On Holding (ONON) Q1 2026: Gross Margin Surges to 64.2% as Premium Strategy Scales Globally
On Holding’s premium-first strategy drove a step-change in gross margin, with broad-based growth across all channels and geographies. Apparel and D2C momentum signal durable new growth levers, while innovation and disciplined channel management underpin margin expansion. Leadership transition maintains strategic continuity, even as On prepares for its next phase of global scale and product-led expansion.
Summary
- Premium Execution Drives Margin Expansion: Gross margin reached a new high, underpinned by full-price discipline and product innovation.
- Apparel and D2C Outperform: Apparel’s rapid growth and D2C share gains are reshaping the business mix.
- Leadership Continuity Anchors Long-Term Vision: Management transition reinforces strategy with no deviation from premium and innovation focus.
Business Overview
On Holding is a premium sportswear brand specializing in performance footwear, apparel, and accessories. The company generates revenue through two primary channels: wholesale (selling to retailers) and direct-to-consumer (D2C, including ecommerce and owned retail stores). Its major segments are footwear, which remains the core driver, and a fast-growing apparel business. On’s strategy centers on premium positioning, innovation-led product launches, and disciplined channel expansion across the Americas, EMEA (Europe, Middle East, Africa), and APAC (Asia-Pacific).
Performance Analysis
On Holding delivered record Q1 revenue and a material step-up in profitability, driven by disciplined premium execution and broad-based demand. Net sales surpassed 830 million Swiss francs, with constant currency growth of 26.4% and all major regions—Americas, EMEA, and APAC—posting double-digit or better gains. Notably, APAC exceeded 20% of total sales for the first time, reflecting rapid international expansion.
Gross margin rose sharply to 64.2%, a structural improvement attributed to full-price realization, cost-side efficiencies, and favorable product mix. D2C sales outpaced wholesale, up 28.7% in constant currency, and now represent 38.7% of total sales. Apparel net sales grew over 57% in constant currency, contributing more than 10% to D2C sales for the first time. Operational leverage was evident as SG&A and distribution costs declined as a percentage of sales, even as marketing investments increased to fuel brand awareness and category expansion.
- Apparel Emerges as Growth Engine: Apparel’s 57%+ growth outpaces footwear, strengthening cross-category engagement and repeat rates.
- D2C Channel Momentum: D2C share continues to rise, with digital and physical store traffic growing faster than sales, signaling latent demand.
- Innovation Pipeline Drives ASP and Margin: Product launches like LightSpray and CloudMonster 3 are lifting average selling price (ASP) and reinforcing premium positioning.
On’s multi-channel, multi-category growth is translating into both scale and improved profitability, with further operational efficiencies and innovation tailwinds expected through the year.
Executive Commentary
"Our disciplined focus on premium execution delivered exceptionally strong gross profit and adjusted EBITDA margins, a clear reaffirmation of our premium strategy. Demand is incredibly broad-based. Our strategy is resonating across regions, categories, and channels, reaching more fans than ever before."
Caspar Capetti, Founder & Co-CEO
"We have achieved this by staying true to who we are, committed to delivering high-quality products rooted in performance and design at full price and with the best consumer experience. Our own digital and physical stores offer the best brand experience, allowing us to grow our D2C share from 38% to 42% and further expand the realized cross-profit margins."
Martin Hoffman, Outgoing CEO & CFO
Strategic Positioning
1. Premium-First, Full-Price Discipline
On’s commitment to premium positioning is uncompromising, with leadership explicitly rejecting volume-at-all-costs growth. Full-price realization, even in a promotional market, is non-negotiable—this underpins brand equity and supports industry-leading margin structure. Average selling price (ASP) has climbed from $145 to over $170 since IPO, and On continues to invest in product innovation rather than price-driven expansion.
2. Multi-Channel, Multi-Category Model
The business is deliberately balancing wholesale and D2C growth, using its own stores to deepen brand experience and expand in markets where wholesale partnerships are limited. Apparel and lifestyle products are now critical entry points, especially for younger and female consumers, and are driving higher cross-category purchase rates and faster repeat cycles.
3. Innovation as a Growth Flywheel
Product innovation is central to On’s model. The LightSpray platform and Surreal SuperFoam technology are positioned as generational shifts in running and lifestyle footwear, with commercial launches already driving sell-outs and higher engagement. Innovation extends to materials, design, and even manufacturing automation, supporting both margin and brand differentiation.
4. Geographic Diversification and Localized Expansion
APAC and Latin America are now significant contributors, with APAC surpassing 20% of sales and markets like South Korea tripling revenue year-over-year. Localized retail expansion (e.g., Seoul, Shenzhen, London) is paired with tailored product and marketing activations to build cultural relevance and community engagement.
5. Leadership Continuity and Strategic Depth
The transition to co-CEOs and a new CFO is framed as continuity, not change. Both co-founders have deep operational and strategic experience, and the leadership bench is being broadened to support global scaling. The company’s 2030 vision, to be unveiled later this year, is expected to reinforce the current strategy rather than pivot from it.
Key Considerations
On’s Q1 results reflect a business scaling premium economics globally, while investing in new growth levers and operational efficiency. The company’s focus on full-price discipline, innovation, and D2C expansion is producing durable, margin-accretive growth. However, On is also navigating a more promotional global market and macroeconomic uncertainties, requiring ongoing discipline and adaptability.
Key Considerations:
- Margin Durability: Gross margin expansion is structural, not cyclical, reflecting supply chain efficiencies and premium pricing power.
- Channel Shift to D2C: Direct channels are driving higher engagement, better data, and margin leverage, but require continued investment in retail and digital experience.
- Apparel as a Brand Entry Point: Apparel’s rise as a first-purchase category, especially among younger consumers, is reshaping lifetime value dynamics.
- Innovation Pipeline Risk and Opportunity: Commercialization of new platforms like LightSpray and Surreal will be critical to sustaining ASP and category leadership.
- Global Expansion Execution: Rapid growth in APAC and other new markets provides diversification, but local execution and brand control remain critical.
Risks
On faces heightened risk from global macro volatility, including FX headwinds, tariff exposure (notably new 20% tariffs from Vietnam), and a more promotional industry environment. Pacing D2C and wholesale growth to avoid inventory overhangs, while maintaining premium positioning, will be a delicate balance. Execution risk around innovation launches and localized expansion could impact margin and brand perception if not carefully managed.
Forward Outlook
For Q2 2026, On guided to:
- Continued strong D2C growth, maintaining Q1’s momentum
- Wholesale to grow, but at a slower pace to ensure clean inventory ahead of major innovation launches
For full-year 2026, management reiterated guidance:
- Constant currency net sales growth of at least 23%
- Gross margin of at least 64.5%, despite incremental tariff headwinds
- Adjusted EBITDA margin in the range of 19.5% to 20%, above prior guidance
Management emphasized confidence in innovation pipeline, D2C outperformance, and premium channel discipline as drivers of sustained growth and profitability. Guidance philosophy remains focused on quality, not growth at any cost.
- Innovation launches (Surreal, LightSpray, CloudZone 99) expected to drive H2 engagement
- Retail expansion in key global cities to continue
Takeaways
On’s Q1 results reinforce the power of its premium, innovation-led model and its ability to scale profitably across categories and geographies. The company is not chasing growth at the expense of brand equity, and its disciplined approach to channel and product management is delivering both top-line and margin expansion.
- Premium Model Validated: Gross margin expansion and robust D2C growth show the brand’s pricing power and operational leverage are sustainable.
- Strategic Continuity: Leadership transition is designed to preserve and accelerate the current strategy, not redirect it.
- Innovation and Category Expansion: Execution on new product platforms and apparel penetration are the critical watchpoints for 2026 and beyond.
Conclusion
On Holding’s Q1 2026 results demonstrate a company scaling premium economics globally, with disciplined execution across innovation, channel mix, and geographic expansion. The brand’s ability to maintain margin leadership while investing for future growth sets a high bar in the premium sportswear sector.
Industry Read-Through
On’s results highlight the competitive advantage of premium positioning and innovation in a promotional global sportswear market. Brands able to maintain full-price discipline, drive D2C engagement, and deliver category-expanding product launches are best positioned for both growth and margin expansion. The rapid rise of apparel as a brand entry point, and the strategic importance of innovation in both product and manufacturing, have read-throughs for all active and lifestyle brands seeking to defend or grow share. Global expansion requires local nuance and operational rigor, as seen in On’s APAC and retail playbook. Margin durability and channel control will increasingly separate leaders from laggards in the sector.