WEBVTT - Berkshire-Owned Brooks Running Sees Another Record Year

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<v Speaker 1>Bloomberg Audio Studios, Podcasts, radio News.

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<v Speaker 2>You're listening to Bloomberg Business Week with Carol Masser and

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<v Speaker 2>Tim Stenovek on Bloomberg Radio.

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<v Speaker 3>All right, we want to get a look at the

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<v Speaker 3>consumer in the ever popular world of ath leisure. When

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<v Speaker 3>I'm not wearing this, I'm often in yoga pants and

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<v Speaker 3>also work out clothing. Hey, we want to do this

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<v Speaker 3>with the CEO Brooks. This is the latest data on

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<v Speaker 3>the US labor market. Showed US job openings unexpectedly falling

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<v Speaker 3>in the month of December to the lowest level since

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<v Speaker 3>twenty twenty, layoffs edging up, adding to evidence of sluggish

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<v Speaker 3>demand for workers. And then we also had US companies

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<v Speaker 3>announcing the largest number of job cuts for any January

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<v Speaker 3>since the depths of the Great Recession back in two

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<v Speaker 3>thousand and nine. That's according to the outplacement firm Challenger,

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<v Speaker 3>Gray and Christmas. So a lot to get to with

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<v Speaker 3>our next guest, we do welcome back Dan Sheridan. He

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<v Speaker 3>is CEO of Brooks, running the Seattle based subsidiary of

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<v Speaker 3>Warren Buffets Berkshire Hathaway.

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<v Speaker 2>Dan, how are you hi, Carol, Thanks for having me back.

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<v Speaker 2>Happy to be here, it's great to have you here

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<v Speaker 2>with Tim and me.

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<v Speaker 3>Lots to get to We're going to get to it.

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<v Speaker 3>I got to say, with the backdrop of marketso and

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<v Speaker 3>some nervousness out there and bitcoins continued slide. I got

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<v Speaker 3>to ask you about the macro and I got to

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<v Speaker 3>ask you, does anyone buy your sneakers with bitcoin or crypto?

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<v Speaker 4>I think if they do, it's a very small percentage,

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<v Speaker 4>you know. I think for us, we just finished our

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<v Speaker 4>twenty twenty five year and we grew sixteen percent. So

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<v Speaker 4>our consumer is very, very healthy right now, and it's

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<v Speaker 4>rooted in the participation, which we've talked about in the past.

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<v Speaker 4>More people around the world are running and walking, and

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<v Speaker 4>Brooks is winning the runner at the cash register, and

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<v Speaker 4>so our consumer is holding up.

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<v Speaker 1>We just talked. We talked with you back in October.

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<v Speaker 1>It was just ahead of the marathon here in New

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<v Speaker 1>York City. Curious how your world has changed since then.

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<v Speaker 1>What can you tell us about changes in consumer demand

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<v Speaker 1>since then, supply chain improvements or supply chain changes, the

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<v Speaker 1>business outlook, what has changed in a few months.

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<v Speaker 4>Yeah, Well, I think you always start with the consumer,

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<v Speaker 4>and our consumer is very resilient. You know, we compete

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<v Speaker 4>in maybe the most competitive category, and sporting goods were

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<v Speaker 4>the number one brand there. And what we're seeing at

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<v Speaker 4>the consumer level is because running is so important in

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<v Speaker 4>their life, they trade off on other discretionary items, but

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<v Speaker 4>the shoe and apparel always wins because it's so important

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<v Speaker 4>in their life, and we're seeing it around the world.

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<v Speaker 4>Tim the consumer is very very strong in our category.

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<v Speaker 4>Our Ameya business was up over twenty percent. Our Asia

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<v Speaker 4>business growing really really nicely for us, and so it's

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<v Speaker 4>not just a US story here. It truly is a

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<v Speaker 4>global story for us, and we're winning.

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<v Speaker 2>You know.

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<v Speaker 4>In terms of supply chain, we've seen it somewhat normalize over.

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<v Speaker 2>The last call it four or five months.

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<v Speaker 4>We had a lot of tension in the trade discussions

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<v Speaker 4>and we've got our arms around that. But I would

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<v Speaker 4>tell you it's stabilized for us in our cab category.

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<v Speaker 3>Well, you know, and I do wonder so in terms

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<v Speaker 3>of tire of concerns global supply chains, things have settled

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<v Speaker 3>down and you feel like where they are they will

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<v Speaker 3>stay that way for the next couple of years.

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<v Speaker 2>Yeah, we're hopeful.

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<v Speaker 4>I mean, based on the signals that we track, we

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<v Speaker 4>think we're in a solid spot right now.

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<v Speaker 2>Now.

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<v Speaker 4>What we know is that things are changing rapidly in

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<v Speaker 4>terms of the discussion with the administration. But for our category,

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<v Speaker 4>we you know, we have high tariffs. I think last

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<v Speaker 4>time we were on we talked about it. Our tariffs

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<v Speaker 4>are extremely high for this category and so we went

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<v Speaker 4>to work on that through the whole value chain to

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<v Speaker 4>get our arms around it. We're going to see some

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<v Speaker 4>compression in terms of profitability, but in terms of the

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<v Speaker 4>long term vision, we think we've got our arms around

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<v Speaker 4>it and we'll continue to monitor.

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<v Speaker 1>And I want to talk a little bit about China

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<v Speaker 1>because in the fall you told our Bloomberg New team

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<v Speaker 1>that you were going to make a big investment in

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<v Speaker 1>the next few years, thirty stores in China by twenty

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<v Speaker 1>twenty seven. China sales in twenty twenty five for your

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<v Speaker 1>company up two hundred and forty five percent. At the

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<v Speaker 1>same time, Nike, Adidas, Lululemon, they've been struggling in China.

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<v Speaker 1>What are you doing differently?

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<v Speaker 2>Yeah, Again, it starts.

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<v Speaker 4>With the consumer, and what we know about the Chinese

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<v Speaker 4>consumer is as the middle class is growing, this is

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<v Speaker 4>the perfect time for a brand like Brooks to enter

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<v Speaker 4>we deliver fantastic performance product consistently over time. We have

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<v Speaker 4>a brand energy that resonates with the Chinese Runner and

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<v Speaker 4>we're engaging in the communities are that are part of

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<v Speaker 4>the run community over there, and so the store is

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<v Speaker 4>central to that in China, and so.

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<v Speaker 2>Our rollout of stores is a big part of this.

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<v Speaker 4>But we're having a lot of success online with those

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<v Speaker 4>running communities and we're new ent thanks into China.

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<v Speaker 2>So the growth we're experiencing.

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<v Speaker 4>Is incredible and it's just a testament to how we

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<v Speaker 4>enter markets and how we execute.

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<v Speaker 2>Our team is executing really really well over there.

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<v Speaker 3>It does sound really good, and I am curious about

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<v Speaker 3>longer term future plans. You are obviously part of the

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<v Speaker 3>Berkshire universe and have been for a while. Would you

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<v Speaker 3>guys ever consider maybe an acquisition to expand into some

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<v Speaker 3>of the adjacent categories. Talk to us about kind of

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<v Speaker 3>expansion and strategy plans. And we're also always curious like,

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<v Speaker 3>could you guys go public at some point or do

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<v Speaker 3>you think that you're going to stay within the Berkshire

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<v Speaker 3>homestead for a while more?

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<v Speaker 4>Boy, Carol, I hope we stay forever with Berkshire, and

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<v Speaker 4>I believe we will. You know, the biggest advantage we

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<v Speaker 4>have at an ownership structure is Berkshire Hathaway. I talked

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<v Speaker 4>to you about this last time. We're so fortunate to

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<v Speaker 4>be owned by Berkshire. And more importantly, you know, I

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<v Speaker 4>as a CEO have a very long time horizon that

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<v Speaker 4>I focus on because of our ownership, and that's a

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<v Speaker 4>benefit to us in every decision we make, and so

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<v Speaker 4>ownership matters in business. We're lucky and fortunate to have

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<v Speaker 4>the ownership of Berkshire Hathaway, and we continue to take

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<v Speaker 4>a long term approach to this strategy when we enter

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<v Speaker 4>markets like China, like in Europe, and the exposure that

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<v Speaker 4>we have there and the growth that we have there,

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<v Speaker 4>the fact that we can focus on ten and twenty

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<v Speaker 4>year horizons here is very different than our competition.

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<v Speaker 2>And I don't take that for granted.

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<v Speaker 3>That's actually very Chinese if you think about it in

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<v Speaker 3>terms of strategy.

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<v Speaker 1>You know, last time we spoke with you, Warren Buffett

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<v Speaker 1>was still at the helm of Berkshire Hathaway. Now it's

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<v Speaker 1>greg Abel. How is that going so far? How does

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<v Speaker 1>his leadership compare to Buffets? What's he like? What are

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<v Speaker 1>his priority priorities. What is your contact with him, Ben, Yeah.

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<v Speaker 4>I would tell you the word that comes to mind

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<v Speaker 4>is consistent. It's consistent with the culture of deserve, trust

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<v Speaker 4>and empowerment. Greg has always led with that. It's consistent

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<v Speaker 4>with in terms of how they think of the subsidiaries.

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<v Speaker 4>And so Greg is a very consistent manager and will

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<v Speaker 4>remain that for US. I believe that I had a

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<v Speaker 4>unique opportunity in December to travel to Omaha and spend

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<v Speaker 4>some time with both Greg and Warren and now Adam

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<v Speaker 4>Johnson who's now leading our division.

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<v Speaker 2>And I could tell you that the same things are

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<v Speaker 2>true throughout the leadership at Berkshire. And what an advantage

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<v Speaker 2>for brooks Hey one of the things.

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<v Speaker 3>And we're talking with Dan Sheridan, CEO brooks Running joining

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<v Speaker 3>us from Seattle, Washington. Dan, we talked about the Chinese

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<v Speaker 3>consumer and sounds like things are going really well. I

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<v Speaker 3>would love to know what is the breakdown between Europe,

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<v Speaker 3>China the US and I want to just if we

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<v Speaker 3>can kind of drill down a little bit more into

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<v Speaker 3>how the US consumer is doing.

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<v Speaker 4>Yeah, So for our business, Carol, the US is are

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<v Speaker 4>our largest region, about eighty percent of our global revenue

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<v Speaker 4>comes out of the US, and that's why it's so

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<v Speaker 4>exciting for us in terms of the growth that we

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<v Speaker 4>see ahead. We are very meaningful in the European market

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<v Speaker 4>where the number one brand in Germany now and performance run.

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<v Speaker 2>It's been a you know.

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<v Speaker 4>A ten year vision of ours to achieve that. And we're,

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<v Speaker 4>as I said, we're just getting started in China. So

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<v Speaker 4>when we look at the total addressable market, it's a

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<v Speaker 4>forty eight billion dollar.

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<v Speaker 2>Market in terms of run. And you know where we.

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<v Speaker 4>Invest is in the top top countries where where running

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<v Speaker 4>running is exploding. And so the markets that we're set

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<v Speaker 4>up in are the ones that we're investing in. And

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<v Speaker 4>Western Europe's a big investment. China is a big investment.

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<v Speaker 4>And as I said, the consumers super healthy there. It's

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<v Speaker 4>rooted in participation. You know what, we track our participation

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<v Speaker 4>metrics in the US, there's about fifty million runner that

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<v Speaker 4>run twice a week. We think globally that's close to

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<v Speaker 4>two hundred million people that are that are choosing this

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<v Speaker 4>activity and Brooks is winning with that consumer.

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<v Speaker 2>So the consumer is super healthy.

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<v Speaker 1>So on the consumer and the consumer choosing Brooks, why

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<v Speaker 1>are they choosing Brooks from a technological perspective rather than

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<v Speaker 1>a competitor such as Hoka or Nike. So what is

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<v Speaker 1>the differentiator with Brooks Runnings technology.

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<v Speaker 2>I love the question, Tim. This is why we exist.

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<v Speaker 4>We're a product company first and foremost, and so innovation

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<v Speaker 4>for the Runner is why we win. Every single day,

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<v Speaker 4>we spend hours, months, years researching the biomechanics of human motion.

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<v Speaker 4>We are in the business of keeping people healthy, running farther, faster, longer,

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<v Speaker 4>and we've been able to do that consistently. We're in

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<v Speaker 4>our twenty fifth year of fourteen percent compounded annual growth

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<v Speaker 4>because of the position we have in products, so we

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<v Speaker 4>win first and foremost in product.

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<v Speaker 2>The second thing is we execute really well as a business.

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<v Speaker 4>As you can imagine global supply chains. We sell in

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<v Speaker 4>over fifty five countries around the world. We have developed

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<v Speaker 4>a supply chain and an operation excellence that we think

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<v Speaker 4>wins in every market, and that's not easy to do.

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<v Speaker 2>That's the really hard part. And then this brand speaks

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<v Speaker 2>to runners.

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<v Speaker 4>We're an authentic, relevant brand that understands the journey of

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<v Speaker 4>runners around the world. So when they're looking for a brand,

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<v Speaker 4>they find authenticity in our brand, and that combination works

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<v Speaker 4>in every market we've gone into, and so we often

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<v Speaker 4>say we study our competition, but we really obsess on

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<v Speaker 4>the consumer.

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<v Speaker 2>And we've been able to stay ahead of

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<v Speaker 4>The consumer in product, in execution, and with our brand

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<v Speaker 4>ethos of let's run there, and it's working in every

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<v Speaker 4>market we're competing in