On Holding shares fall sharply after Q2 sales miss

On Holding, the Swiss sportswear manufacturer, experienced a sharp decline in its shares following a disappointing performance in the second quarter. The company's earnings per share stood at CHF 0.31, surpassing the analyst's estimate of CHF 0.29. While revenue increased by 21.6% on a constant currency basis to CHF 850.3 million, it fell short of the consensus estimate of CHF 881.4 million.

Premarket trading in the U.S. saw the shares plummet by more than 13%. However, the direct-to-consumer channel drove growth, with a remarkable 34.3% increase on a constant currency basis, surpassing expectations in every region. Asia-Pacific continued to contribute over 20% of the global net sales, driven by robust demand in Japan, South Korea, and Greater China.

Apparel net sales expanded by 56.2% on a constant currency basis. The company's profitability improved, with the gross profit margin reaching 65.4%, a 3.9 percentage point increase year-over-year. Notably, the company managed to absorb higher U.S. import tariffs without any refunds. For the full year, On Holding anticipates low-20% growth in net sales, with the direct-to-consumer channel expected to significantly outperform wholesale in the second half.

This projection implies net sales ranging from CHF 3.47 billion to CHF 3.56 billion, compared to a consensus estimate of CHF 3.56 billion. Gross profit margin is expected to be at least 65.0%, and adjusted EBITDA margin is forecasted to fall between 19.5% and 20.0%.