\n\tIn a surprise announcement, On revealed<\/a> that Martin Hoffmann will step down as chief executive officer in May as part of a \u201cplanned hiatus\u201d to pursue philanthropic interests. In turn, On cofounders David Allemann and Caspar Coppetti now will serve as co-CEOs and Scott Maguire will be promoted to president and chief operating officer.<\/p>\n \n\tOn executives noted that the changes will not impact its 2026 guidance<\/a>, which calls for net sales to grow by at least 23 percent on a constant currency basis for the full year. That implies reported net sales of at least 3.44 billion Swiss francs. The company also noted earlier this month in its most recent earnings report that it anticipates \u201ccontinued elevated profitability\u201d in 2026, with a full-year gross profit margin of at least 63 percent and an adjusted EBITDA margin between 18.5 percent and 19 percent.<\/p>\n \n\tBut market watchers are skeptical of both the CEO change and other shifting trends, including a slowdown in the American business, the lack of a clear wholesale strategy and slipping DTC sales. <\/p>\n \n\tJefferies\u2019 equity analyst Randal Konik pointed to the departure of co-CEO Marc Maurer<\/a> just one year ago as a bad sign. \u201cThe departure of two CEOs in a year is notable for a company that considers itself in the first inning of growth,\u201d Konik wrote in a research note on Wednesday. \u201cWe see this as a reaction to [business] complexity rising and competitive pressure building. [The total addressable market] of On is not as big as the market thinks, so growth will slow, margins will compress, and the stock price will decline substantially.\u201d<\/p>\n \n\tKonik also called out On\u2019s slowdown in its Americas business and its direct-to-consumer channel as pause for concern.<\/p>\n \n\t\u201cDTC slowdown may already be happening,\u201d he wrote. \u201cMoreover, paid search is rising, which may indicate the company is trying to drive new customer growth. Americas business is slowing too. USA in particular only up 13 percent in \u201925, slowing roughly 1,300 basis points from last year\u2019s trend. If USA goes negative in \u201927, it doesn\u2019t matter what growth occurs in China.\u201d<\/p>\n \n\tAs for William Trading analyst Sam Poser, the executive changes have led his firm to reduce its price target from $44 a share to $41 a share. The analyst suggested that On needs more work on its wholesale channel to succeed in the future.<\/p>\n \t\t\t\t\t\t \t\t\t\t\tScott Maguire, Olivier Bernhard, David Allemann and Caspar Coppetti.<\/p>\n \t\t\t\t\t\t\t\t\tCourtesy of On<\/p>\n \n\t\u201cWe 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,\u201d Poser wrote in a research note. \u201cAs a result, many of On\u2019s U.S. wholesale accounts are looking for alternatives as On\u2019s segmentation and allocation strategies are based on what On hopes for, but not how the consumers are shopping.\u201d<\/p>\n \n\tPoser added that he expects, and is beginning to see, deceleration of sell-through rates at athletic specialty retailers like Foot Locker and JD Sports, which will likely become greater, and more evident as Nike regains momentum at those retailers.<\/p>\n \n\tKonik agreed with this take as well, adding in his note that Nike\u2019s big marketing and research and development budgets will make it harder for On to sustain its previous easy share gains in the years ahead.<\/p>\n \n\t\u201cWe expect On\u2019s growth will moderate through \u201926 and beyond, as the company faces tougher comparisons, rising competition and DTC and apparel benefits plateau,\u201d Konik said. \u201cWholesale door expansion is slowing and On appears increasingly dependent on paid search to drive DTC traffic. Bottom line, we see parallels with brands such as K-Swiss or Puma \u2014 brands that, historically, have had a niche, then a star moment, then fade.\u201d<\/p>\n \n\tFor Jonathan Komp, senior research analyst at Baird Equity Research, he\u2019s a bit more optimistic of On\u2019s leadership changes \u2014 adding in a note that Maguire taking a larger role at the company is a \u201ckey positive\u201d for On.<\/p>\n \n\t\u201cIn our interactions, we have been impressed by Maguire\u2019s executive leadership background and expertise as a product-led operator, which we believe has brought an important fresh perspective<\/a> to On\u2019s executive leadership team,\u201d Komp wrote.<\/p>\n \n\tThe analyst added that Allemann and Coppetti taking on a larger role in the company is also a good thing.<\/p>\n![\"Scott](\"https:\/\/wwd.com\/wp-content\/themes\/vip\/pmc-wwd-2021\/assets\/public\/lazyload-fallback.gif\")
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