On Holding AG（ONON） · Athletic Footwear & Apparel

On Holding: Premium Growth, Priced for Perfection

Jun 17, 2026·~23 min read

Quick ReadPlain-language overview · read this first

On Holding (ONON) is a Swiss premium performance-sportswear brand, best known for its running shoes and their proprietary CloudTec cushioning. The report rates it Hold: the business is genuinely high-quality, but the stock already prices in years of near-perfect execution. At the current price of 38.69 USD, the report sees no conservative-entry margin of safety.

Footwear still drives the company, making over 88% of Q1 2026 sales, but the engine is a premium system rather than just sneakers: full-price discipline, proprietary technology, and a fast-rising direct-to-consumer mix. Fiscal 2025 net sales were CHF 3.014 billion, up 30.0% reported and 35.6% on a constant-currency basis, with DTC at 41.8% of sales. The growth quality stands out. Gross margin climbed to 62.8% in 2025 and 64.2% in Q1 2026, showing real pricing power at scale, and APAC and apparel are emerging as second growth curves, up 61.4% and 57.5% constant-currency in Q1 2026.

The fundamentals carry a few catches. Reported net income actually fell to CHF 203.7 million in 2025 from CHF 242.3 million, because foreign-exchange swings distort the bottom line, so the report leans on owner earnings and cash conversion instead of headline EPS. The balance sheet is strong, with CHF 1.02 billion of cash and no draw on its credit facility, though DTC expansion has pushed lease liabilities up to CHF 521.5 million, making the model less capital-light than the margin story suggests.

On valuation, the stock trades at roughly 3.1x trailing sales and a trailing P/E near the high-40s. The report's owner-earnings scenarios put fair value at 33 to 36 USD (conservative), 42 to 46 USD (base), and 53 to 57 USD (optimistic), with an ideal buy price in the high-20s, near 27 to 29 USD. The current price sits above the conservative zone but below the base zone, so it is not obviously expensive, just not a discount.

The biggest risks are footwear concentration if hero franchises cool, tariff transmission with about 90% of shoes sourced from Vietnam under a 20% incremental U.S. tariff, and a dense run of CEO and CFO changes. The report flags a roughly 50% downside if margins slip, growth normalizes, and the multiple compresses together.

The above is a summary of the report's views and does not constitute investment advice. Markets carry risk; invest with caution.

Lead
On Holding is a Swiss premium performance-sportswear brand built on running footwear, monetizing a proprietary-technology product system through a fast-rising direct-to-consumer channel alongside selective wholesale. The bull-bear core is a rare combination of scale growth and margin expansion: fiscal 2025 net sales of CHF 3.014 billion, up 30.0% reported and 35.6% constant-currency, with gross margin climbing to 62.8% and DTC mix at 41.8%, set against a stock that at roughly 3.1x trailing sales and a trailing P/E near the high-40s already prices in continued near-flawless execution amid Vietnam-tariff and footwear-concentration risk. Rating Hold: premium growth and margin expansion are real, but today's price already demands sustained near-perfect execution, leaving no conservative-entry margin of safety.

Full report

Prices in the article are as of publication; see the valuation band above for the live price.

Research summary

On is no longer a niche Swiss running-shoe curiosity. It is a scaled premium sportswear brand sitting between three worlds that usually do not combine cleanly: technical running credibility, fashion relevance, and premium distribution discipline. The company still makes most of its money from shoes, but the earnings engine is not “selling sneakers” in the generic sense. On sells a premium system: highly recognizable design language, proprietary cushioning and plate technologies, full-price sell-through, a rising direct-to-consumer mix, and more selective wholesale than the industry giants leaned on in their growth years. In fiscal 2025, On generated CHF 3.014 billion of net sales, up 30.0% reported and 35.6% on a constant-currency basis. Direct-to-consumer accounted for CHF 1.261 billion, or about 41.8% of sales; wholesale still accounted for CHF 1.753 billion, or 58.2%. Gross margin rose to 62.8% from 60.6%. The shape of the model is the point. This is a brand using wholesale to accelerate awareness while steadily pulling more of the economics into owned digital and owned retail.

The market is trading three questions right now. Can On remain a 20%-plus constant-currency grower even after reaching CHF 3 billion in annual sales? Is the gross-margin expansion of the last two years structural, or partly flattered by mix, freight, and favorable FX? And can the brand evolve from “premium running company with lifestyle spillover” into a broader head-to-toe sportswear franchise without losing the scarcity and performance credibility that made the shoes work in the first place? Management’s own 2026 language makes the hierarchy plain. It reiterated at least 23% constant-currency net-sales growth for 2026, said DTC, APAC, and apparel should outperform, and raised gross-margin guidance to at least 64.5%, all while embedding a 20% incremental tariff on Vietnam imports into the U.S. and excluding any potential tariff refunds.

The share-price story has not been linear, because the market keeps changing the label it applies to On. At the September 2021 IPO, investors bought a “premium challenger brand” story at 24 USD per share. In 2022 the stock traded like a speculative growth name exposed to rates and consumer cyclicality. The rerating in 2023 and 2024 came when On proved it could outgrow incumbents, build DTC, and expand gross margin at the same time. Then sentiment soured again in 2025 and early 2026, when softer U.S. consumer demand, tariff fears, and leadership transitions collided with a stock that had already priced in a lot of triumph. Reuters described the shares as having fallen about 40% from January 2025 into the March 2026 CEO transition announcement, even though the operating business had just posted record 2025 sales above CHF 3 billion. That divergence is the core stock point. On’s business kept compounding; its valuation stopped assuming a frictionless runway.

The central bull-bear disagreement is easy to state and hard to settle. Bulls think On is still early in a durable premiumization story. They point to full-price discipline, high and rising gross margins, APAC as a genuine second engine, China store density that sits far below mature global-brand potential, apparel growth that starts from a small base but moves fast, and a market backdrop where Nike’s execution problems have opened space for credible challengers. In Q1 2026, On’s reported sales rose 14.5%, but constant-currency growth was 26.4%; apparel grew 45.1% reported and 57.5% constant-currency; APAC grew 44.4% reported and 61.4% constant-currency. Gross margin reached 64.2%, and adjusted EBITDA margin reached 21.0%. That is not the profile of a brand already fading.

Bears do not have to claim the brand is weak. Their argument is that the stock had been pricing in something close to ideal execution. The business is still heavily concentrated in footwear, with shoes making 92.4% of Q4 2025 sales and over 88% of Q1 2026 sales. Sourcing is concentrated too: six partners accounted for about 70% of production in 2025, footwear was produced mainly by ten suppliers, eight of them in Vietnam, and about 90% of shoes were sourced from Vietnam. They can point to fashion-cycle risk disguised as brand heat. And there is leadership turnover, first Marc Maurer’s exit, then Martin Hoffmann’s departure, then the shift to founder co-CEOs and a new CFO, all within roughly a year. And they can argue that a trailing headline P/E near the high-40s, depending on the exact data vendor and FX convention, still leaves little room for a stumble.

One factual correction versus the starting brief carries more weight than the rest: the latest primary filing does not show FY2025 net sales of roughly CHF 3.8 billion. It shows CHF 3.014 billion. Q1 2026 sales were CHF 831.9 million. Adding Q2 2025, Q3 2025, Q4 2025, and Q1 2026 yields a trailing-four-quarter total of roughly CHF 3.12 billion, which matches the directional figure in the brief, but the full-year 2025 number itself is materially lower than the prompt’s placeholder. That gap changes both the valuation baseline and the slope of the growth curve.

Viewed through fundamentals rather than sentiment, On sits in the rare category of premium consumer companies still proving both growth and margin at scale. Revenue has climbed from CHF 267 million in 2019 to CHF 425 million in 2020, then to CHF 1.792 billion in 2023, CHF 2.318 billion in 2024, and CHF 3.014 billion in 2025. Gross margin moved from sub-60% in the pre-IPO period to 60.6% in 2024, 62.8% in 2025, and 64.2% in Q1 2026. Net income can still swing with FX, though, and the stock’s multiple remains too dependent on continued premium execution to qualify as a cheap compounder today.

The one-phrase label that fits best is high-quality compounding growth with a valuation that now demands selectivity. Business quality is plainly above that of a fad brand: real technology, real supply-chain discipline, real customer pull, and real geographic breadth. The stock, though, is no longer priced like a neglected challenger. At about 3.1x trailing sales, roughly 2.7x guided 2026 reported sales, and a trailing headline earnings multiple around the high-40s on converted 2025 net income, the equity assumes the brand-and-margin flywheel keeps turning. That may well happen. It is just not the same as saying the shares offer a large margin of safety here.

Vertical history and business model

Origins and stage development

On was founded in Zurich in 2010 by Olivier Bernhard, David Allemann, and Caspar Coppetti. Bernhard’s role mattered from the start. He was not a generic startup founder but a former elite endurance athlete, and the original pitch was a different running sensation, later expressed through CloudTec, rather than athleisure. The company says it has delivered premium footwear, apparel, and accessories since its market launch in 2010, and the founders still describe the ambition as building the most premium global sportswear brand.

The first phase was product validation. In 2019, net sales were CHF 267.1 million, of which 75.1% came from wholesale and only 24.9% from DTC. The company was already premium, but the business still leaned far more on external retail. The second phase was the pandemic-era channel shift. In 2020, sales rose 59.2% to CHF 425.3 million, and DTC share jumped to 37.7% from 24.9%, helped by e-commerce traffic and new-customer acquisition. This was more than a short-term COVID artifact. It accelerated a permanent change in how On would monetize brand demand.

The third phase was public-market scaling. On priced its IPO at 24 USD per Class A share, started trading on the NYSE on September 15, 2021, and sold 31.1 million shares before the underwriters’ over-allotment. The listing story was clean: premium performance brand, Swiss engineering, fast growth, DTC runway, and a founder-controlled dual-class structure. The capital-markets bargain was just as clear. Public shareholders got growth access, the founders kept control. Class B shares carry one-tenth the par value of Class A shares and, on a capital-invested basis, ten times the voting power; by December 31, 2025, the extended founder team and affiliates still controlled 57.1% of voting power while owning far less of the economic interest.

The fourth phase was brand broadening without abandoning running. By 2023 and 2024, On was no longer merely a running-footwear story. The company’s 2025 annual report frames the business around three pillars: strengthen the running core, expand distribution and retail with China explicitly called out, and build new communities through categories such as training and tennis while becoming a full sportswear brand. That framing captures the vertical arc well. On is moving from a hero-shoe company to a premium performance platform, but it keeps the technical-product story out front instead of letting lifestyle do all the work.

Financial vertical review

The financial history is unusually strong for a public consumer brand still in heavy expansion mode. Net sales rose from CHF 1.792 billion in 2023 to CHF 2.318 billion in 2024 and CHF 3.014 billion in 2025. Wholesale grew from CHF 1.120 billion in 2023 to CHF 1.376 billion in 2024 and CHF 1.753 billion in 2025. DTC grew faster, from CHF 671.8 million in 2023 to CHF 942.8 million in 2024 and CHF 1.260.5 billion in 2025. The reason is straightforward. On has grown through brand heat and product innovation, but it has also steadily shifted mix toward the channels it controls better.

Gross margin tells the same story more forcefully than revenue does. It was 60.6% in 2024, rose to 62.8% in 2025, reached 63.9% in Q4 2025, and reached 64.2% in Q1 2026. Management attributed the 2025 improvement mainly to operational efficiencies, especially freight, plus favorable FX. Q4 2025 and Q1 2026 still showed expansion even as U.S. tariff pressure increased, which suggests that some of the gain is real pricing power and mix rather than freight normalization alone.

Net income is less smooth than gross profit because FX distorts the bottom line. Fiscal 2025 net income fell to CHF 203.7 million from CHF 242.3 million in 2024 even as sales and gross margin rose, and Q2 2025 posted a net loss outright because foreign-exchange effects overwhelmed otherwise strong underlying operating performance. For this business, that makes owner-earnings and cash conversion more telling than headline EPS.

Cash flow has been strong, but it grows more capital-intensive as the physical footprint expands. Cash inflow from operating activities was CHF 232.1 million in 2023, CHF 510.6 million in 2024, and CHF 359.5 million in 2025. Capex cash outflow for property, plant, and equipment plus intangible assets was CHF 47.1 million in 2023, CHF 64.9 million in 2024, and CHF 78.6 million in 2025. The company says 2025 capital expenditures mainly supported new retail stores, regional offices, IT, and LightSpray production equipment. That is growth capex, not maintenance capex in disguise.

The balance sheet is stronger than many consumer-growth peers. At December 31, 2025, On held CHF 1.0199 billion of cash and cash equivalents, had no draw on its CHF 700 million multicurrency credit facility, and said it believed existing cash plus operating cash flow were sufficient for at least the next twelve months. Inventories were basically flat at CHF 419.8 million versus CHF 419.2 million a year earlier, a good sign given 30% annual sales growth. The pressure point on the balance sheet is leases, not debt. Right-of-use assets reached CHF 494.1 million and lease liabilities reached CHF 521.5 million as the company expanded warehouses and retail. That is manageable, but it does mean the DTC growth story is no longer capital-light.

How the business machine works

On still lives and dies by footwear, but the composition is shifting slowly in the right direction. In fiscal 2025, shoes accounted for CHF 2.818 billion of sales, apparel CHF 160.9 million, and accessories CHF 35.0 million. In Q1 2026, shoes were CHF 763.7 million, apparel CHF 55.3 million, and accessories CHF 12.9 million. Apparel and accessories remain too small to drive group economics today, yet their growth rates are high enough to matter strategically. Apparel rose 45.1% reported in Q1 2026 and 57.5% on a constant-currency basis. The flywheel is easy to read: footwear creates entry, apparel raises wallet share, and DTC captures more of both.

The moat is partly real and partly conditional. The real part begins with brand and product. CloudTec, Speedboard, CloudTec Phase, Helion superfoam, and LightSpray are not empty marketing terms; they are core pieces of how On explains product differentiation, and the company says its patents can extend into 2050 depending on jurisdiction. On also held about 1,900 trademark registrations in over 100 jurisdictions as of the end of 2025. None of this guarantees dominance. It does establish that the product story is not purely aesthetic.

The second moat is distribution discipline. On’s premium economics come from refusing to behave like a mass athletic brand too early. DTC reached 41.8% of fiscal 2025 sales, and owned retail plus e-commerce are central to management’s growth plan. The company operated 67 retail locations globally at the end of 2025, plus 38 locations in China including Hong Kong. China stands apart because On can support denser small-format and stand-alone store economics there than in many Western markets.

The third moat is still being tested: can On blend performance, design, and culture without becoming just another fashion-sensitive sneaker label? Management is leaning into that intersection. Q1 2026 commentary highlighted LightSpray moving from elite-athlete validation toward a broader commercial platform and described strong lifestyle momentum around Cloudtilt Remix. That is commercially attractive, and it is also where the moat gets shakier, because the further the brand pushes into sneaker-informed audiences, the more it depends on taste shifts rather than pure performance replacement cycles.

Governance deserves a discount, even if a modest one. The founders still exercise disproportionate voting control. Martin Hoffmann first became sole CEO in July 2025 after Marc Maurer’s departure, then stepped down effective May 1, 2026, handing the CEO role back to co-founders David Allemann and Caspar Coppetti while Frank Sluis became CFO. The transition may work well, and it may even sharpen founder accountability. Concentrated control plus a compressed sequence of CEO/CFO changes is still a reason to demand valuation discipline.

Industry and horizontal comparison

Industry structure and cycle

The sporting-goods industry has slowed from the rebound years but is still growing faster than many adjacent discretionary categories. McKinsey and the World Federation of the Sporting Goods Industry said the sector grew about 7% annually from 2021 to 2024 and projected around 6% annual growth from 2024 to 2029, with that growth harder won because of geopolitics, consumer caution, and sharper competition. The backdrop matters for how to read On. The company is not simply surfing a booming industry. It is taking share in an industry that is still growing, just more selectively than before.

This is a consumer and brand cycle business, but not a pure short-cycle fashion one. The most sensitive variables are premium discretionary demand, channel inventory discipline, and foreign exchange. On’s own disclosures add a policy layer on top, because so much of its sourcing runs through Vietnam and Indonesia while the U.S. remains its largest region. In 2025, the Americas represented 57.7% of net sales, APAC 17.0%, and EMEA 25.3%. That regional mix leaves the company heavily exposed to U.S. tariffs and consumer demand even as APAC becomes the growth engine.

Horizontal competitor analysis

The closest public comparison is Deckers, and specifically HOKA inside Deckers. HOKA is the nearest proof that a premium technical-running brand can keep scaling without instantly collapsing into discounting. Deckers is a different corporate animal, though. In fiscal 2026, Deckers generated $5.472 billion of revenue, with HOKA at $2.587 billion and DTC at $2.264 billion, or about 41% of sales. Gross margin was 57.7%, lower than On’s 62.8% in 2025 and well below On’s 64.2% in Q1 2026. The gap is not simply that On is “better.” Deckers carries UGG, broader channel exposure, and a different price architecture. HOKA is the cleaner performance-running comp; Deckers as a whole is the cleaner operating-discipline comp.

Nike is the scale incumbent On wants to take share from in running and premium performance, and the contrast is stark. Nike’s fiscal 2025 revenue fell 10% to $46.3 billion, NIKE Direct revenue fell 13% to $18.8 billion, and gross margin fell to 42.7%. Fiscal Q3 2026 revenue was flat reported and down 3% currency-neutral, with gross margin down again to 40.2%. Nike is fighting a turnaround across inventory, pricing, product cadence, and China. Reuters has separately described Nike’s China stumble as an execution problem rather than merely a macro problem. On benefits from that opening, but the comparison also shows how hard it is to hold brand altitude at massive scale.

Amer Sports is a different kind of peer. It is not one brand but a portfolio, with Arc’teryx carrying much of the premium heat while Salomon is the most relevant running and outdoor comparison to On. In fiscal 2025, Amer generated $6.566 billion of revenue, up 27%, with gross margin at 57.6%, adjusted gross margin at 58.0%, and DTC revenue of $3.209 billion, or roughly 49% of sales. Amer’s numbers show what happens when premium brands pair strong DTC economics with broad category breadth. On carries the higher gross margin; Amer has more category diversification and a bigger DTC base. The horizontal lesson in one line: Amer is the more diversified premium sports platform, On the purer single-brand premium-growth bet.

Lululemon is not a direct running competitor, but it matters because it shows both the upper bound and the risk of turning premium apparel into an ecosystem. In fiscal 2025, Lululemon’s revenue rose 5% to $11.1 billion, but gross margin fell 260 basis points to 56.6%, operating margin fell 380 basis points to 19.9%, and inventory rose 18% to $1.7 billion. International growth stayed strong while the Americas weakened. On’s ambition to become a true sportswear brand should be read against Lululemon’s experience. Broadening beyond a hero category can deepen customer economics, but once the product newness fades, the earnings algorithm slows quickly.

The ecological niche is clear. On is a premium challenger, not yet a category leader, but stronger than a niche player. It takes share from the industry’s profit pool where incumbents got complacent: premium adult performance consumers who want technical credibility and design polish without the ubiquity of Nike or Adidas. The companies most likely to take On’s profit pool are not mass brands at the low end. They are premium peers that can sustain authenticity while scaling, above all HOKA, Salomon, and any incumbent that re-accelerates in technical running. That is why the moat question is brand durability rather than manufacturing capability alone.

Metric	On Holding	Deckers	Amer Sports	Nike	Lululemon
Latest annual revenue	CHF 3.014B	$5.472B	$6.566B	$46.3B	$11.1B
Latest annual growth	30.0% reported	9.8%	27%	-10%	5%
Gross margin	62.8%	57.7%	57.6%	42.7%	56.6%
DTC mix	41.8%	41.4%	48.9%	40.6%	predominantly DTC-owned retail model
Current market cap	~$12.2B	~$15.9B	~$17.4B	~$66.7B	~$13.3B

† On annual metrics are fiscal 2025 except market cap, which is as of 2026-06-16. Deckers is fiscal 2026 ended 2026-03-31. Nike is fiscal 2025 ended 2025-05-31. Amer Sports and Lululemon are fiscal 2025.

The logic behind the table is more important than the table. On’s edge is not that it is the biggest or the cheapest. It is growing much faster than the mature incumbents while already carrying a gross margin above the broader peer set, and that combination is rare. What tempers the case is that the company is still far less diversified than Amer or Nike, and far more dependent than Deckers on a single brand being right at the product level season after season.

Current fundamentals and valuation

What is happening now

The last four reported quarters show a business still accelerating in exactly the areas management cares about most. Q2 2025 sales were CHF 749.2 million, up 32.0% reported and 38.2% constant-currency. Q3 2025 sales were CHF 794.4 million, up 24.9% reported and 34.5% constant-currency. Q4 2025 sales were CHF 743.8 million, up 22.6% reported and 30.6% constant-currency. Q1 2026 sales were CHF 831.9 million, up 14.5% reported and 26.4% constant-currency. Those four quarters add to roughly CHF 3.12 billion of trailing-four-quarter sales. The deceleration in reported growth is largely an FX translation story; the constant-currency trend is still much stronger.

The same pattern holds by segment. DTC growth has generally outpaced wholesale, APAC has been the fastest region, and apparel has grown faster than footwear from a small base. Q2 2025 DTC sales reached 41.1% of revenue. Q3 2025 APAC revenue grew 94.2% reported and 109.2% constant-currency. Q1 2026 apparel sales grew 45.1% reported and 57.5% constant-currency. Those are the exact vectors the market is trading today: DTC mix, China and APAC, and apparel diversification.

So the stock trades a blend of real fundamentals and narrative. The real part is the premium-growth engine. The narrative part is that On can keep extending the runway almost indefinitely because the incumbents are weak and the brand has entered culture as well as performance. That second part is where caution belongs. The company remains heavy in footwear, still sources most shoes from Vietnam, and sits in the middle of a management handoff. The business does not need to break for the shares to disappoint; execution only has to become merely very good rather than near-perfect.

Historical and peer valuation

At the current share price, On trades at roughly 3.1x trailing sales using the last four quarters of reported revenue and the 2026-06-16 FX rate, and about 2.7x guided 2026 reported sales using management’s at-least-CHF-3.51-billion outlook. On converted FY2025 net income, the headline trailing P/E sits around the high-40s. None of that is bubble territory for a brand growing more than 20% constant-currency with 64%-plus gross margin, but it is too rich to call forgiving.

The cash-flow picture is better than the net-income multiple suggests. Cash from operations over 2023-2025 totaled CHF 1.102 billion against net income of CHF 525.6 million, an average OCF/net-income ratio a little above 2.1x over the available three-year series. Using 2025 alone, CFO was CHF 359.5 million against net income of CHF 203.7 million. Because 2025 capex was largely growth-oriented, I treat maintenance capex as well below total capex; a rough maintenance estimate in the CHF 20–30 million range puts owner earnings meaningfully above accounting earnings. That pulls the effective owner-earnings multiple closer to the high-20s to low-30s than to the headline high-40s. Still not cheap, but less extreme than a simple P/E screen implies.

Absolute valuation and conclusion

The cleanest way to value On today is to anchor on owner earnings and cross-check against sales multiples, since the business is both profitable and still expanding rapidly. The scenario table below uses FY2026 reported sales translated at the 2026-06-16 CHF/USD rate and treats owner earnings as the better lens than GAAP-equivalent headline earnings, given the gap between net income and cash conversion. This is valuation-scenario analysis within a research framework, not investment advice.

Dimension	Conservative	Base	Optimistic
Revenue / margin assumptions	CHF 3.51B sales; owner-earnings margin ~8.5%	CHF 3.60B sales; owner-earnings margin ~10.0%	CHF 3.72B sales; owner-earnings margin ~11.0%
Cash-flow assumptions	DTC and apparel grow, but tariffs and store costs offset part of mix benefit	DTC mix rises, tariffs manageable, working capital contained	DTC, APAC, and apparel all outperform; gross margin sustains near guided highs
Multiple assumptions	~28x owner earnings	~31x owner earnings	~34x owner earnings
Implied fair value	33–36 USD	42–46 USD	53–57 USD
Key catalysts	tariff relief, stable U.S. demand, continued APAC growth	same plus sustained 64%+ gross margin	same plus apparel mix surprise and stronger China monetization
Permanent-loss risk	brand heat cools, gross margin slips, multiple contracts	execution on DTC/store expansion disappoints	optimism outruns durable demand, causing rerating

The margin-of-safety answer is not flattering. The current price sits above the conservative fair-value zone and below the base fair-value zone, so the stock is no longer obviously expensive, yet it is not offering a conservative-entry discount either. The most fragile assumption is sustained premium-margin retention as store count, apparel mix, and tariff complexity all rise together. Haircut the base owner-earnings assumption by 30% and the base fair value compresses into the high-20s to mid-30s, which is exactly why valuation discipline matters here. My margin-of-safety verdict is not obvious.

Risks catalysts and tracking indicators

The first serious business risk is not generic competition. It is that On’s premium appeal proves narrower than the current P&L makes it look. Footwear still accounts for the overwhelming majority of revenue, and the lifestyle adjacency that helps the brand accelerate can also make demand less predictable than core replacement running demand. If a few hero franchises cool at once, the company would feel it in volume, then markdowns, then the multiple. Probability medium; impact high. The observable indicators are footwear mix staying above 88–90%, slower apparel growth, and any break in gross-margin resilience.

The second is sourcing concentration and tariff transmission. On used fewer than 30 suppliers in 2025, with six partners accounting for about 70% of production. Roughly 90% of shoes and around 65% of apparel and accessories were sourced from Vietnam in 2025. Management’s 2026 guidance still embeds a 20% incremental tariff on products imported to the U.S. from Vietnam. If those costs prove harder to offset than management expects, the damage moves through gross margin first and valuation second. Probability medium; impact high.

The third is DTC-capex creep. The bull case likes DTC because it lifts gross margin and deepens customer ownership. The hidden cost is that stores, warehouses, and leases are real capital commitments. Right-of-use assets jumped to CHF 494.1 million and lease liabilities to CHF 521.5 million at the end of 2025. If store productivity stalls, the market could quickly stop rewarding DTC mix and start fixating on capital intensity. Probability medium; impact medium to high.

The fourth is governance and leadership concentration. Founder control is not new, but the 2025-2026 management sequence is unusually dense: Marc Maurer exited, Martin Hoffmann became sole CEO, Frank Sluis was hired as CFO, and then the co-founders returned as co-CEOs while Hoffmann stepped down. That can work. It can also shrink the governance premium investors are willing to pay for a still-expensive growth stock. Probability low to medium; impact medium.

The fifth is valuation risk itself. On is not priced for failure, but it is priced for durable excellence. In mature consumer categories, the worst stock outcomes often come from very good companies whose growth merely normalizes. If constant-currency growth fell into the low teens while gross margin slipped back toward the low 60s, On would still be a good business, and the stock could still derate sharply. Probability medium; impact high.

Positive catalysts are easy to picture: another quarter of 25%-plus constant-currency growth, DTC mix lifting without higher markdowns, APAC holding its outsized growth pace, apparel passing a psychologically important share threshold, or tariff relief against the embedded guidance assumption. The negative ones are just as clear: softer U.S. sell-through, a gross-margin miss, APAC or China store underperformance, or evidence that leadership change is interfering with execution.

Indicator	Recent / normal zone	Alert threshold
Constant-currency net-sales growth	23%+ guide; 26.4% in Q1 2026	below 18% for two quarters
Gross margin	62.8% in 2025; 64.2% in Q1 2026	below 63% for two quarters
DTC mix	41.8% in 2025	below 40% without a deliberate wholesale push
APAC growth	61.4% cc in Q1 2026	below 25% cc
Apparel growth	57.5% cc in Q1 2026	below 25% cc
Inventory growth vs sales growth	flat inventory in 2025 vs 30% sales growth	inventory growth above sales growth for two quarters
Vietnam tariff assumption	20% embedded in 2026 guide	higher effective rate without offset
Lease liabilities	CHF 521.5M at FY2025	continued growth without store productivity evidence

Tracking matters because On’s story depends on interaction, not isolated figures. Gross margin without DTC quality means less. APAC growth without inventory discipline can turn dangerous. Apparel growth without repeat purchases can fade fast. The right way to watch On is to ask whether premium demand, channel mix, and capital intensity stay aligned. When they do, the stock works. When they separate, the multiple usually breaks before the revenue line does.

Open questions and limitations

A few items remain less certain than I would like. I did not verify a same-day U.S. 10-year Treasury yield inside this research set, so the flat-earnings return cannot be compared precisely against that bond yield. I also did not build a full quarterly store-level productivity model, because primary disclosures do not provide enough detail. And market-cap data vendors can differ modestly on On because of the unusual Class A/Class B economic structure, so the valuation should be read as directionally robust rather than falsely precise to the penny.

Cross-synthesis summary

What On has genuinely proven across its journey is not that it can launch a hot shoe. It has proven that it can transplant a premium technical-running idea into a global brand system without losing financial discipline. The evidence sits in the numbers and the sequence. Sales rose from CHF 267 million in 2019 to CHF 3.014 billion in 2025. DTC mix climbed from 24.9% in 2019 to 41.8% in 2025. Gross margin rose from the high-50s in the pre-IPO period to 62.8% in 2025 and 64.2% in Q1 2026. The company also built a meaningful APAC presence, with 38 China locations and a broader regional growth engine that already accounts for 17% of sales. That is not luck. It is product-market fit, disciplined channel building, and a management culture that until now has executed unusually well.

Past success came from several factors at once. Running premiumization helped. The direct-to-consumer shift helped. Nike’s missteps and the broader fragmentation of athletic footwear helped. On also did the hard company-specific things right: it kept product innovation central, preserved full-price discipline, pushed its own channels without blowing up wholesale relationships, and used running credibility to earn permission to move into tennis, training, all-day wear, and apparel. Those factors still exist today, though some are less favorable than before. Freight and FX were a tailwind in 2025. Tariffs are not. U.S. consumer conditions are less forgiving. And the brand is more widely known now, which helps scale but raises the pressure to keep newness high.

Horizontally, On’s real advantage is not sheer size. It is one of the cleanest premium-growth profiles in global sportswear. Against Nike, it is smaller but fresher. Against Deckers, it is earlier in the brand-platform journey and carries higher gross margins but more dependence on one brand. Against Amer Sports, it has cleaner single-brand coherence but less diversification. Against Lululemon, it has more genuine performance-footwear credibility but less proven head-to-toe monetization. That is a good place to be as a business. It is a more precarious place to be as a stock, because the market tends to pay up for these hybrids precisely when they look most flawless.

The current valuation rewards both past success and a fair amount of future success. That is why the stock does not screen as a bargain even after the earlier derating. The market is effectively saying it believes On can remain a 20%-plus constant-currency grower, keep gross margin in the mid-60s, lift DTC and apparel, and absorb tariffs without permanently damaging premium economics. No single piece of that is absurd. All of it together is demanding. I do not think the market is badly misjudging the company. I think it still slightly underestimates how narrow the path is between “excellent execution” and “good company, mediocre stock.”

For the next year, the critical variables are gross margin under tariffs, constant-currency growth versus reported growth, and whether APAC and apparel stay meaningfully faster than the group. Over three years, the test is whether apparel grows large enough to matter without diluting brand identity, and whether owned retail can scale without bloating leases and overhead. Over five years, the real question is whether On has become a true premium sportswear house or remains a footwear-led brand with periodic apparel bursts. That difference will decide whether the valuation multiple converges toward broader athletic peers or stays structurally above them.

Three conditions would make the company a better investment. Price is one: a move into the high-20s would create a margin of safety relative to the conservative scenario. Evidence is the second: two or three more quarters showing that 64%-plus gross margin survives tariff reality would lift confidence that today’s route margin is not temporary. Breadth is the third: apparel moving toward low-teens revenue share with healthy sell-through would make the sportswear-platform argument much stronger. I would revisit the thesis negatively if gross margin fell below 63% for two consecutive quarters, if APAC growth cooled sharply without a clear external reason, or if inventory and lease growth started outrunning sales.

Bull and bear reasons

Bull reasons

On has compounded from CHF 267 million in 2019 to CHF 3.014 billion in 2025 while lifting DTC mix from 24.9% to 41.8%, which is the hallmark of a brand getting stronger, not weaker.
Gross margin expanded from 60.6% in 2024 to 62.8% in 2025 and 64.2% in Q1 2026, showing premium pricing and mix power at scale.
APAC and apparel are real second-leg growth drivers, with APAC up 61.4% constant-currency and apparel up 57.5% constant-currency in Q1 2026.
The balance sheet remains strong, with CHF 1.020 billion of cash at March 31, 2026 and no draw on the CHF 700 million credit facility.
On still benefits from incumbent stumbles in technical running, especially Nike’s recent execution issues in China and channel management.

Bear reasons

Shoes remain the dominant revenue source, leaving the business more category-concentrated than the sportswear-platform narrative implies.
Supply-chain concentration is meaningful: six partners account for about 70% of production and around 90% of shoes are sourced from Vietnam.
Lease liabilities have risen sharply with DTC expansion, making the model less asset-light than the margin story sometimes suggests.
The management transition from Maurer to Hoffmann to founder co-CEOs plus a new CFO adds governance and execution uncertainty just as the macro backdrop has become harder.
Even after the earlier derating, the stock still assumes sustained premium execution, with a trailing headline earnings multiple around the high-40s and only a modest cushion versus the conservative valuation case.

Pre-mortem

One plausible 50% drawdown script is operational rather than existential. In 2027, U.S. tariff pressure stays elevated, APAC growth normalizes, and new stores carry lower-than-expected productivity. Gross margin slips from the mid-64s back toward 60–61%, owner-earnings margin fails to expand, and the market re-rates the stock from roughly 3x sales / low-30s owner-earnings toward something closer to 2x sales / high-teens owner-earnings. From today’s level, that combination could plausibly halve the share price. The business would still be alive and relevant; the stock would just stop being treated as a premium-growth outlier.

A second script is brand-specific. HOKA, Salomon, and a recovering Nike all improve product cadence in performance running at once, while On’s lifestyle-leaning franchises lose some of their novelty. Footwear growth cools into the low teens, apparel fails to become a true second engine, and investors decide the brand is strong but less unique than they had believed. A multiple that depends on rarity then compresses faster than the revenue line.

Final research conclusion

On is a very good company. It has already crossed the hardest threshold for growth brands: proving that sales can scale into the billions while margins improve rather than erode. The mix of premium pricing, technical product language, rising DTC mix, and APAC runway is real, and the founding logic still holds. Running remains the anchor, and the brand has earned the right to extend outward.

What stops the stock from being more compelling today is not weak fundamentals. It is the remaining price of excellence. The current share price does not look reckless, but it assumes On can keep doing many hard things at once: absorb tariffs, widen apparel, expand stores, hold full-price sell-through, and work through leadership changes without losing the brand’s edge. That is possible. Investors are simply not being paid enough for the execution risk to call the shares a fresh buy here.

【Company-profile scores】

Fundamental quality: high
Growth: high
Moat: medium
Financial soundness: strong
Management credibility: medium
Valuation attractiveness: low
Risk level: medium
Suitable investor type: long-term growth

【Investment rating】

Rating: Hold
One-line thesis: Premium growth and margin expansion are real, but today’s price already assumes continued near-flawless execution.
【Ideal Buy Price】27–29 USD Basis: roughly 20% below the conservative fair-value zone of 33–36 USD derived from owner-earnings and sales-multiple cross-checks.
Acceptable hold price: 36–53 USD
Clearly overvalued price: 59–63 USD
Current-price classification: acceptable hold
Whether to wait for a better price: yes. A move into the high-20s, or equivalent evidence that 64%-plus gross margin is durable under tariffs, would improve the setup materially. The opportunity cost of waiting is missing continued compounding in APAC, DTC, and apparel if execution stays exceptional.
Target holding horizon: 3–5 years
Expected annualized return: conservative low-single digits; base high-single digits to low-teens; optimistic mid-teens
Max-loss risk: roughly 50% in the pre-mortem case where margin slips, growth normalizes, and the multiple compresses together
Reassessment-trigger signals: gross margin below 63% for two consecutive quarters; constant-currency growth below 18% for two consecutive quarters; APAC growth below 25% constant-currency; inventory growth exceeding sales growth for two quarters; clear deterioration in China store productivity or DTC economics.

【Valuation Range】

current: 38.69 (close as of 2026-06-16)
bear (conservative · ideal buy zone): [27, 29]
base (fair · acceptable hold zone): [36, 53]
bull (optimistic · above the clearly-overvalued line): [59, 63]

Sources

Primary sources used in this report were On Holding’s 2025 Form 20-F, On’s Q1 2026 earnings release, On’s 2026 management-transition and CFO-announcement releases, the 2021 IPO prospectus, and peer-company primary earnings releases or annual filings for Deckers, Nike, Amer Sports, and lululemon. Supplementary context came from Reuters and McKinsey/WFSGI industry research where public-company primary sources did not directly cover the macro or peer-narrative point.

Other tickers mentioned

DECK.US: closest public comparison through HOKA, useful for premium running growth, DTC mix, and margin comparison.
NKE.US: dominant incumbent losing momentum in areas where On is gaining share, especially premium running.
AS.US: premium sports and outdoor portfolio reference, especially for Arc’teryx and Salomon as high-end peers.
LULU.US: premium brand-extension comparison for head-to-toe monetization and DTC economics.

This report is based on public information and does not constitute investment advice. Markets carry risk; invest with caution.

Mentioned Tickers

DECK NKE AS LULU

Baillie Framework · Ten Questions for Growth Investing

Hunting ten-year five-baggers among great growth stocks — pressing the upside question: "Can it get much bigger?"

How high is its market ceiling — is it growing a slice of an existing pie, or creating an entirely new market?6/10

The ceiling is large but bounded, and On is taking a bigger slice of an existing pie rather than inventing a new market. Premium performance footwear and sportswear already exists at vast scale; On is a share-gainer inside it, not the creator of a new category.

Size the addressable space first. McKinsey and the World Federation of the Sporting Goods Industry put the sporting-goods sector at roughly 7% annual growth from 2021 to 2024 and project around 6% annually through 2029, a market measured in the hundreds of billions of dollars. Against that, On's fiscal 2025 net sales were CHF 3,014.0 million, so the company sits well below 1% of global sporting-goods spend. There is plenty of room to grow into before saturation becomes the binding constraint.

The honest framing is that On competes for the same premium-adult performance buyer that Nike, Deckers' HOKA, Adidas, Salomon, and lululemon already serve. Nike alone did $46.3 billion in fiscal 2025 revenue. On is winning by being fresher and more premium where incumbents stumbled, not by opening up demand that did not exist. That is a share-shift story, which is more contestable than a blank-market story because rivals can fight back.

Where the ceiling genuinely lifts is category and geography breadth. The report frames three pillars: strengthen the running core, expand distribution with China called out, and build apparel and adjacent categories such as training and tennis. Apparel is still tiny but grew 57.5% on a constant-currency basis in Q1 2026, and APAC grew 61.4% constant-currency from a low base, with only 38 China locations at the end of 2025. If On can monetize head-to-toe sportswear and replicate Western store density across Asia, the practical ceiling moves up materially.

For a Baillie long-horizon lens, the verdict is medium-high rather than blue-sky. The pie is enormous and On's penetration is low, so the upside is real. The constraint is that this is a premiumization land-grab inside a mature, competitive industry rather than the creation of a brand-new demand pool, so the ceiling is set as much by how much share On can defend from strong incumbents as by the size of the market itself.

Jun 18, 2026
Can its revenue at least double over the next five years? Is that growth driven mainly by volume, price, or new businesses?7/10

Yes, doubling revenue within five years is realistic, and the driver is overwhelmingly volume and mix expansion rather than headline price increases. Management's own guidance plus On's recent trajectory make a double a base-case outcome, not a stretch.

Start from the run-rate. Fiscal 2025 net sales were CHF 3,014.0 million, up 30.0% reported and 35.6% constant-currency. For 2026 the company guides to at least 23% constant-currency growth and reported net sales of at least CHF 3.51 billion. Even at a decelerating pace, compounding constant-currency growth in the low-to-mid 20s gets revenue past CHF 6 billion inside five years. To merely double from the 2025 base requires only about 15% annual growth, comfortably below the current guide.

The growth is volume-led, with three identifiable engines. Geography is the largest: APAC grew 61.4% constant-currency in Q1 2026 off a base where APAC was only 17.0% of 2025 sales and China had just 38 locations, so store rollout alone adds substantial unit volume. Category breadth is the second: apparel rose 57.5% constant-currency from a small base. Channel mix is the third: DTC was 41.8% of 2025 sales and is growing faster than wholesale, which lifts revenue per customer captured.

Price contributes, but as a supporting factor, not the engine. On's premium positioning and full-price sell-through mean it does not need promotions to hold realized prices, and the rising gross margin shows pricing power is intact. Still, the bulk of the revenue line comes from selling more units across more stores, more regions, and more categories rather than from charging existing customers materially more.

The risk to a clean double is reported-versus-constant-currency divergence and tariff drag. Q1 2026 reported growth was only 14.5% even though constant-currency was 26.4%, because On reports in CHF and FX has been a translation headwind. A persistently strong franc could keep reported revenue well below the underlying volume story, so a five-year double in reported CHF is probable but not guaranteed; in constant-currency terms it is close to a layup if execution holds.

Jun 18, 2026
Five years out, what takes over as the next growth engine? Does that “second curve” exist today?5/10

The second curve exists today in embryonic form, and it is twofold: apparel as a category and APAC, especially China, as a geography. Neither is yet large enough to carry the group, but both are visible and growing fast enough to take the baton if running footwear matures.

The clearest candidate is apparel. In fiscal 2025 apparel was only CHF 160.9 million of sales versus CHF 2,818 million in shoes, so it is roughly 5% of the business. But it grew 45.1% reported and 57.5% constant-currency in Q1 2026, far outpacing footwear. The strategic logic is the standard premium-brand flywheel: footwear creates entry, apparel raises wallet share. If apparel reaches low-teens revenue share with healthy sell-through, it becomes a genuine second engine rather than an accessory line.

The second curve is geographic. APAC was 17.0% of 2025 sales and grew 61.4% constant-currency in Q1 2026. China matters most: On operated only 38 locations there at the end of 2025, and management explicitly calls out China store expansion as a pillar. On can support denser small-format store economics in China than in many Western markets, so this is a multi-year unit-rollout runway, not a one-year pop.

A third, smaller seed is technology productization. The report describes LightSpray moving from elite-athlete validation toward a broader commercial platform. That is early and unproven at scale, but it is the kind of proprietary-process bet that could open a distinct margin and product vector later.

The honest caveat for a long-term lens is that these are second legs of the same premium-sportswear story, not a true reinvention into a different business. Apparel and China deepen and broaden the existing model; they do not diversify On away from being a brand whose fortunes rise and fall with premium discretionary demand and product newness. The second curve reduces dependence on hero running franchises, but it does not yet change what On fundamentally is, so its quality depends entirely on apparel converting into repeat purchases rather than one-time brand-driven trial.

Jun 18, 2026
What is its core competitive advantage? Will that moat widen or narrow over the next three to five years?5/10

On's core advantage is a premium brand-and-product system paired with distribution discipline, and over the next three to five years that moat is more likely to hold or widen modestly than to narrow, though it is narrower and more conditional than the financials alone suggest.

The moat has three layers. First, brand and proprietary product: CloudTec, Speedboard, Helion superfoam, and LightSpray are real engineering claims, On held about 1,900 trademark registrations in over 100 jurisdictions at the end of 2025, and the report notes patents extending toward 2050 in some jurisdictions. Second, distribution discipline: DTC reached 41.8% of 2025 sales and On refuses to flood mass channels, which protects full-price sell-through. Third, pricing power, evidenced by gross margin rising to 64.2% in Q1 2026 while peers discount.

The widening case rests on the economics of scale done right. As DTC mix and brand awareness rise, On captures more margin and more direct customer data, and incumbent weakness gives it room. Nike's fiscal 2025 revenue fell 10% to $46.3 billion with gross margin down to 42.7%, opening space in premium running that On is filling. A challenger that keeps gaining share while holding margin is usually deepening, not eroding, its moat.

The narrowing risk is genuine and specific to the brand type. The further On pushes from pure performance into lifestyle and sneaker-informed audiences, the more it depends on taste cycles rather than durable replacement demand. The report flags lifestyle momentum around franchises like Cloudtilt Remix, which is commercially attractive but makes demand less predictable. A brand whose heat comes partly from fashion can cool faster than one whose pull is purely technical.

For a three-to-five-year view the moat is best described as medium and conditional rather than wide and secure. The product and distribution edges are durable enough to defend premium economics if execution stays sharp, and the trajectory points to gradual widening. But the moat is contested by strong premium peers like HOKA and Salomon and is exposed to fashion-cycle risk, so it is not the kind of structural fortress that lets an investor ignore execution. It widens only if On keeps proving performance credibility faster than it leans on lifestyle novelty.

Jun 18, 2026
If its core business were disrupted, does it have the DNA to reinvent itself? How does it handle mistakes and bad news?5/10

On shows partial evidence of a self-reinvention gene and a reasonable, if untested-under-crisis, posture toward mistakes. It has adapted its model once before under pressure, but it has never had to rebuild after a genuine disruption of its core, so the gene is plausible rather than proven.

The strongest evidence of adaptability is the channel pivot. On entered as a wholesale-led premium brand, with DTC only 24.9% of 2019 sales, then used the pandemic disruption to permanently shift its economics, reaching 41.8% DTC in 2025. That was a structural change in how the company monetizes demand, executed deliberately, which is the kind of move a reinvention-capable organization makes. Continuous product innovation, from CloudTec through LightSpray, also signals a culture that does not sit still on a single hero technology.

On the premise of surviving disruption to the core, the picture is less reassuring. The business remains overwhelmingly footwear: shoes were 91.8% of Q1 2026 sales. If premium running demand were structurally disrupted, by a technology shift, a fashion rotation away from the brand, or a category-wide deflation, On has no proven second business large enough to absorb the blow. Apparel and APAC are growing but tiny relative to the footwear core. The self-reinvention gene therefore exists at the product and channel level but has not been demonstrated at the existential level.

How it treats mistakes and bad news is mixed but leans candid. The report credits On with a notable factual self-correction: management and disclosures make clear FY2025 net sales were CHF 3,014.0 million, not the inflated placeholder some briefs carried, and the company is transparent about embedding a 20% incremental Vietnam tariff and excluding potential refunds in guidance rather than assuming relief. Conservative guidance framing and clear segment disclosure suggest a management that does not paper over hard facts.

The open question a long-term investor should hold is governance under stress. The compressed leadership sequence in 2025-2026, Maurer out, Hoffmann in then out, founders back as co-CEOs, has not yet been tested by a real downturn. Adaptability in good times is easier than reinvention in bad times, and On's response to a genuine core disruption is unproven, so the gene is best treated as promising but not yet battle-tested.

Jun 18, 2026
Does management — the founders especially — hold a long-term view with interests deeply tied to the company? Are they willing to sacrifice current profit for the payoff five to ten years out?6/10

Founder alignment is strong on the long-horizon and control dimensions, but the willingness to sacrifice current profit for the long term is only partially demonstrated, and the recent governance churn complicates the picture. On balance this dimension is a qualified positive with a real governance discount.

The long-term-vision and skin-in-the-game case is solid. On was founded in 2010 by Olivier Bernhard, David Allemann, and Caspar Coppetti, and the founders remain deeply embedded. Through a dual-class structure the founding team and affiliates still controlled 57.1% of voting power at December 31, 2025 while owning far less of the economics, and in 2026 two co-founders, Allemann and Coppetti, stepped back into the co-CEO seats. Founder control plus a stated ambition to build the most premium global sportswear brand is exactly the long-horizon orientation a patient investor wants.

The willingness to spend now for later is visible but not dramatic. On is plainly investing ahead of demand: 2025 capex of CHF 78.6 million went mainly into new retail stores, regional offices, IT, and LightSpray production equipment, and right-of-use assets and lease liabilities both climbed sharply with the DTC build-out. That is growth investment that depresses near-term free cash flow for a bigger future footprint. What tempers it is that On still runs at strong profitability while investing, with adjusted EBITDA margin of 21.0% in Q1 2026; management is not making a Bezos-style choice to crush margins for share, so the profit-sacrifice is moderate rather than aggressive.

The governance discount is the offsetting factor. The 2025-2026 sequence was unusually dense: Marc Maurer departed, Martin Hoffmann became sole CEO then stepped down effective May 1, 2026, Frank Sluis was hired as CFO, and the founders returned. Concentrated voting control combined with a compressed reshuffle of both CEO and CFO is a legitimate reason to demand valuation discipline; it can sharpen founder accountability, but it also raises execution and continuity risk just as the macro backdrop hardened.

For a Baillie-style assessment the verdict is medium. The founders' horizon and alignment are genuine strengths, and the company invests for the long term while staying profitable. But the dual-class concentration limits outside-shareholder influence, the willingness to sacrifice current profit is real but not extreme, and the leadership turnover means management credibility, while reasonable, has not yet earned a premium.

Jun 18, 2026
If it disappeared tomorrow, how badly would customers miss it? Is the way it grows sustainable, without relying on harm to society or regulators?5/10

If On disappeared tomorrow, a devoted core would miss it, but the broader market would substitute fairly easily, so indispensability is moderate. On the second half of the question, On's growth model is socially and regulatorily sustainable, with tariff exposure as the main external friction rather than any practice that harms society.

On indispensability, the honest answer is that On occupies an emotional niche but not a need. Premium running shoes are a discretionary, replaceable purchase. A committed On runner values the specific CloudTec ride and the brand identity, and full-price sell-through plus rising DTC mix to 41.8% of 2025 sales show real pull and loyalty. But the competitive field is deep, with HOKA, Salomon, Nike, and others offering credible premium alternatives, so a disappearing On would leave runners disappointed rather than stranded. That places it above a fad brand but well below a true switching-cost monopoly.

The clearest evidence of pull is pricing behavior. On sustains a gross margin of 64.2% in Q1 2026 without promotional crutches, which shows customers will pay up rather than trade down. That is meaningful affection, but it is brand preference, not dependence; the further On leans on lifestyle and fashion-adjacent franchises, the more that affection is tied to staying culturally current rather than to irreplaceable utility.

On sustainability of the growth model, On scores well. Its growth comes from product innovation, premium positioning, channel mix, and geographic expansion, none of which relies on regulatory arbitrage, addictive mechanics, data exploitation, or externalizing harm. There is no obvious social-license fragility of the kind that hangs over tobacco, gambling, or certain platform businesses. Growth is earned through what customers willingly buy.

The one external sustainability risk is policy and supply concentration, not social harm. About 90% of shoes were sourced from Vietnam in 2025 and guidance embeds a 20% incremental U.S. tariff on Vietnam imports. That is a cost and resilience question that could pressure margins, but it does not make the growth model socially unsustainable. So the combined verdict is moderate indispensability plus clean, durable sustainability: customers would miss On but could replace it, and nothing about how it grows invites a regulatory or social backlash.

Jun 18, 2026
What are the unit economics of this business (gross margin, incremental returns)? Do they get better or worse at scale? Where does the money it earns go?7/10

The unit economics are excellent and have improved with scale, which is the single strongest pillar of the On story. Gross margins are best-in-class among large sportswear peers, incremental returns are high, and the cash generated is being reinvested into growth rather than returned, which is appropriate for a company at this stage.

Gross margin is the headline. It rose from 60.6% in 2024 to 62.8% in 2025 and reached 64.2% in Q1 2026. That sits far above the broader peer set: Deckers ran 57.7% in fiscal 2026 and Nike just 42.7% in fiscal 2025. The crucial point for this question is direction: margin expanded as the company scaled, driven by full-price discipline, freight and operational efficiencies, and a richer DTC and apparel mix. Economics got better with size, not worse.

Profitability flows through to operating leverage. Adjusted EBITDA margin reached 21.0% in Q1 2026, up from 16.5% a year earlier, so incremental revenue is converting into incremental profit at a high rate. That is the signature of a business whose unit economics improve as volume builds across owned channels.

One nuance keeps this honest: reported net income is noisier than the margin trend. FY2025 net income fell to CHF 203.7 million from CHF 242.3 million in 2024 even as sales and gross margin rose, because FX swings distort the bottom line, and one 2025 quarter posted a net loss on FX effects. Owner-earnings and cash conversion are the better lens here than headline EPS, and on that basis the underlying economics are stronger than the GAAP-equivalent net-income line implies.

Where the money goes is reinvestment, and it is getting more capital-intensive. On pays no meaningful dividend and is funding growth: 2025 capex of CHF 78.6 million went mainly into retail stores, regional offices, IT, and LightSpray equipment, while the DTC build-out pushed lease liabilities to CHF 521.5 million. The balance sheet supports it, with CHF 1,019.9 million of cash and no draw on its credit facility. The one watch-item is that the DTC model is no longer capital-light: stores and leases are real commitments, so if store productivity stalls the high incremental returns could compress. For now, though, the unit economics improve with scale and the reinvestment is sensible.

Jun 18, 2026
For it to rise fivefold in ten years, what conditions must all hold at once? Are they realistic? What expectations does today's share price already imply?3/10

A 10-year 5x is possible but demanding, and several conditions would all have to hold at once; today's price already implies durable excellence rather than a neglected bargain, which is precisely what limits the upside. From the June 2026 level around $37.85 and a market cap near $12.2-12.5 billion, a 5x means roughly a $60-62 billion equity value within a decade.

The conditions that must all hold are stackable and none individually absurd. First, revenue would need to compound at roughly 17-18% or more for ten years, lifting net sales from CHF 3,014.0 million in 2025 toward CHF 15 billion or beyond, in the range of a Nike-scale franchise. Second, gross margin would have to stay in the mid-60s, defending the 64.2% reached in Q1 2026 against tariffs, rising store costs, and apparel mix. Third, apparel and APAC would need to mature into true second engines so the brand is no longer 90%-plus footwear. Fourth, the premium valuation multiple cannot compress much, which itself requires the brand to avoid a fashion-cycle cooldown. Fifth, the management transition has to settle without execution damage.

The realism check is sobering: each condition is individually plausible, but the joint probability of all five holding for a decade is much lower than any one in isolation. The hardest is the combination of sustained 20%-plus growth with mid-60s margin at multiples of today's scale, in a competitive premium category where incumbents like HOKA and a recovering Nike fight back. That is the difference between blue-sky and base case.

What today's price implies is the crux. At roughly 3.1x trailing sales, about 2.7x guided 2026 sales, and a trailing headline P/E around the high-40s, the market is already paying for On to remain a 20%-plus constant-currency grower with mid-60s margin that absorbs tariffs and broadens beyond footwear without losing premium economics. The stock is not priced for failure; it is priced for continued near-flawless execution.

The implication for a 5x is therefore unforgiving. A large part of the next decade's success is already in the price, so the return depends on On exceeding an already-high bar, not merely meeting it. The report's own scenario work puts conservative fair value around 33-36 USD and base around 42-46 USD, with the current price between the two. A 10-year 5x can happen if On is genuinely exceptional, but the entry point offers little margin of safety to underwrite it, so the realistic probability is modest rather than high.

Jun 18, 2026
Why hasn't the market grasped all this yet — does it not understand, not respect it, or not see far enough? What would become the “narrative inflection point”?3/10

The market has largely noticed On already, which is the most important and most honest answer to this question. This is not a misunderstood or overlooked stock in the Baillie sense; if anything the market sees it clearly and prices it richly. The live debate is not "can't see far" versus "looks down on it" but whether the premium it already assigns is too generous.

The evidence that the market understands On is the valuation itself. The stock trades at roughly 3.1x trailing sales and a trailing headline P/E around the high-40s, a premium that explicitly rewards the growth, the 64.2% Q1 2026 gross margin, and the APAC and apparel runway. Far from ignoring the story, the market has priced in a continuation of it. So the framing of "why hasn't it noticed" mostly does not apply; the more useful question is what the market might still be underweighting at the margin.

To the extent there is any "can't see far" gap, it is the durability of constant-currency growth hidden by FX optics. Reported growth was only 14.5% in Q1 2026 while constant-currency was 26.4%, because On reports in CHF and a strong franc masks the underlying momentum. A market anchoring on the softer reported line could underestimate the real volume trajectory, and the depth of the China store runway off just 38 locations may be underappreciated. That is a modest, second-order mispricing, not a wholesale blind spot.

There is also a symmetric risk the bullish framing ignores: the market may be overestimating, not underestimating, On. The business is still 91.8% footwear in Q1 2026, heavily sourced from Vietnam under a 20% incremental tariff, and midway through a compressed leadership change. In mature consumer categories the worst stock outcomes come from very good companies whose growth merely normalizes, and a name priced for excellence has more room to disappoint than to surprise.

On the premise of what becomes the narrative inflection point, two are identifiable. The bullish inflection: two or three consecutive quarters proving mid-60s gross margin survives tariff reality, plus apparel crossing into low-teens revenue share with healthy sell-through, which would validate the "true sportswear platform" story and justify a multiple that stays structurally above athletic peers. The bearish inflection: gross margin slipping below 63% for two quarters, constant-currency growth falling into the high teens, or visible China and DTC store underperformance, any of which would reframe On from premium-growth outlier to good-company-rich-stock and trigger a rerating. The narrative turns the moment evidence forces the market to choose between "premium sportswear house" and "footwear brand with periodic apparel bursts," and right now the price is betting on the former.

Jun 18, 2026

Ask about this report

Members can ask about this report; once answered it appears under "Reader Q&A" on this page. You can also highlight a passage in the text to ask about it directly.