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- [00:01]
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Dan Sheridan
Change, visit your nearby Lowe's on Colorado street in Kennewick.
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Carol
Bloomberg Audio Studios Podcasts, radio news all right, we want to get a look at the consumer and the ever popular world of athleisure. When I'm not wearing this, I'm often in yoga pants and also workout clothing. Hey, we want to do this with the CEO Brooks this has the latest data on the US labor market showed US Job openings unexpectedly falling in the month of December to the lowest level since 2020. Lab layoffs edging up, adding to evidence of sluggish demand for workers. And then we also had US Companies announcing the largest number of job cuts for any January since the depths of the Great recession back in 2009. That's according to the outplacement firm Challenger Gray and Christmas. So a lot to get to with our next guest. We do. Welcome back. Dan Sheridan. He is CEO of Brooks, running the Seattle based subsidiary of Warren Buffett's Berkshire Hathaway. Dan, how are you?
- [01:21]
Dan Sheridan
Hi Carol. Thanks for having me back. Happy to be here.
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Carol
It's great to have you here with Tim and me. Lots to get to. We're going to get to it. I got to say with the backdrop of markets though, and some nervousness out there and bitcoin's continued slide, I got to ask you about the macro and I got to ask you, does anyone buy your sneakers with bitcoin or crypto?
- [01:41]
Dan Sheridan
I think if they do, it's a very small percentage. You know, I think for us, we just finished our 20, 25 year and we grew 16%. So our consumer is very, very healthy right now and it's rooted in the participation which we've talked about in the past. More people around the world are running and walking and Brooks is winning the runner at the cash register. And so our consumers holding up.
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Tim
We just, we talked with you back in October was just ahead of the marathon here in New York City. Curious how your world has changed since then. What can you tell us about changes in consumer demand since then? Supply chain improvements or supply chain changes? The business outlook? What has changed in a few months?
- [02:23]
Dan Sheridan
Yeah, well, I think you always start with the consumer. And our consumer is very resilient. You know, we compete in maybe the most competitive category in sporting goods. We're the number one brand there. And what we're seeing at the consumer level is because running is so important in their life, they trade off on other discretionary items. But the shoe and apparel always wins because it's so important in their life. And we're seeing it around the world. Tim, the consumer is very, very strong. In our catego, our EMEA business was up over 20%. Our Asia business growing really, really nicely for us. And so it's not just a us story here. It truly is a global story for us. And we're winning. You know, in terms of supply chain. We've seen it somewhat normalized over the last, call it four or five months. We had a lot of tension in the trade discussions and we've got our arms around that. But I would tell you it stabilized for us in our category.
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Carol
Well, you know, and I do wonder. So in terms of tariff concerns, global supply chains, things have settled down and you feel like where they are, they will stay that way for the next couple of years.
- [03:38]
Dan Sheridan
Yeah, we're hopeful. I mean, based on the signals that we track, we think we're in a, in a, in a, in a solid spot right now. Now, what we know is that things are changing rapidly in terms of the discussion with the administration. But for our category, we, you know, we have high tariffs. I think last time we were on, we talked about it, our tariffs are extremely high for this category. And so we went to work on that through the whole value chain to get our arms around it. We're going to see some compression in terms of profitability. But in terms of the long term vision, we think we've got our arms around it and we'll continue to monitor.
- [04:19]
Tim
Hey, I want to talk a little bit about China because in the fall you told our Bloomberg news team that you were going to make a big investment in the next few years. 30 stores in China by 2027. China sales in 2025 for your company up 245%. At the same time, Nike, Adidas, Lululemon, they've been struggling in China. What are you doing differently?
- [04:44]
Dan Sheridan
Yeah, again, it starts with the consumer. And what we know about the Chinese consumer is as the middle class is growing, the this is the perfect time for a brand like Brooks to enter. We deliver fantastic performance product consistently over time. We have a brand energy that resonates with the Chinese runner and we're engaging in the communities that are part of the run community over there. And so the store is central to that in China. And so our rollout of stores is a big part of this. But we're having a lot of success online with those running communities and we're new entry into China. So the growth we're experiencing is incredible. And it's just a testament to how we enter markets and how we execute. Our team is executing really, really well over there.
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Carol
It does sound really good. And I am curious about longer term future plans. You are obviously part of the Berkshire universe and have been for a while. Would you guys ever consider maybe an acquisition to expand into some of the adjacent categories? Talk to us about kind of expansion and strategy plans. And we're also always curious, like could you guys go public at some point or do you think that you're going to stay within the Berkshire homestead for a while more?
- [06:00]
Dan Sheridan
Boy, Carol, I hope we stay forever with Berkshire and I believe we will. You know, the biggest advantage we have in an ownership structure is Berkshire Hathaway. I talked to you about this last time. We're so fortunate to be owned by Berkshire. And more importantly, I as a CEO have a very long time horizon that I focus on because of our ownership. And that's a benefit to us in every decision we make. And so ownership matters in business. We're lucky and fortunate to have the ownership of Berkshire Hathaway and we continue to take a long term approach to this strategy when we enter markets like China, like in Europe, and the exposure that we have there and the growth that we have there. The fact that we can focus on 10 and 20 year horizons here is very different than our competition. And I don't take that for granted.
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Carol
That's actually very Chinese if you think about it in terms of strategy.
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Tim
You know, last time we spoke with you, Warren Buffett was still at the helm of Berkshire Hathaway. Now it's Greg Abel. How is that going so far? How, how does his leadership compare to Buffett's? What's he like? What are his priorities? What has your contact with him been?
- [07:16]
Dan Sheridan
Yeah, I would tell you the word that comes to mind is consistent. It's consistent with the culture of deserved trust and empowerment. Greg has always led with that. It's consistent with in terms of how they think of the subsidiaries. And so Greg is a very consistent manager and will remain that for us. I believe that I had a unique opportunity in December to travel to Omaha and spend some time with both Greg and Warren. And now Adam Johnson, who's now leading our division and I could tell you that the same things are true throughout the leadership at Berkshire. And what an advantage for Brooks.
- [07:58]
Carol
Hey, one of the things. And we're talking with Dan Sheridan, CEO of Brooks Running, joining us from Seattle, Washington. Dan, we talked about the Chinese consumer and sounds like things are going really well. I would love to know what is the breakdown between Europe, China, the US And I want to just, if we can kind of drill down a little bit more into how the US consumer is doing.
- [08:19]
Dan Sheridan
Yeah. So for our business, Carol, the U.S. is our largest region. About 80% of our global revenue comes out of the U.S. and that's why it's so exciting for us in terms of the growth that we see ahead. We are very meaningful in the European market. We're the number one brand in Germany now in performance run. It's been a 10 year vision of ours to achieve that. And as I said, we're just getting started in China. So when we look at the total addressable market, it's a $48 billion market in terms of run. And where we invest is in the top, top countries where running, running is exploding. And so the markets that we're set up in are the ones that we're investing in. And Western Europe's a big investment. China is a big investment. And as I said, the consumer's super healthy there. It's rooted in participation. What we track our participation metrics. In the US there's about 50 million runners that run twice a week. We think globally, that's close to 200 million people that are, they're choosing this activity and Brooks is winning with that consumer. So the consumer is super healthy.
- [09:36]
Tim
So on the, on the consumer and the consumer choosing Brooks, why are they choosing Brooks from a technological perspective rather than a competitor such as Hoka or Nike? What is the differentiator with Brooks Running technology?
- [09:52]
Dan Sheridan
I love the question, Tim. This is why we exist. We're a product company first and foremost. And so innovation for the runner is why we win every single day. We spend hours, months, years researching the biomechanics of human motion. We are in the business of keeping people healthy, running farther, faster, longer, and we've been able to do that consistently. We're in our 25th year of 14% compounded annual growth because of the position we have in product. So we win first and foremost in product. The second thing is we execute really well as a business. As you can imagine, global supply chains, we sell in over 55 countries around the world. We have developed a supply chain and an operation excellence that we think wins in every market. And that's not easy to do. That's the really hard part. And then this brand speaks to runners. We're an authentic, relevant brand that understands the journey of runners around the world. So when they're looking for a brand, they find authenticity in our brand. And that combination works in every market we've gone into. And so we often say we study our competition, but we really obsess on the consumer. And we've been able to stay ahead of the consumer in production, in execution. And with our brand ethos of let's run there. And it's working in every market we're competing in.
- [11:21]
Carol
All right. So appreciate getting some time once again with you, Dan. Dan, be well. Thank you so much. Dan Sheridan, of course, he's the CEO of Brooks Running, joining us there from Seattle, Washington.