Brooks CEO says his shoes fit Buffett better
(The story officially corrects 10th paragraph to reflect Brooks saying it is now based in Seattle.)
By Jonathan Stempel
OMAHA, Nebraska (Reuters) - Warren Buffett once called his 1993 purchase of Dexter Shoe Inc "the worst deal that I've made," but owning athletic shoe maker Brooks Sports Inc, which this year celebrates its 100th anniversary, may make him feel like less of a heel.
Brooks became part of Buffett's Berkshire Hathaway Inc in 2006 when its parent, the sporting goods maker Russell, was sold to Berkshire's Fruit of the Loom unit. Berkshire spun out Brooks as a separate business unit in 2012.
While Brooks is a small piece of Buffett's empire, accounting for barely one-quarter of 1 percent of Berkshire's revenue, Jim Weber, its chief executive since 2001, said it's the kind of business Buffett likes: focused, easy to follow, and following a long-term strategy.
The latter was the result of his decision more than a decade ago to stop trying to compete everywhere with bigger rivals such as Nike Inc, Asics Corp and Adidas AG. No more basketball. No more tennis. Just running, including performance shoes and apparel.
"We had ended up playing all the categories, where athletic footwear became lifestyle footwear," the Minnesota native said in an interview ahead of Berkshire's annual shareholder weekend, which includes a 5K run. "In 2001, you had to have visible eye candy on the shelf - Shox, Air - and we realized we weren't going to win at that game. By doing one product, we stopped confusing our customer."
The result, he says: What was a $65 million company in 2001 is on track to generate "well over" $500 million of revenue this year, suggesting annualized growth of around 18 percent. A goal is to become a $1.5 billion business by early next decade.
OUT THE FRONT DOOR
At first, Weber said Brooks focused on its Beast and Addiction shoes, which are meant for runners who may be heavier, have flat feet, or need extra control.
But it knew that many runners need more flexible shoes, so it created shoes including the Adrenaline GTS, for people with more normal feet. It is now its top seller.
"Once we got that shoe right," he said, "we knew we could survive."
Though Brooks competes at the premium end of the market, Weber said even a lean economy doesn't dampen business for the Seattle-based company.
"Running has proven to be somewhat recession- and economic pressure-resistant," he said. "All you need is a pair of shoes, and you go out your front door."
BUFFETT DOESN'T RUN, WANTS THE CREDIT
Weber said he runs roughly 25 miles a week. He won't give out his times and says "I'm slow," but Buffett has said Weber has run a 3:31 marathon.
The two talk about Brooks "whenever I need to," Weber says, which ends up being five or six times a year. The "one required meeting" each year is for Buffett to approve his pay.
"One of the things most interesting to me in working with Berkshire and with Warren, is he's really less interested in annual budgets and more interested in, is the brand stronger today than it was a year ago," he said. "And when you run into a tough marketplace, don't underinvest."
Buffett said in his annual shareholder letter last year that Brooks was "on fire." That's unlike Dexter, which he said in 2008 had lost what he saw as a "durable competitive advantage."
And while not a runner himself, the 83-year-old Buffett is surely pleased with Brooks, as Weber explained when discussing how the company came to be spun out of Fruit of the Loom.
"When he called me to talk about setting Brooks up as a standalone (subsidiary), I was on holiday," he said. "I had a four-day old voicemail from Warren on this idea. We laid it all out and it made a lot of sense, and he said, 'From here on out, Jim, I'm going to take all credit for your success.'"
(Reporting by Jonathan Stempel in New York; Editing by Bernard Orr)