For its second quarter, Swiss athletic label On Running posted a 13.5% increase in net sales, missing analyst expectations even though growth figures appear much stronger after currency adjustment.
Currency Shifts Dramatically Affect Reported Results
In a Tuesday press release, On revealed that net sales for the second quarter totaled 850.3 million Swiss francs, or about $1.05 billion. Sales surged by 21.6% in constant currency year-over-year, yet this pace was below what many analysts had forecast—mid-20% growth on a constant currency basis.
The significant contrast between constant currency growth and the reported figure demonstrates the sizable influence of exchange rate fluctuations this quarter. The William Blair research group highlighted an 810 basis point discrepancy—21.6% in constant currency versus 13.5% reported—emphasizing the considerable impact that exchange rates had on On’s top-line figures.
Direct-to-Consumer Growth Offsets Wholesale Slowdown
Sales performance varied across channels and regions. The brand’s direct-to-consumer (DTC) net sales grew by 26% during the quarter, while wholesale saw a more modest gain of just 4.8%. Geographically, On realized its highest gains in the Asia-Pacific region, where sales surged 43.1%, but growth in the Americas lagged at only 4.5%.
Telsey Advisory Group analysts highlighted the robust DTC performance as a key positive, helping alleviate the weaker results from wholesale. Their report noted that the company’s constant currency revenue increase of 20.6% was “very good in the grand scheme,” but fell short of their roughly 26% expectation. They also pointed out that the quarter’s growth momentum slowed in comparison to the 26.4% first quarter increase.
Forecast for Full Year Now More Conservative
Following these results, On adjusted its guidance for the rest of the year. The company is now projecting full-year net sales growth in the low 20% range on a constant currency basis, down from the previous forecast of no less than 23%. Gross profit margin expectations are now set at a minimum of 65%, a tick higher than the earlier 64.5%. Details of this revised outlook are found in On’s official second-quarter results release, and can be cross-referenced with their first quarter guidance.
Leadership acknowledged disappointments, particularly regarding wholesale growth in the Americas. On a call with analysts Tuesday, co-founder and co-CEO David Allemann commented that the team was “not pleased” with promotional activities and multibrand performance in the wholesale segment, while identifying the DTC operation as “the most premium expression” of the On brand.
William Blair researchers believe On’s decision to scale back wholesale expansion in favor of growing the direct-to-consumer business is the “right approach” under present market conditions, but they warned that ongoing currency headwinds are expected to introduce further volatility to upcoming quarterly results.
Market Challenges and Strategic Shifts
The clear gap between reported results and constant currency numbers points to a mounting disconnect between market expectations and the complexities of operating internationally. Analysts note that factors such as unpredictable exchange rates and limited visibility into international and wholesale channels continue to make future outcomes hard to predict.
Despite persisting headwinds, the company’s leaders are intent on doubling down on direct consumer engagement and upholding a premium brand image. Observers will be monitoring On’s evolving sales strategies and the potential ongoing impact of currency movements on the company’s reported performance in coming months.