20-F: On Holding AG Reports Strong 2025 Growth, Net Income Dip

On Holding AG achieved significant net sales growth of 30% in fiscal year 2025, driven by strong demand across all channels and regions, despite a 15.9% decrease in net income.

Summary

• Net sales for fiscal year 2025 increased by 30.0% to CHF 3,014.0 million, or 35.6% on a constant currency basis, compared to fiscal year 2024.
• Direct-to-Consumer (DTC) net sales grew by 33.7% to CHF 1,260.5 million, representing 41.8% of total net sales, surpassing wholesale growth.
• Wholesale net sales increased by 27.5% to CHF 1,753.4 million, accounting for 58.2% of total net sales.
• Asia-Pacific (APAC) region showed the strongest growth, with net sales increasing by 96.4% to CHF 511.1 million, followed by EMEA (32.0% to CHF 762.7 million) and Americas (17.6% to CHF 1,740.1 million).
• All product categories experienced growth: shoes increased by 27.5% to CHF 2,804.4 million, apparel by 68.2% to CHF 169.9 million, and accessories by 124.1% to CHF 39.6 million.
• Gross profit increased by 34.7% to CHF 1,893.6 million, with gross profit margin improving to 62.8% from 60.6% in 2024, primarily due to operational efficiencies and favorable foreign exchange.
• Net income decreased by 15.9% to CHF 203.7 million from CHF 242.3 million in 2024, with net income margin falling to 6.8% from 10.4%.
• Adjusted EBITDA increased by 46.3% to CHF 567.0 million, and adjusted EBITDA margin improved to 18.8% from 16.7%.
• Cash and cash equivalents increased by 10.3% to CHF 1,019.9 million, and net working capital increased by 14.3% to CHF 570.3 million.
• The effective income tax rate decreased significantly to 0.7% in 2025 from 13.4% in 2024, mainly due to deferred income tax benefits related to intercompany profits in inventory and higher effectiveness of tax incentives.
• A highly-automated warehouse in Atlanta, US, became fully operational in 2025, and a new automated warehouse in Beringen, Belgium, is expected to be fully operational by the end of 2026.
• The company amended its Long Term Incentive Plan (LTIP) 2021 in March 2025 to modify RSU vesting schedules and PSU performance cycle allocations, with 25% of 2025 PSU grants on a two-year cycle and 75% on a three-year cycle, and 100% on a three-year cycle from 2026 onwards.

Sentiment

Score: 6

Explanation: StockSavvy.ai views this as a moderately positive filing. While top-line growth and gross margin expansion are excellent, the significant drop in net income and EPS due to foreign exchange losses and increased operating expenses warrants caution, tempering overall enthusiasm despite strong operational momentum.

Positives

• Net sales increased by a robust 30.0% to CHF 3,014.0 million in fiscal year 2025, demonstrating strong market demand.
• Direct-to-Consumer (DTC) channel sales grew by 33.7% to CHF 1,260.5 million, indicating successful brand engagement and retail expansion.
• Gross profit margin improved significantly to 62.8% from 60.6%, driven by operational efficiencies, reduced freight costs, and favorable foreign exchange impacts.
• Adjusted EBITDA increased by 46.3% to CHF 567.0 million, with the adjusted EBITDA margin expanding to 18.8% from 16.7%, reflecting strong underlying operational performance.
• Asia-Pacific (APAC) region experienced exceptional growth of 96.4% in net sales, highlighting successful market penetration and brand awareness in key markets like China and Japan.
• Apparel and accessories categories showed impressive growth of 68.2% and 124.1% respectively, indicating successful diversification beyond footwear.
• The effective income tax rate decreased to 0.7% due to deferred income tax benefits and tax incentives, positively impacting net income.
• The Atlanta warehouse became fully operational in 2025, enhancing distribution capabilities in North America.
• The company maintains a strong cash position with CHF 1,019.9 million in cash and cash equivalents and an undrawn CHF 700 million multicurrency credit facility, providing significant financial flexibility.

Negatives

• Net income decreased by 15.9% to CHF 203.7 million in fiscal year 2025, despite strong revenue growth, leading to a decline in net income margin to 6.8% from 10.4%.
• Basic EPS Class A decreased to CHF 0.62 from CHF 0.75, and diluted EPS Class A decreased to CHF 0.61 from CHF 0.74.
• Adjusted net income also decreased to CHF 266.4 million from CHF 317.4 million, and adjusted basic/diluted EPS Class A declined.
• A significant foreign exchange loss of CHF 173.2 million was recorded in 2025, compared to a gain of CHF 67.7 million in 2024, primarily due to CHF/USD exchange rate revaluation effects.
• Cash inflow from operating activities decreased by CHF 151.1 million to CHF 359.5 million, mainly due to changes in working capital (inventories and trade receivables) and other current assets/liabilities.
• Selling expenses as a percentage of net sales increased to 8.6% from 7.3%, driven by expanding retail footprint and associated personnel and depreciation costs.
• Marketing expenses as a percentage of net sales increased to 12.5% from 11.9%, indicating higher spending on brand building initiatives.
• The company is highly concentrated on footwear, apparel, and accessories, making it vulnerable to rapid changes in consumer preferences.
• The dual-class share structure concentrates voting control with the extended founder team, limiting Class A shareholders' influence and potentially depressing the stock price due to index exclusion policies.

Risks

• Brand reputation and premium image are vulnerable to product quality issues, lack of product acceptance, environmental/labor concerns, customer service complaints, and negative publicity, potentially accelerated by social media.
• Failure to successfully implement growth strategies, including expanding product offerings and DTC channels, could harm competitive position and results.
• High concentration in footwear, apparel, and accessories makes the company vulnerable to changes in consumer tastes and preferences.
• Limited operating experience and brand recognition in new markets may hinder expansion strategy and growth.
• Inability to adequately connect with the consumer base, especially through social media, could adversely affect business and financial condition.
• Reliance on successfully locating stores in suitable, high-traffic locations, with any impairment of a location or decrease in customer traffic harming sales and profitability.
• Failure to continue technical innovation, unique designs, and environmentally sustainable products could lead to loss of competitiveness and decreased consumer interest.
• Operating in a highly competitive market with larger, more resourced competitors may lead to pricing pressures and loss of market share.
• Competitors may imitate premium products and technology, diverting sales and diluting brand value.
• Adverse effects from the financial health of wholesale partners, including cancellations, payment defaults, or reduced orders due to economic downturns or shifts in consumer behavior.
• Inherent risks of international operations, including foreign laws, political unrest, trade disruptions, and changes in economic conditions.
• Political uncertainty or geopolitical tensions (e.g., Russia-Ukraine, Israel-Hamas conflicts, Red Sea disruptions) could disrupt supply chains, increase costs, and decrease consumer spending.
• Pandemics, epidemics, or other public health emergencies could disrupt sourcing, supply chains, manufacturing, and distribution, negatively impacting business.
• Significant disruptions in supply from current or future sources due to reliance on a focused network of third-party suppliers, many concentrated in single countries (e.g., Vietnam for footwear).
• Problems with distribution systems, including third-party vendors' ability to scale warehouse and factory operations, could harm ability to meet customer expectations and manage inventory.
• Fluctuations in raw material and commodity costs (e.g., petrol-based materials, rubber, cotton), including due to inflation, could negatively affect operating results.
• Reliance on third-party suppliers for fabrics and subcomponents, with limited control over their operations, increasing risk of quality issues, higher costs, or supply disruptions.
• Potential employment shortages in supply operations (e.g., Vietnam, China, Indonesia) could increase costs and limit scaling efficiency.
• Substantial dependence on the continued service of senior management and broader leadership team, with loss of key individuals making business operation and goal achievement more difficult.
• Laws and regulations on executive compensation in Switzerland may restrict ability to attract, motivate, and retain qualified personnel.
• Inability to attract and retain a diverse group of highly talented individuals could hinder growth and successful business operation.
• Climate-related risks such as extreme weather conditions and natural disasters could negatively impact operations, and failure to meet sustainability goals could harm reputation.
• Increased scrutiny from investors and customers regarding ESG responsibilities could result in additional costs, risks, and negative impact on reputation.
• Inability to obtain, maintain, protect, and enforce intellectual property rights (patents, trademarks, designs, trade secrets) could allow competitors to commercialize similar products.
• Third parties may initiate legal proceedings alleging infringement of intellectual property rights, leading to costly litigation, damages, or operational changes.
• Reliance on third-party licenses (e.g., THE ROGER brand), with failure to comply with obligations or disruptions to relationships potentially leading to loss of critical rights.
• Security breaches, cybersecurity incidents, or other disruptions to IT systems could result in loss, theft, misuse, or unauthorized access of sensitive information, damaging relationships and exposing to litigation.
• Evolving data privacy and security laws (e.g., CCPA, GDPR, UK GDPR, FADP, PIPL) and non-compliance could lead to government enforcement actions, litigation, and reputational harm.
• Utilization of AI technologies introduces risks related to data management, data privacy, potential for false/inaccurate outputs, ethical issues, and evolving regulatory frameworks.
• Changes in tax laws, regulations, and treaties (e.g., OECD Pillar Two rules) in Switzerland, the US, or other countries could result in additional tax liabilities or increased volatility in the effective tax rate.
• Adverse outcomes from examination of income or other tax returns could negatively affect results of operations and financial condition.
• Potential classification as a Passive Foreign Investment Company (PFIC) for US shareholders, leading to adverse US federal income tax consequences.
• Changes in trade policies, tariffs, and import/export regulations (e.g., US 20% import tariff on Vietnam) could increase costs, disrupt sourcing, and adversely affect business.
• Compliance with numerous laws and regulations (labor, product safety, competition, consumer protection) exposes the company to criminal sanctions, civil penalties, and reputational harm.
• The dual-class share structure concentrates voting control with the extended founder team, limiting Class A shareholders' influence and potentially depressing the stock price due to index exclusion policies.
• Future sales of Class A ordinary shares by existing equity holders could cause the market price to decline.
• No intention to pay dividends for the foreseeable future, meaning shareholder returns depend on share price appreciation.
• Reliance on research and reports from securities analysts, with negative evaluations or failure to meet forecasts potentially causing share price decline.
• As a Swiss corporation, shareholder rights may differ from those in US jurisdictions, and Swiss law limits ability to challenge board decisions or implement US-style poison pills.
• Not listed in Switzerland, so shareholders do not benefit from certain Swiss takeover protection provisions.
• Swiss corporate law limits flexibility to raise capital, issue dividends, and manage ongoing capital needs due to shareholder approval requirements for certain actions.
• Shareholders outside the US may not be able to exercise preemptive rights in future equity issuances, leading to dilution.
• US shareholders may face difficulties obtaining judgments or enforcing civil liabilities against the company or its officers/directors in US courts due to Swiss incorporation and non-US residency of some personnel.

Future Outlook

The company aims to be the most premium global sportswear brand, focusing on growing market share in running, expanding multi-channel distribution (especially owned retail and China), and establishing the brand in new categories like training and tennis to become a full sportswear brand. It expects continued investments in people, sales, marketing, distribution networks, product inventory, research and development, and corporate infrastructure to drive growth, which may lead to increased expenses. The functional currency change for On Holding AG and On AG to USD from CHF, effective January 1, 2026, is expected to reduce foreign exchange impacts on profit or loss statements but increase impacts to other comprehensive income.

Management Comments

• Our mission is to ignite the human spirit through movement. It shapes our culture, guides our decisions, and sets the direction for where we're going next.
• We believe our premium positioning and our relentless focus on performance and design sets us apart within the global sportswear market.
• Our culture of innovation has enabled us to repeatedly introduce groundbreaking technologies designed to elevate the running experience and create enduring excitement around our brand.
• By executing successfully against these pillars, On delivered strong results in 2025.
• Innovation is core to our brand. In 2025, we advanced our pioneering LightSpray technology, a process set to redefine the running experience and reimagine manufacturing.
• The growth and diversification of our product assortment was a significant driver of our net sales increase in 2025.
• The expansion of our apparel and accessories collections brought new fans to the brand and further underscored our evolution from a footwear pioneer into a true 'toe-to-head' sportswear brand.
• We intend to continue to increase marketing expenses in the future, focusing on elevating brand awareness across our markets, investment in digital customer acquisition and customer experience through our retail network alongside an exciting portfolio of elite athletes, influencers, and public figures.
• We remain focused on successfully scaling our global distribution capabilities while deploying enhanced inventory oversight across our network of new and existing logistics partners.
• We continue to work to mitigate the price increases on products with our strong partner relationships.
• We seek to continue to diversify our production partners and supplier network to reduce our reliance on single-partner relationships, and provide further mitigation against inflationary price impacts.

Industry Context

StockSavvy.ai notes that On Holding AG's strong revenue growth and expanding gross margins in 2025 demonstrate its continued success in capturing market share within the highly competitive global sportswear industry. The company's strategic focus on premium positioning, technical innovation (e.g., LightSpray), and multi-channel expansion, particularly in DTC and high-growth regions like APAC, aligns with broader industry trends favoring direct consumer engagement and specialized performance products. While larger incumbents like Nike and Adidas possess greater resources, On's ability to diversify its product offerings beyond footwear into apparel and accessories, coupled with its athlete-validated performance narrative, positions it well against both established players and emerging specialized brands like Hoka One One and Lululemon. The significant foreign exchange loss, however, highlights a common challenge for multinational companies operating in a volatile global economic environment.

Comparison to Industry Standards

• On's net sales growth of 30.0% (35.6% constant currency) significantly outpaces many established sportswear giants like Nike and Adidas, which typically report single-digit to low double-digit growth in mature markets, indicating strong market penetration and brand momentum.
• The increase in gross profit margin to 62.8% is competitive, often exceeding that of mass-market sportswear brands and aligning more closely with premium or luxury apparel brands, reflecting successful brand positioning and operational efficiencies.
• The DTC channel's contribution of 41.8% to net sales and its 33.7% growth rate is a strong indicator of successful digital transformation and direct consumer engagement, a trend many competitors are actively pursuing but often with lower proportional success.
• APAC's net sales growth of 96.4% is exceptionally high, demonstrating a more aggressive and successful expansion in this region compared to many peers who face intense competition and slower growth rates in the saturated Asian markets.
• The diversification into apparel (68.2% growth) and accessories (124.1% growth) shows a successful 'toe-to-head' strategy, a common goal for sportswear brands, but On's growth rates in these segments are notably higher than many competitors' recent performance in expanding non-footwear categories.
• The decline in net income despite strong revenue and gross profit growth, largely due to foreign exchange losses, is a point of divergence from companies that might have more stable currency hedging or less exposure to specific currency pairs, or those that report in USD.
• The investment in LightSpray technology and automated warehouses (Atlanta operational, Belgium by 2026) positions On at the forefront of manufacturing innovation, potentially offering a competitive edge in efficiency and sustainability compared to traditional manufacturing models used by many industry players.

Management Changes

Corporate Governance

Legal Proceedings

• The company does not believe it is party to any claim or litigation that would individually or in the aggregate have a material adverse effect on its business as of the date of this Annual Report.

Related Party Transactions

• Employment agreements were entered into with certain executive officers in connection with the 2021 public offering, providing for base salary, annual performance cash bonus, and participation in pension and long-term equity incentive plans.
• Indemnification agreements have been entered into with executive officers and directors, requiring the company to indemnify them to the fullest extent permitted by law.
• A shareholders agreement exists with the extended founder team, requiring them to vote together on certain matters and outlining conditions for conversion of Class B voting rights shares to Class A ordinary shares.
• Marc Maurer's termination agreement waived his one-year post-termination non-compete covenant, meaning no compensation was required for this covenant.
• Total short-term employee benefits for the extended founder team amounted to CHF 1.7 million in 2025 (CHF 3.4 million in 2024, CHF 4.2 million in 2023).
• Post-employment benefits for the extended founder team amounted to CHF 4.9 million in 2025 (CHF 1.1 million in 2024, CHF 0.3 million in 2023).
• Share-based compensation for the extended founder team amounted to CHF 12.7 million in 2025 (CHF 13.8 million in 2024, CHF 13.8 million in 2023).
• Total share-based compensation for non-executive members of the Board of Directors amounted to CHF 1.2 million in 2025 (CHF 1.2 million in 2024, CHF 1.1 million in 2023).

Stakeholder Impact

• **Shareholders (Class A):** Experience dilution risk from future equity issuances and the dual-class structure concentrating voting power with founders. Returns depend on share price appreciation as no dividends are planned. Negative foreign exchange impacts reduced net income and EPS.
• **Shareholders (Class B/Founders):** Maintain significant voting control due to the dual-class structure. Benefit from long-term incentive plans and potential appreciation of their shares.
• **Employees:** Benefit from active share-based compensation plans (LTIP 2021, BoD 2019) designed to attract, retain, and motivate high-quality personnel. The company is investing in human capital and has increased its total workforce.
• **Customers:** Benefit from continued product innovation (e.g., LightSpray, CloudTec), expanded product offerings (apparel, accessories), and an enhanced multi-channel retail experience (new stores, e-commerce). However, potential product quality issues or supply chain disruptions could negatively impact customer satisfaction.
• **Suppliers/Manufacturers:** Benefit from long-term relationships and increased production volumes. However, they face increased scrutiny regarding socially and environmentally responsible business practices and compliance with the Supplier Code of Conduct. Potential employment shortages in certain geographies could impact their operations.
• **Creditors:** The company maintains a strong capital base and has an undrawn CHF 700 million credit facility, indicating good liquidity and ability to meet obligations. Assets (trade receivables, inventory) are pledged as collateral for the credit facility.
• **Regulatory Authorities:** The company is subject to evolving data privacy and security laws, trade policies, and tax regulations across multiple jurisdictions, requiring continuous compliance efforts and potential increased costs.

Next Steps

• Continue to expand product offerings to earn more share of customers' closets.
• Engage in customer acquisition and retention efforts to drive long-term customer relationships.
• Continue to grow the business by leveraging investments in human capital and operational infrastructure.
• Expand and diversify the wholesale channel, accelerate partnerships with digital pure-play retailers, and expand owned retail stores.
• Enter into distribution and other strategic arrangements with potential distributors globally.
• Continue to invest in research and development for innovation, intellectual property, and design of footwear, apparel, and accessories.
• Successfully develop, implement, and scale LightSpray technology and products.
• Continue to invest in marketing capabilities, focusing on elevating brand awareness, digital customer acquisition, and customer experience.
• Continue investing in the distribution network and product inventory, including new manufacturing partners.
• Successfully scale global distribution capabilities and deploy enhanced inventory oversight.
• Complete the full operationalization of the new highly-automated warehouse in Beringen, Belgium, by the end of 2026.
• Monitor and adapt to evolving global macroeconomic conditions, including foreign exchange rate volatility, inflation, and trade policies.
• Account for the change in functional currency for On Holding AG and On AG from CHF to USD prospectively from January 1, 2026.
• Prepare for the retroactive effectiveness of IFRS 18 Presentation and Disclosures in Financial Statements from January 1, 2027.

Key Dates

Recommendation

On Holding AG demonstrates robust top-line growth and impressive gross margin expansion, driven by successful DTC and APAC strategies, as well as product diversification. These operational strengths are highly commendable. However, the significant decline in net income and EPS, primarily due to substantial foreign exchange losses, introduces a notable element of volatility and risk to the bottom line. While the underlying business momentum is strong, the impact of external macroeconomic factors, particularly currency fluctuations, creates uncertainty. The dual-class share structure also presents governance concerns for Class A shareholders. Given the strong operational performance offset by material financial headwinds and governance structure, a 'hold' recommendation is appropriate, suggesting investors monitor the company's ability to mitigate foreign exchange risks and translate revenue growth into consistent net income growth, while acknowledging the long-term growth potential.

Keywords

Sportswear, Footwear, Apparel, Accessories, Running, DTC, Wholesale, LightSpray, CloudTec, Switzerland, SEC Filing, 20-F, Financial Results, Global Expansion, Innovation, Sustainability, Supply Chain, Risk Management, Corporate Governance, Share-based Compensation