Brooks Running is a hundred-year-old American footwear company. In 1914, they started with ballet slippers and bath shoes. A page on their website boasts, “While we can’t take much credit for revolutionizing the ballet or bath shoe industries, we remain just as committed to specialized gear for a specialized activity.” The industry Brooks did revolutionise was performance running. However, their path was far from linear — the company went through a string of highs and lows, with a striking low point being close to bankruptcy in 2001. This is the story of Jim Weber’s turnaround at Brooks, when pit against larger, more powerful incumbents in the shoe industry.
To understand why Brooks was in financial straits in 2001, we need to trace the evolution of the company over the course of the twentieth century. From 1914, through to the 1970s, Brooks diversified into a range of products, from baseball cleats and football shoes, to a line of shoes scientifically engineered for children. The company’s focus on running began in 1972, when a Yale graduate, Frank Shorter, won the marathon at the Munich Olympics. Shorter’s win sparked a wave of marathon running in the United States of America — and Brooks positioned itself to take advantage of it. In 1974, Brooks launched a running shoe, the Villanova, that brought them up to speed with the market leaders of the time. The Villanova was special because it was outfitted with a new technology in the midsole of the shoe: ethyl vinyl acetate or ‘EVA’, an air-infused, shock-absorbing foam. Even better, the shoe was designed with direct feedback from an American Olympic runner. Brooks was one of the top three brands in the running market by the late 1970s. However, Brooks began diversifying again. The company started manufacturing baseball shoes, walking shoes, and even launched products for the aerobics market. Of course, this wasn’t an unusual strategy at the time; in fact, catering to just one market was considered risky. Weber, who hadn’t become CEO of Brooks yet, says in his business memoir, Running with Purpose, “the standard athletic playbook” called for “at least three legs of a stool: running, court, training, and so on”.
The 1980s saw Brooks stumble: it experienced production issues brought on by a bloated product line, and struggled due to an economic downswing. In response to these challenges, a new CEO, Helen Rockey, was appointed to turn the company around. Rockey announced a plan to increase sales and profits by 25% in a three-to-five year window. She trimmed the product line, and reoriented Brooks toward running, turning multi-year losses into a profit. In 1999, private equity firm J.H. Whitney & Company acquired Brooks. Rockey stepped down to become CEO of an athletic shoe and apparel retailer soon after the acquisition. Under the next two presidents after Rockey, Brooks began to flounder. The product line expanded, the company lost direction, and the losses returned. To make matters worse, Brooks had also taken on millions in debt as part of the sale to Whitney.
Weber was an independent board member at Brooks at the time. He recalls how dire the situation was:
“By the fall of 2000, Brooks was in crisis. We were having weekly board calls because the bank was refusing to fund operations. There was a question whether payroll checks would bounce. As plans were being missed, the banks were demanding more capital be put into the business, so Whitney and the board were actively trying to assess how bad things were with customers, suppliers, management, product, inventories, and cash flow.”
During a particularly bad board meeting, the board chairman Ann Iverson turned to Weber, and said, “Jim, you should be in here running this business.” For the next ninety days, Weber learned more about the business and plotted strategies to make Brooks profitable again. He concluded that the key to a turnaround was Whitney’s support. In March 2001, Whitney threw Brooks a lifeline, agreeing to recapitalize the company with $7 million. That was all Weber needed, and on April 4 2001, he was named CEO.
Even though Weber was now the CEO of a failing company, the job was a childhood dream come true. A profile of Weber written by his alma mater, based on an interview with him, mentions:
“One thing Weber knows is that nothing great is built in only a few years. In seventh grade, in St. Paul, Weber wrote a paper about careers. Even back then, he knew exactly what he wanted to be: an NHL hockey player. He also knew that the likelihood of that was slim, and his second choice was to run a business. He loved the idea of building something great. In that paper, he wrote about the structures of companies, what each role does, and how someone gets to be president. He discovered that you need to get an MBA, so, at age 12, he planned to get one.” (emphasis supplied)
Weber hit the ground running, tasked with presenting to an unhappy group of Brooks’s international distributors just two weeks after being appointed CEO. Owing to the company’s performance — losses of $5 million, $30 million in debt, and millions of dollars of obsolete inventory — the mood in the conference room was “downright gloomy”. The economy was in tatters, thanks to the recession of 2001. The banks funding Brooks wanted out, and all the distributors were either angry or worried. Weber says, “Brooks was in trouble, and the entire industry knew it.”
Weber was the fourth CEO of Brooks in just the last two years. He could sense his audience’s scepticism at the start of his PowerPoint presentation. Then, on slide eight, a hush fell over the room. “What will Brooks be?” Weber had asked — and his answer was simple: a running-only brand. He says:
“Going forward, I told them, we would pivot to a running-only brand. Real performance for real runners. Our product would perform for the most discerning runners, earning their trust mile after mile, and our brand would embody the spirit and soul of all who run. We would be serious about the running lifestyle and celebrate the positive energy gained from it. We would satiate the endorphin addict. Our product line would be the best running shoes, the best running bras, running socks, and running apparel. Running, running, running. Our customer focus would be active runners, period. From competitive racers to weekly fitness runners. Brooks would build engineered performance gear and price it accordingly. Our gear would serve the sport and the enthusiast lifestyle, not casual use, not family footwear, and not fashion. The room grew quieter still.”
Weber’s decision was controversial because of how different it was from the strategy of every one of Brooks’s competitors — companies like Nike, Adidas, Reebok, New Balance, and Asics. These other companies made shoes for a range of athletic activities, not just one sport. All the same, Weber’s resolve was strong. He was driven by a quote he wrote on his whiteboard on his first day as CEO of Brooks: “The secret to success is constancy of purpose”. This sentence stayed on the whiteboard for the length of his tenure, to remind him “to focus, to play the long game, and to not get distracted.”
Weber’s choice was informed by careful analysis of the growing market for running shoes. The number of people who participated in road races had increased 25% from 1996 to 2001. He tracked the last boom in the running market to 1972, the year in which Shorter won the marathon at the Munich Olympics, and women were allowed to register for the Boston Marathon. According to Weber, nearly thirty years later, “running was once again exploding,” a phenomenon that was going unnoticed by most major shoe brands. Weber writes:
“[W]e were all competing for sales to the masses, trying to cover every sport and every price point with visible technology that had eye appeal on the shelf. Performance running was a backwater. Nike and Adidas were winning overall but losing market share within the category. New Balance and Asics were doing better within the higher-priced running market.”
Citing a statistic in magazine Runner’s World, Weber notes that their new target customer — the frequent runner — bought an average of of 2.6 pairs of shoes per year. He says:
“Running was, and still is, the biggest category in athletic footwear and apparel. I felt then that if we focused and got a small piece of it, we could not only survive but build a meaningful brand and a valuable business.”
He sums up his conviction like so:
“Every industry develops conventional wisdom, and there is peril in falling in line with it. Often it seems to reflect the market leader’s path to success or the short-term, low-hanging fruit that can be captured in sales. Conventional wisdom leads to merchandising to the obvious, versus creating unique or compelling solutions. In footwear, many believe the conventional wisdom that says brands must play in all categories, across myriad price points. They believe that a company can’t survive by playing a narrow game. Our contrarian philosophy was to focus only on premium running, turning a narrow focus into a strength.”
The strategy seems clear only in retrospect. At the time, focusing on just one market must have been terrifying. Take, for example, advice Weber received from well-wishers: Tom Raynor, the founder of Fleet Feet, a curator of high-quality running gear — and a Brooks alum to boot! — told Weber ‘with genuine concern’: “We care about Brooks, and we need you to succeed. We’re just not sure you can survive in run only.”
The next order of business was a distribution plan that complemented the company’s new North Star. Weber opted to “focus not on being where shoes were sold but where runners shopped for performance gear” — specialty stores that catered exclusively to local running communities. This decision upended Brooks’s existing sales strategy. Weber writes:
“The company had been focused where the volume was sold and its distribution pyramid had malls (Finish Line and Foot Locker), family footwear (Famous Footwear), sporting goods (Dick’s and Big 5 Sporting Goods), and department store chains (Dillard’s, Nordstrom, Macy’s) as the foundation, plus a narrow block of specialty run shops on top. I flipped the pyramid to prioritize specialty run, then sporting goods and select mall and department store retailers who were focused on runners buying premium performance product. This meant we would be in less than 20 percent of all available doors of distribution for athletic footwear, but the four thousand stores we would focus on were where premium-price running product was purchased.”
The company’s new focus on running did, however, come at a cost. For instance, the loss of Brooks’s biggest customer, the retailer Big 5 Sporting Goods. The average Brooks shoe at this retailer sold for about $30, a price at which the company was practically losing money because of razor-thin margins. When the retailer proposed lowering the price even further, to $19.99, Weber’s mind was made up. He says:
“I thought to myself, okay, this is over. There was no way we could be profitable at that price. I went back to Seattle, and we didn’t lift a finger on that book of business. We just let it trail out to zero because there was no win there for us or our customer.”
The places Brooks aimed to sell their shoes — local speciality stores — didn’t demand low prices, but they did expect a reliable supply of premium products. Weber started by cutting 60% of the company’s product line. He anticipated the dip in revenue that followed this decision, believing that it would “eventually reduce losses and inventory, generating badly needed cash.” Then, he turned his attention to building a new product.
Before we get into the details of the shoes Brooks began making — and for those of you who don’t run marathons — the next few paragraphs will be a quick overview of running shoe terminology.
Motion-control shoes, designed to correct overpronation, were a Brooks specialty. The company pioneered this category in 1977 with the Vantage, featuring a removable wedge to slant the runner's foot outward. By 1992, Brooks had launched two new models in this category — the Beast and the Addiction (also known as the Baby Beast) — which became so popular that doctors prescribed them for runners with injuries like shin splints. These models accounted for about half of Brooks's performance running shoe business in 2001, with Weber noting that at the time, “beyond those two shoes, Brooks had little else.”
Another important concept in the running shoe market was visible technology — the practice of the cushioning systems in shoe design being apparent, often with visible air or gel pockets in the heel. In the early 2000s, premium running shoes above $100 were all about visible technology. Nike first used heel-cushioning bubble technology in 1979, and in 1987, created an icon by making it visible in the popular Nike Air. Asics, another competitor, had shoes with gel pockets, and as retailers loved reminding Brooks at the time, used a dozen or more technologies in their shoes, helping clerks on the floor sell more pairs.
Lastly, stability shoes occupied a middle ground, offering some support while being lighter and more flexible than motion-control shoes. Weber identified this as “the most important performance segment” where Brooks needed to strengthen its position. The company's mid-priced stability shoe, the Adrenaline GTS (Go To Support), was in its third iteration but hadn't yet gained significant popularity. However, Brooks believed this shoe had the potential to align with their new mission and could take off with the right design and guaranteed supply.
Weber and his team reinvented the Adrenaline GTS. They created a new ‘last’ — the 3D mould around which a shoe is shaped — which made the fit better, perfected the toe box, and overall, resulted in a smoother running experience. The other key breakthrough was the ‘progressive diagonal rollbar,’ a technology that used triple-density midsole foam to correct for overpronation and provide ‘graduated’ support as the foot moved through the motions of running. In an attempt to service demand while minimising risk, Brooks built this shoe in just one colour combination — blue and white — and kept it the same for 18 months. It’s a bit of an understatement to call the Adrenaline GTS 4 a winner — the shoe was the foundation on which Brooks could build its next chapter. Weber says, “The Adrenaline GTS became the franchise product that would save the company and fund investment in growth for the next decade.” The Adrenaline GTS 4 continues to be one of the best-selling running shoes of all time, clinching various awards, and selling more than 30 million pairs.
Source: Brooks History
As the sales of the Adrenaline GTS increased, Brooks began exploring other categories within performance running. Their models Ghost and Glycerin had success in the neutral shoe market — that is shoes for runners who don’t overpronate, and thus, don’t need excessive support. They also launched their first trail shoe, the Cascadia, with feedback from ultra-running athlete Scott Jurek.
Brooks prioritised feedback from their customers — running enthusiasts — as they refined their new products. Weber notes that a survey revealed that runners ranked fit and comfort, followed by injury prevention and performance features as the most important factors in their decision to purchase a pair of shoes, outranking both price and appearance. Moreover, the company had learned in their conversations with retailers that the Pegasus, a popular Nike shoe, fit differently depending on which of the company’s factories produced it. Weber writes:
“We’d seen that movie before. Runners become loyal to specific shoe styles. If you mess up the fit, you risk losing them forever. Brooks made the decision to invest heavily in wear testing. We now have a community of a hundred thousand runners who give us real-time feedback on every shoe across multiple sizes before we hit commercialization. We get a ton of feedback, some good and some bad. But it’s always constructive.”
Speaking of positive feedback, Weber says, “a specialty store retailer told us that we have the ‘ahh’ factor. People put on the shoe, stand up from the stool, and just say, ‘Ahh.’”
Brooks transformed its pricing strategy, focusing exclusively on mid-to-premium performance shoes. The company “jettisoned every shoe under $75 and would no longer make or sell them”. This marked a significant departure from their 2000 approach, when the company had a “good, better, best” pricing strategy — which translated into cheap $30 sporty, family wear; affordable $60 to $80 athleisure options; and premium $100 performance-level shoes. Notably, over 50% of their sales in 2000 came from the $30 category, which the company internally dubbed “barbecue shoes,” because, Weber says, “that’s what they were actually used for; that, and mowing the lawn.” The company’s pricing strategy has stuck: even today, Brooks shoes are not cheap, and do not target the lower-end of the market.
The next step in Brooks’s turnaround was their marketing strategy. Targeting a specific demographic helped them: they could now focus on being visible in places a running enthusiast would frequent, and earning the support of key influencers like the owners of specialty running shops. Weber says, tongue in cheek, “Of course, Nike spent more on marketing by 10:00 a.m. each day than we could spend all year. But we committed to authentic, passionate, energetic marketing that would create a real community for runners—from the grassroots to online and events.”
Brooks aimed to create a brand that celebrated every runner’s run, and highlighted the excitement of running. Weber describes some of the eccentric campaigns that the company’s vice president of marketing Dave Larson spearheaded:
“In the years to come, we offered a VIP porta-potty experience for runners wearing our shoes. We also offered a booth at the Chicago Marathon that provided a photo op with a giant pasta bowl and a massive meatball. We made an ad featuring one of our elite athletes struggling with our motto, Run Happy. ‘Yeah,’ she deadpanned, ‘we all want to kick ass, but we should have fun doing it.’ Our ads spotlighted real runners, not models.”
Source: @BrooksRunningSA on Twitter (Mar 9 2020)
The president of Running Network was quoted talking about Brooks’s marketing efforts: “with limited marketing dollars, they get way more value than bigger companies,” and the reason, Weber says, is that “all of our people were focused on runners, and we didn’t mind if non-runners had never heard about us.”
In Running with Purpose, Weber talks about how he got his team to stay motivated through these changes. He cites a page-long strategy document that outlined his vision for the company as being key. Weber also worked with the company’s leadership to adjust their inflated business goals against reality — they lowered revenue and profit projects until they had a fair chance of hitting them and rebuilding credibility. A new and experienced CFO, David Bohan, was also brought on. Together, they cleaned up the balance sheet, liquidated inventory, and revitalised product development. Brooks focused on effective inventory management with the goal of improving cash flow and margins by developing and delivering products on time.
Gradually, the tide began to turn — the company’s numbers improved, and after a long time, the team received a bonus. Weber says, “We started to feel a little more pep in our stride. The opt-in employee fun run we held from Brooks’s headquarters on Friday afternoons picked up its pace. With the new Adrenaline, we were increasing market share, and in meetings we enjoyed a little trash talk about competitors.” The internal company shorthand for momentum became “On your left,” the universal running signal for passing another runner from behind.
By 2004, Brooks’s sales growth, profit margins, and returns on capital were in the top quarter of the industry; revenues were up 26% from the previous year. The company attracted attention from the media, retail distributors, customers, and, of course, potential acquirers. Russell Athletic, a century-old athletic brand which had acquired the likes of Spalding in the past, was one of the many to take notice. They bought Brooks at nine-times EBITA for $115 million. The CEO of Russell, Jack Ward, told reporters that the acquisition was driven by Brooks’s “leadership in performance running products”.
In the spring of 2006, Berkshire Hathaway acquired Russell. Russell, Brooks, and other sports brands under Russell were placed under Berkshire’s Fruit of the Loom subsidiary. Incidentally, Warren Buffett had a strong influence on the way Weber thought about business and operations. Weber says:
“It was prophetic that I had gone to school on Warren Buffett’s idea of building economic moats—creating competitive advantages that are meaningful to customers. Even if my bosses at Russell and Fruit did not quite understand what we were doing at Brooks, I was confident that over time Warren Buffett and Charlie Munger, his partner and vice chairman at Berkshire Hathaway, would.”
Weber was right. In 2012, Buffett recognized Brooks’s potential and established it as a standalone company, with Weber reporting directly to him.
And for good reason. In a May 15 2022 interview on Acquired, Weber says:
Jim: Absolutely. We saw a higher margin business and we benchmark against all the public companies. We’re asset-light, it's really an inventory and receivables business, and there's a reason we only have one store at our headquarters. We think it's an advantage for us right now in the development of our brand. But if you have high margins and good flow through operating profits in the teens and you're incremental, obviously capital, you can flow cash growing 20%, 30%, 40%. We haven't needed [a] dollar of [external] capital since 2001.
Acquired’s Ben Gilbert: Wow.
Acquired’s David Rosenthal: That's incredible.
Jim: That's why Warren Buffett likes us.
Ben: You send cash to Omaha, not the other way around.
Jim: Our return on tangible net assets has been over 50% for the last 15 years.
David: Wow, 50% annually?
Jim: Yeah, on average net tangible assets.
After a 23-year long career as CEO of Brooks, Weber stepped down in March 2024, handing the baton to homegrown successor Dan Sheridan. In Running with Purpose, Weber writes, satisfied with the moat he had built:
“Our fit–feel–ride promise would become part of our moat. We knew if we won the trust of runners at mile twenty, they would buy our brand again. The way we deliver product to retailers, on time and consistently, is part of our moat. We don’t have classic network effects from a platform, network, or monopoly. But if you can create loyalty with franchise products like the Adrenaline GTS, in turn creating word-of-mouth and attracting repeat buyers, those franchises can gain volume scale advantages, driving both lower production costs and broader distribution to increase sales opportunities. Soon you can invest more in innovation and marketing than the other brands. Couple that with world-class inventory management, and you can realize tremendous momentum.”
Sources
Running with Purpose by Jim Weber. Published in 2022.
https://www.brooksrunning.com/en_us/meet-brooks/our-history/
https://wwd.com/fashion-news/fashion-features/article-1083280/
https://www.brooksrunning.com/en_es/blog/gear-stories/scott-jurek-talks-trail-shoes.html
https://www.seattletimes.com/business/sale-to-russell-putting-brooks-on-bigger-track/
https://www.sec.gov/Archives/edgar/data/85812/000119312506081999/dex991.htm
https://www.acquired.fm/episodes/arena-show-part-ii-brooks-running-with-ceo-jim-weber
https://www.cnbc.com/2024/03/12/brooks-running-ceo-jim-weber-to-step-down.html