What happened
Shares of On Holding (ONON 4.04%) were falling today after the footwear company posted disappointing results in its second-quarter earnings report.
As of 10:11 a.m. ET, the stock is down 17%.
So what
The Swiss running shoe company said that revenue jumped 52.3%, or 60% on a constant-currency basis, to $506.7 million, which topped estimates at $477.5 million.
Its direct-to-consumer channel remained strong, growing revenue by 54.7% and making up nearly 40% of sales, while gross margin improved from 55.1% to 59.5% as air freight usage decreased.
Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) also nearly doubled, from $35.8 million to $71.5 million.
However, an unrealized foreign exchange loss led adjusted earnings per share to fall from $0.14 to $0.04.
CEO Martin Hoffman said, "The strength of the On brand and continued exceptional growth is visible across channels, regions, and products. We are thrilled that we are visibly progressing further on our strategy and ambition to win credibility and market share in the performance space."
The company also gained traction in tennis after Iga Switek won the French Open women's singles title wearing On shoes, and it expanded the availability of the Cloudboom Echo 3, its fastest long-distance running shoe.
Now what
On is also raising its outlook slightly for the year, calling for full-year revenue of $2.01 billion, which was up from its previous forecast of at least $1.99 billion. That implies a 44% growth rate for the full year and a 30% growth rate for the second half. On a constant currency basis, it implies a 44% growth rate.
While the earnings report was generally solid, the stock is expensive, and revenue growth is strong but slowing. Plenty of footwear stocks have come and gone, and high expectations are baked into On given its market cap of near $10 billion.
However, if the company can continue to gain market share, the stock could be a winner.
