Swiss sportswear maker On Holding, known for its CloudTec running shoes and backed by tennis legend Roger Federer, has approved its first-ever share buyback program. The company authorized up to $1 billion in share repurchases through 2029, signaling confidence in its long-term growth prospects even as one of its key markets cools.
The announcement came during an investor day where On laid out its strategic roadmap for the rest of the decade. The company set ambitious targets, including high-teens annual sales growth through 2029 and net sales of at least 5.6 billion Swiss francs (roughly $6.2 billion). It also reiterated its 2026 goal of achieving a gross margin of at least 65%.
Expanding beyond running shoes
On has built its reputation on innovative running shoes, but the company is now pushing deeper into apparel and soccer. This diversification is a key part of its growth strategy, as it looks to reduce reliance on any single product category or region.
The move into soccer is particularly notable. On has already signed high-profile athletes and sponsorships, and it sees the sport as a major opportunity to expand its brand globally. Apparel, meanwhile, offers higher margins and recurring revenue potential, as customers often buy more than just shoes.
However, the company faces a challenge: growth in the Americas, its largest market, is slowing. This has raised questions about whether On can maintain its momentum. The new targets suggest management believes it can, but investors will be watching closely to see if the company can execute on its expansion plans.
What the buyback means
Share buybacks are a way for companies to return cash to shareholders. By repurchasing its own stock, On reduces the number of shares outstanding, which can boost earnings per share and support the share price. It also signals that management believes the stock is undervalued.
For On, this is a significant step. It's the company's first buyback, and the $1 billion authorization is substantial relative to its market value. It shows that On is generating enough cash to both invest in growth and return money to investors.
Buybacks are common among mature companies, but On is still in a growth phase. The decision to initiate one suggests that management is confident in the company's financial health and future cash flows.
What it means for investors
For everyday investors, On's announcement is a mixed signal. On one hand, the buyback and growth targets are positive signs. They indicate that the company is profitable, generating cash, and has a clear plan for the future.
On the other hand, the cooling growth in the Americas is a cautionary note. On's success has been driven by rapid expansion, and any slowdown could pressure its valuation. The company's ability to hit its high-teens growth target will depend on how well it can replicate its success in new categories and regions.
Investors should also consider the broader context. On operates in a competitive sportswear market, facing rivals like Nike and Adidas. Its premium positioning and innovative products have helped it stand out, but maintaining that edge will require continued investment.
The buyback program runs through 2029, giving On plenty of time to execute. But it also means the company is committing to returning cash to shareholders, which could limit its ability to make large acquisitions or investments in the future.
As with any investment, it's important to do your own research and consider your own financial goals. On's announcement is a positive development, but it's just one piece of the puzzle.
For more on how companies use buybacks to reward shareholders, see our analysis of Galp's buyback forecasts. And for a look at how other companies are navigating growth challenges, check out LVMH's recent struggles.
