WEBVTT - Brooks Running CEO Dan Sheridan Talks Footwear Market, Growth Outlook

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

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<v Speaker 2>All Right, we want to get a look at the

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<v Speaker 2>consumer and the ever popular world of eth leisure. When

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<v Speaker 2>I'm not wearing this, I'm often in yoga pants and

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<v Speaker 2>also work out clothing. Hey, we want to do this

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<v Speaker 2>with the CEO Brooks. This is the latest data on

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<v Speaker 2>the US labor market. Showed US job openings unexpectedly falling

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<v Speaker 2>in the month of December to the lowest level since

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<v Speaker 2>twenty twenty, layoffs edging up, adding to evidence of sluggish

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<v Speaker 2>demand for workers. And then we also had US companies

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<v Speaker 2>announcing the largest number of job cuts for any January

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<v Speaker 2>since the depths of the Great Recession back in two

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<v Speaker 2>thousand and nine. That's according to the outplacement firm Challenger,

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<v Speaker 2>Gray and Christmas. So a lot to get to with

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<v Speaker 2>our next guest, we do. Welcome back Dan Sheridan. He

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<v Speaker 2>is CEO of Brooks, running the Seattle based subsidiary of

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<v Speaker 2>Warren Buffets Broishire Hathaway. Dan, how are you.

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<v Speaker 3>Hi, Carol, Thanks for having me back. Happy to be here.

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<v Speaker 2>It's great to have you here with Tim and me.

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<v Speaker 2>Lots to get to We're going to get to it.

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<v Speaker 2>I got to say, with the backdrop of markets and

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<v Speaker 2>some nervousness out there and bitcoins continued slide. I got

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<v Speaker 2>to ask you about the macro, and I got to

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<v Speaker 2>ask you, does anyone buy your sneakers with bitcoin or crypto?

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<v Speaker 3>I think if they do, it's a very small percentage,

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<v Speaker 3>you know. I think for us, we just finished our

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<v Speaker 3>twenty twenty five year and we grew sixteen percent. So

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<v Speaker 3>our consumer is very, very healthy right now, and it's

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<v Speaker 3>rooted in the participation, which we've talked about in the past.

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<v Speaker 3>More people around the world are running and walking, and

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<v Speaker 3>Brooks is winning the runner at the cash register, and

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<v Speaker 3>so our consumer's 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 3>Yeah, Well, I think you always start with the consumer,

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<v Speaker 3>and our consumer is very resilient. You know. We compete

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<v Speaker 3>in and maybe the most competitive category, and sporting goods

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<v Speaker 3>were the number one brand there. And what we're seeing

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<v Speaker 3>at the consumer level is because running is so important

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<v Speaker 3>in their life. They trade off on other discretionary items,

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<v Speaker 3>but the shoe and apparel always wins because it's so

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<v Speaker 3>important in their life. And we're seeing it around the world.

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<v Speaker 3>Tim The consumer's very very strong in our category. Our

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<v Speaker 3>Ameya business was up over twenty percent. Our Asia business

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<v Speaker 3>growing really really nicely for us, and so it's not

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<v Speaker 3>just the US story here. It truly is a global

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<v Speaker 3>story for us, and we're winning. You know. In terms

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<v Speaker 3>of supply chain, we've seen it somewhat normalized over the

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<v Speaker 3>last call it four or five months. We had a

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<v Speaker 3>lot of tension in the trade discussions and we've got

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<v Speaker 3>our arms around that. But I would tell you it's

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<v Speaker 3>stabilized for us in our category, well.

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<v Speaker 2>You know, and I do wonder so in terms of

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<v Speaker 2>tire of concerns globalsply chains, things have settled down and

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<v Speaker 2>you feel like where they are they will stay that

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<v Speaker 2>way for the next couple of years.

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<v Speaker 3>Yeah, we're hopeful. I mean, based on the signals that

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<v Speaker 3>we track, we think we're in a solid spot right now. Now.

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<v Speaker 3>What we know is that things are changing rapidly in

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<v Speaker 3>terms of the discussion with the administration. But for our category,

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<v Speaker 3>you know, we have high tariffs. I think last time

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<v Speaker 3>we were on we talked about it. Our tariffs are

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<v Speaker 3>extremely high for this category, and so we went to

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<v Speaker 3>work on that through the whole value chain to get

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<v Speaker 3>our arms around it. We're going to see some compression

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<v Speaker 3>in terms of profitability, but in terms of the long

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<v Speaker 3>term vision, we think we've got our arms around it

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<v Speaker 3>and we'll continue to monitor.

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

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<v Speaker 1>because in the fall you told our Bloomberg News 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>two twenty seven. China sales in twenty twenty five for

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

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<v Speaker 1>the 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 3>Yeah, Again, it starts with the consumer, and what we

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<v Speaker 3>know about the Chinese consumer is as the middle class

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<v Speaker 3>is growing, this is the perfect time for a brand

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<v Speaker 3>like Brooks to enter. We deliver fantastic performance product consistently

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<v Speaker 3>over time. We have a brand energy that resonates with

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<v Speaker 3>the Chinese runner and we're engaging in the communities that

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<v Speaker 3>are that are you know, part of the run community

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<v Speaker 3>over there, and so the store is central to that

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<v Speaker 3>in China, and so our rollout of stores is a

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<v Speaker 3>big part of this. But we're having a lot of

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<v Speaker 3>success online with those running communities, and we're new entry

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<v Speaker 3>into into China. So the growth we're experiencing is incredible

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<v Speaker 3>and it's just a testament to how we enter markets

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<v Speaker 3>and how we execute. Our team is executing really really

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<v Speaker 3>well over there.

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<v Speaker 2>It does sound really good, and I am curious about

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<v Speaker 2>longer term future plans. You are obviously part of the

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<v Speaker 2>Berkshire universe and have been for a while. Would you

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<v Speaker 2>guys ever consider maybe an acquisition to expand into some

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<v Speaker 2>of the adjacent categories. Talk to us about kind of

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<v Speaker 2>expansion and strategy plans. And we're also always curious, like,

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<v Speaker 2>could you guys go public at some point or do

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<v Speaker 2>you think that you're going to stay within the Berkshire

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<v Speaker 2>homestead for a while more Boy, Carol.

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<v Speaker 3>I hope we stay forever with Berkshire, and I believe

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<v Speaker 3>we will. You know, the biggest advantage we have at

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<v Speaker 3>an ownership structure is Berkshire Hathaway. I talked to you

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<v Speaker 3>about this last time. We're so fortunate to be owned

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<v Speaker 3>by Berkshire. And more importantly, you know, I as a

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<v Speaker 3>CEO have a very long time horizon that I focus

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<v Speaker 3>on because of our ownership, and that's a benefit to

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<v Speaker 3>us in every decision we make, and so ownership matters

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<v Speaker 3>in business. We're lucky and fortunate to have the ownership

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<v Speaker 3>of Berkshire Hathaway, and we continue to take a long

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<v Speaker 3>term approach to this strategy when we enter markets like China,

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<v Speaker 3>like in Europe, and the exposure that we have there

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<v Speaker 3>and the growth that we have there. The fact that

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<v Speaker 3>we can focus on ten and twenty year horizons here

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<v Speaker 3>is very different than our competition. And I don't take

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<v Speaker 3>that for granted.

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<v Speaker 2>That's actually very Chinese if you think about it in

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<v Speaker 2>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?

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<v Speaker 3>Yeah, I would tell you the word that comes to

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<v Speaker 3>mind is consistent. It's consistent with the culture of deserve,

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<v Speaker 3>trust and empowerment. Greg has always led with that. It's

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<v Speaker 3>consistent with in terms of how they think of the subsidiaries.

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<v Speaker 3>And so Greg is a very consistent manager and will

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<v Speaker 3>remain that for US. I believe that I had a

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<v Speaker 3>unique opportunity in December to travel to Omaha and spend

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<v Speaker 3>some time with both Greg and Warren and now Adam

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<v Speaker 3>Johnson who's now leading our division. And I could tell

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<v Speaker 3>you that the same things are true throughout the leadership

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<v Speaker 3>at Berkshire. And what an advantage for.

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<v Speaker 2>Brooks Hey one of the things. And we're talking with

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<v Speaker 2>Dan Sheridan, CEO brooks Running joining us from Seattle, Washington. Dan,

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<v Speaker 2>we talked about the Chinese consumer and sounds like things

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<v Speaker 2>are going really well. I would love to know what

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<v Speaker 2>is the breakdown between Europe, China the US and I

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<v Speaker 2>want to just if we can kind of drill down

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<v Speaker 2>a little bit more into how the US consumer is doing.

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<v Speaker 3>Yeah, So for our business, Carol, the US is our

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<v Speaker 3>largest region. About eighty percent of our global revenue comes

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<v Speaker 3>out of the US, and that's why it's so excited

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<v Speaker 3>for US in terms of the growth that we see ahead.

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<v Speaker 3>We are very meaningful in the European market where the

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<v Speaker 3>number one brand in Germany now and Performance Run. It's

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<v Speaker 3>been a you know, a ten year vision of ours

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<v Speaker 3>to achieve that. And we're, as I said, we're just

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<v Speaker 3>getting started in China. So when we look at the

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<v Speaker 3>total addressable market, it's a forty eight billion dollar market

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<v Speaker 3>in terms of run and you know where we invest

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<v Speaker 3>is in the top top countries where where running running

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<v Speaker 3>is exploding. And so the markets that we're set up

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<v Speaker 3>in are the ones that we're investing in. And Western

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<v Speaker 3>Europe's a big investment. China is a big investment. And

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<v Speaker 3>as I said, the consumers super healthy there. It's rooted

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<v Speaker 3>in participation. You know what, we track our participation metrics

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<v Speaker 3>in the US, there's about fifty million runners that run

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<v Speaker 3>twice a week. We think globally that's close to two

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<v Speaker 3>hundred million people that are that are choosing this activity.

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<v Speaker 3>And Brooks is winning with that consumer. So the consumer

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<v Speaker 3>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 3>I love the question Tim, this is why we exist.

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<v Speaker 3>We're a product company first and foremost, and so innovation

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<v Speaker 3>for the Runner is why we win. Every single day.

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<v Speaker 3>We spend hours, months, years researching the biomechanics of human motion.

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<v Speaker 3>We are in the business of keeping people healthy, running farther, faster, longer,

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<v Speaker 3>and we've been able to do that consistently. We're in

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<v Speaker 3>our twenty fifth year of fourteen percent compounded annual growth

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<v Speaker 3>because of the position we have in products, so we

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<v Speaker 3>win first and foremost in product. The second thing is

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<v Speaker 3>we execute really well as a business. As you can

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<v Speaker 3>imagine global supply chains. We sell in over fifty five

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<v Speaker 3>countries around the world. We have developed a supply chain

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<v Speaker 3>and an operation excellence that we think wins in every market,

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<v Speaker 3>and that's not easy to do. That's the really hard part.

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<v Speaker 3>And then this brand speaks to runners. We're an authentic,

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<v Speaker 3>relevant brand that understands the journey of runners around the world.

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<v Speaker 3>So when they're looking for a brand, they find authenticity

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<v Speaker 3>in our brand, and that combination works in every market

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<v Speaker 3>we've gone into. And so we often say we study

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<v Speaker 3>our competition, but we really obsess on the consumer and

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<v Speaker 3>we've been able to stay ahead of the consumer in product,

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<v Speaker 3>in execution and with our brand ethos of let's run there,

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<v Speaker 3>and it's working in every market we're competing in, all right.

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<v Speaker 2>So appreciate getting some time once again with you, Dan,

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<v Speaker 2>Dan Bewell, thank you so much. Dan Sheridan, of course

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<v Speaker 2>he's the CEO, Brooks Running joining us there from Seattle

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<v Speaker 2>Wash and Ted