Runners know '20 miles into that shoe' whether they're going to buy again: Brooks Running CEO

Brooks Running CEO Jim Weber joins Yahoo Finance Live to discuss the company's growth in sneakers despite the economic slowdown, its experience with Warren Buffett's investment strategy, and what is next for Brooks Running at the Berkshire Hathaway's Annual Shareholders Meeting in Omaha.

Video Transcript

SEANA SMITH: Let's get back to Brian Sozzi in Omaha with the CEO of Brooks Running. Hey, Soz.

BRIAN SOZZI: All right, thanks so much Seana. I'm here with Jim Weber. Jim, good to see you as always. You're a bit of a rock star here. Everybody is taking photos in front of you. The crowd is packed. Good to see you here.

JIM WEBER: It's great to be in Omaha. This is such a unique event. We'll sell as many pairs of shoes here as we would at a great marathon expo. And it's because of Warren. We put Warren on the shoe, and everybody wants a pair.

BRIAN SOZZI: I got here-- I've been here maybe an hour and a half, two hours. And the lines at your booth are snaking around your booth. What do the sales look like?

JIM WEBER: You know, we brought 6,000 pairs in. And this is the record. It's interesting, you know? Last year, people were coming back. We've never seen this much activity here. So it feels like there's a lot of people in Omaha. And they've got to lace up for our race. We got a 5K race Sunday morning too, so.

BRIAN SOZZI: That's great. Talk to us a bit about the state of your business. How was the first quarter? I think we saw a lot of retailers a little cautious.

JIM WEBER: Yep.

BRIAN SOZZI: Sales slowed down a little bit. What'd you see at Brooks?

JIM WEBER: So far, here's what we're seeing. You know, we started to fulfill demand after the supply chain craziness. We were up over 40% in Q4. We're up 20% in Q1. So we're seeing great demand.

As of last week, retail in the US is fantastic. We're still seeing across channels really good sell-through, at least in performance running. Europe, we're seeing a slowdown. The last two months, Europe has definitely slowed down. We think the economy and concerns are starting to take hold there. But US retail is quite good.

BRIAN SOZZI: So when you crunch the numbers in the US, do you see anything that would suggest a recession is on the horizon?

JIM WEBER: Wow. You know, I think we're all cautious. I think we're all cautious. And there's anxiety. There's apprehension. But we've seen in the past that running often can kind of transcend a recession.

So we're pretty confident, cautiously, that running is gonna be fine through this. But I don't think anyone knows. Retail is really hard to judge for fall. We think the consumers-- their employment's good. You know, households are still in good, healthy shape. So I'm optimistic. But hard to know.

BRIAN SOZZI: Has inflation started to ease?

JIM WEBER: Absolutely. We're seeing supply chain-- oil's now, I think, below $70 a share. So supply chain has normalized, both in terms of service levels and costs. And that's really big for us. And even materials inflation is so much driven by the petroleum market. So we're definitely seeing inflation settle down.

BRIAN SOZZI: Explain to us the popularity for your shoe, because you have what, 23% market share?

JIM WEBER: Yep, at measured retail in the United States.

BRIAN SOZZI: There's a lot of new competitors in your space.

JIM WEBER: There is.

BRIAN SOZZI: Why are you able to hold on to that market share?

JIM WEBER: You know, we've been at this for 22 years, of focusing only on the runner and really trying to build the best gear from head to toe. And we think you have to earn it. For people that are really putting in mileage, 20 miles into the shoe, they know if they're ever gonna buy that shoe again.

So we built a lot of trust, I think, with runners over time. And we feel like you got to earn them every time. We wake up every day, and we feel like we have to earn the runner's support for our gear. And so it's very competitive. They've never had more choices. But we're optimistic about our ability to service the runner.

BRIAN SOZZI: I went to your website. You're selling sneakers with nitrogen in them. Is that marketing? Is that going to make me run faster?

JIM WEBER: I love engineering. I'm not an engineer, but I love it. We've been engineering materials specifically for running shoes for 20 years. This material is actually really special.

Normally, when you're engineering material, you have to trade off lightweight, cushioning, resiliency properties, durability. We saw no trade-offs. This is better in every front. And it's the molecular level. It's a lighter molecule. But the cushioning and the durability is among the best we've ever seen.

BRIAN SOZZI: So what you're saying is--

JIM WEBER: It's really good.

BRIAN SOZZI: --I'm going to run faster.

JIM WEBER: And you're gonna enjoy it more. Yeah.

BRIAN SOZZI: Where is Brooks on the sustainability push? I think we've seen brands like AirBirds come in here, try to pull chemicals out of their products. Is that something you're focused on?

JIM WEBER: You know, we've set some goals over the next 15 years that we think the runner is going to expect us to really limit our impact on the planet because they run outdoors. So you know, our Ghost is our number one selling shoe. It's the number one selling running shoe in the United States. It's carbon neutral. And it's done in a combination of 60% recycled materials and carbon offsets.

We got a long way to go, but we just think the runner's gonna expect it. So it's an engineering challenge. And then we're working on circularity too. And running shoes wear out, and bringing them back, and recycling the materials. We think it's table stakes. Over the next 15 years, we got to figure it out.

BRIAN SOZZI: As a company inside the portfolio of Berkshire Hathaway, run by Warren Buffett, what has that experience been like over the past decade?

JIM WEBER: You know, I've learned a lot because we've always treated all of our owners as investors and really tried to steward this brand and business to build value. But I underestimated how much ownership can matter because they're long-term thinkers. And they know that the brand is in the mind of the customer. And that's where all of our revenue growth, all of our margin, all of our profitability comes from.

So they're totally supportive of us building the brand in the minds of our customers. And everybody can say that, but they're really committed to it. So we couldn't be happier. They're supporting us to invest against the growth of this brand, and it's really fun.

BRIAN SOZZI: The other side of this is, no one lives forever. And no one can be CEO forever. When Warren is not here, what happens?

JIM WEBER: Yep. Well, I think the board has made it pretty clear. Greg Abel's going to be the guy. I report to Greg now. And Warren sees everything we do, of course. And we still connect.

BRIAN SOZZI: Is that report-- is it different dealing with Greg than Warren?

JIM WEBER: Well, actually not. The philosophy's the same. The culture's the same. The focus on cash flow and returns is the same, understanding a brand. The difference is Greg's a faster runner than Warren.

We had Greg out for a strategy review. He sample sized. He tried on all of our prototypes in our development timetable for the next three years. It's really powerful because he's a runner. So that's a big difference. He's faster.

BRIAN SOZZI: From the outsider looking in, and lastly, is it fair to say that Greg is a true disciple of Warren? Can you see the similarities between the two?

JIM WEBER: Oh, my. I think the business savvy and the business mindset? Absolutely. Absolutely. We have great conversations. And he likes Brooks for the same reasons that Warren liked Brooks. And that's important to us, right? We have to earn their trust and support. That's my primary job. And we work hard to do that. And I think we've got it.

BRIAN SOZZI: And we'll let you get back to working the floor. You're a very popular and in-demand guy here. Brooks Running CEO Jim Weber, good to see you. Appreciate it.

JIM WEBER: Thanks, Brian. Thanks for having me.

BRIAN SOZZI: Guys, back to you.

- Brian, I have to say, I'm feeling a little guilty listening to Jim. I can't remember the last time I went for a run. But I'm gonna definitely try on those shoes and maybe--

BRIAN SOZZI: You can do it today. It's OK.

- --take it for a run.

BRIAN SOZZI: Go for it.

- Brian Sozzi, there for us in Omaha with Brooks' CEO. Thanks so much for that.