Can ONON's Higher 2026 Margin Outlook Offset Tariff and Sales Risks?

On Holding AG ONON raised its 2026 gross-margin outlook after a second quarter marked by 21.6% constant-currency sales growth and wider profitability. The stronger margin view gives investors a clearer measure of the premium model's resilience.

The question is whether that cushion can hold as new U.S. tariffs increase product costs and management restrains wholesale shipments in promotional markets. Those pressures make second-half execution central to the outlook.

ONON Lifts Its 2026 Gross Margin Floor

ONON raised its full-year gross-margin expectation to at least 65% from at least 64.5%. It maintained adjusted earnings before interest, taxes, depreciation and amortization margin guidance of 19.5%-20%.

The higher gross-margin outlook reflects a richer direct-to-consumer mix, full-price discipline and operating efficiencies. It also excludes potential benefits from anticipated tariff refunds, leaving the operating drivers rather than refunds to support the stated floor.

ONON DTC Growth Is Doing More of the Heavy Lifting

Direct-to-consumer sales increased 34.3% at constant currency in the second quarter, compared with 12.7% growth in wholesale. The channel reached 45.7% of net sales, up from 41.1% a year earlier, and management expects it to strongly outperform wholesale in the second half.

That mix shift matters because ONON controls merchandising, pricing and brand presentation more directly in its own channels. Deckers Outdoor Corporation DECK also saw direct sales outpace wholesale for HOKA in its first quarter of fiscal 2027, with DTC up 17.3% and wholesale up 2.9%.

NIKE, Inc. NKE showed a different channel pattern in its fiscal 2026 fourth quarter, when currency-neutral wholesale revenues rose 1% and NIKE Direct revenues fell 9%. The contrast highlights how channel execution can meaningfully shape growth and margin outcomes across athletic footwear.

Tariffs Test ONON's Margin Resilience

Second-quarter gross margin expanded 390 basis points to 65.4%, while adjusted earnings before interest, taxes, depreciation and amortization margin rose to 19.8% from 18.2%. Freight efficiencies, a higher direct-to-consumer mix, premium positioning and favorable foreign exchange more than offset higher U.S. import duties.

The test becomes tougher from here. Additional Section 301 tariffs imposed in July 2026 are expected to increase duties on ONON's products, and the incremental earnings impact was not quantified. Further tariff pressure could require more sourcing, pricing or efficiency offsets to protect profitability.

ONON's Sales Outlook Reflects Wholesale Restraint

On Holding expects full-year 2026 constant-currency net sales growth in the low-20% range. Management deliberately restrained wholesale sell-in during the second quarter and early third quarter to protect channel inventory health and full-price integrity in a promotional marketplace.

That choice supports premium positioning and creates a cleaner runway for upcoming running-product launches, but it sacrifices some near-term volume. If promotions persist, additional shipment restraint could keep wholesale growth below the pace of direct-to-consumer demand.

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ONON's Style Signals Add Context to the Outlook

The higher margin floor strengthens the operating case, but tariffs and slower wholesale sell-in leave second-half execution risks intact. Margin durability therefore depends on whether direct-channel mix and efficiencies continue to offset higher product costs without creating a larger sales trade-off.

ONON currently carries a Zacks Rank #4 (Sell). Its Growth Score of A, Momentum Score of A and VGM Score of A point to favorable growth and momentum characteristics, while the Value Score of D is less supportive. Because the Style Scores are designed to complement the Zacks Rank, those A scores do not override the more cautious near-term Rank signal. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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