Brooks just closed a stellar third quarter, one that saw global revenues rise 29 percent, driven by a 32 percent increase in footwear. The Seattle-based company continued to thrive in the challenged U.S performance running market, taking share to hit the second market position in the category and notching double-digit revenue increases in the EMEA, Asia-Pacific and Latin America regions. But CEO Jim Weber is focusing squarely on the future. FIX caught up with Weber to talk tariffs, the retail marketplace and why performance wins.
JW: As you know, our category has been unsettled in the past three years, and we hit a sink hole in 2015 and 2016 — participation was down, there was retail disruption. We took a hard look at our assumptions and reinvented some of our product lines. Were still runner focused, we’re still hitting the right price points. But we got stale, and we just didn’t move quickly enough. So we came in fall of ’17 with the new Glycerin and Ghost, and we added the new Adrenaline and Transcend in early ’18, and we added the Energy Return springy category this year. There are so many opportunities in athletic — and they’re big ones — in fashion and lifestyle. But we think performance is timeless. Fit, feel and ride always matter: always, always, always. I don’t think the other brands are focused on performance. Hoka’s done well, and On Running has got something, and Altra. But I gotta tell you, I don’t think there’s a lot of performance in the industry.
JW: Tariffs. The athletic market is a global market, and athletic footwear hasn’t had a meaningful supply chain existing here since the 1970s. The tariffs on athletic footwear is 20 percent out of China, and it’s highly likely they’ll be an additional 25 percent added in February, which means 45 percent tariffs on running shoes made in China. And the options aren’t great. The big brands have said the tariffs won’t impact their business: they have enough supply chain to shift to other factories. Small and medium brands, we can’t do that [easily.] We don’t think the competition is going to raise prices, so we’re not going to raise prices. But can we eat the additional $20 million in cost? It’s really complicated. We’re probably going to move production with our factory partners, which is very disruptive and costs us a lot of money and could hurt our quality, although we’re not going to let it. It’s why we have to take our time and make long-term decisions.
JW: We’re feeling really good about next year. We have a strong product pipeline, and we’re getting better at connecting to runners digitally 24/7. The digital migration continues — we estimate 35 percent of products really going through the phone or e-commerce — but brick and mortar is important as ever. The best-of-breed shops in sporting goods and specialty run are doing well. REI is having a fine year. We’re planning double-digit growth. We won’t plan 30 percent growth! But we’re challenging ourselves to execute.