Onward and Upward: Navigating Tariffs for Growth and Innovation

Anticipating a Boost from Easing US Import Duties

Swiss athletic footwear and apparel brand On Holding foresees a potential positive impact on its operations due to the recent U.S. Supreme Court ruling that invalidated emergency tariffs imposed by the government. CEO Martin Hoffmann expressed confidence that these adjusted tariff rates could provide a significant tailwind for the rapidly expanding company, particularly as it continues to demonstrate strong quarterly financial performance.

Robust Sales Projections and Market Leadership

The company, renowned for its premium running shoes, projects a minimum of 23% sales growth for the fiscal year 2026, calculated on a constant-currency basis. While this represents a moderation from the impressive 30% growth achieved in 2025, it still significantly outpaces the projected growth rates of industry titans such as Nike and Adidas, solidifying On's position as a dynamic force in the sportswear market.

Navigating Market Fluctuations and Sustained Profitability

Despite a general downturn in the broader market that led to an 11% dip in On's shares during premarket trading, the company maintains a positive outlook on its profitability. It expects its annual profit margin to increase to at least 63% from 62.8% in 2025. This projection currently does not account for the additional benefit that a reduced U.S. tariff rate could bring, suggesting even greater potential upside.

Strategic Tariff Revisions and Investment Opportunities

The United States, which serves as On's largest market, recently implemented a temporary 10% blanket tariff on imports, with plans to elevate it to 15%. Crucially, even this increased rate would remain considerably lower than the additional 20% duty previously applied to goods sourced from countries like Vietnam and Indonesia, key manufacturing hubs for On. Hoffmann indicated that if the 15% rate becomes the standard, it would represent an additional advantage beyond their current guidance. Furthermore, On is actively seeking tariff refunds, with any proceeds earmarked for reinvestment into business development rather than being passed directly to consumers.

Exceptional Fourth-Quarter Performance and Targeted Consumer Strategy

The company delivered an impressive fourth-quarter performance, with sales climbing by 22.6% to 743.8 million Swiss francs (approximately $949.69 million). This figure surpassed analysts' average estimates of 724.3 million francs, a success attributed in part to the company's judicious strategy of limiting discounting during the competitive holiday shopping season. On's deliberate focus on affluent consumers has proven beneficial, especially as brands catering to lower-income segments face increasing pressure from a more stratified economy, particularly in the U.S.

Innovation-Driven Momentum and Global Expansion

CEO Hoffmann emphasized the brand's commitment to a robust product pipeline and continuous innovation as key drivers of its global momentum. He stated that this premium positioning resonates strongly with customers worldwide. Looking ahead, On plans to further expand its retail footprint with an estimated 10 to 15 new store openings slated for the current year, reinforcing its commitment to growth and accessibility. Concurrently, quarterly adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) saw a substantial 31.8% increase, reaching 131 million francs, underscoring the company's financial health and operational efficiency.