On Holding AG Q3 2026 Results - ON HOLDING AG

Financial Performance:

• Net sales reached a record 931.4 million CHF, growing 17.8% at constant currency and 17.2% reported.
• Gross margin (excluding tariff refunds) hit a historical high of 66.9% (reported 72.6% with 52.6 million CHF tariff refunds); underlying margin expansion was 320 basis points.
• Adjusted EBITDA margin expanded to a record 21.9% (excluding tariff and freight items) or 21.9% excluding tariffs; SG&A as % of sales rose 270 basis points to fund growth.
• Cash position stands at 1.34 billion CHF, up over 300 million CHF year-to-date.
• Inventory increased 30.2% YoY to 495.7 million CHF; volume growth was 16%, indicating better inventory management relative to sales.
• DTC sales grew 24.8% at constant currency (25.0% reported) to 393.3 million CHF, achieving a DTC share of 42.2% (+2.6% YoY).
• Wholesale sales grew 13.2% at constant currency (12.2% reported) to 538.2 million CHF, with improved sell-out rates and healthy partner inventory.

Guidance and Future Outlook:

• Full-year 2026 net sales growth reiterated at low 20% at constant currency.
• Gross margin outlook raised from "at least 65%" to "around 66%" excluding tariff refunds, with 2026 EBITDA margin guidance of 20.5%-21% (ex-tariffs) or 21.0%-21.5% (including).
• Q4 expected to accelerate growth, primarily DTC-led, with full-price discipline maintained despite a promotional environment.
• Long-term growth (2027-2029) projected in the high-teens range, with a non-linear trajectory expected to start at the high end and taper slightly due to phasing of major product renewals (Runner, Superfoam rollout) and the gradual ramp of new sports (Football, Golf).
• Asia-Pacific growth expected to settle into the mid-to-high 20s corridor post-2027 as the base expands.

Business Segments and Product Lines:

• Footwear: Running sales drove innovation; CloudSurfer 3 launched with sell-through 4x higher than predecessor; CloudBoom Strike 2 Light Sprayed sold out instantly (demand 6x supply). Training footwear (Cloud X5, Tempo) became the fourth-largest franchise.
• Apparel: Strongest segment growth at 38% constant currency; "Her" collection launched with Cindea (Python prints) selling out globally; training apparel saw significant growth and new customer acquisition.
• Lifestyle: CloudTilt Arc launched ahead of plan; Cloud Nova Mary Jane (Zendaya collab) and Cloud Muse beating forecasts; Cloud Tilt established as a Gen Z staple in EMEA.
• New Sports: Football announced as the most seen story in company history, with e-commerce sales tripled in France and doubled in Germany/GSpain pre-launch; Golf scheduled for H1 2027.
• Technology: Light Sprayed technology ramping; new Vietnam facility coming online mid-year to double capacity; defect rate improved to ~5%.

Market and Competitive Landscape:

• Market share gains reported in the US, Europe, and Asia, specifically becoming the #1 running brand in Japan wholesale and #2 premium footwear brand in China.
• Successfully maintained full pricing discipline and market-leading ASP while competitors traded on promotions; youngest consumers (<24) growth doubled YoY.
• Run specialty channel granted exclusive 3-month window for CloudSurfer 3, validating the channel's critical role in product validation.
• Apparel share in new store fleet is 50% higher than existing fleet; retail productivity growing faster than footwear.

Risks and Challenges:

• Production capacity for Light Sprayed technology currently below demand; ramping up to four production locations by mid-2027.
• Potential for promotional environment to pressure volume; mitigated by full-price strategy and innovation-led demand.
• Macro-economic inflationary pressures on commodities, countered by manufacturing efficiencies and scale.
• Retail store openings (Munich, Miami) delayed to Q4, impacting Q3 DTC results.

Management Commentary and Tone:

• Tone is highly confident, describing Q3 as the "first quarter of the plan" and validating the "Premium Playbook" (grow sales, grow earnings faster).
• Emphasis on "high-quality earnings compounder" status, contrasting the company's strategy against an industry trading price for volume.
• Management highlighted the synergy between margin generation and re-investment in R&D (Superfoam, AI, New Sports).
• Confident in the long-term runway of the business model, citing strong partner conviction and healthy order books for 2027.

Analyst Questions and Answers:

• Asia-Pacific Growth: Clarified that 31.9% growth was strong but not the long-term run rate; future growth expected in the mid-to-high 20s as the base expands and supply/demand balance is managed.
• Wholesale Penetration: Aim to reach 75% of key accounts (Dick's, Foot Locker, JD) by 2029; progress is steady and aligned with partner store upgrades.
• Light Sprayed Scale: Targeting 10% penetration by 2029/2030; technology will expand to lifestyle sneakers by 2028.
• AI Strategy: Using AI for customer service and internal ops (AWS to Google Cloud migration completed in 3 months); focused on maintaining brand connection through scale and data.
• Q4 DTC Acceleration: Driven by younger consumer acquisition, larger basket sizes (footwear + apparel mix), and new store openings.
• Growth Shape: High-teens growth expected to be front-loaded (higher in early 2027) tapering slightly later as the full running franchise renews and new sports ramp up.

Other Key Points:

• CloudSurfer 3 is exclusively available in run specialty stores for the first three months.
• Retail store fleet expansion target is 180 doors over the next three years (currently closing in on 100).
• Marketing spend at 12.1% of sales, slightly below run rate, due to phasing of football launch production costs into Q4.
• The "Her" apparel line is a strategic focus to triple sales over three years, with significant share-of-wallet expansion.
• Company is investing in "single customer view" and omnichannel AI capabilities to support 2029 ambitions.