Mbappe boosts On's brand visibility, but hurdles to soccer success remain

• On missed Q2 sales estimates and faces slowing growth in its key Americas market, though it maintains a price-to-earnings ratio of 18.7, slightly above sportswear rivals
• Analysts compare the Mbappe deal to Under Armour's partnership with Stephen Curry, which established presence in basketball but failed to achieve Nike Jordan Brand-level cultural influence or scale
• Soccer requires massive investment with Adidas, Nike, and Puma outfitting 14, 12, and 11 national teams respectively at the FIFA World Cup, making 'performance credibility' difficult to buy

Summary

Swiss athletic footwear brand On Holding made a high-profile entry into soccer by signing French star Kylian Mbappe, who previously partnered with Nike for approximately two decades. However, analysts warn that translating this celebrity endorsement into actual sales growth will be challenging in the highly competitive soccer market dominated by Nike, Adidas, and Puma.

Key Challenges:

• On missed Q2 net sales estimates, raising investor concerns about slowing growth despite gaining market share from competitors
• The company faces increased competition in its key Americas market
• Soccer represents one of the most expensive and difficult categories to penetrate, requiring substantial marketing investment

Market Position:

On currently trades at a price-to-earnings ratio of 18.7, slightly above sportswear rivals, reflecting high growth expectations. At the recent World Cup, Adidas outfitted 14 national teams, while Nike and Puma sponsored 12 and 11 teams respectively, illustrating the entrenched competition.

Deal Structure:

Financial terms were not disclosed, but the Mbappe partnership includes both cash and equity components. For comparison, tennis star Roger Federer acquired approximately 2.5% equity stake when joining On from Nike in 2019.

Analyst Concerns:

Jefferies analyst Randy Konik compared the situation to Under Armour's Stephen Curry partnership, which helped establish the brand in basketball but failed to achieve Nike Jordan Brand-level success. Morningstar's David Swartz questioned whether the deal justifies its "undoubtedly high" cost.

On plans to leverage its LightSpray robotic manufacturing technology for soccer boots as it seeks new revenue engines beyond running and tennis.