On’s Record 72.6% Margin Includes CHF 52.6M of Tariff Cash

On Holding, the Swiss maker of On running shoes, reported a third-quarter gross profit margin of 72.6%, the highest in its history, in results filed with the SEC on 10 November. The figure includes CHF 52.6 million of U.S. tariff refunds; without them, the margin was 66.9%.

Gross profit rose by CHF 153.8 million to CHF 676.0 million, by our arithmetic from the filed figures. The tariff refunds equal about 34% of that increase, by our arithmetic, so roughly a third of the quarter’s gross profit gain came from money returned by U.S. Customs.

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What On Reported

Net sales rose 17.2% to CHF 931.4 million, or 17.8% at constant currency, the first quarter above CHF 900 million. Wall St Engine cited consensus estimates of CHF 929 million for sales and CHF 0.40 for adjusted earnings per share; On reported adjusted diluted earnings of CHF 0.54 a share.

Direct-to-consumer sales rose 25.0% to CHF 393.3 million, lifting the channel to 42.2% of net sales, while wholesale rose 12.2% to CHF 538.2 million. Asia-Pacific grew 31.1% to CHF 189.9 million, and EMEA passed CHF 250 million for the first time.

Net income rose 36.9% to CHF 162.8 million. Adjusted EBITDA was CHF 256.8 million, a margin of 27.6%, or 21.9% excluding the tariff refunds, against 22.6% a year earlier.

What Was Posted on X

Wall St Engine posted this summary of On Holding’s third-quarter results at 10:20 UTC on 10 November, including consensus estimates of CHF 929 million for sales and CHF 0.40 for adjusted EPS. This piece uses the post for those estimates only; every On figure above comes from the company’s SEC filing.

Where the Refunds Came From

The management discussion filed with the results explains the money. On February 20, 2026, the U.S. Supreme Court invalidated tariffs levied under the International Emergency Economic Powers Act, or IEEPA, and Customs opened an electronic refund system on April 20.

On says its total IEEPA tariffs paid are about CHF 57.4 million, of which about CHF 52.6 million were submitted and received. Because the duties related to inventory already sold, On booked the refunds as a reduction to cost of sales. By our arithmetic, that is about 92% of the IEEPA tariffs it paid.

After the quarter, On submitted further claims of about CHF 4.5 million, all accepted by Customs before 10 November. It has not recognised them yet, because recovery was “not virtually certain” at 30 September.

The Margin Without the Refunds

The filing says the refunds added 570 basis points to the quarter’s gross margin. The prior-year quarter included a one-off gain of about 200 basis points from lower-than-anticipated freight and other costs. Adjusting for both, On puts the underlying improvement at about 320 basis points.

Excluding the refunds, gross profit was CHF 623.4 million, up about 19% from a year earlier, by our arithmetic, against 29.5% as reported. On names operational efficiencies, favourable currency effects and a higher share of direct-to-consumer sales as the other drivers.

Frank Sluis, On’s CFO, said: “Products that consumers choose at full price, a higher share of sales through our own channels and the efficiencies of scale delivered the highest gross profit margin in On’s history, even before U.S. tariff refunds”.

Costs and Guidance

Spending grew faster than sales. Excluding share-based compensation, SG&A rose to 49.8% of net sales from 47.1%. Selling expenses rose 47.5% to CHF 96.2 million, which On attributes mainly to its expanding retail footprint.

On kept its forecast of full-year net sales growth in the low-20% range at constant currency, or CHF 3.47 billion to CHF 3.56 billion at current spot rates. It now guides a gross margin of about 67.5% including the refunds, and about 66% excluding them, up from at least 65%.

The adjusted EBITDA margin outlook is 21.0% to 21.5% including the refunds and an unchanged 19.5% to 20.0% excluding them. The filing also notes that in July 2026 the U.S. imposed Section 301 tariffs that “are expected to result in an increase in tariffs on our products”.

How It Fits Our Coverage

Tariff refunds have shown up in other results we covered: Apple discussed gross margin excluding them in DRAM Revenue Up 369%; Apple’s Implied Margin Step Is $2.2B, and an IEEPA refund appears among the items in Regal Rexnord Filing: Data Center Sales Up 4x to About $74M.

The Structural Read

As we read the filing, the refunds are a one-quarter cash recovery of duties already expensed: On had paid about CHF 57.4 million of IEEPA tariffs and has booked about 92% of it back, by our arithmetic, with a further CHF 4.5 million accepted but not yet recognised.

As we read the guidance, On separates the two: its gross margin outlook is about 67.5% with the refunds and about 66% without, so the like-for-like raise is from at least 65% to about 66%.

Three Implications

FOR MARGINS Adjusted EBITDA margin was 27.6%, or 21.9% excluding the tariff refunds, against 22.6% a year earlier.

FOR CHANNELS Direct-to-consumer sales rose 25.0% to CHF 393.3 million, 42.2% of net sales, which On names among the drivers of its gross margin.

FOR TARIFFS AHEAD The filing says Section 301 tariffs imposed in July 2026 are expected to raise tariffs on On’s products, and does not give an amount.

What Is Not Established

The filing does not split the underlying margin gain between pricing, channel mix and currency, or say how much the July Section 301 tariffs will cost. The conference call and the share-price reaction were not reviewed for this piece.

The Bottom Line

On’s record 72.6% gross margin includes CHF 52.6 million of refunded U.S. tariffs, about a third of its gross profit gain, by our arithmetic. Excluding them, the margin was 66.9%, which On calls the highest in its history even before the refunds.