On Holding’s quarterly revenue fell short of Wall Street expectations, triggering a sharp sell-off in its shares, as higher US tariff costs and cautious consumer spending weighed on the premium sportswear maker’s performance.
The Roger Federer-backed company reported second-quarter net sales below analysts’ estimates on Tuesday, sending its shares ONON down 19%.
The Zurich-based company has now lost about a third of its market value so far this year as investors assess slowing growth prospects despite continued gains in market share from larger rivals Nike and Adidas.
Asia and apparel remain bright spots
For the quarter ended June 30, On reported net sales of 850.3 million Swiss francs ($1.05 billion), missing analysts’ consensus estimate of 878.16 million francs.
The company nevertheless continued to post robust growth in key international markets.
Asia-Pacific contributed more than one-fifth of total sales for another consecutive quarter, supported by strong momentum in Japan, South Korea and Greater China.
Its apparel business also stood out, with constant-currency net sales rising 56.2% during the quarter.
However, those gains were insufficient to offset softer overall revenue performance amid a challenging macroeconomic backdrop.
Adjusted earnings came in slightly ahead of expectations, with profit of 0.35 Swiss francs per share compared with analysts’ estimate of 0.34 francs.
Company prioritises premium positioning
Executives said the company would continue to protect its premium brand image rather than pursue aggressive discounting to boost volumes.
“We are not sprinting for short-term volume. We are deliberately engineering for the multi-decade value of a premium brand,” co-CEO David Allemann said during the post-earnings conference call.
On raised its full-year gross profit margin forecast to at least 65%, up from its previous guidance of 64.5%.
It also widened its full-year net sales guidance to between 3.47 billion and 3.56 billion Swiss francs on a constant-currency basis.
However, the company now expects constant-currency sales growth in the low-20% range, down from its earlier forecast of at least 23%.
The revised outlook also trails the 24.7% consensus estimate cited by Citi.
Based on current exchange rates, the company’s projected sales range also came in below the market expectation of 3.56 billion francs.
Analysts flag slower growth outlook
Citi analysts said management’s decision to limit wholesale shipments in order to preserve full-price selling and prepare for future product launches could weigh on second-half sales and pressure the stock.
The stock has fallen 33% this year.
Jefferies analyst Randal Konik also cautioned that recent margin improvements may prove difficult to sustain as revenue growth slows and inventories remain elevated, increasing the likelihood of downward earnings estimate revisions in the coming quarters.
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