Swiss Sportswear Brand On Beats Sales Predictions, Adjusts Outlook Amid Vietnam Tariffs

The Swiss sports apparel company, On, reported a remarkable 32% increase in sales for the second quarter. This impressive growth allowed the company to revise its annual revenue forecast upwards, despite facing challenges due to tariffs imposed on imports from Vietnam.

The innovative sneaker brand, known for capturing market share from industry giants, now anticipates total yearly sales to reach 2.91 billion Swiss francs (approximately $3.58 billion), up from their previous projection of 2.86 billion francs ($3.52 billion). This aligns closely with Wall Street's expectation of 2.92 billion francs ($3.59 billion), according to LSEG surveys.

Additionally, On has revised its gross margin expectations, setting a new range of 60.5% to 61%, improving from the earlier forecast of 60% to 60.5%.

With Vietnam accounting for about 90% of its production, On implemented a price increase on July 1 to counter escalating costs. Yet demand from both wholesale buyers and end consumers has not waned, as emphasized by CEO Martin Hoffmann in a CNBC interview.

Hoffmann elaborated, "We are confident in our lifestyle segment, so we prioritized raising prices in that area while maintaining stability in our running shoe prices. Currently, we haven’t noticed any adverse effects due to these price changes."

On has consistently achieved growth of over 30% in nearly all quarters since 2023, surpassing Wall Street's sales projections for the second quarter yet again.

Quarterly Performance Review

Here's a comparative analysis of On's second-quarter performance against Wall Street's predictions based on LSEG analyst surveys:

For the quarter ended June 30, On experienced a net loss of 40.9 million francs ($50.4 million) or 12 cents ($0.15) per share. This contrasts with the previous year's net income of $30.8 million ($37.9 million), or 10 cents ($0.12) per share. The loss was largely attributed to currency exchange fluctuations between the Swiss franc and the U.S. dollar.

Sales, however, reached 749 million francs ($922 million), marking a 32% rise from 568 million francs ($699 million) in the same quarter last year.

Growing Market Share

Established in 2010 in Switzerland, On aims to position itself as a top-tier sportswear brand. Although it accounts for a smaller portion of overall sales compared to Nike, On has built a strong reputation for innovation, carving out notable gains specifically in the running shoe sector.

Despite a relatively challenging sneaker market, On continues to expand, achieving mid-double-digit sales growth and further potential given its limited brand presence in several global regions.

Strategic Sales Balance

A pivotal element of On's strategy is the balance between direct sales through its online platforms and physical stores, and sales made via wholesale channels. As Nike scaled back from wholesalers, On capitalized by occupying valuable retail shelf space, all while expanding its store network and online sales.

In the second quarter, On's revenue from both wholesale and direct-to-consumer segments outstripped Wall Street forecasts. Wholesale revenue reached 441 million francs ($543 million), surpassing anticipated figures of 429 million francs ($528 million). Direct sales totaled 308 million francs ($379 million), exceeding expectations of 279 million francs ($344 million), as reported by StreetAccount.

Sales performance across the Americas, Europe, the Middle East and Africa, and the Asia-Pacific region also exceeded estimates, according to StreetAccount.

Strength in the Chinese and American Markets

Although On hasn't provided a separate breakdown for its success in China, CEO Hoffmann noted its outstanding performance, with sales soaring approximately 50% in the second quarter compared to last year.

"Both the American and Chinese consumers are showing robust demand for our products," Hoffmann said. "We've observed a nearly 50% increase in same-store performance in our retail outlets, with even stronger growth in our e-commerce sales. New store openings further strengthen our presence in China, making it a particularly strong market for us."