On Holding Q3 2026 Earnings Call Transcript

On Holding (NYSE:ONON) reported third-quarter financial results on Tuesday. The transcript from the company’s third-quarter earnings call has been provided below.

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View the webcast at https://events.q4inc.com/attendee/915968735

Summary

On Holding reported record net sales of 931 million Swiss francs for Q3 2026, marking an 18% increase at constant currency, with strong contributions from all regions and channels.

The company highlighted its strategic focus on the “On Premium Playbook,” emphasizing innovation and full-price sales, leading to high gross and EBITDA margins.

Future outlook includes a reiteration of full-year net sales growth in the low 20s at constant currency, with expectations for gross margins to be around 66% excluding tariff refunds.

Operational highlights include the successful launch of new products like Cloudsurfer 3 and an increase in DTC share to 42.2%, driven by younger consumers and new store openings.

Management emphasized investments in new sports such as football and golf, as well as technology and innovation, including AI and LightSpray production capabilities.

Full Transcript

OPERATOR

Q3 2026 results. After today’s prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please press star-one to raise your hand. To withdraw your question, press star-one again. I will now hand the conference over to Liv Radlinger, Head of Investor Relations. Liv, please go ahead.

Liv Radlinger (Head of Investor Relations)

Good afternoon and good morning to our investor community. Thank you for joining On Holding’s third quarter earnings conference call and webcast. With me today on the call are Caspar Coppetti, Founder and Co‑CEO, and Frank Sluice, CFO. David Allemann, Founder and Co‑CEO, will join us for the Q&A session. Before we begin, I will briefly remind everyone that today’s call will contain forward‑looking statements within the meaning of the federal securities laws. These forward‑looking statements reflect our current expectations and beliefs only and are subject to certain risks and uncertainties that could cause actual results to differ materially. Please refer to our annual report on Form 20‑F for the 2025 fiscal year filed with the SEC on March 3, 2026, for a detailed discussion of such risks and uncertainties.

We will further reference certain non‑IFRS financial measures such as adjusted EBITDA and adjusted EBITDA margin. These measures are not intended to be considered in isolation or as a substitute for the financial information presented in accordance with IFRS accounting standards. Please refer to today’s release for a reconciliation to the most comparable IFRS measures. We will begin with Caspar, followed by Frank leading through today’s prepared remarks, after which we are looking forward to opening the call for the Q&A session. With that, I am very happy to turn the call over to Caspar.

Caspar Coppetti (Founder and Co-CEO)

Thank you, and a very warm welcome to everyone from Zurich. Seven weeks ago we were thrilled to host so many of you here with us for our second Investor Day. You walked through our lab, our makerspace, and our foam competence center. You watched a LightSpray upper come together in minutes, saw the design‑led vision that will take our apparel business to the next level, and got a first look behind the curtain at our plans for new sports. No slide deck and no earnings call can ever bring On’s culture of innovation to life quite like being here, and we are grateful to those of you who made the trip.

On that stage, we made a clear commitment for the next three years to redefine what a sportswear brand can be by running the On Premium Playbook. We aim to grow faster than our industry and grow earnings even faster than sales, with the goal of making On the high‑quality earnings compounder in our industry. Today we report the first quarter of that plan, and we are thrilled with the progress that we are making. Net sales in the quarter grew close to 18% at constant currency to a record 931 million Swiss francs, ahead of the latest expectation we provided you in September, and the first time we have crossed 900 million Swiss francs in a single quarter. That is more than four times the size of the quarter in which we went public five years ago. At the same time, our underlying gross margin and adjusted EBITDA margin reached the highest levels in our history.

That is the On Premium Playbook doing exactly what it was built to do. Growth and margin together, and not or. We delivered these results in what remains a highly promotional environment by staying true to who we are. That means leading with innovation, design, and resonant storytelling, giving our fans a unique offering that they do not find elsewhere. In a high‑discount environment there will always be some consumer choices based on price. It has never been our strategy to go for these, and in such an environment we are just as committed to premium as our highest principle.

We are incredibly proud of what we have delivered this quarter, with our newest technologies and styles selling strongly at full price. This strategy is what allows us to reach record profitability while investing meaningfully in the three years ahead in the technology that will run On at the scale of our 2029 ambitions and behind football and golf ahead of their launches next year. Much of that investment lands in the second half of this year, and it is exactly what sets us up to deliver 2027 and beyond.

Now let me show you how the On Premium Playbook came to life in Q3 through the three strategic growth engines we set out in Zurich: Performance led by Run, Lifestyle led by Sneaker, and apparel led by her. In Performance, we lead with Run, and in this quarter the biggest innovation cycle in our history got off to a flying start, proving once again that running remains our origin and our core. In Zurich, Scott told you about a day he and I spent in a run specialist store in the U.S., watching runners pick up our shoes and put them down again.

We brought what we saw home, put every function around it, and built the shoe in record time. The first masterpiece of our new sensation‑based franchise architecture, introducing a breakthrough Surreal superfoam combined with a new CloudTec geometry. That shoe is the Cloudsurfer 3, and in October it launched with select run specialty partners. The early signals are exceptional. In its first week, the Cloudsurfer 3 sold through at more than four times the rate the Cloudsurfer 2 did in its launch week.

It is already the number one model with several of our key run specialty partners, and we are pleased to see their team so invigorated by it, introducing it to their fans with fittings, group runs, and in‑store events. This momentum is fully echoed by key run influencers and industry media, who have praised the shoe as a premium leap forward for everyday runners. But this is only the first shoe with our Surreal superfoam. By the end of 2027, almost all our performance running franchises will run on one of our new supercritical foams.

On’s pinnacle product, the Cloudboom Strike 2, keeps showing the world what our innovation technology can do. Demand for the Lightspeed version was six times greater than what we could produce, selling out in our U.S. online store on launch day. Our athletes have carried it through the autumn season. A double victory in the Frankfurt Marathon was followed by a milestone in the New York City Marathon, the first time On athletes reached the podium in both the men’s and the women’s race at a World Marathon Major.

And in the Cloudmonster franchise, the Lace and Lightspeed Hyper, the most advanced expressions, keep taking a larger share. Runners can feel the difference the technology makes for them, and they’re choosing the very best of it. These successes and the generational updates coming to our core franchises through 2027 give us strong confidence in our ability to win meaningful share in premium running, a market that continues to grow faster than the industry around it.

In Lifestyle, we lead with Sneaker. This quarter, the Cloudtilt was again one of the fastest‑growing sneaker franchises in the whole industry, and every new expression is bringing in new fans. The Cloudtilt ARC launched in September and beat our plan in all three regions in its first days, in Asia Pacific by more than four times. In Europe, the Cloudtilt is fast becoming a Gen Z staple, taking significant share with this important consumer. But the story is much bigger than one franchise.

The Cloud, which also featured in our football edits, continues to show strong momentum — a true evergreen product, an icon franchise. By seamlessly connecting this classic silhouette with our high‑profile entry into football, we are driving significant cross‑category brand heat and introducing our performance heritage to a whole new generation of lifestyle consumers. In October, two new silhouettes joined the lineup: the Cloudnova Moon Mary Jane, created with Zendaya and already trading well above retail on resale platforms, and the sleek lower‑profile Cloud Muse, which has beaten our forecast since launch.

Next year comes the Cloudswift 5, our first sneaker design from street codes up. The Cloudtilt was just the start. In apparel, we lead with her. Apparel grew 38% at constant currency, and we are on track with our goal to triple net sales over the next 10 years while extending our share of wallet with existing customers. Winning with her is a long game, and this quarter showed exactly how we will win it. Product designed for her in environments built around her. On the training floor we launched new train tights in Formtech, a fabric developed to sculpt and shape, and backed them with our women’s training campaign, and women’s share of our Train collection rose meaningfully.

Then in October came our latest collection with Zendaya, a bold design statement in python prints and the most visible power moment in our history — a reach of two and a half billion, close to 90% positive sentiment, and top styles selling out across markets within days. Retail continues to be the engine that drives our apparel ambition. In our new‑generation fleet, apparel share is already at least 50% higher than in our existing stores, and apparel productivity is growing faster than footwear across the whole estate.

A strong value year as we look to more than double our store apparel productivity over the three‑year horizon. Her product, her moments, her store. It is early, but it is working. Beyond our three strategic growth engines, we showed you in Zurich how we are building for the decades to come with new sports. We’re only weeks into their journey, but the early signals from football have been remarkable. Our announcement post became the most‑seen story in On’s history, and in the days that followed, e‑commerce sales of our campaign products more than tripled in France and more than doubled in Germany and Spain. That is the halo before we have launched a single boot.

Golf follows in the first half of next year, and we will build both sports to longevity. We are thrilled with everything we have seen so far and even more excited about what lies ahead. The On Premium Playbook — everywhere. That conviction ran through every channel and every region this quarter. In the Americas, the work we did with our wholesale partners over the summer — enhanced storytelling, more tech‑rep education, more shop‑in‑shops — paid off. Sellouts strongly improved from the second quarter. Our partners’ inventory is healthy, and the Cloudsurfer 3 has landed successfully into exactly the market we wanted.

In Asia Pacific, we’re building a brand that not only lasts but is loved. That means expanding deliberately and elevating as we go — upgrading select locations, opening in some of the most in‑demand premium mall locations, and adding incredible new stores in the region’s greatest cities. It means the same discipline in every channel and every market. And it means engaging our fans even more directly through more than 1,020 events a year. Japan shows how powerful that combination can be.

In one of the world’s most premium and culturally influential markets, demand for On continues to outpace supply. When our latest drop with Kith On landed in September, it sold out almost immediately. The very next morning, we took it to the streets of Shibuya with a community run that reached well over a million people organically. Every decision we make is the On Premium Playbook in action: market‑leading growth at remarkably strong margins. That margin funds investment into the superfoam, the robots, the stores, and the athletes that create the next wave of demand, enabling us to keep growing at pace from a bigger base. The margin funds the innovation. The innovation earns the margin. And the loop turns again. As we said at the Investor Day — simple in principle, demanding in practice, powerful.

Because it compounds. Seven weeks into the plan, it is already compounding. Frank, please take us through the numbers.

OPERATOR

We will now begin the question-and-answer session. David and Frank are joined by Caspar Coppetti, Founder and Co-CEO. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device.

Please stand by while we compile the Q&A roster. Your first question comes from the line of Laurent Vasilescu with BNP Paribas. Your line is open. Please go ahead.

Laurent Vasilescu (Analyst)

Oh, good morning. Thank you very much for taking my question. I wanted to follow up. Frank, thank you very much for the color on Asia Pacific. I think you called out that Asia Pacific should grow in the mid to high 20s corridor. I’m curious to know what you’re seeing, and I know you called out Japan as very strong, but curious to know what you’re seeing broadly across Asia, China, and then what does that imply, if you could, what does it imply for the fourth quarter for the other two regions as we kind of look for acceleration in the fourth quarter?

Caspar Coppetti (Founder and Co-CEO)

Good morning, Laurent, this is Caspar. Allow me to take the first part of your question before I hand over to Frank. As you’re aware, we’re running On’s premium playbook across all our regions. Now, if I had to pick one region where that playbook is almost like a match made in heaven, it is Asia, with its aspirational consumer, its brand-savvy consumer. At the same time, Asia Pacific is our youngest region, and so there’s a lot more demand than we can actually at the moment fulfill.

And I’ll give you a bit of color around that. Take South Korea for example. We see a booming economy there. We currently have three stores, three On stores that are operating there. That is well, well beyond the potential that we have. We have a fourth coming online pretty soon, maybe Q4, maybe Q1, but that’s just one example. I spoke to this in the prepared remarks. In Japan, we have seen a tremendous demand, especially also for our running product. So in Japan, wholesale, say the Alpen Group, we’re now the number one running brand. When we look into China and you look at where our own stores and our partner stores are, we’re still focused on the tier-one and tier-two cities. So there’s also a lot of untapped demand there. As a matter of fact, a third-party study just showed that we’ve become now the number two premium footwear brand in China.

And so we are, you know, the consumers are really looking for what we have. So what you’re seeing in the numbers is it’s a really paced growth. We could go much faster, but we don’t see a need for it. And of course we’re not willing to lean in, say in a period like now, Double 11, when it’s highly promotional. We don’t necessarily want to waste our marketing dollars to spend against basically, you know, more promotions when we want to sell full price.

And with that, I hand over to Frank for the bridge on the numbers.

Frank

Thanks, Laurent, for the question. Yeah, as Caspar explained, we are of course really happy with the quarter three growth in APAC with 32%. It’s been strong on an ever-growing base. The mid to high 20s refer to the Investor Day, the planned period ’27 to ’29. And in that sense, of course we’re not giving an outlook for quarter four per region, but I think it will gradually move as the base is growing in APAC. Of course, like in any other region, we’ll steadily get to that growth rate across the planned period as we described in IDS today.

Laurent Vasilescu (Analyst)

Very helpful. And as my second follow-up question, I’d say it was very helpful to the Investor Day. I think you called out that you’re currently at 60% of Dick’s Sporting Goods doors and 15% for Foot Locker and JD with the ambition to get to 75% for 2029. I think you called out additional doors for this quarter. Curious, you know, how do we think about the 75% target? Is it a steady progression over the next three years or is there a material step in next year as you continue to have strong orders from these key accounts?

Caspar Coppetti (Founder and Co-CEO)

Yeah, thanks. That’s an excellent question. I mean, first off, I also want to share the good news that the strong progress in wholesale sellout in the US that we’ve seen and we reported on Investor Day, that has continued for the whole quarter. I think the numbers we outlined that you just repeated reflect also the investments that especially Dick’s are making in upgrading their fleet. They’re opening quite a large number of House of Sport stores.

They’re elevating some of their existing doors, and this means that we have a wider field to play with our own premium playbook. So, you know, don’t look at this number as a fixed number, but more of a kind of like a well-aligned number with our key partners of, you know, what is the premium environment that they can provide to them.

OPERATOR

Thank you. Thanks. Your next question comes from the line of Adrian Yee with Barclays. Your line is open. Please go ahead.

Adrian Yee (Analyst)

Great. Thank you very much. My first question is going to be on the LightSpray, obviously, technology. What have you learned from the early reads on it? And in the Analyst Day or the Investor Day, you talked about a 10% penetration target, but it was unclear about when we would get to that and how that changes the supply chain, the investments that you need to make over that horizon, and how you might accelerate that to get to a higher number on a shorter time period.

Thank you very much.

Caspar Coppetti (Founder and Co-CEO)

Thank you so much for your question. We love talking about innovation. Hey, look, LightSpray is well on track. We just saw quite a big uplift in demand for LightSpray after the football announcement because obviously the technology that the football boot is based on is LightSpray. And so that actually translated over to LightSpray sales of our existing models, mostly the LightSpray Cloudmonster Hyper. Now, unfortunately production is still quite below demand and we’re ramping up production very quickly.

So, you know, we have the two facilities, the one in Switzerland and the skilled factory in Korea. We’re just about to bring online a factory in Vietnam. And, you know, some of the football boots and most of the football boots will be made in Portugal. So by mid-year next year we’ll have four LightSpray locations in production. What’s very encouraging is to see, as we scale this technology, that our margins are becoming very attractive. One of the things that we have to manage, as every manufacturer has to manage, is the defect rate. And we’ve made fantastic progress towards a 5% defect rate, which is in line now with other technologies. And so, you know, I also want to give a shout-out to the technical team on our end that has managed this in a very short period of time.

Now, you know, if you look a bit ahead, and that’s to your 10% question, that is directional. Whether we hit that by ’29 or 2030 or ’28, I wouldn’t go too deep. What you can expect though is that we’re going to roll out LightSpray not just to our performance franchise, but it will also start to show up in our lifestyle or sneaker franchises. And we have quite a deep pipeline of how the technology becomes more vivid, has more optionality, has more color options and more texture, and so on.

And, you know, I would say expect some of that to land in ’28, where we will for the first time see the full potential of the technology.

Adrian Yee (Analyst)

Okay, great, thank you. And my follow-up question is on AI and the investments that you’re making there. You know, there’s some discussion about kind of a future world where AI somewhat disintermediates some of the brands. And I’m just thinking about how are you kind of philosophically thinking about kind of maintaining that customer connection, the brand and the experience, in order to kind of mitigate that risk. Thank you,

Caspar Coppetti (Founder and Co-CEO)

Thank you for the question. When it comes to AI and changing consumer surface, you of course know that we have seen the whole transition from desktop to mobile to social, and so that’s just the latest change of the surface and we’re very proactive about it. So a high percentage of our customer service conversations are already fully done with AI. That gives us a rich color on customers and it’s really a conversation. And if you can imagine that this happens at scale, not just in customer service, but then also on the overall services that we give consumers through the website, through retail, through our app, that of course is an incredible potential to engage with customers at scale through AI. So we’re definitely working on that.

And you’ve probably seen that we’ve, in a more tech-focused area of migrating completely from AWS to Google Cloud, used agentic to fully do that migration. Originally the plan was to do that in one and a half years. That whole process compressed down to three months just through the agentic move from AWS to Google. That’s been one of the case studies at the recent Google at Work conference of a complex process that is made much more efficient through agents.

And so if it can happen there, you can imagine what that means then for the consumer-facing technology.

OPERATOR

Your next question comes from the line of Anisha Sherman with Bernstein. Your line is open. Please go ahead.

Anisha Sherman (Analyst)

Thank you so much. I’m curious about the environment in the Americas. It’s nice to see the stronger growth in that region. Can you give some color on are you seeing an improvement in that promotional environment that you’ve now talked about for two quarters? And what drives your optimism in Q4 where you say that partners are at healthy inventory levels? Do you expect the promotional environment to continue to improve? And then a quick follow-up on your comments on wholesale versus DTC. Can you talk about your expectations for the mix in Q4? It seems like you saw a pull-forward in wholesale deliveries into Q3, while on the other side it seems like you pushed out some of the DTC retail growth into Q4. So can you give some color on where you expect the balance to be on the channels? Thank you.

Caspar Coppetti (Founder and Co-CEO)

Thank you. I’m happy to take the first part of the question. I would say especially in US wholesale, it’s pretty much the same story as in Q2 and Q3. In terms of promotional environment, we of course are a bit less affected by that. So we’re leading with innovation and our stories and we stay the course. So we’re very much basically unaffected by that. We focus on what we can control, and that is trying to keep inventory levels and our supply in the right balance.

Now, in Q2 we spoke about that we took measures to prepare for the upcoming generational shift in our running technologies. Some of that is now already in market. What we’re very encouraged by is that these signals are of course, you know, right now Cloudsurfer that is only available in run specialty. The strong sell-through signal has been noticed by our wholesale partners, and, you know, so the bigger boxes, and they’ve actually increased their spring ’27 orders on the back of that.

So we remain very, very confident that we will gain share in performance running in ’27. And of course on the lifestyle sneaker side there’s a, you know, a big trend away from the heritage styles to more innovation-led styles and On is heavily benefiting from that. So already this year we have been gaining quite a bit of market share in the sneaker space and we continue, we expect this trend to continue into ’27.

Frank

Thanks, Caspar. Yeah, I think, Anisha, to give a bit more color on the numbers: I think first of all what we have seen is that the first thing I would say in the US is that the sell-out has been beyond the sell-in, and that’s also why we are positive on the inventory developments. So this is an important factor. Of course, as we said in quarter two, we’ll spend a lot of time with our wholesale partners in order to drive the sell-out, and that has really worked.

The meaningful step-up has been there in quarter three, including a tight control of the sell-in. So we’re positive on the inventory levels. If we look further to quarter four, we will not of course guide specifically on the channels, but what we have said in the press release is that we expect an acceleration of quarter four growth versus quarter three, and that will be predominantly DTC-led. And the other point is on the wholesale: what we saw in quarter three was something that we can’t really control, that we had a bit of extra pickups from retailers, meaning that our growth—we said in the investor day we would land at about 17%—we were slightly ahead, which came predominantly from that.

And that will have obviously a corresponding impact on quarter four. But again, that’s why I think when we look at quarter four, we expect an acceleration, DTC-led.

Anisha Sherman (Analyst)

Thank you so much.

OPERATOR

Your next question comes from the line of Kelly Crago with BMO Capital Markets. Your line is open. Please go ahead.

Kelly Crago (Analyst)

Hi, thanks for taking your question. Great quarter. I just want to dig into the US wholesale channel a bit more. First, on the run specialty channel: you had some good callouts there around the Cloud Surfer 3. So just curious how that channel has been trending for you, how it’s trending now, and how you expect that to trend as we look ahead. And then I have one follow-up. Thanks.

Caspar Coppetti (Founder and Co-CEO)

Thank you. Yeah, the Run Specialty channel for us is something that’s very close to our heart because that’s where we started, and we still believe that’s where technologies are validated. So what we’ve done now with Cloud Surfer 3—this shoe was developed with a lot of input from our Run Specialty partners, a lot of insights. We also have a panel of Run Specialty owners that test the product. So we said, to honor that commitment that the channel has, the channel has access to it for the first three months exclusively.

That is obviously something that not a lot of brands have done or ever done, and so we’re getting a lot of love back. We’re definitely seeing that in the pull rates—how often On gets pulled—how other silhouettes, franchises are being sold, and we’re seeing it in the order rates going into ’27. If you look back maybe five years, our pure market share in the channel was maybe a bit higher than it is today, but it was a very different product mix at the time. The Run Specialty channel also sold our lifestyle footwear Cloud as a comfort shoe. And so we have kind of reset the distribution around our lifestyle product, and comfort is no longer part of Run Specialty. In fact we’re not doing comfort at all. If you compare the numbers, that explains part of the difference.

Right now we’re definitely seeing a very quick acceleration and a strong belief of the channel in us. And I’m personally going to travel out to the biggest trade show for the channel, The Running Event in San Antonio later this month, to also check in and get some feedback that we then can use again to build better product in the future.

Kelly Crago (Analyst)

Great, thank you. Yes, just on the lifestyle piece within the wholesale channel, as we’ve seen the market slow and the promotions step up and some big players out there having some challenges, I guess, how have the conversations gone with your retail partners? Are you seeing shelf space gains based on the market dynamics here, and has that impacted your order books as we look to ’27? Thanks.

Caspar Coppetti (Founder and Co-CEO)

Yes, yes, absolutely. So, again, overall the lifestyle market is down. We’re very significantly up, and maybe as a result, we’ve gained a lot of market share. And of course that is reflected in the shelf space that we’re getting. Our goal as On is to have basically—to stand on several legs in that channel. Obviously the Cloudtilt is an absolute blockbuster: in Europe it’s the number one selling sneaker, in the US and in Asia it’s in the top three.

What we’re very encouraged by now in this Q3 is that we’re starting other styles to be picked up heavily. First of all, the youth is discovering the Cloud, one of our original staples that’s now 12 years old, and they’re really almost like rediscovering it and giving it new meaning. So we’ve seen a lot of demand for that, especially in lighter colors. We also see, in addition to the high-stack trend that we’ve seen for quite a long time now in the market, a sleeker silhouette emerge, especially for the female customer.

And we have just launched two styles that cater to that: the Cloudnova Moon, Mary J that we launched with Sandia, and the Cloud Muse that we just launched. Both are getting really, really good pickup rates. So this continues to be a good story for us. And of course, as some of our competitors have not-so-strong innovation pipelines, also our key partners—so Foot Locker, JD, Snipes over here in Europe—they’re willing to trial things with us. And you can imagine if a consumer comes back into, say, a Foot Locker store and they see a new style from On, it’s a discovery process. And so that’s how we’re hoping to broaden our appeal with that consumer.

OPERATOR

Your next question comes from the line of Jay Sole with UBS. Your line is open. Please go ahead.

Jay Sole (Analyst)

Great, thank you so much. I think on the last call you talked about acceleration in sales growth, and we’re seeing that in fourth quarter from Q3. But I think with the broader rollout of the Cloud Surfer 3 starting in January, the strength of the Cloudtilt as we talked about, strong order rates and order books, do you expect to see a further acceleration into Q1? I think that was sort of the thinking if we go back last call. If you could talk about that, that would be great.

Thank you.

Frank

Yeah, thanks, Jay. For quarter one, we will not give guidance on the quarters for next year yet, but I would not necessarily—as of course running is one variant, I would say—so I would not assume a strong acceleration, a further acceleration in quarter one. Long story short, as of course it’s one part of the full portfolio. I think what is more important, if we look at the back end or the second half of 2027, then of course we will bring the super foams to the entire running franchise, including the Cloudrunner and the Cloudmonster.

And that effect is probably more meaningful because then it’ll be the full running franchise.

Jay Sole (Analyst)

Got it. All right, Frank, that’s very helpful, thank you. And maybe can you talk about how you’re raising your gross margin guidance? It also sounded like you’re making some incremental investments, taking the opportunity to reinvest some of that gross profit into the business. What were the incremental investments that you decided to make over the last few weeks? And can you talk about how you continue to plan to grow sales, obviously, and grow earnings above sales given, you know, there’s higher costs out there, there’s inflation across different commodities and things like that?

Can you talk about how you’re handling both those issues? Thank you.

Frank

Yes, thanks for asking, Jay. So indeed the gross margin has been trending really favorably, of course being a direct result of the full-price strategy that we have, the commercial policies, but also continued efficiencies coming through scale in the manufacturing and supply base. We have indeed decided recently to invest some of it into the business because of course the new sports are coming in new. We did not know that at the beginning of the year.

We’ll have a bit of production costs, for example, for the football launch in 2027. And also I think on the technology front we just see meaningful progress, as David just elaborated on. So we also don’t want to take the foot off the gas on that front. So important, I think most important, is that the investments are completely in line with our investor day narrative, as we explained. And secondly, that we are still maintaining our earnings outlook.

OPERATOR

Your next question comes from the line of Anna Andreeva with Piper Sandler. Your line is open. Please go ahead.

Anna Andreeva (Analyst)

Great, thank you so much for taking our question, and congrats. You mentioned earlier the expectation for DTC to accelerate sequentially in the fourth quarter. Can you talk about just what’s giving you that confidence? Are you seeing acceleration already quarter to date, and how should we think about that across the geographies? And just as a follow-up, you mentioned the factory in Vietnam for light spray coming online shortly, which is super interesting.

And you talked about ’26 capacity increase by, I think, 30-fold. So maybe talk about what can we expect from capacity from this new facility. Thank you so much.

David Allemann (Founder and Co-CEO)

So, Anna, thank you very much for your question. This is David. You’re right. I mean, D2C grew 25%, almost twice as fast as wholesale, and gained 2.6 points of share year over year. And I feel very few brands in our industry are growing their own channels at that rate. And we did that—and I think that’s important—we did that at full price, which is why our gross margin hit the record 66.9%. And we also achieved this despite high productivity, flagship openings shifting into Q4—for example, Munich and Miami Aventura.

So we had to offset that. The more interesting question, and I think that’s where you’re pointing to, is what is driving the growth. We’re putting even more energy into our D2C engine: younger customers, bigger baskets that mix footwear and apparel, and a stronger presence and preference for the brand through our retail stores, which of course is part of our long-term strategy. It follows our premium playbook—preference is earned and definitely is not bought. And that’s also what you saw from us in the last quarters, if I can give you a few examples.

So younger customers: our online customers under 24 almost doubled year over year. And that’s both men and women. There’s bigger baskets: people who come to us through apparel come back sooner and buy more. So we’re really kind of growing share of wallet as well. And then just the sheer presence through retail: 10 new stores in Q3, from Copenhagen to San Francisco, São Paulo. So we spoke about that in the call, and then if you think about how this goes into the next year, we basically told you at the investor day that we’re going to scale over the next three years to roughly 180 doors.

We’re currently closing in on 100 doors over the next months. So that’s of course then a whole lift for an overall D2C business. So it’s really an incredible energy. And that also shows in our latest product tracker that shows that nearly one in three heavy sneaker buyers says that they now prefer On. And our gain in preference was the biggest of the 12 brands that we tracked. So it’s really our premium playbook at work: earn preference, protect the price, and then economics compound.

Caspar Coppetti (Founder and Co-CEO)

Yes. And then, Anna, to your second question. A lot of these consumers are looking for a LightSpray product and we currently cannot make them fast enough. So that’s why the additional capacity in Vietnam will be very, very welcomed. Once fully built, this will more than double our capacity. But there’s also another reason why we’re opening it in Vietnam at this stage, because we want to, as I said earlier, have more product variety, so more expression of what a LightSpray product can look like.

And so we’re leveraging the proximity to our tier twos in Vietnam to pilot these things and then we can take them. The goal with LightSpray, of course, is to be closer to consumers with our manufacturing. So the things we have learned in Korea are now going to Vietnam and these things can then go to other locations that are still to come.

Anna Andreeva (Analyst)

That sounds great. Thank you so much.

OPERATOR

Your next question comes from the line of Alex Stratton with Morgan Stanley. Your line is open. Please go ahead.

Alex Stratton (Analyst)

Great. Thanks so much. Just a couple for you here. One final one just on DTC. Did that fall slightly below plan across geographies, or was that concentrated more heavily in one geography or another? And then separately, just on the high-teens revenue growth target from the investor day, can you just talk about how we should think about the shape of that over the three years? Thanks so much.

Caspar Coppetti (Founder and Co-CEO)

Thanks, Alex. On DTC, I think, as David said, we just see a lot of bright spots really, and we believe there is a lot of positive momentum, in particular also the younger consumer coming into our ecosystem. I think there’s a couple of ways to look at it. The reality is quarter two was a bit above our expectations, and quarter three was slightly below. But I would not necessarily read it as a trend, but more as fluctuations that you always see in a business more than any of that.

And that’s also why we are quite confident on the acceleration that we’ll see in quarter four back to in the range of that running rate year to date. That’s how I would mostly look at it. We also gave in the commentary a couple of additional colors, like there were two stores that came in a little bit late; instead of quarter three, launched in quarter four. Some of these details. Of course, in e-commerce you also have marketplaces that are inherently a bit more promotional. But all in all, I would stick to that sort of volatility that you typically see over the quarters.

If we then go to the second question on the outlook, the phasing of the growth in the high teens, the way we see it is that we’ll expect that we’ll be at the high end of that range in the beginning of the period and end at the lower end of the range. So not linear, but maybe somewhat linear, and there are a couple of reasons for that. I think the first one is that the full renovation of the Runner, the launch of the super foams across the full portfolio, will be in H2 2027, so that will also have a positive impact in 2028.

The second factor to call out is, of course, Los Angeles ’28 is going to be a big event also for us and we expect upside there. The third element is that the new sports, we will only launch them gradually in 2027, and there will be increased returns and growth coming from that in the second half of the planned period. And that’s why the growth we’ll see is as described, starting at the upper end of the range and ending a bit at the lower end of the range.

Hope that helps, Alex.

Alex Stratton (Analyst)

Thanks a lot.

OPERATOR

We have reached the end of the Q and A session. This concludes today’s call. Thank you so much for attending. You may now disconnect.

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