Key Points
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In September, the company authorized its first share buyback worth up to $1 billion.
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On is expanding its product lines into football and golf to increase market share and sales.
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The On Holding (NYSE: ONON) athletic shoes are gaining real attention and traction among athletes and everyday adults running errands. The company has been one of the fastest-growing brands this decade, but this year the stock is down about 23%. The problem seems to be an intentional slowdown that’s testing investors’ patience.
In August, shares dropped precipitously after second-quarter sales missed Wall Street’s estimates. On experienced the largest one-day drop in its history as a slowdown in wholesale racked investors’ nerves.
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It’s all part of the plan for On
The slowdown is intentional, however, as On is limiting shipments to retailers to promote full-price sales and make room for new products in the coming year. The business’s fundamentals look strong as well.
In its latest quarterly report, On’s direct-to-consumer sales grew 34.3% while gross margin widened to 65.4% year over year. Net sales in apparel were up 56.2%. Management expects constant-currency sales to grow in the low-20% range in 2026. While that’s a slight revision down from its previous guidance, it’s still a healthy trajectory as the company expands into other sports such as football and golf. The company is targeting $7 billion in sales with this expansion, an ambitious goal.
The shoe and sportswear company also recently authorized a $1 billion share buyback. On is trading at about 21 times trailing earnings, and with a price-to-earnings growth ratio well below 1 at 0.49. This suggests the stock is fairly priced and is actually currently under the analysts’ consensus price target of $43.55.
I don’t think there’s anything inherently wrong with On Holding, but investors should be patient as the company navigates through its slowdown and heads into 2027. The business’s growth may slow somewhat, but On is running on solid financial ground.
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Catie Hogan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends On Holding. The Motley Fool has a disclosure policy.
