Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: You're listening to Bloomberg Business Week with Carol Masser and
Speaker 2: Tim Stenovek on Bloomberg Radio.
Speaker 3: All right, we want to get a look at the
Speaker 3: consumer in the ever popular world of ath leisure. When
Speaker 3: I'm not wearing this, I'm often in yoga pants and
Speaker 3: also work out clothing. Hey, we want to do this
Speaker 3: with the CEO Brooks. This is the latest data on
Speaker 3: the US labor market. Showed US job openings unexpectedly falling
Speaker 3: in the month of December to the lowest level since
Speaker 3: twenty twenty, layoffs edging up, adding to evidence of sluggish
Speaker 3: demand for workers. And then we also had US companies
Speaker 3: announcing the largest number of job cuts for any January
Speaker 3: since the depths of the Great Recession back in two
Speaker 3: thousand and nine. That's according to the outplacement firm Challenger,
Speaker 3: Gray and Christmas. So a lot to get to with
Speaker 3: our next guest, we do welcome back Dan Sheridan. He
Speaker 3: is CEO of Brooks, running the Seattle based subsidiary of
Speaker 3: Warren Buffets Berkshire Hathaway.
Speaker 2: Dan, how are you hi, Carol, Thanks for having me back.
Speaker 2: Happy to be here, it's great to have you here
Speaker 2: with Tim and me.
Speaker 3: Lots to get to We're going to get to it.
Speaker 3: I got to say, with the backdrop of marketso and
Speaker 3: some nervousness out there and bitcoins continued slide. I got
Speaker 3: to ask you about the macro and I got to
Speaker 3: ask you, does anyone buy your sneakers with bitcoin or crypto?
Speaker 4: I think if they do, it's a very small percentage,
Speaker 4: you know. I think for us, we just finished our
Speaker 4: twenty twenty five year and we grew sixteen percent. So
Speaker 4: our consumer is very, very healthy right now, and it's
Speaker 4: rooted in the participation, which we've talked about in the past.
Speaker 4: More people around the world are running and walking, and
Speaker 4: Brooks is winning the runner at the cash register, and
Speaker 4: so our consumer is holding up.
Speaker 1: We just talked. We talked with you back in October.
Speaker 1: It was just ahead of the marathon here in New
Speaker 1: York City. Curious how your world has changed since then.
Speaker 1: What can you tell us about changes in consumer demand
Speaker 1: since then, supply chain improvements or supply chain changes, the
Speaker 1: business outlook, what has changed in a few months.
Speaker 4: Yeah, Well, I think you always start with the consumer,
Speaker 4: and our consumer is very resilient. You know, we compete
Speaker 4: in maybe the most competitive category, and sporting goods were
Speaker 4: the number one brand there. And what we're seeing at
Speaker 4: the consumer level is because running is so important in
Speaker 4: their life, they trade off on other discretionary items, but
Speaker 4: the shoe and apparel always wins because it's so important
Speaker 4: in their life, and we're seeing it around the world.
Speaker 4: Tim the consumer is very very strong in our category.
Speaker 4: Our Ameya business was up over twenty percent. Our Asia
Speaker 4: business growing really really nicely for us, and so it's
Speaker 4: not just a US story here. It truly is a
Speaker 4: global story for us, and we're winning.
Speaker 2: You know.
Speaker 4: In terms of supply chain, we've seen it somewhat normalize over.
Speaker 2: The last call it four or five months.
Speaker 4: We had a lot of tension in the trade discussions
Speaker 4: and we've got our arms around that. But I would
Speaker 4: tell you it's stabilized for us in our cab category.
Speaker 3: Well, you know, and I do wonder so in terms
Speaker 3: of tire of concerns global supply chains, things have settled
Speaker 3: down and you feel like where they are they will
Speaker 3: stay that way for the next couple of years.
Speaker 2: Yeah, we're hopeful.
Speaker 4: I mean, based on the signals that we track, we
Speaker 4: think we're in a solid spot right now.
Speaker 2: Now.
Speaker 4: What we know is that things are changing rapidly in
Speaker 4: terms of the discussion with the administration. But for our category,
Speaker 4: we you know, we have high tariffs. I think last
Speaker 4: time we were on we talked about it. Our tariffs
Speaker 4: are extremely high for this category and so we went
Speaker 4: to work on that through the whole value chain to
Speaker 4: get our arms around it. We're going to see some
Speaker 4: compression in terms of profitability, but in terms of the
Speaker 4: long term vision, we think we've got our arms around
Speaker 4: it and we'll continue to monitor.
Speaker 1: And I want to talk a little bit about China
Speaker 1: because in the fall you told our Bloomberg New team
Speaker 1: that you were going to make a big investment in
Speaker 1: the next few years, thirty stores in China by twenty
Speaker 1: twenty seven. China sales in twenty twenty five for your
Speaker 1: company up two hundred and forty five percent. At the
Speaker 1: same time, Nike, Adidas, Lululemon, they've been struggling in China.
Speaker 1: What are you doing differently?
Speaker 2: Yeah, Again, it starts.
Speaker 4: With the consumer, and what we know about the Chinese
Speaker 4: consumer is as the middle class is growing, this is
Speaker 4: the perfect time for a brand like Brooks to enter
Speaker 4: we deliver fantastic performance product consistently over time. We have
Speaker 4: a brand energy that resonates with the Chinese Runner and
Speaker 4: we're engaging in the communities are that are part of
Speaker 4: the run community over there, and so the store is
Speaker 4: central to that in China, and so.
Speaker 2: Our rollout of stores is a big part of this.
Speaker 4: But we're having a lot of success online with those
Speaker 4: running communities and we're new ent thanks into China.
Speaker 2: So the growth we're experiencing.
Speaker 4: Is incredible and it's just a testament to how we
Speaker 4: enter markets and how we execute.
Speaker 2: Our team is executing really really well over there.
Speaker 3: It does sound really good, and I am curious about
Speaker 3: longer term future plans. You are obviously part of the
Speaker 3: Berkshire universe and have been for a while. Would you
Speaker 3: guys ever consider maybe an acquisition to expand into some
Speaker 3: of the adjacent categories. Talk to us about kind of
Speaker 3: expansion and strategy plans. And we're also always curious like,
Speaker 3: could you guys go public at some point or do
Speaker 3: you think that you're going to stay within the Berkshire
Speaker 3: homestead for a while more?
Speaker 4: Boy, Carol, I hope we stay forever with Berkshire, and
Speaker 4: I believe we will. You know, the biggest advantage we
Speaker 4: have at an ownership structure is Berkshire Hathaway. I talked
Speaker 4: to you about this last time. We're so fortunate to
Speaker 4: be owned by Berkshire. And more importantly, you know, I
Speaker 4: as a CEO have a very long time horizon that
Speaker 4: I focus on because of our ownership, and that's a
Speaker 4: benefit to us in every decision we make, and so
Speaker 4: ownership matters in business. We're lucky and fortunate to have
Speaker 4: the ownership of Berkshire Hathaway, and we continue to take
Speaker 4: a long term approach to this strategy when we enter
Speaker 4: markets like China, like in Europe, and the exposure that
Speaker 4: we have there and the growth that we have there,
Speaker 4: the fact that we can focus on ten and twenty
Speaker 4: year horizons here is very different than our competition.
Speaker 2: And I don't take that for granted.
Speaker 3: That's actually very Chinese if you think about it in
Speaker 3: terms of strategy.
Speaker 1: You know, last time we spoke with you, Warren Buffett
Speaker 1: was still at the helm of Berkshire Hathaway. Now it's
Speaker 1: greg Abel. How is that going so far? How does
Speaker 1: his leadership compare to Buffets? What's he like? What are
Speaker 1: his priority priorities. What is your contact with him, Ben, Yeah.
Speaker 4: I would tell you the word that comes to mind
Speaker 4: is consistent. It's consistent with the culture of deserve, trust
Speaker 4: and empowerment. Greg has always led with that. It's consistent
Speaker 4: with in terms of how they think of the subsidiaries.
Speaker 4: And so Greg is a very consistent manager and will
Speaker 4: remain that for US. I believe that I had a
Speaker 4: unique opportunity in December to travel to Omaha and spend
Speaker 4: some time with both Greg and Warren and now Adam
Speaker 4: Johnson who's now leading our division.
Speaker 2: And I could tell you that the same things are
Speaker 2: true throughout the leadership at Berkshire. And what an advantage
Speaker 2: for brooks Hey one of the things.
Speaker 3: And we're talking with Dan Sheridan, CEO brooks Running joining
Speaker 3: us from Seattle, Washington. Dan, we talked about the Chinese
Speaker 3: consumer and sounds like things are going really well. I
Speaker 3: would love to know what is the breakdown between Europe,
Speaker 3: China the US and I want to just if we
Speaker 3: can kind of drill down a little bit more into
Speaker 3: how the US consumer is doing.
Speaker 4: Yeah, So for our business, Carol, the US is are
Speaker 4: our largest region, about eighty percent of our global revenue
Speaker 4: comes out of the US, and that's why it's so
Speaker 4: exciting for us in terms of the growth that we
Speaker 4: see ahead. We are very meaningful in the European market
Speaker 4: where the number one brand in Germany now and performance run.
Speaker 2: It's been a you know.
Speaker 4: A ten year vision of ours to achieve that. And we're,
Speaker 4: as I said, we're just getting started in China. So
Speaker 4: when we look at the total addressable market, it's a
Speaker 4: forty eight billion dollar.
Speaker 2: Market in terms of run. And you know where we.
Speaker 4: Invest is in the top top countries where where running
Speaker 4: running is exploding. And so the markets that we're set
Speaker 4: up in are the ones that we're investing in. And
Speaker 4: Western Europe's a big investment. China is a big investment.
Speaker 4: And as I said, the consumers super healthy there. It's
Speaker 4: rooted in participation. You know what, we track our participation
Speaker 4: metrics in the US, there's about fifty million runner that
Speaker 4: run twice a week. We think globally that's close to
Speaker 4: two hundred million people that are that are choosing this
Speaker 4: activity and Brooks is winning with that consumer.
Speaker 2: So the consumer is super healthy.
Speaker 1: So on the consumer and the consumer choosing Brooks, why
Speaker 1: are they choosing Brooks from a technological perspective rather than
Speaker 1: a competitor such as Hoka or Nike. So what is
Speaker 1: the differentiator with Brooks Runnings technology.
Speaker 2: I love the question, Tim. This is why we exist.
Speaker 4: We're a product company first and foremost, and so innovation
Speaker 4: for the Runner is why we win. Every single day,
Speaker 4: we spend hours, months, years researching the biomechanics of human motion.
Speaker 4: We are in the business of keeping people healthy, running farther, faster, longer,
Speaker 4: and we've been able to do that consistently. We're in
Speaker 4: our twenty fifth year of fourteen percent compounded annual growth
Speaker 4: because of the position we have in products, so we
Speaker 4: win first and foremost in product.
Speaker 2: The second thing is we execute really well as a business.
Speaker 4: As you can imagine global supply chains. We sell in
Speaker 4: over fifty five countries around the world. We have developed
Speaker 4: a supply chain and an operation excellence that we think
Speaker 4: wins in every market, and that's not easy to do.
Speaker 2: That's the really hard part. And then this brand speaks
Speaker 2: to runners.
Speaker 4: We're an authentic, relevant brand that understands the journey of
Speaker 4: runners around the world. So when they're looking for a brand,
Speaker 4: they find authenticity in our brand, and that combination works
Speaker 4: in every market we've gone into, and so we often
Speaker 4: say we study our competition, but we really obsess on
Speaker 4: the consumer.
Speaker 2: And we've been able to stay ahead of
Speaker 4: The consumer in product, in execution, and with our brand
Speaker 4: ethos of let's run there, and it's working in every
Speaker 4: market we're competing in