Aug 11 (Reuters) – Sportswear brand On missed Wall Street estimates for second-quarter net sales on Tuesday, as a tougher consumer environment and higher costs from U.S. tariffs weighed on demand.
The company 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. The U.S.-listed shares of On were down 14% in premarket trading.
Consumers have become more selective about discretionary spending in an uncertain economy, making them increasingly wary of premium-priced brands such as On.
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%.
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.
On, founded in 2010 and known for its sneakers’ distinctive hollow soles, has rapidly muscled into a sportswear market previously dominated by Nike and Adidas, eating into both brands’ market share.
Adidas’ shares dropped about 12% after the company missed quarterly profit estimates last month.
($1 = 0.8110 Swiss francs)
(Reporting by Angela Christy in Bengaluru and Helen Reid in London; Editing by Janane Venkatraman and Tasim Zahid)
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