On Holding AG (ONON) Q4 2025 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call highlights strong financial performance, with raised guidance and impressive growth in key segments like apparel and accessories. The Q&A session revealed optimism about future growth, particularly in North America and Asia Pacific, and strong D2C performance. The company is well-positioned with a robust product pipeline and strategic focus on premium brand positioning. Despite some unclear responses, the overall sentiment is positive, suggesting a stock price increase.

Key Financial Performance

Revenue CHF 3 billion in 2025, representing a 36% growth at constant currency year-over-year. This growth was driven by strong demand for the brand, premium pricing power, and expansion in key regions.

Gross Profit Margin 62.8% in 2025, a record high, up from the previous year. This increase was attributed to disciplined full-price execution, sustainable operating efficiencies, and favorable foreign exchange dynamics.

Adjusted EBITDA Margin 18.8% in 2025, exceeding 2026 aspirations. This was achieved through high gross margins, reinvestment into product innovation, and operational excellence.

Cash Position Over CHF 1 billion at the end of 2025, the strongest in the company's history. This was fueled by strong cash flow generation of CHF 359.5 million and precise planning.

Direct-to-Consumer (D2C) Share 41.8% globally in 2025, a rise of 110 basis points year-over-year. This reflects a deepening direct connection with fans and strong performance in D2C channels.

Retail Store Expansion 67 retail stores globally by the end of 2025, with a net addition of 18 locations. New stores were 40% larger than existing ones, driving a 20% increase in sales productivity.

Apparel Business Growth 76% net sales growth at constant currency in 2025. Apparel now represents 7% of total net sales, driven by D2C channels and innovations in performance and training collections.

Accessories Growth 135.1% net sales growth at constant currency in 2025. Accessories contributed to the overall business profitability and premium mix.

Regional Performance - Asia Pacific CHF 126.5 million in Q4 2025, a 70.8% increase reported and 85.1% at constant currency. This growth was driven by strong demand across all channels and regions, particularly in China.

Q4 Net Sales CHF 743.8 million, a 22.6% increase year-over-year and 30.6% at constant currency. This was driven by strong D2C performance and exceptional wholesale demand.

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Operating Highlights

Cloudsurfer 3: 15% lighter, 20% softer, and provides 15% more energy in push-offs. Will be expanded to a wide range of running shoes.

LightSpray Technology: Revolutionary shoe manufacturing process reducing 200 assembly steps to 1, cutting CO2 emissions by 75%, and producing ultra-light shoes. Scaled production with a new facility in South Korea.

Apparel Business: Achieved 76% net sales growth, driven by direct-to-consumer business and female-focused innovations like new sense tech fabric.

Retail Expansion: Opened 18 new stores in 2025, including Tokyo Ginza, which became a top 10 global store. Plans to scale to 20 countries in the coming months.

Regional Growth: Strong growth in EMEA and APAC regions, with APAC surpassing CHF 0.5 billion in sales. Opened flagship stores in Shenzhen and Riyadh.

Digital Ecosystem: Deployed conversational AI for personalized customer service and plans to transform operations with AI in design and supply chain.

Operational Efficiencies: Achieved record gross profit margin of 62.8% and adjusted EBITDA margin of 18.8%. Improved inventory management and cash flow.

Premium Brand Positioning: Focused on premium pricing and cultural relevance through collaborations with Loewe, Zendaya, and others. Expanded into tennis and paddle sports.

Multi-Category Expansion: Apparel and accessories now represent 7% of total net sales, with apparel growing 75.5% and accessories 135.1% at constant currency.

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Risk or Challenges

Market Conditions: The company faces potential risks from foreign exchange fluctuations, which could impact reported net sales and profitability. Additionally, the current currency environment is described as exceptional, indicating potential volatility.

Regulatory Hurdles: Higher U.S. import tariffs are mentioned as a challenge, which could increase costs and impact profitability.

Supply Chain Disruptions: While not explicitly stated as a current issue, the company's reliance on new manufacturing technologies like LightSpray and its production facility in South Korea could pose risks if there are disruptions or delays in scaling these operations.

Economic Uncertainties: The company acknowledges the impact of foreign exchange fluctuations and tariffs, which are influenced by broader economic conditions. These factors could affect operational costs and financial performance.

Strategic Execution Risks: The company is heavily investing in innovation, retail expansion, and digital transformation. Any delays or failures in these initiatives, such as scaling LightSpray technology or achieving the expected growth in apparel and D2C channels, could adversely impact its strategic objectives.

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Guidance & Outlook

Revenue Growth: The company expects net sales to grow at least 23% at constant currency in 2026, reflecting a 3-year constant currency CAGR from 2023 to 2026 of at least 30.5%. This growth factors in a significantly higher base following Q4 2025 results.

Gross Margin: The company anticipates a full-year gross margin of at least 63% in 2026, above 2025 results, driven by premium full-price offerings, operational efficiencies, and a shift towards D2C channels.

Adjusted EBITDA Margin: The adjusted EBITDA margin is expected to be in the range of 18.5% to 19% for 2026, exceeding the 18% target set at the 2023 Investor Day.

D2C Channel Growth: Direct-to-consumer (D2C) is expected to outperform wholesale, driven by category expansion, particularly in apparel, and investments in technology to enhance customer engagement and lifetime value.

Apparel Growth: Apparel is expected to meaningfully outpace overall growth in 2026, supported by proprietary and innovative materials and refined studio and training collections.

Innovation and Product Launches: The company plans to launch the Cloudsurfer 3 in the second half of 2026, featuring a world-first informed development with new Surreal foam technology. The LightSpray manufacturing technology will also scale with the Cloudmonster franchise.

Regional Expansion: Asia Pacific is expected to continue as a key growth driver, with strong demand across the region. The company also plans to expand its retail footprint globally, focusing on high-productivity flagship stores.

Currency Impact: At current spot rates, the company anticipates a reported net sales target of at least CHF 3.44 billion, with foreign exchange fluctuations not affecting the underlying business strength.

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Shareholder Return Plan

The selected topic was not discussed during the call.

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Key Q&A

Q:Could you talk about your expectations for growth across regions in 2026, particularly in North America, and how partners are accepting new innovations?

A:The On brand is performing strongly worldwide, with the strongest product pipeline ever for 2026. Innovations like LightSpray and relaunches of Cloudmonster and Cloudrunner are expected to redefine running shoes. Apparel is also a significant growth engine. Growth is strongest among the 15-35 demographic, and D2C channels are expected to outgrow wholesale. The company has a strong order book and expects growth across all regions, with a slightly higher growth rate in the first half of the year.

Q:How are you thinking about expanding wholesale distribution in the U.S. and globally this year?

A:There is a 50% opportunity to expand in key accounts globally. The focus is on growing the brand in a premium and durable way, with an emphasis on elevating customer experience and increasing apparel sales in key accounts. While wholesale remains important, the D2C channel is expected to outgrow wholesale, allowing for a deeper consumer relationship and showcasing the brand in a premium way.

Q:Should we think strong momentum from the holiday season is continuing into 2026? Can you provide insights on DTC growth, database growth in 2025, and new customer additions, especially younger consumers?

A:The brand is becoming multidimensional across regions, channels, and products. Retail and D2C channels are crucial for presenting products in a premium way, attracting younger consumers. Co-created apparel products with Zendaya and innovations like Cloudsurfer are expected to resonate with younger demographics. The company anticipates growth in running share globally and sees opportunities with younger male consumers.

Q:Will you organize a CMD in the second half, and what are the key investor questions you want to address? What regions and categories will drive the expected 10-point slowdown in organic growth? What percentage of volume will be under LightSpray in 2026 and 2027?

A:The CMD is planned for early next year to outline future aspirations. The Americas is the strongest region, while Asia-Pacific growth is expected to moderate to maintain premium positioning. Europe shows strong momentum. LightSpray production capacity has increased 30-fold, moving from thousands to hundreds of thousands of shoes, with broader market availability expected in 2026 and 2027.

Q:Can you provide more color on the 30% brand awareness and how it differs by region and customer demographic? Should we expect higher gross margins in the first half of the year?

A:Brand awareness has reached 30%, with higher awareness in specific regions. Upcoming partnerships and campaigns are expected to drive further awareness. Gross margins are expected to be strong throughout the year, with the highest margins in Q4 due to D2C share. The guidance includes potential upside from tariff changes and does not account for refunds, which could further improve margins.

Q:How should we think about EBITDA margin and the distribution and G&A line items in 2026 and beyond?

A:The company is focused on driving incremental profitability while reinvesting in the brand. Improvements in supply chain automation and distribution efficiency are expected to continue. The strategy combines strong profitability with reinvestments into brand-building and strategic projects.

Q:What is the total size of the addressable market you are targeting, and what is your current market share? What efficiencies will drive gross margin improvements in 2026?

A:The company sees a societal shift towards investing in oneself, creating a white space beyond traditional sportswear. On is positioned to fill this demand with its premium, identity-driven products. Gross margin improvements are driven by pricing power, reduced airfreight, better inventory management, and scaling with factories.

Q:Review of Unclear Management Responses

A:Management avoided providing specific details on the percentage of volume under LightSpray in 2026 and 2027, as well as the exact regional and demographic breakdown of the 30% brand awareness.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

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On Holding AG (ONON) Q4 2025 Earnings Call Transcript

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The company's earnings call reveals robust financial performance, with strong growth across regions and product lines, particularly in APAC and apparel. Positive guidance revisions and strategic investments in marketing and innovation bolster future prospects. Analysts seem satisfied with management's responses, indicating confidence. The improved gross margin and increased sales forecasts, along with a focus on premium positioning, suggest a strong positive sentiment. Despite the absence of market cap data, the comprehensive positive outlook and strategic direction suggest a strong positive stock price movement.

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The earnings call summary and Q&A reveal strong financial performance with significant sales growth, robust brand momentum, and strategic product launches. Despite macroeconomic challenges, the company confidently raises its guidance, supported by effective supply chain management and pricing strategies. Positive cash flow and reduced capital expenditures further indicate financial health. The Q&A section reinforced the positive outlook with detailed responses, highlighting continued growth in apparel and innovation. However, the reduction in cash balance and cautious U.S. outlook temper the sentiment slightly, resulting in a positive rather than strong positive rating.

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Frequently Asked Questions

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