Aug 11 (Reuters) – Sportswear brand On missed Wall Street estimates for second-quarter net sales on Tuesday, sending its shares down 15% premarket, as higher costs from U.S. tariffs and a tougher consumer environment weighed on demand.
A tougher consumer environment is testing even high-growth sportswear brands. While On continues to chip away at the market share of Nike and Adidas, slower growth in its largest U.S. market highlights the challenge of maintaining its rapid expansion without resorting to the steep discounts that have weighed on many rivals.
Executives at On emphasized they were prioritizing profitability over sales volumes, mindful of the risk of discounting.
“We do not compromise our full-price integrity for volume, even in the heavily promotional environment we saw this quarter in some markets,” the company’s CFO Frank Sluis said.
The company also raised its full-year gross profit margin outlook to at least 65%, from its previous expectation of 64.5%.
Bigger rival Adidas’ shares dropped about 12% after the company missed quarterly profit estimates last month.
On also expects full-year net sales to be in the range of 3.47 billion Swiss francs to 3.56 billion francs on a constant currency basis, widening its previous outlook of about 3.51 billion francs.
Sales growth in On’s core Americas market, which accounts for more than half of its revenue, slowed to 13% for the quarter in currency-adjusted terms, down from a 17% increase in the March quarter.
The company continued to post strong growth outside its core market, with Asia-Pacific sales rising 54.7% on a constant-currency basis for the quarter.
Overall, the company, founded in 2010 and known for its sneakers’ distinctive hollow soles, posted net sales of 850.3 million Swiss francs ($1.05 billion) in the quarter ended June 30, missing analysts’ estimate of 878.16 million francs.
For the three months ended June 30, the company reported adjusted profit per share of 0.35 francs, edging past analyst estimates of 0.34 francs per share.
(Reporting by Angela Christy in Bengaluru and Helen Reid in London; Editing by Janane Venkatraman and Tasim Zahid)
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