Analyst: Wholesale Challenges at On Cause Concern

Jefferies analyst Randal Konik has some big questions about sneaker brand On Holding after conducting some channel checks.

In a research note on Monday, Konik described On’s outlet store at Woodbury Commons Premium Outlets a “ghost town,” adding that the store was “notably quiet for a Friday, with relatively new styles (Cloud 6) already on sale. He noted that Woodbury has the reputation as one of the highest-traffic outlet destinations in the country, and typically sees “meaningful weekend-adjacent volume.”

What concerned him was the presence of relatively new product, include the Cloud 6.

“Seeing new product at the outlet this early in its lifecycle suggests either that sell-through at full-price doors has disappointed or that On is proactively routing excessive inventory through its own off-price channel,” Konik wrote. “Either interpretation contradicts the premium, full-price positioning narrative that management has consistently communicated to investors and directly pressures GM (gross margin) assumptions.”

The analyst also said that a quiet Friday at the On outlet store “is not a good sign for a brand that management has positioned as demand-exceeding-supply. If the brand’s own outlet is struggling to draw consumers, it raises questions about where excess inventory is ultimately going to clear and at what margin cost.”

Konik did not mention what traffic was like at other outlet stores at Woodbury on Friday. But he did note that it wasn’t just the location that appeared to be an issue for On.

The visit to Woodbury followed a series of channel checks in South Florida last month that included JD Sports, Foot Locker, a Miami-based Run Specialty retailer, Nordstrom and Nordstrom Rack.

He wrote last month that those checks revealed a “stark contradiction to On managment’s full-price selling narrative,” adding that core stock-keeping units and core sizes were on sale, marked down more than once and at up to 50 percent off.

The JD Sports store in Sawgrass Mills had On sneakers marked down for sizes 6-11, not odd lots, contrary to management’s emphasis that a “no-discounting philosophy” is the cornerstone of On’s premium brand positioning. A research note indicated multiple markdowns at the Foot Locker store, also in Sawgrass Mills, while the Run Specialty door had a dedicated sales rack with several rows of core On sneakers at 50 percent off. And there were On models “sitting at full price at Nordstrom in Shops at Merrick Park [that] were available at steep discounts at Nordstrom Rack just down the street,” the analyst noted.

“When a consumer can find the same shoe at a fraction of the price five minutes away, full-price integrity is functionally compromised,” he concluded, adding that elevated Nordstrom inventory without sell-through “suggests an order book set when demand expectations were materiall higher.”

Konik said last week’s visit to the Nordstrom Rack store in New Jersey sent the “same structural signal.” The store had fewer On sale items versus South Florida. While he acknowledged that could be a positive, Konik also said that New Jersey is not a primary focus market for On the way South Florida is. Therefore, the “lighter promo presence may simply reflect lower sell-in levels and less wholesale emphasis, not better sell-through,” the Jefferies analyst concluded.

He also said that the heavier discounting observed in Miami could prove to be the more “bearish data point.” South Florida is a key market for On, where the brand has invested in distribution, marketing and DTC (direct-to-consumer) presence. The discounting he saw at several retailers “paints a picture of a wholesale channel under real stress in On’s own backyard,” Konik concluded, adding that if “full-price integrity is compromised in a focus market, the implications for retailer confidence and forward order books are material.”

Konik believes that the wholesale channel could be meaningfully breaking down, and that gross margin risk is higher than Wall Street assumes. And with paid search now at 77 percent of DTC traffic and organic demand stalling, “the brand is spending more to generate less,” the analyst concluded.

The analyst believes that shares of On are overvalued since the brand is at the higher end of its sportswear and footwear peer group and footwear sales growth is beginning to normalize.

Konik isn’t the only analyst expressing concerns.

“We remain concerned that On does not have the necessary ground game in place to understand and execute against the nuanced differences between and within the store base of its wholesale accounts,” Williams Trading analyst Sam Poser wrote in a research note in March. “As a result, many of On’s U.S. wholesale accounts are looking for alternatives as On’s segmentation and allocation strategies are based on what On hopes for, but not how the consumers are shopping.”

Poser also noted that he is beginning to see deceleration of sell-through rates at athletic specialty retailers such as Foot Locker and JD Sports, which is expected to become great as Nike regains momentum at those retailers.

The sneaker brand is dealing with other developments too, notably a second CEO change in a year. Last June saw the departure of co-CEO Marc Maurer. And this part March, On said in a surprise disclosure that Martin Hoffmann, who had been doing double-duty as co-CEO and CFO since Maurer left, would step down as CEO in May as part of a “planned hiatus” to pursue philanthropic interests. On cofounders David Allemann and Caspar Coppetti are now serving as co-CEOs, while Scott Maguire was promoted to president and chief operating officer. Joining the brand this month as CFO is Frank Sluis.

Meanwhile, On’s 2026 revenue guidance when it posted fourth-quarter results in March came in below expectations. For the fourth quarter, the company said sales of shoes rose 20.8 percent to 687.3 million Swiss francs. Earlier this year, some analysts said that future growth for the athletic performance brand could come from growing markets across Asia and EMEA (Europe, Asia and Middle East). And while almost none of the brand’s products are sourced from China, On Holding does feel the impact of tariffs on Vietnamese imports.

Meanwhile, On opened a Boston store in the Back Bay neighborhood just days before the running of the Boston Marathon on April 20. The brand in February also expanded its LightSpray shoe production with a new South Korean factory. And the brand in March evolved its Cyclon program on the circularity front to include the return of pre-loved On products and the purchase of refurbished gear.

Representatives for On did not respond to requests for comment.