On: The Squeak Test

Investment Council: ONON: pending →

All current verdicts: The Verdict Board →

In January 2025, the stock touched $63.62. On May 30, 2026, it closed at $40.80. The 52-week high is $61.29; the 52-week low is $31.41. The stock has fallen approximately 35% from its 52-week high. Market cap is about $13.6 billion.

The decline has three named causes and one that nobody talks about at earnings calls.

Named cause 1: guidance that disappointed a market priced for perfection. In early March 2026, On reported record FY2025 sales of CHF 3.01 billion — up 30% year-over-year — with gross margin of 62.8% and adjusted EBITDA of CHF 567 million. But the 2026 guidance called for "at least 23%" constant-currency growth, well below the 35.6% pace of 2025 and short of the ~CHF 3.7 billion that sell-side models had penciled in. The stock fell 14% in pre-market. Jefferies wrote that "competitive intensity rising" and "premium positioning alone may not be enough." The company was growing faster than nearly any peer in athletic footwear. It just was not growing fast enough relative to its own multiple.

Named cause 2: the CEO left. Martin Hoffmann, who had served as CEO and CFO for 13 years, announced in early 2026 that he was stepping down effective May 1, 2026, to "take a planned hiatus and pursue philanthropic interests." The stock dropped 10% on the news. Co-founders David Allemann and Caspar Coppetti stepped in as co-CEOs. Scott Maguire was promoted to President and COO; Frank Sluis became CFO. The market read the move as the professional operator handing back control to the founders — a governance regression in the eyes of institutional investors who had been buying the "Swiss Nike" thesis.

Named cause 3: tariffs hit the growth engine. On absorbed $70.4 million in tariff costs in Q1 2026 alone, largely from its Vietnam sourcing concentration. KeyBanc cut its price target to $43, citing tariff headwinds as a structural overhang. Management told the Q1 earnings call that 2026 guidance was built on a 20% tariff assumption but acknowledged "potential outcomes still uncertain."

The cause nobody talks about: the shoe squeaks. In October 2025, a class action was filed in U.S. District Court in Portland alleging that On's signature CloudTec technology — the hollow-pod sole design that defines the brand — causes a "noisy and embarrassing squeak." At least 11 styles are named in the complaint, including the Cloud 5, Cloud 6, CloudMonster, and Cloudrunner. On's warranty explicitly excludes noise as "normal wear and tear." The case is in discovery. TikTok lit up. The Better Business Bureau logged 300 complaints in three years, with squeaking and premature sole deterioration as the two dominant themes.

The squeak matters because it is not a random defect. It is a design consequence of the same CloudTec architecture that On markets as its core innovation and prices at a 30-40% premium to Nike and Adidas equivalents. The question the market has not priced is whether the product's signature feature is also its signature liability.

That is how On got to $40.

The company is healthy. Revenue is accelerating internationally. Margins are expanding. Cash generation is strong.

The story this table tells is: "decelerating premium growth brand absorbing tariff and FX headwinds while margins expand and the geographic mix shifts east." The financial health is not in question. The brand health is.

Every claim about consumer sentiment in this report is sourced and counted.

The Trustpilot sample (3,223) is statistically robust. The BBB complaint base (300) is sufficient for trend analysis. Glassdoor (262 reviews) meets the floor for directional reading.

On AG carries a 1.3-star Trustpilot rating on 3,223 reviews. An estimated 83% of reviews are 1-star. The 95% confidence interval for the 1-star proportion is 81.7% to 84.3%.

Test: One-sample Z-test against a 65% industry baseline for athletic footwear retailers on Trustpilot.

Trustpilot skews negative across all consumer brands — the platform attracts aggrieved customers. But even within that self-selection, On's 83% 1-star rate is extreme. The conservative industry baseline for athletic footwear on Trustpilot is approximately 65% 1-star (Nike: 1.6 stars, Hoka: ~1.8 stars).

Z = 21.38, p < 0.0001.

The 1-star rate is 18 percentage points above the already-high industry baseline. The difference is not explainable by sampling variation at n = 3,223. On has a statistically significant complaint concentration problem that exceeds the normal platform skew.

The dominant complaint themes: (1) squeaking — the subject of the class action, (2) premature sole and upper deterioration, (3) refund and return difficulties, (4) customer service unresponsiveness. On replies to 96% of negative Trustpilot reviews — they are aware and engaged. The resolution rate is the question.

BBB logged 300 complaints in three years. Of these, 59 were filed in the last 12 months — an average of 4.9 per month. The prior 24 months averaged 10.0 complaints per month.

Test: Poisson rate comparison (two-sample Z-test on monthly complaint rates).

Z = -5.02, p < 0.0001.

The complaint rate has declined by 51% over the last 12 months versus the prior 24-month average. This is statistically significant and directionally positive. Two interpretations: (1) On's customer service improvements are reducing BBB escalation, or (2) the class action lawsuit, filed October 2025, is channeling complaints into the legal system instead.

The decline does not mean the product issues are resolved. The class action is active. The Trustpilot reviews continue to accumulate. What has changed is where customers file.

The P&L shows a company growing 26% with expanding margins. The customer review data shows a brand whose flagship technology generates a federal lawsuit. The gap between these two realities is the trade.

1. The CloudTec durability problem is not a warranty line item yet. On's warranty explicitly excludes squeaking as "normal wear and tear." Warranty claims for the single most-cited defect are denied by policy, which reduces warranty expense on the P&L while increasing complaint volume on public platforms. The financial statements undercount the quality issue by design.

2. The Zendaya halo has not been tested by the squeaking narrative. On's marketing strategy is built on Zendaya as brand ambassador, with Spike Jonze-directed campaigns and a co-created collection launching April 2026. The campaign is working — Q1 DTC sales grew 16.4%. But TikTok squeaking videos and the class action generate their own media cycle. The two narratives have not yet collided in mainstream press. When they do, the brand premium faces a stress test.

3. The co-CEO transition is happening at the worst possible time for product credibility. David Allemann and Caspar Coppetti designed CloudTec. Returning to the CEO role while CloudTec is under class-action scrutiny creates a narrative tension: the inventors of the technology are now responsible for adjudicating whether the technology has a design flaw. Professional managers can say "we identified and fixed a product issue." Founders cannot say "the thing I invented is broken" without destroying brand equity.

Recovering:

NOT recovering:

Unknown:

1. Trustpilot is a complaint-driven platform. The 83% 1-star rate does not mean 83% of On customers are unhappy. It means 83% of customers who go to Trustpilot have a complaint. The true satisfaction rate across all buyers is almost certainly higher.

2. The BBB complaint decline may reflect channel shift, not improvement. The 51% drop coincides with the class action filing in October 2025. Customers may be joining the class action instead of filing with BBB.

3. Glassdoor sample is modest. At 262 reviews for a ~3,500-employee company (7.5% sample rate), the data is directional but not definitive.

4. Revenue growth is real. CHF 3 billion in annual sales, 64% gross margin, net cash — this is a financially healthy company. The risk is brand, not balance sheet.

5. The class action has no settlement. The financial impact is speculative. But the reputational impact is already visible in the review data.

The bull case and the bear case turn on the same question: does the CloudTec quality issue cap the brand's premium positioning, or does international growth and Zendaya-driven marketing drown out the noise?

Bear case: The Americas have stalled (+3% Q1). The class action forces a CloudTec redesign or warranty expansion, compressing margins. The Trustpilot 1.3 enters mainstream consumer awareness. Employee morale at 3.0 Glassdoor constrains talent for the 100-store expansion. The co-founder CEOs cannot acknowledge a design flaw. Stock revisits the $31 low.

Bull case: Q1 was seasonally soft in the Americas; Q2-Q3 reaccelerate. APAC and EMEA carry the growth story to CHF 3.5B+. The class action settles quietly for immaterial amounts. The Zendaya collection drives DTC mix higher, expanding gross margins past 65%. The co-founders' product obsession is actually an asset. Stock re-rates to $55-60.

Now ($40.80): The stock is trading at approximately 29x consensus 2026 EPS — a premium multiple for a company guiding 23% growth (down from 30-36% in prior years). The premium is justified only if the brand-quality narrative stabilizes. The consumer data suggests the brand is under more stress than the multiple reflects.

Next catalyst — Q2 2026 earnings (August 18, 2026): The key metric is Americas growth. Q1's +3% was the weakest quarter in On's public history for its largest region. If Q2 shows Americas reaccelerating above 10%, the stock re-rates toward $50. If Americas stays in low-single-digits while APAC carries, the market will start asking whether On is a one-region story.

Decider date — the class action resolution window (H2 2026 – H1 2027): The squeaking lawsuit moves through discovery in 2026. A quiet settlement removes the tail risk. A public trial or forced product modification puts the CloudTec brand story on the witness stand. The litigation outcome is the swing factor that separates the $55 bull case from the $28 bear case.

When On reports Q2 2026 on August 18, subscribers get:

On's story is the oldest tension in premium brands: the gap between what the marketing says the product is and what the customer's shoe sounds like when they walk across a quiet office.

We will be listening.

Investment Council: ONON: pending →

All current verdicts: The Verdict Board →

Turnaround Radar · Issue 43 · May 30, 2026

Not investment advice. Do your own research.