With revenues surging 43 percent in 2012 to crack $400 million for the first time and future orders ahead 31 percent, Brooks Sports is feeling no slowdown in the running category.
At a breakfast meeting with journalists held last week at the Outdoor Retailer Winter Market in Salt Lake City, Jim Weber, president and CEO, half-joked about the widespread concerns over the running category following Finish Lines release of disappointing third-quarter results on Jan. 4.
Is running over?, remarked Weber regarding some of the trade headlines reading at the time. I would look at running like eating. If eating is over, than running would be over. Because people are running. You look at every place they can run – endurance racing, triathlons, adventure runs, road races – running lifestyle is as healthy as its ever been. Maybe healthier than its ever been.
Finish Line had lowered guidance partly because of what executives heralded as a quick shift in demand from running footwear in favor of basketball. Weber agreed that fashion cycles influence all athletic footwear, including the running category. But Brooks business is super healthy across channels and Weber suspects that the performance-run side is healthy not only at run specialty but across athletic channels, including at Finish Line. Said Weber, The performance running category thats sold to runners is fantastic.
At Brooks, footwear sales grew 45 percent in 2012, with its lightweight category leading the pack. By years end, PureProject held 12 percent of the lightweight running retail dollar market share, up 10 percentage points since December 2011. Strong PureProject sales propelled Brooks to second place for overall retail dollar market share in the minimalist running footwear category. According to the latest share data, the neutral and guidance categories werent far behind with three Brooks shoes experiencing double-digit growth December 2011 to 2012 – Glycerin (83 percent), Ghost (66 percent) and Ravenna (43 percent).
While driven overall by the U.S., Brooks also saw revenues increase 41 percent on a local currency basis in Europe. All major European countries contributed. Future order backlog in Europe increased 25 percent.
While expanding on its rank as the No. 1 spot in the U.S., Brooks also ended the year leading in Germany and scored the number two spot in France and the UK, as the highest-ranked brand by SRAs, according to the Sports Marketing Surveys Running Specialty Store Sales Survey.
Its so clear to us now that our brand is resonating, Weber said.
Weber said Brooks, a subsidiary of Berkshire Hathaway, is clearly benefiting from the movement toward healthy lifestyles seen over roughly the last 15 years thats also supporting many other running brands. Pointing in irony to how even Coca Cola had just launched an anti-obesity program, he believes the wellness trend and runnings popularity overall continues to build. Said Weber, You got to move. And running is so strong, we feel weve got another ten years of work at least on building out our brand.
But he also said Brooks continues to benefit from efforts mostly put in place when he first took over the brand 12 years ago. These include pushing a product-centric focus, being a good partner to retail customers, and engaging with runners on their level.
Regarding the brands outreach efforts, Weber believes Brooks ‘Run Happy positioning remains unique within the industry by focusing more on the inspirational side of running.
Its about your running for your own personal reasons, said Webber. ‘Run Happy as a positioning statement really has a different vibe to it than a typical aspirational athletic brand. Were celebrating the run and all the reasons people run. And the sport, track & field, is part of that. But, boy, its much bigger than that. And were also trying to execute uniquely wherever we go.
For its store partners, inventory availability has been a central means of support. At-once fill-in orders increased 49 percent in 2012 with at-once representing over 30 percent of footwear orders last year in the U.S.
Weber said quick delivery has become even more challenging with lines getting broader in terms of widths, colors and overall SKUs. While Brooks replenishment speed reflects ongoing investments in supply chain processes to support its goal of reaching a billion in sales, it also reflects a stressed commitment internally. Said Weber, We didnt forecast the growth we had. We chased it and our operations team just did a phenosmenal job.
Finally, Brooks continues to lead with product, with Weber noting, You are only as good as your last shoe. This includes creating shoes that keep runners injury free as well as delivering the experiences they want in their run.
Part of its most-recent success on the product side that has led to multiple-review wards stemmed from a reevaluation of its business model in 2009 after the business began stagnating a little bit amid the economic downturn. Finding runners kept running and the category again proved to be more recession-resistant than others, Brooks was encouraged to basically stay the course theyd take over the last decade while investing ‘in those three or four things that really make us distinctive.
One newer focus was on improving the looks of its shoes. Weber noted that while Brooks was rebuilt on science – function and fit based on the principles of biomechanics, the ‘art side also needed greater attention. Surveys, according to Weber, dont typically reveal that runners are looking for a shoe that is a little more attractive, whether through more color or an overall sleeker silhouette. Brooks found that shoe shells across brands in 2009 were just too similar. Said Weber, You stepped back and you could put different logos on different shoes and there was too much sameness so we really tried to step out in design.
Regardless, the challenge around design has been in rolling out tweaks in an evolutionary rather than revolutionary manner given runners expectations of each franchise model. Said Weber, Were in this crazy business where half of the conversations youre having with your team is, ‘Youre changing it too much, he joked.
But the other major program in recent years stemmed from a push to gain a better understanding of the whole minimalism trend. Backed by a deeper exploration of runners insights, Brooks overall design mindset has shifted from solely focusing on what runners needed from an injury prevention and fit standpoint to also include what they wanted from an experience one. Noted Weber, Thats the way were thinking about product now and I think its different than how other people are thinking about product. By design, its runner insight. Lets find out what theyre really looking for even if they cant speak it but try to understand it as best as we can, apparel included.
The rethinking led to the launch of the PureProject line, which was by far Brooks largest launch in its history. The collection, launched in Spring 2012, represented over 20 percent of sales last year, a fraction of internal expectations. Weber noted that new launches typically take second or third iterations to work. But Brooks design team really dialed in the fit in the shoes and that was critical. It was a huge success for us and its been successful globally.
Andre Kriwet, global director or footwear product management, said PureProject was really about choice. PureProject line represents the demand by some runners for more of a feel experience while its traditional lines represent the float experience. Said Kriwet, We see ourselves as having the best tools or the best gear, but then its up to the runner to figure out what they want to do.
What was particularly encouraging about PureProjects success was that Brooks traditional lines have continued to grow very strongly, according to Kriwet. He said, That really shows us that the positioning was spot on and we didnt really cannibalize any numbers.
Among its core lines, the Adrenaline and Trance are still Brooks largest volume shoes. While both continue to grow, the rate has been a little slower with all the attention to lightweight models across the marketplace. Runners are particularly gravitating toward its Glycerin, Ghost and Ravenna models with each brand closing the gap with Adrenaline. In the PureProject line, the Cadence, Flow and Connect ranked 4th, 6th and 8th in their first year.
Kriwet said Brooks now has a broad number of models working in the market. He added, Quite honestly, five to seven years ago we had two or three shoes that we sold a lot; now its eight or 10 shoes we really sell a lot.
Weber said that while Brooks raised prices in many areas to offset higher input costs, 2012 marked the brands second lowest margin in ten years. He said this reflects the companys focus to put value into its shoes as well as lower margins overall in the PureProject line.
On the apparel side, sales grew 25 percent last year, with the brand remaining as the second-largest seller in the category in the SRC channel behind Nike – still twice the size in market share than the 3rd largest vendor. Overall, apparel represents only 10 percent to 15 percent of Brooks revenues. Brooks has been adding to its apparel design internally and is also bringing in a materials development team for the first time to further differentiate its apparel offerings. Weber feels its even more challenging to create a point of view in apparel given the many brands attacking that side and the fact that so much of running apparel isnt unique.
Looking ahead, Brooks is planning to remain innovative around both its design and outreach efforts with the hiring in November of Anthony Piazza as footwear design creative director. In the consulting business for 12 years and fresh to the running world, Piazza has been charged with more deeply understanding runners insights to guide the brands efforts.
Potentially more innovation is promised to come from a new, larger research project to more deeply explore the confusion in the marketplace erupting from the minimalist conversation, according to Kriwet. The confusion includes why stability shoes clearly work for some runners even though theyre not in vogue while other runners overpronate for over 20 years have never been injured.
The project is designed to rethink fitting runners from a more generalized baseline – such as 7 degrees over pronation, you need to have this shoe – to base it closer to each individuals needs. The goal is to better harmonize how the shoe interacts with the body. Said Kriwet, We want to optimize muscle activity, joint motion and performance. And all that equals to a better performance.
The research may also explores whether more intuitive language may work better to communicate needs with runners over the traditional neutral, stability and other classifications.
Overall, Weber feels Brooks growth is just beginning. While his job has changed at least three times since he took over to turnaround the brand, he still relishes his role in guiding Brooks to become a global brand.
What drives me is I like to solve puzzles and I like to be part of a team and I love to win, said Weber. And as Ive gotten older – you get to know yourself – Ive recognized that I love to build things. So Im having so much fun. My team doesnt always have so much fun around me. But we have the opportunity to create a brand in the best category in all of sport.
