A bold statement from a Swiss sneaker giant has sparked controversy and left investors scratching their heads. Despite record-breaking sales, On Holding, the innovative sneaker brand, has seen its stock plummet by 11% in pre-market trading. But here's the twist: this dip comes despite the company's guidance for continued strong growth and improved profitability in 2025.
The brand, known for its premium athletic shoes and apparel, has been on a remarkable journey. In the fourth quarter, they reported net sales of 743.8 million Swiss francs ($946 million), a significant 30.6% increase in constant currencies, surpassing estimates. For the full year, sales exceeded 3 billion francs for the first time, a slight edge over expectations.
But here's where it gets controversial: On Holding's guidance for 2026 net sales growth of at least 23% in constant currencies falls short of analyst expectations. The company predicts sales of at least 3.44 billion francs, while analysts had their eyes on a higher target of around 3.7 billion francs.
And this is the part most people miss: On Holding is in the final year of its ambitious strategy to double sales to 3.55 billion francs and boost its EBITDA margin to at least 18% by 2026. They aim to become the ultimate premium global sportswear brand.
Co-founder and executive chair, David Allemann, believes they are witnessing a global shift where health and performance take precedence over traditional status symbols. On Holding is capitalizing on this trend with its innovative products and focus on performance footwear and apparel, successfully taking market share from legacy giants like Nike and Adidas.
Profitability has also reached new heights, with adjusted EBITDA increasing by a substantial 31.8% in the quarter, reflecting a strong 18.8% margin. Asia-Pacific has been a standout region, with sales growth of 85.1% in constant currencies. The Americas and EMEA regions also showed impressive growth of 21.3% and 27.5%, respectively, in the three months ending December.
CEO Martin Hoffmann attributes their success to their premium strategy, which allows them to exceed aspirations while reinvesting in high-return areas to fuel future growth.
In a previous quarter, On Holding surprised investors by raising guidance for the third time in a row and beating expectations, sending their stock soaring by 18%. The company's commitment to maintaining its premium brand image is evident in its decision not to offer any deals during the shopping season.
However, some analysts caution that challenges may lie ahead in 2026, and the stock's valuation may not fully account for these risks. Jefferies analyst Randal Konik suggests that in a tougher pricing environment and with increasing competitive intensity, On Holding's premium positioning alone may not be sufficient to sustain price-led growth without compromising demand or resorting to higher promotional activities.
So, the question remains: Can On Holding maintain its premium brand image and continue its impressive growth trajectory? Or will it face challenges in a competitive market? We invite you to join the discussion and share your thoughts in the comments below!
