On’s revenue disappoints — is currency change to blame?

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Dive Brief:

• On’s second quarter net sales grew 13.5% year over year to 850.3 million Swiss francs (about $1.05 billion at press time) or by 21.6% on a constant currency basis, according to a Tuesday press release. That’s a miss from analyst’s expectations of growth in the mid-20s on a constant currency basis, per several notes shared with Retail Dive.
• The brand’s DTC net sales grew 26% while wholesale increased 4.8%. On’s net sales grew the most in the Asia-Pacific region at 43.1%, whereas sales in the Americas increased 4.5% for the period.
• On lowered its full-year expectations, now projecting sales to grow in the low 20% range on a constant currency basis and gross margin profit of at least 65%. That compares to its previous net sales outlook of at least 23% and gross profit margin of at least 64.5%.

Dive Insight:

On’s better-than-expected DTC sales helped offset the shortfall from wholesale in its second quarter, according to Telsey Advisory Group analysts.

“On’s 2Q26 constant currency (CC) revenue growth of 20.6% was very good in the grand scheme, but fell below our expectation of ~26%,” Telsey Advisory Group analysts said in an emailed note Tuesday, adding that this also marked a deceleration from 26.4% growth in On’s first quarter. 

The street’s missed expectations for On’s sales this quarter may speak to a larger disconnect between analysts and the company’s position. 

“On’s quarters are hard to call given big pockets of limited visibility, namely around international, wholesale, and the impact of currency,” William Blair analysts said in a note Tuesday. “Currency in particular seems to be one of the larger drivers of the disconnect between Street and reported performance, with the spread in constant FX and actual sales growth of 810 basis points (21.6% constant FX versus 13.5% reported).”

Currency is likely to continue driving volatility for the brand’s reporting, the William Blair analysts said. However, On’s seemingly intentional move to slow wholesale and focus on DTC is the “right approach,” they added. 

On’s DTC channel represents “the most premium expression” of the brand, co-founder and co-CEO David Allemann said on a call with analysts Tuesday. The company is “not pleased” with wholesale’s highly promotional, multibrand marketplace activity in the quarter, particularly in the Americas, Allemann added.