On Running Posts Record Sales and Margins, but Muted Outlook Sparks Debate Over Brand Momentum
This analysis is based on original reporting by Retail Dive. For daily retail news and insights, subscribe to the free Retail Dive newsletter.
Swiss activewear maker On Running sprinted past a major milestone in its 2025 fiscal year, with net sales exceeding 3 billion Swiss francs ($3.8 billion) for the first time. The company, known for its premium running shoes, posted a 30% jump in annual sales and expanded its gross margin to 62.8%, up from 60.6% the previous year.
The fourth quarter was particularly strong, with sales climbing nearly 23% and gross margin hitting a record 63.9%. While net income dipped slightly for both the quarter and the full year, the company remained firmly profitable.
"On's momentum remained robust in the final quarter, fueled by high sell-through rates for core footwear lines and balanced geographic growth," analysts from Telsey Advisory Group noted in a client report. "All key metrics surpassed expectations, with stronger sales flowing directly to the bottom line."
The company's industry-leading margins underscore its successful premium branding strategy. Management attributed the performance to favorable currency exchange rates, ongoing operational efficiencies, and disciplined full-price selling.
However, the market's focus quickly shifted to the future. On's guidance for 2026, projecting constant-currency sales growth of "at least" 23% and gross margins of at least 63%, fell short of some Wall Street expectations. This conservative outlook, executives explained, does not yet factor in potential benefits from recent U.S. tariff policy shifts, following a Supreme Court decision that overturned a set of Trump-era levies. CEO Martin Hoffmann suggested actual results could be higher if new tariffs are reduced or if the company receives refunds.
Analysts are split on how to interpret the forecast. Some see it as a sign of slowing momentum. "The 2026 outlook implies the brand's upside is dwindling, especially as Nike regains its footing," warned a team from Jefferies, who also predicted a potential sales and margin miss in 2027, citing deceleration in On's direct-to-consumer and apparel segments.
Other firms urged a longer-term view. William Blair analysts maintained On as a top pick, calling it "a healthy brand with strong demand signals across all segments and geographies." They argued that the guidance appears soft partly because the Swiss franc has strengthened significantly against the dollar, masking underlying constant-currency growth. The firm also dismissed comparisons to a potential "Hoka-like deceleration," pointing to On's greater product diversification across different shoe styles and use cases as a buffer.
Looking ahead, On executives emphasized a packed innovation schedule for 2026, including the commercialization of its LightSpray technology and key footwear launches like the Cloudmonster 3. Apparel, which saw constant-currency growth of over 75% last year, remains a critical customer acquisition channel and is performing well in stores that give it prominent display space—a necessity for premium positioning, according to Hoffmann.
The brand continues to target what co-founder David Allemann terms the "movement class": consumers who view health and longevity as the ultimate luxury. Through celebrity partnerships, like that with actress Zendaya, and a focus on bringing technical innovation to everyday styles, On aims to expand the premium activewear market rather than dive directly into its most heated competitive segments.
Market Voices: Analyst & Investor Reactions
Sarah Chen, Portfolio Manager at Alpine Growth Capital: "The margin story here is exceptional and proves the brand's pricing power. The guidance is prudent, not weak. They're managing expectations amid tariff uncertainty while investing in apparel and tech—that's smart long-term play."
Marcus Doyle, Independent Retail Analyst: "This is the classic 'beat and lower' that often precedes a slowdown. A 23% guide after 30% growth is a deceleration. The 'Hoka deceleration' fear is real. When growth brands start talking about 'durability' over hyper-growth, the inflection point is near."
Priya Sharma, Senior Analyst at ClearView Research: "The market is overly fixated on a single number. The franc's strength is a massive, temporary headwind. Underlying demand, product cadence, and apparel growth are all accelerating. This is a buying opportunity."
Jake Rivera, Fitness Influencer & Early Investor: "Are you kidding me? They crushed it! Record sales, record margins, and the stock dips on 'guidance' that might be too low? This is Wall Street not understanding a brand that's winning with real people. The Zendaya collab and Cloudsurfer are everywhere. The brand isn't 'dwindling'—it's just getting started."