Key Takeaways
- The athletic apparel market presents a classic narrative of a legacy incumbent, Nike, navigating operational challenges versus a high-growth challenger, On, whose valuation reflects immense optimism.
- Financial data reveals a stark divergence: On delivers superior percentage growth and gross margins (over 61%), while Nike’s immense scale provides stability but faces revenue stagnation and margin pressure.
- Strategic focus differs significantly; Nike is undertaking a multi-year turnaround centred on product innovation and rightsizing its distribution channels, whereas On is focused on scaling its premium brand into new categories and geographies.
- For investors, the comparison hinges on execution risk. Nike represents a potential value play if its recovery materialises, while On is a growth investment priced for near perfection, making it vulnerable to any deceleration.
The contest for dominance in the global sportswear market has become a fascinating study of contrasting corporate lifecycles. On one side stands Nike, the undisputed incumbent, grappling with the immense challenge of steering a supertanker through shifting consumer currents. On the other is On Holding, the Swiss upstart whose meteoric rise and premium positioning have captivated both runners and investors. To view this as a simple footrace between two shoe companies is to miss the point; it is a live-fire exercise in strategy, brand equity, and the starkly different expectations embedded in their respective stock valuations.
A Tale of Two Financial Trajectories
An examination of the most recent financial reports from both companies illuminates the core of the investor dilemma. While Nike’s sheer scale dwarfs On in absolute terms, the growth and profitability metrics tell a story of divergent momentum. Nike is navigating a period of stagnation and strategic recalibration, whereas On continues to post the kind of growth figures that command a significant market premium.
Nike’s fourth quarter results for fiscal 2024 revealed revenues of $12.6 billion, a 2% decline on the prior year. More tellingly, its wholesale revenues fell by 5%, while its much-vaunted NIKE Direct to Consumer (DTC) business was flat.1 In stark contrast, On’s first quarter of 2024 saw net sales surge by over 20% to CHF 508.2 million, with its own DTC channel growing an impressive 39%.2
Perhaps the most critical point of comparison lies in profitability. On has achieved a gross profit margin of 61.3%, a figure that reflects its premium pricing strategy and disciplined management. Nike’s margin, while healthy for its scale at 44.7%, points to the competitive and promotional pressures inherent in serving a mass market. This divergence is not trivial; it is the engine of On’s valuation and the central challenge for Nike’s recovery narrative.
| Financial Metric | Nike, Inc. (NKE) | On Holding AG (ONON) |
|---|---|---|
| Most Recent Quarter | Q4 Fiscal 2024 (ended May 31, 2024) | Q1 2024 (ended March 31, 2024) |
| Revenue | $12.6 billion (-2% YoY) | CHF 508.2 million (+20.9% YoY) |
| Gross Profit Margin | 44.7% | 61.3% |
| DTC Channel Growth | Flat (currency neutral) | +39.0% (currency neutral) |
| Net Income | $1.5 billion (+45% YoY) | CHF 91.4 million (+103.1% YoY) |
| Sources: Nike, Inc. Q4 2024 Earnings Release; On Holding AG Q1 2024 Earnings Release. | ||
The Strategic Battleground
Beyond the numbers, the strategic priorities of each firm are drifting further apart. Nike’s leadership has been candid about its recent missteps, acknowledging a dilution of its brand through an overextended product line and a somewhat clumsy execution of its DTC strategy. The company is now embarking on what it calls a “multi-year product innovation cycle,” effectively promising a return to the groundbreaking products that once secured its cultural and commercial dominance.3 It is also rebuilding bridges with its wholesale partners, a tacit admission that its pivot away from them may have been too aggressive.
On, meanwhile, faces the challenges of success. Its primary task is to scale its operations and expand its product portfolio without losing the premium allure that justifies its margins. The brand has moved from its core running base into adjacent categories like tennis apparel and everyday “athleisure,” a well-trodden path with its own perils.4 Maintaining brand heat while growing into a global powerhouse is a delicate balancing act. Its ability to manage inventory and distribution as it scales will be a critical test of its operational maturity.
Valuation and The Path Forward
The market’s assessment of these two companies could not be more different. Nike trades at a valuation that reflects its incumbent status and recent struggles, making it a potential, if not uncertain, turnaround story. An investment in Nike is a wager that its immense resources, brand recognition, and logistical prowess can successfully engineer a return to form. The risk is that the company becomes a value trap, unable to reignite the innovation engine and losing further ground to more nimble competitors.
Conversely, On is priced for continued, almost flawless, execution. Its high price-to-sales multiple is predicated on maintaining its steep growth trajectory and robust margins for the foreseeable future. Any significant deceleration in growth, compression in margins, or misstep in brand strategy could trigger a severe re-rating of its stock. For investors, the question is whether On can grow into its valuation by capturing a meaningful slice of the global market currently held by giants like Nike and Adidas.
Ultimately, the competition between Nike and On is less about a single product and more about the viability of two opposing business models in a changing market. The coming years will reveal whether Nike’s scale can overcome its strategic inertia, or if On’s focused, premium approach can be scaled into a new industry template. The speculative hypothesis is this: the decisive factor will not be marketing spend, but supply chain mastery. If On can scale its global distribution without succumbing to the discounting and brand dilution that plague mass-market players, it will not just challenge Nike; it will provide a new playbook for 21st-century brand building.
References
- NIKE, Inc. (2024, June 27). NIKE, Inc. Reports Fiscal 2024 Fourth Quarter and Full Year Results. Nike News. Retrieved from https://about.nike.com/en/newsroom/releases/nike-inc-reports-fiscal-2024-fourth-quarter-and-full-year-results
- On Holding AG. (2024, May 14). On delivers record Q1 results and raises full-year profit outlook. On Investor Relations. Retrieved from https://investors.on-running.com/news-releases/news-release-details/delivers-record-q1-results-and-raises-full-year-profit
- Friend, T. (2024). Nike Earnings Preview: Shares Keep Falling on Turnaround Doubts. Yahoo Finance. Retrieved from https://finance.yahoo.com/news/nike-earnings-preview-shares-keep-151500435.html
- Stoll, J. (2024). On vs. Hoka: The Running Shoe Battle for Supremacy. The Wall Street Journal. Retrieved from https://www.wsj.com/style/fashion/on-hoka-running-sneakers-7f41f02c
