On Holding (NYSE:ONON) reports its next quarterly results next month, and investors will go straight to sales growth. Management has already guided the third quarter to about 17% in constant currency, which strips out exchange-rate swings, compared with 21.6% in the second quarter. But a slower pace is only part of the story, because On is choosing some of it. The company says it is deliberately limiting how much it sells to retailers, so it doesn’t have to join a promotional market where discounting is common.
The company is a Zurich-based maker of premium running shoes that has added apparel, tennis gear and everyday sneakers. It sells through its own website and stores and through retailers, and the own channels earn better margins. That makes the slowdown look more like a decision than a crack, though the decision only pays off if the faster channels fill the gap. Investors who want more fast-growing stocks can find On Holding in our recent list 10 Best Future Stocks to Buy for the Next 5 Years.
Own Stores and Asia Carry the Growth
Direct-to-consumer sales made up 45.7% of second-quarter net sales, the highest share On has recorded for that quarter. That mix helped lift gross margin to 65.4% from 61.5% a year earlier, even though On absorbed higher US import tariffs.
The growth is also spreading beyond running shoes. Asia-Pacific sales rose 54.7% in constant currency and now supply more than a fifth of the total, while apparel sales also grew quickly. That breadth gives On other places to grow while it pulls back in wholesale. If you’re interested in fast-growing consumer names, we recently compiled a report on 10 Fastest Growing Consumer Stocks to Buy Now.
Profit is growing faster than sales, and adjusted EBITDA rose 23.5% against a 13.5% increase in reported sales. On is also opening stores in places like São Paulo and Copenhagen. Over the past five years, revenue grew about 51.6% a year, which is why even 21.6% now reads as a slowdown.
The Americas Wholesale Business Is Cooling
Investors had priced On for exceptional growth, and the Americas is where the pace has slipped most. Sales there rose 13.0% in constant currency in the second quarter, down from 15.0% for the first half, and that was the slowest of On’s three regions.
Management says the wholesale slowdown is intentional. CFO Frank Sluis said On will not give up full-price sales for volume, even in a heavily promotional environment. The company expects its own channels to strongly outperform wholesale in the second half.
That explanation is believable, because gross margin rose instead of falling, which is not what forced discounting looks like. But it leaves a gap, since the plan unveiled at last month’s investor day calls for high-teens annual growth through 2029 and sales of at least CHF 5.6 billion. Wholesale is still the larger channel, so the faster channels have to make up the difference.
What Investors Now Pay for On’s Growth
The forward P/E ratio, which compares the share price with the earnings analysts expect next, sits at 20.00 on adjusted figures. That is 29.88% above the sector median of 15.40, so investors still pay a premium for On’s growth. But it is 66.00% below On’s own five-year average of 58.83, which shows how much of the old excitement has left the price. If you own the stock, you own it at a far lower multiple than in its fast-growth years.
Hedge funds have not left, and the number holding the stock rose to 54 in the second quarter of 2026 from 52 in the first quarter. That small gain came as growth slowed. Short sellers see it differently, with 11.10% of the float sold short. Those traders borrow shares and sell them, so they win only if the price falls, which means they are betting the slowdown deepens. For investors looking for cheaper growth, our list of 10 Undervalued Growth Stocks to Buy Now is worth a look.
The company has also authorized its first buyback, up to $1 billion through 2029, which management links to strong cash generation. Margins look secure, so the headline’s question comes down to growth. A third quarter near 17% in constant currency, with gross margin still strong, would show the slowdown is the managed kind. A weaker Americas would hand short sellers a stronger case.
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This article is originally published at Insider Monkey.
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