On Holding AG Q3 2026 Results - ON HOLDING AG

Explicit Guidance:

• FY2026 Net Sales: Reiterated growth in the low 20s at constant currency for the full year, with acceleration expected in Q4 due to holiday campaigns and product innovation.
• FY2026 Gross Margin: Raised outlook to approx. 66% excluding tariff refunds (previously at least 65%), driven by full-price discipline, DTC mix, and scale efficiencies.
• FY2026 Adjusted EBITDA Margin: Guidance raised to 19.5%–20.0% excluding tariff refunds; including refunds, expected range is 21.0%–21.5%.
• FY2027 Outlook: No specific financial guidance provided for 2027, but management anticipates strong acceleration in Q1 2027 following the broad January rollout of CloudSurfer 3.
• Long-term Growth (2027–2029): Asia-Pacific region growth expected to stabilize in the mid-to-high 20s corridor; overall long-term growth target remains in the "high teens" at constant currency, phasing from the upper end to the lower end of the range over the three-year horizon.

Business-Segment Outlook:

• Performance (Running): "Superfoam" technology expected to underpin almost all performance running franchises by end of 2027. CloudSurfer 3 launched exclusively with run-specialty partners first (Q4 2026), with broader rollout beginning January 2027.
• Lifestyle (Sneakers): CloudTilt identified as fastest-growing franchise; CloudNova Moon Mary Jane and CloudMuse performing above forecast. CloudSweep 5 (first shoe designed from "street up") scheduled for launch next year.
• Apparel: On track to triple net sales over the next three years. Q3 growth was 38% (constant currency); goal is to more than double store apparel product over the three-year horizon. Apparel share in new stores already 50% higher than existing fleet.
• Training: CloudX became fourth-largest footwear franchise; training apparel share of new customers nearly doubled QoQ. Viewed as a major growth vector with global momentum just beginning.
• New Sports: Football launch scheduled for 2027; Golf launch in H1 2027. Football pre-launch demand signals included 200%+ e-commerce sales increases in France/Germany/Spain. Golf follows football in build-out strategy.
• Light Spry Technology: Targeting 10% penetration (directional, not tied to specific year). Full potential expected in 2028 as technology rolls to lifestyle franchises.
• Geography: Americas expected to accelerate in Q4; Asia-Pacific growth moderating to mid-to-high 20s by 2029; EMEA remains high-growth with long runway.

Market and Competitive Outlook:

• Premium Share: Confidence in gaining share in premium running (a market growing faster than the industry) through 2027 via generational updates.
• Wholesale Distribution: Ambition to increase presence in key accounts to 75% of Dick's Sporting Goods, Foot Locker, and JD by 2029. Currently at 60% of Dick's and 50% of others.
• Channel Mix: DTC share expected to continue rising; DTC growth anticipated to accelerate in Q4 and Q1 2027, outpacing wholesale.
• Pricing Environment: Intentional avoidance of promotional strategies to preserve brand equity and margin; full-price discipline maintained despite industry-wide promotions.
• Consumer Trends: Shift from heritage styles to innovation-led styles benefits ON; "Gen Z" and under-24 demographic engagement is accelerating (under-24 online customer base nearly doubled YoY).

Macro / Industry Outlook:

• Promotional Environment: Management expects the promotional environment to persist but notes ON is "unaffected" due to innovation-led demand and supply chain balance.
• Supply Chain: Inventory levels at partners deemed healthy; sell-out improving ahead of sell-in in the US.
• Currency: FX tailwind observed, but management emphasizes growth drivers are organic and operational.

Strategic Initiatives:

• Capex & Expansion: Store count target of 180 doors over the next three years (currently closing in on 100 new doors). Q4 2026 openings include Miami and Munich (shifted from Q3).
• Manufacturing: New Light Spray factory in Vietnam coming online shortly; target to have four Light Spray production locations (Switzerland, Korea, Vietnam, Portugal) by mid-2027. Vietnam facility to double capacity and serve as a pilot for "tier two" products.
• Technology & AI: Migrating from AWS to Google Cloud (completed in 3 months using agents); embedding AI deeply into customer service and omnichannel capabilities (single customer view).
• Investment Plan: 2026 viewed as the investment year for new sports (football/golf) and technology foundations; 2027+ expected to deliver earnings leverage and scale benefits.

Risks and Headwinds to Outlook:

• Capacity Constraints: Current Light Spray production below demand; defect rates managed to ~5% but still a factor in scaling.
• Geopolitical/Trade: Tariff refunds included in financial reporting; gross margin guidance excludes future tariff impacts.
• Inventory Timing: Wholesale pull-forward from Q3 (holiday deliveries moved from October) creates headwinds for Q4 reporting, though underlying sell-out remains strong.
• Execution Risks: New sports launch (football/golf) involves upfront production costs and returns risk; AI migration and manufacturing scaling require continued operational discipline.
• Market Volatility: Promotional environment in broader industry could pressure consumer behavior if ON does not maintain differentiation.

Management Tone on the Future:

• Confidence: High confidence in the "On Premium Playbook"; view of the business as a "high-quality earnings compounder."
• Commitment: Reiterated commitment to long-term brand health over short-term volume; "never our strategy to go for" low-price promotional choices.
• Evolution: Shift from "investor day" promises to realized execution; "seven weeks into the plan, it is already compounding."
• Strategic Clarity: Clear delineation between 2026 (investment year) and 2027–2029 (leverage and compounding years).

Miscellaneous:

• Share Count/Buybacks: No specific guidance on share repurchases or dividends mentioned in this transcript.
• Specific Numbers: Record net sales of 931.4 million CHF; Gross margin 66.9% (excl. refunds); Adjusted EBITDA margin 21.9% (excl. refunds).
• Partnerships: Collaborations with Zendaya, Loewe, Burnaboy, and Kith driving demand; Football partnership with prominent athletes.