

Founded in 2010, the company has grown from running into tennis, training and outdoor sports, and it plans to expand into golf and football. The September announcement about entering football was described as the "most-seen brand moment in its history." As part of that push, the company has teamed up with French star Kylian Mbappé.

Why this matters for your portfolio

Investors wanted a bolder sales upgrade. Instead, On kept guidance unchanged - a stance it first set in August that knocked the stock back then - even as margins improved with help from a one-time refund. The shares fell up to 8.3% premarket and, despite a bounce since that August slide, were still down 20% for the year through Monday's close. Rival Nike has slumped this year too, reflecting skepticism toward the broader sneaker category as some shoppers pull back.

The bottom line: management is pointing to stronger holiday sell-through and sticking with a year-end sales range of 3.47 to 3.56 billion francs at current FX. For anyone tracking brand heat, On is leaning on new launches and selective marketing, while pushing store openings into the fourth quarter.

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