On Holding runs on dollars and reports in francs

On Holding AG reported second quarter net sales of CHF 850.3 million on 11 August 2026, against expectations of about CHF 878.4 million. The shortfall was roughly CHF 28 million. The shares fell 20.29 percent that day and closed at $30.91, the largest single-day decline since the company listed in 2021.

The same release shows that currency translation removed more than twice that amount from the quarter. On publishes its accounts in Swiss francs and sells most of its shoes for dollars, euros and yen, so the sales figure investors compared against expectations had already been reduced by a year of exchange rate movement before anyone assessed the underlying business.

Two growth rates for the same three months

On is a Swiss company whose reporting currency differs from the currencies it earns in, so its release carries two figures for the same period. Net sales grew 13.5 percent, which is what the accounts state. Net sales also grew 21.6 percent on a constant currency basis, which is what the accounts would have stated had exchange rates remained where they were a year earlier. Both figures are accurate, and both appear in the same document.

The translation is larger than the shortfall

The company disclosed that net sales rose by CHF 101.1 million, which places the same quarter a year earlier at CHF 749.2 million. Applying the 21.6 percent constant currency growth rate to that base gives approximately CHF 911 million. The company booked CHF 850.3 million. The difference of roughly CHF 61 million is the amount translation removed.

Measured against a shortfall of about CHF 28 million, the currency effect was more than twice the size of the miss. At the prior year's exchange rates, the quarter would have exceeded expectations by approximately CHF 33 million rather than falling short. This figure is an approximation, because constant currency growth is calculated inside the company from actual transaction rates rather than from a published percentage, but the size of the gap is not sensitive to that estimate.

The Americas carries most of the effect

The drag is not distributed evenly across the business. Asia-Pacific lost 11.6 percentage points to translation and still reported 43.1 percent growth, which is high enough that the reduction attracted little attention. The Americas is the more consequential case, because it is the largest region at 53.6 percent of first-half sales. In the currencies where those sales were made, the Americas grew 13.0 percent. In the accounts, it grew 4.5 percent.

That figure does much of the damage on its own, because a reader scanning the release sees a company whose largest market has almost stopped growing. Part of the slowdown is a deliberate decision rather than an artefact of translation. On has been restricting shipments to wholesale partners in the Americas in order to protect full-price selling, and the filing states that it took further selective action during the third quarter and may take more before the year ends.

The company changed its functional currency in January

The management discussion contains a disclosure that makes this more than a question of arithmetic. Effective 1 January 2026, On Holding AG and On AG, the group's principal trading entity, changed their functional currency from the Swiss franc to the US dollar. Functional currency is the currency in which a business actually operates, meaning the currency of its prices, its costs and its cash flows. On concluded that its functional currency is the dollar.

Its presentation currency, which is the currency the financial statements are published in, remains the Swiss franc. The company therefore operates in dollars and reports in francs, and the difference between those two positions is recorded in other comprehensive income each quarter. None of this is improper, and IFRS permits a company to present its accounts in any currency it selects. The consequence is that the growth rate the market judges On by is denominated in a currency its own accountants have determined the business no longer runs on.

What changed in the guidance

The second contributor to the fall was the outlook. In May, On told investors to expect at least 23 percent constant currency growth for the full year, and it converted that figure into francs at prevailing spot rates. In August, the growth expectation became the low-20 percent range and the franc conversion was no longer provided.

Withdrawing the franc figure is the most informative change in the release. In May, when spot rates implied full-year sales of at least CHF 3.51 billion, the company was willing to perform the conversion on behalf of its readers. In August it was not, which left investors to translate a constant currency forecast into a reporting currency the company had stopped quoting.

The underlying business improved

It is worth stating plainly what did not deteriorate, because a 20 percent decline in the share price implies that something did. Gross margin reached 65.4 percent, up from 61.5 percent a year earlier, and the company raised its full-year margin guidance while absorbing higher US import tariffs. Results moved from a net loss of CHF 40.9 million to net income of CHF 105.0 million. Direct-to-consumer sales, which carry the highest margin, reached 45.7 percent of the total, and cash stood at CHF 1.21 billion.

The currency has a second effect that runs the other way. Part of the margin improvement came from what the filing describes as favorable foreign exchange impacts, because On purchases in dollars and a stronger franc makes those purchases cheaper once converted. The same exchange rate that reduced the reported top line supported the margin beneath it.

The stake that drew the attention

Roger Federer bought approximately 2.5 percent of On in 2019 for $50 million, and that holding is the majority of his measured wealth. When the shares fell on 11 August, Forbes marked his net worth at $952.4 million, below $1 billion for the first time in about a year. His position did not change that day. What changed was the share price, and a substantial part of the move traces to a reported growth rate that had been reduced by translation rather than to a decline in the business itself.

What would settle it

Two developments would resolve the ambiguity. The first is whether On moves its presentation currency to the dollar so that it matches the functional currency adopted in January. That change would close the gap immediately, and it would make the comparative figures difficult to read for a year afterwards. The second is the wholesale decision, which is a genuine choice about revenue rather than a consequence of arithmetic, and which the company has indicated may go further before December.

Until one of those happens, investors will continue to model a dollar business while reading a franc scoreboard, and quarters like this one will keep producing disagreements about whether a given number represents a miss or a translation.

Cover photograph: Swiss franc banknotes, by Tony Webster (opens in a new tab), via Wikimedia Commons, licensed CC BY 2.0 (opens in a new tab). Cropped and resized from the original.