On Holding AG is eyeing a business model that is expected to help insulate it somewhat from tariff surprises.

Martin Hoffmann, CEO and CFO, said that during the company’s second quarter earnings conference call to investors Tuesday that On implemented selective price increases in the U.S. in early July. He also said raising prices had no impact on the firm’s second quarter profitability.

“Considering our strong performance in Q2, continued powerful momentum in the first weeks of Q3, a strong order book for the fall/winter season and the continued efficiency tailwinds driven by our focus and commitment to operational excellence, we are increasing our 2025 guidance across all line items with high expectations for net sales growth, gross profit margin and adjusted EBITDA margin,” Hoffmann said. The company also raised guidance in the first quarter following an earnings report that was ahead of expectations.

The second quarter net loss was 40.9 Swiss francs, against net income of 30.8 million Swiss francs a year ago. Net sales grew by 38 percent to 749.2 million Swiss francs, from 567.7 Swiss francs a year ago.

The company now expects net sales at constant currency rates is forecasted to be up at least 31 percent year-over-year, ahead of prior guidance of at least 28 percent. Hoffmann said the increased outlook already includes the impact of a 20 percent incremental tariff on imports to the U.S. from Vietnam and the 10 percent assumed in previous guidance.

While not thrilled about the higher tariff rates, Hoffmann also isn’t worried about them. The CEO said that On has been paying around 20 percent import duty on the majority of imported product to the U.S. from its Southeast Asian manufacturing countries, and now that’s shifting to 40 percent for imports from Vietnam and to 39 percent for imports from Indonesia.

The U.S. disclosed last month that it has the framework for a preliminary trade agreement with Vietnam for a 20 percent tariff, with final terms still to be negotiated. The framework for a trade deal with Indonesia also disclosed last month, calls for a 19 percent tariff rate. Specifics for Trump’s trade deals have not been disclosed, and Hoffmann’s projections suggest that the new tariffs are stacked on top of existing duties.

“As a premium brand and as a fast-growing brand, we have multiple opportunities to compensate for these impacts of our cost sold,” he said. Hoffmann said investments and the upscaling of On’s abilities to drive more gross profit margin translates into innovative products that come at higher price points. Those factors have increased the DTC mix, created economies of scale on product cost and fostered supply chain optimization.

And even though there have been select price increases, there’s still one more option that On hasn’t yet needed to do.

“We have not even yet spoken to our retail partners, our factory partners, about mitigation efforts, which is still something we can do, but we haven’t needed it yet. So this gives us the confidence to raise basically all our financial numbers,” the CEO said.

Hoffman said that while the company is just a year-and-a-half into its three-year strategic plan, On is “far ahead of expectations.” He said the momentum for brand awareness growth will “carry forward with the launch of the Cloudboom MAX next week,” describing it as the first super shoe for the everyday runner and one that he and others at On will be wearing in their fall marathons.

The CEO also said that gross profit margin increased by 160 basis points year-over-year to 61.5 percent, an indication of the strength of the premium position of the brand. “The year-over-year increase was primarily driven by the high DTC share, lower freight expenses as well as a net foreign exchange tailwind from the further depreciation of the U.S. dollar during the quarter,” he said.

As On continues to build iconic footwear franchises, the company also is starting to merge sports with fashion as it aims for a premium lifestyle focus with higher price points that allow for high profit margins.

“What truly excites me is that we’re not just creating footwear, we’re building iconic franchises. Today, we have nine distinct footwear franchises, each contributing more than 5 percent to our top line,” co-founder and co-chairman David Allemann said on the conference call. “That kind of balance isn’t an accident. It’s the result of a year’s long focused strategy to build resilience into our portfolio.”

He noted that the company is building a business that has the potential to have a “very high margin profile.” The business model has the brand expanding beyond footwear to include apparel. That transforms On to “somewhere between a sports brand and a fashion brand,” with a placement at the “intersection of performance, innovation and fashion” that allows it to have “very, very high price points,” the co-chairman said.

Iconic footwear franchises include Cloudsurfer and Cloudmonster, and the Swiss brand is seeing momentum with the newly launched Cloud 6. Footwear sales in the second quarter ended June 30 rose 36.0 percent at constant exchange. Apparel, representing just about 7 percent of total sales, is gaining traction. The Zurich-based brand previewed its Spring/Summer ’26 collection during Paris Fashion Week, and is set to launch an apparel line with brand ambassador Zendaya this fall. “What connects footwear and apparel is On’s strive in technological innovation and our routes in Swiss engineering and design,” Allemann said, noting that those factors allows the firm to “build a truly resilient portfolio.”

“But our product resilience is about more than just footwear and apparel — it’s our commitment to win in multiple sports,” Allemann said. “We started in running, but we successfully expanded to trail, outdoor, tennis and training, moving us closer to our vision of being the most premium holistic sportswear brand.”

He also emphasized that while On is fundamentally a sports brand, the cultural shift towards sport as the new “uniform” creates a lifestyle focus that unlocks a much larger addressable market. One example cited was the recent Loewe x On Cloudtilt collaboration sneaker, which retailed at $590 a pair and was “sold out almost entirely within days.”

The co-chairman said that wholesale — up 23 percent in the quarter — remains a vital distribution channel, citing success with “over 11,000 stores globally from the biggest players to local running specialty.” But it is the direct-to-consumer (DTC) business that is the standout that has driven large gains, both online and in physical retail. DTC represents 41.1 percent of total sales and remains a huge growth area for On.

The company, which operates 54 company-owned stores worldwide, is also seeing untapped potential for stores across Europe, particularly in France, Italy and Spain, as well as triple-digit growth in Asia, especially in Singapore and Thailand.

The co-founder also noted that a few weeks ago, the company launched its first LightSpray factory in Zurich, with four robotic arms. “It’s a path to the future of manufacturing, faster, less labor-intensive, in various locations with a much simpler supply chain that’s closer to consumer demand,” Allemann said. LightSpray technology cuts a multi-part production process into a three-minute, minimal-waste step, creating the lightest racing shoe — its Cloudboom Strike LS — that weighs just 170 grams.