CEO of Buffett-owned Brooks Running moves production out of China, cites tariff threat

OMAHA, Neb. (Reuters) - The chief executive of Brooks Running, part of Warren Buffett’s Berkshire Hathaway Inc, said his company will shed much of its presence in China by moving running shoe production to Vietnam, a result of the trade dispute between China and the United States.

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Jim Weber, who has run Brooks since 2001, said in an interview that Brooks made the decision in January, when U.S. President Donald Trump was threatening to boost tariffs on the shoes to 45 percent from 20 percent.

Weber said the tariff threat weighed “massively” because Brooks cannot simply raise prices on its shoes, which typically retail for $100 to $160 a pair, and though trade tensions have cooled, the company could not wait for a resolution.

“We’re going to pull most of our production out of China,” he said. “We’ve had to make a long-term decision on this picture. It’s disruptive, but the reality. So we’ll be predominantly in Vietnam by the end of the year.”

About 8,000 jobs will also move to Vietnam from China, Weber added.

Vietnam is emerging as a preferred destination for companies looking to move production because of tariff concerns.

The country generates about 55 percent of Brooks’ running shoe production, with China accounting for the remainder.

Brooks shoes are sold in 56 countries, and account for the bulk of the Seattle-based company’s annual revenue, which grew 26 percent last year to $644 million.

Revenue from January to April is up 22 percent in 2019, and Weber is targeting full-year revenue of just under $750 million. He hopes revenue will reach $1 billion by 2021. Brooks also sells apparel.

Weber said Brooks may start shoe production in a third, yet-to-be-determined country next year. The eventual breakdown could be 65 percent from Vietnam, 10 percent from China and 25 percent from the third country, he said.

Brooks plans to continue research and development, as well as small production runs of shoes, in China.

Weber also said Brooks hoped to “prototype small, custom personalized shoe runs” in the United States within the next several years, but much of the company’s technical know-how and automation is in Asia. “Volume is a long ways away,” he said.

Brooks became part of Berkshire in 2006 when Berkshire’s Fruit of the Loom unit bought its parent at the time, Russell Corp. Berkshire spun out Brooks as a standalone unit in 2012.

Weber began reporting last year to Berkshire Vice Chairman Greg Abel, after previously reporting to Buffett.

Reporting by Jonathan Stempel in Omaha, Nebraska; Editing by Nick Zieminski