How Brooks harnessed the run club boom to generate record-breaking revenue

0:04Hello, and welcome to the Modern Retail Podcast. I'm your host, executive editor Anna Hensel. I'm excited to be co-hosting this podcast during a very interesting time in retail. There's a lot of change happening, but also makes it very exciting to dig in. So consumer behavior has changed a lot over the past few years. But one category that continues to outshine other sectors within retail is the running category. More people started taking up running during the pandemic, of course. But run groups have remained persistently popular and companies that sell shoes or gear to runners are benefiting.

0:43So today I'm going to be talking with Dan Sheridan, the CEO of Brooks Running. The company just reported its full year earnings and finished 2024 with record global revenue. I'm going to be digging into the results with Dan, talk with him about what he thinks is working at Brooks, and how the company is setting itself up for more growth in the years to come. Dan, welcome to the podcast. Hi, Ana. Thanks for having me. I'm excited to talk with you. Absolutely. So Brooks just reported full year earnings. Let's dig into those first. Give me the high level of how Brooks is doing right now. Yeah, we had an incredible 2024 record year here at Brooks.

1:23We grew our top line 9 % and we grew across all regions and all channels. And we're now in our 25th year of growth. Over that 25 years, we've grown approximately 15 % compounded. And I think it's an outcome of this incredible sharp focus we have on the category of run that has mass appeal to anybody that really moves, puts one foot in front of the other. And so our company is wired around inspiring people to be active in their life. And that's been a long-term approach for us and one that we're very, very excited about. Yeah, that compound annual growth rate is very enviable. I know a lot of companies would love to see that.

2:10One thing that I thought was really interesting. So in the press release I got where you announced your earnings, there's a quote from you in there. And it says the sun is shining on the performance running category. I'd love to dig into that more. Why do you think the category is benefiting so much right now? Yeah, it's super interesting. This is, over time, a category that is recession-proof, it's depression-proof. It takes a lot to knock us off our access from a business perspective. And the reason is, is it's rooted in participation. So you can go back through the last 60 years and look at the different phases of running booms in the US.

2:54In the 70s, the jogging boom happened, And it was centered on the sport. It came out of a male-dominated, pre-Fontaine, Marty LaCourie, Jim Ryan, all of the iconic runners. And that drew a lot of people into the sport for achievement and personal goals. In the early 2000s, the running boom was centered on a broader approach and invited walkers and people that just wanted to be active. And that grew our sport and our business. And now we're experiencing what I would call the third running boom. And it's really a post-pandemic running boom. You know, it makes intuitive sense to us, at least, that focus on this category.

3:37You had all the gyms and studios shut down around the world. Everybody was at home. They had more time. And so what we saw is people that were, you know, frequent in the sport of run became more frequent. and those that were curious about the sport of run to be active in their life at that time, they had to absolutely find a way to be outside and move. And so we got this new population of runners. Then you have Gen Z, a large population in the US and around the world that saw their parents run or walk maybe for the first time or become more active. And so they're a big part of this too. And so participation drives this category and health and wellness does as well.

4:24So people are investing in themselves and we sit right in the center of that. And that's why our results were so great this year. That's really interesting how you characterize it because I've always kind of laughed to myself a bit when people say running is having a moment or even run clubs are having a moment because this is an activity that we've done since the dawn of time, right? But I think the trends you highlighted are very interesting and on point. And I think over time, maybe the reasons why people get into running or what they prioritize have changed slightly. So with this new kind of class of runners, maybe people who were introduced into it during the pandemic or picked it up more post-pandemic, just to sum it up, what do you feel like they prioritize?

5:15How do they want brands to speak with them? Just what are you seeing from this new class of runners? Yeah, we've done a lot of work on this, actually. We kind of call it the future runner, which is Gen Z coming into our sweet spot in terms of a customer base. And there's some really interesting data that we're getting from survey data here at Brooks and through public data as well, Strava and the like. And what we know is first and foremost, between the age of 18 and 25, their first run, the first time they ever run was at 11 years old. And that's about three years, three years earlier than the other generation.

5:52So they had access to running in their lives earlier. And they're doing it for different reasons. You know, I think the pandemic was a terrible time that I'd never want to go through again, created, you know, I've read the book, anxious anxiety and anxious generation, actually. And, you know, that is also something we're starting to see. People are choosing an active life, not just for the physical benefits, but for the mental benefits and the social benefits. And that's a push off maybe from, you know, being trapped in your home for so long and you're thirsting for connection and social connection.

6:28So what we're seeing is events are starting to grow again. We're seeing run clubs. Run clubs are the new dating app. It's where you're finding your mate. And people are choosing run clubs over going to the bar. And we see that in Gen Z. They're drinking less. Alcohol sales are down and the like. So we think this next generation is a running boom for our industry, but we think it's going to show up a little bit differently. They're going to balance mental, social, and physical in their lives maybe differently than past generations. Right. And so with everything you laid out, this is a generation that balances mental, social, physical, maybe differently than before.

7:13How does that inform how you speak to the consumers? Just curious if you can talk about at all how you're positioning Brooks or how that's led you to change your messaging, if at all, and how you speak to consumers. Yeah, you know, I think we have been a company that has leaned into the inclusiveness of this sport. We always say that everyone is choosing run for an own personal reason. When you look at a start line in a marathon, there's probably maybe 30 people that actually think they can win the race. And everyone else is out there for a different reason. So that's always been in our purview of how we think about our consumer and how we go to market.

7:54And so this dynamic of social, mental and physical, actually, we've been leaning into that for a long time. It's a part of how we think about our brand and invite people in. I think the changes that we're making is maybe on product architecture and specifically on the merchandising side. How do you merchandise in to a younger generation? We used to say that people would find, you know, our brand or our products when they got into their 30s and 40s because that's when they started to have pain in their feet. Oh, that's so interesting. I've always been the type of person I need a running shoe. Right.

8:34Like that's crazy to me, but continue. you. Yeah. So now we have this generation of young people that probably don't have the foot pain that I did in my 30s, 40s, and now in my 50s. And so we have to speak to them differently. We have to merchandise our products to be more versatile because we know that they're doing more than just run. And so there's a shift happening in our business and in our brand to make sure we address the next generation of runners. But it's exciting times. I mean, we really believe that we are in a running boom for the next 10, maybe longer. I think this might be a one-way street.

9:13I don't see people going back to an unhealthy lifestyle. How they interact to get their health and wellness will be different, obviously, in new generations, but really exciting times. Absolutely. It'll be fascinating to watch. So on that note, I would love to talk about product more. Were there any particular franchises or product that drove a lot of growth for you in 2024? Yeah, we've had an incredible year in terms of product introduction. You know, our company has for 20 plus years now really rooted in the biomechanics of human motion. We exist because we build shoes based on data that's going to keep runners running farther, further, healthier, and longer, and trying to reduce injury rates.

10:01And so that science matched with what we call Run Sites, which is a consumer insights group that we've invested here at Brooks. We've got just an incredible group of people that are mining insights of what not only the runner needs, but what they want. And that's been really fun. So out of that comes really great product pointed at a specific consumer for their needs and wants. And this year was, 2024 was a year where we launched eight new styles into the running market. We've got five of the top 10 styles at Specialty Run here in the US. We've got the number one style in the Ghost in Germany.

10:42And these are franchise styles that are tried and true for runners. Our highlights this year, though, were around the max cushion trend that's happening in our industry. And we launched the Ghost Max and Glycerin Max that have absolutely taken off and grabbed market share. We've got a lot going on in our speed and what we call responsive cushioning, kind of lighter weight product in our Hyperion franchise. And that shows up on the track with our professional athletes. So Josh Kerr is one of our athletes that won the silver medal at the Olympics in Paris. I was able to go and experience our brand on a world stage.

11:24And so our innovation cycle is pretty incredible right now. And, you know, innovation matters for runners. We're seeing it not only in footwear, but also apparel, materials, and fit. So we've got a whole stable of product that really impacted the market in 24 and 25. No exception either. We're going to have a lot of product coming to market then. That's interesting because I think anecdotally, me speaking to the runners, I know, yes, they're very interested in like performance and technical gear because there is so much on the market. I am curious, again, how you communicate technical innovations to runners.

12:07Like, how do you communicate that in a digestible way? And like, what have you kind of learned about what's the Brooks differentiator and how you, again, communicate that to customers in like a catchy way? Yeah, I mean, this is the art of marketing, right? Taking really complex performance products and synthesizing that information down to deliver to runners. And, you know, we've been able to do that over the years. I think the secret is having intention in your innovation to solve a latent need for the runner. And so we do that every day. You know, the big story right now in our industry is foams, the midsole compound of your running shoe.

12:53And what we've been able to do with our foams, we call it DNA tuned, is really match these components of our midsole to what runners want. They want great cushioning, inherent support. They want it to be lightweight and they want it to be responsive. And so what we try and do is simplify that down to talk about the attributes that we're delivering to runners. So DNA foam is able to do all of that. And, you know, you can show it in imagery, but it's really about telling the technical features of the product and in a way that it's absorbable by the by the runner. Got it. Another thing I understand that your loyalty program surpassed one million members in North America in 2024.

13:44It did. Yeah. You know, loyalty program is always a hot topic. Just would be curious what perks or benefits you found success with in getting more people to join and be active in your loyalty program. Yeah, so we know that we have, you know, approximately 16 million unique customers that purchase a Brooks product. And we know there are people that are highly engaged in our brand because we're delivering them a great product season after season. And, you know, the other side of that is there's a ton of competition right now. And the barrier for a runner to be curious and want to switch brands has never been lower.

14:26There's so much great product from so many brands. But here's what we know. We know an engaged customer is a very valuable customer for us. So we stood up our Brooks Run Club a few years ago and instantly we knew that this was a place where we could communicate, communicate essentially the values of our brand, what we're doing, why we're doing it, but also create benefits for them if they were able to share data with us. So what's unique about our loyalty program is we give our Brooks Run Club members the opportunity to link their watch data to their account at Brooks. And then we're able to encourage them through their running journey on little goals they might have or attaboy, attagirl as they finish a 5K or a 10K.

15:15And that engagement is really driving our membership and loyalty right now. So that's an area that we're expanding into. So in the US, we hit a million members and we're expanding right now in the UK and through Europe and we're seeing really nice results. People want to be connected to a brand that they're not only investing their dollars in, but they're thinking about it on their run. The most important piece of equipment on the run is probably the shoe, if not the sports bra. And they want to know how these products were made, where they were created, what they come from. And so we're able to do that through the Brooks Run Club.

15:56Right. I wanted to touch on something you mentioned briefly during that, which is your international business. So one thing I saw is that Brooks grew 228 % year over year in China, which is incredible. It comes at an interesting time, as I'm sure you know, with new tariffs being implemented on China, just the global trade market is in a very interesting state right now. How much of an impact do you think tariffs will have on your China business? And how are you trying to proof your business in this economic environment? Yeah. So there's probably two areas to explore here or try and answer for you.

16:42One is the commercial side of our business in China. And we launched a couple of years ago in China. Our results are pretty incredible. We're really excited about what we're seeing. And again, I'd go back to how I started. The reason we launched in China was participation rates are just exploding there. As the middle class grows in China, people have more time and more disposable income to spend on their hobby or their fitness journey. And so we saw that and we're invested like crazy. We just opened our first store in Shanghai and we're expanding. We'll probably open 10 more stores this year in China.

17:23Yeah. And so So we see that as a growth engine. It doesn't come without risk. Obviously, everything we're reading and catching up on daily, if not hourly, on the changes that are coming with this administration are things that we have to plan for and try and be as proactive as possible. But we're very bullish on our business in China. On the other side of this answer is the tariff puzzle. And tariffs are tough for Brooks. And I would argue for our industry. You know, it's not just a Brooks issue. It's a broad footwear issue. I think the stats are that 99 % of the shoes that are sold in the U.S.

18:03are imported. 56 % of those are from China. I wouldn't be surprised by that. I mean, yeah, I can't name any made in the U.S. footwear. I think maybe a couple. But like the point being, I'm not surprised that the vast, vast majority of footwear is imported. Yeah. And so, you know, we're in that. We're not in China. We've worked really hard to create redundancy throughout our supply chain and minimize risk as much as possible. We're in Vietnam mostly and a little bit in Indonesia. And, you know, so right now, and I say right now, we're not impacted by the China tariffs that were implemented this week.

18:45But, you know, if we were to see tariffs come through to other countries, it would impact us. And so we're working really hard on that. We would have to push some of those tariffs on to price increases. That's an uncertain moment for us in a market around the world that you just don't know how price increases will be absorbed by the consumer. So this is a puzzle that is not unique to Brooks. It's not unique to the running industry. And I think everyone's kind of in an uncertain time right now, and we are as well. But we're modeling that out and trying to get smart on the choices we would make if those came.

19:23I think the way you described it as being a puzzle is spot on because just what I'm seeing and hearing now talking to brands, you know, things are changing so quickly. And it's, well, maybe if tariffs are implemented in a certain country, maybe that's not where you manufacture your products. But maybe that is a market that you're really betting on for retail growth this year. And could that lead to changes in demand? So I guess my follow-up question to that is just overall, how are you trying to keep the business nimble right now? Because it seems like this is a very fluid situation. It seems like a year where maybe there might be some unexpected challenges that pop up or just, again, economic conditions could change very quickly.

20:14How are you trying to stay nimble in response to that? Yeah, I think it's the biggest challenge in any business you run. We talk about it in terms of headwinds and tailwinds. Tailwinds are kind of the trends that you hope to jump on and ride smoothly as different trends come into your category. The headwinds are ones that always pop up in business. And the best businesses in the world create agility in their supply chain. They create redundancy as well so that you're not in one country or one market at any one time. And so we've been working on that over the last five or six years to create that agility and redundancy in our supply chain.

20:58And then we're expanding. Our business over the last 20 years has really been built here in the U.S. as running has exploded. And now we're starting to expand. We're expanding globally. Obviously, China we talked about. We've got a robust, robust business in Europe. And we're really working hard to invest in that market as well. Any specific countries you're targeting there for growth? Yeah, we are, you know, really strong in the larger European, Western European countries, Germany, France, Italy. We're really strong in the UK. All of those markets have the same demographics in terms of runners that we do here in our core market of the US.

21:42And so our playbook and our strategy works in those markets. In the German market in 2024, we doubled the market in terms of retail sales and grabbed market share from our competitors over there. In France, we saw three times the growth of the retail market there. So our strategy is working, but it's a global growth initiative that we have to expand this brand. We think Brooks and what we stand for is relevant in any country that has a passionate population of runners and people that are investing in their health and wellness. Absolutely. What else are you focused on for 2025? Yeah, you know, we have a saying at Brooks that sharp focus creates mass appeal.

22:27So, you know, We are anchored in performance as the tip of the spear for us. And our investment in R &D and innovation and our product groups is key to our success. We're a product company at the root of it. And so what we're trying to do now is really expand this brand. We think we have an opportunity to double our business in the next five years. And that comes on really good choices and investments and markets. but it comes in really good choices in the products that we're bringing to market. So you're going to see us continue to invest in footwear, and we're putting a lot of effort into our apparel strategy as well.

23:07Going back to we have roughly 16 million unique runners, we think that all of them should experience Brooks Apparel as well in their life, and we think we have a great offering in our apparel as well. So apparel is a big part. And then what we've seen probably in the last three to four years is this, you know, what I would call coalition between fashion and performance. Yeah. It's no longer a separation from the runway to athletics. And you can see it in our everyday life. Live sports is the hottest commodity out right now. The contracts that are happening for athletes, the TV rights that are happening for leagues is part of this cultural phenomenon that's happening.

23:53And so performance and fashion are merging. I always talk about how the athletes show up to their games. It's not that they're walking into a locker room. They're walking a runway as fashion icons. If you look at the last few covers of Vogue magazine, you've got some of the greatest athletes in the world, you know, and they're on the cover. And that's the merge that we're seeing. So we're going to push into that. We've just launched a lifestyle category here at Brooks, and we're super excited about that. We were at Paris Fashion Week two weeks ago launching that. And so we're dimensionalizing this brand as we go, too, because we know that our core customer also wants product for off the run.

24:36And they want to express themselves as who they are. Maybe it's a runner, maybe it's a walker, a trail runner. And so we're bringing that product into our brand. And we've got a long history and heritage to go back in the vault and pull out products. You know, Brooks is over 110 years old as a brand. So we have a lot of product to bring back into the market and, again, dimensionalize this brand for our customers. I do think the intersection between performance and fashion is really interesting and honestly, probably something I could dedicate an entire another podcast episode to. But Dan, thank you so much for joining us.

25:17This has been a great deep dive into Brooks and the running category generally. Anna, this was great. Thanks for having me.

25:32Thank you for listening to this episode of the Modern Retail Podcast, a show by Digiday Media. If you haven't already, please subscribe and head to Apple Podcasts to leave us a review and a rating. See you next week.