ONON (ONON) Q2 2025: DTC Mix Hits 41%, Accelerating Premium Margin Expansion

August 12, 2025 | By EarningsIQ Research

ONON’s Q2 results underscore a global surge in brand momentum, driven by premium positioning, robust DTC expansion, and broad-based product traction. Apparel adoption and channel productivity are outpacing expectations, while management’s guidance raise signals confidence despite tariff and FX headwinds. Investors should watch ONON’s ability to sustain high-margin growth as it balances global expansion, innovation, and operational discipline.

Summary

• Premium Brand Leverage: ONON’s DTC channel and product innovation are driving margin expansion and global reach.
• Apparel Acceleration: Apparel outpaces footwear growth, with early adoption signaling broader sportswear relevance.
• Guidance Raised: Leadership’s confidence in demand, despite tariffs and FX, supports an upgraded outlook.

Performance Analysis

ONON delivered a record-setting quarter, with net sales up 38% in constant currency, reflecting broad-based strength across regions, channels, and categories. The company’s DTC (Direct-to-Consumer, sales through owned stores and e-commerce) mix reached a new Q2 high at 41%, driven by 54% constant-currency DTC growth, while wholesale also grew at a healthy pace. Apparel revenue soared 76% in constant currency, outpacing even strong footwear franchises and signaling progress toward ONON’s ambition to become a full sportswear brand. Gross margin expanded by 160 basis points to 61.5%, propelled by premium pricing, DTC mix, and operational efficiencies, offsetting new tariff and FX pressures.

Regional performance was exceptionally balanced: EMEA delivered its fastest growth in two years, Americas saw robust DTC-led expansion, and APAC posted triple-digit growth for the third straight quarter, now comprising a mid-teens share of total sales. Inventory discipline and working capital improvements enabled ONON to meet surging demand without overextending, supporting continued cash generation. Management attributed margin gains to both structural levers (DTC, premiumization, supply chain) and tactical moves (price increases, cost control), while reiterating commitment to long-term brand investments.

• DTC Channel Outperformance: DTC mix hit 41%, with e-commerce and retail fueling global brand engagement and margin upside.
• Apparel Momentum: Apparel sales growth exceeded all footwear franchises, validating ONON’s sportswear ambitions.
• Regional Diversification: APAC’s triple-digit growth and EMEA’s acceleration de-risk reliance on any single market.

ONON’s operational discipline and multi-channel execution position the brand for sustained premium growth, even as macro and FX volatility persist.

Executive Commentary

Strategic Positioning

1. Multi-Channel Balance and Premiumization

ONON’s deliberate balance between wholesale and DTC channels is central to its margin expansion and brand control. The company’s 54 ON stores globally serve as immersive brand hubs, while selective wholesale expansion (mid-single-digit door growth) keeps growth high-quality and demand-led. Premium pricing and full-price sell-through remain priorities, as evidenced by targeted price increases in the US and ongoing product innovation.

2. Product Franchise Expansion

ONON’s portfolio now includes nine footwear franchises each contributing over 5% of sales—a testament to its resilience-by-design approach. New launches like Cloud6, CloudSurfer 2, and CloudBoom Max show ONON’s ability to generate excitement and repeat purchase across running, trail, tennis, and lifestyle. Apparel’s 76% growth, fueled by both technical and lifestyle capsules, is accelerating ONON’s transition from a footwear brand to a full sportswear player.

3. Global Diversification and Local Execution

Triple-digit APAC growth, EMEA acceleration, and US DTC strength reflect ONON’s early investments in a global footprint and operational backbone. New flagships (e.g., Singapore, Paris, LA) and high productivity per door validate the model. Inventory and supply chain improvements allow ONON to run lean, meet demand, and avoid margin-dilutive discounting.

4. Innovation as Margin Driver

ONON’s LightSpray (robotic, ultra-lightweight manufacturing) and high-profile collaborations (Loewe, Zendaya, FKA Twigs) illustrate its commitment to innovation as both a brand and cost lever. These initiatives support premium pricing, operational flexibility, and long-term differentiation.

5. Founder-Led Culture and Execution Discipline

Leadership’s focus on “athlete spirit” and resilience is operationalized through disciplined capital allocation, a deep bench of global talent, and measured investment in brand, tech, and supply chain. This founder-led approach fosters agility and long-term orientation, even as ONON delivers near-term outperformance.

Key Considerations

ONON’s Q2 results highlight a rare combination of global brand heat, operational discipline, and margin expansion. Investors should weigh these factors in the context of industry cyclicality and macro headwinds.

Key Considerations:

• Channel Mix Shift: DTC growth is structurally accretive but requires ongoing investment in retail, e-commerce, and omnichannel experiences.
• Apparel Adoption Curve: Early apparel traction is promising, but sustaining 70%+ growth will require continued innovation and marketing.
• Tariff and FX Exposure: Tariff hikes on Vietnam/Indonesia imports and USD weakness are offset by pricing power and cost controls, but remain ongoing risks.
• Wholesale Strategy: Controlled door growth and focus on premium partners de-risk inventory and markdown exposure, supporting long-term brand equity.
• Inventory and Working Capital: Improved planning and merchandising allow ONON to fulfill demand with lower inventory, supporting cash generation and agility.

Risks

Tariff escalation and currency volatility could pressure margins if pricing power or cost mitigation levers weaken. Apparel’s rapid growth may face tougher comps and execution risks, especially as ONON expands beyond core running. Wholesale demand, particularly in the US, is being managed for quality, but any missteps in channel balance or inventory could impact growth and profitability. Macro uncertainty and competitive intensity in global sportswear remain persistent headwinds.

Forward Outlook

For Q3 and Q4, ONON guided to:

• Constant currency net sales growth of at least 31% for full-year 2025 (up from prior 28%)
• Gross profit margin of 60.5% to 61% (prior 60% to 60.5%)
• Adjusted EBITDA margin of 17% to 17.5% (prior 16.5% to 17.5%)

Management emphasized:

• Order book strength and Q3 momentum underpin guidance raise
• Tariff impacts are largely mitigated through pricing, DTC mix, and operational efficiencies

Takeaways

ONON’s Q2 marks an inflection in premium brand leverage, with DTC and apparel as key margin and growth drivers. Execution discipline and innovation are supporting upgraded guidance, but investors should monitor for signs of decelerating momentum or margin compression as macro and competitive dynamics evolve.

• Margin Expansion Engine: DTC mix, product innovation, and supply chain efficiencies are powering structural margin gains.
• Brand Heat Across Channels: Apparel and global retail productivity validate ONON’s ambition to build a premium multi-sport, multi-channel global brand.
• Watch for Channel and Regional Balance: Sustaining premium growth will require ongoing discipline in channel mix, inventory, and regional execution.

Conclusion

ONON’s Q2 results and guidance raise reinforce its trajectory as a premium, innovation-led global sportswear brand. Brand momentum, disciplined execution, and strategic investments position ONON for continued outperformance, but vigilance on macro, tariff, and channel risks remains essential for investors.

Industry Read-Through

ONON’s premiumization and DTC acceleration highlight a broader shift in global sportswear, where brand control, channel mix, and product innovation are increasingly critical to margin structure and growth. Apparel adoption and cross-category expansion signal that the lines between performance and lifestyle are blurring, raising the bar for incumbents and new entrants alike. Tariff and FX headwinds remain a sector-wide risk, but ONON’s ability to mitigate these through pricing and operational agility offers a blueprint for other premium brands navigating global volatility.

ONON Consumer Discretionary Athletic Apparel Premiumization DTC Apparel Innovation Tariffs