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Full Gallop

On a six-year run of double-digit growth in sales and revenue, Randy Watson, chairman and CEO of Justin Brands, discusses the factors fueling the success and why the best is yet to come.

Randy-Watson-image2-August-2013Randy Watson likes disruption—the positive kinds. The chairman and CEO of Justin Brands, makers of Justin, Tony Lama, Chippewa and Nocona, believes new opportunities are created when the old way of doing business is disrupted. Take the rise of social media, for example. It’s dramatically changing the way consumers shop as well as their expectations. Watson believes Justin Brands better adapt to these changes or run the risk of being left behind. “Even though one of our brands is 135 years old (Justin), that consumer is looking for a whole different shopping experience and we are working hard to address that,” he says. “We’re not going to rest on our laurels of 457 years of combined brand equity. We’ve got to remain relevant.”

Before social media’s disruption, Watson describes how a style might have taken five years for its lifecycle to be completed. It could have started in Texas, been hot there for two years, and then spread to California and New York. “Today, you can tweet a photo of a new style and, in a matter of seconds, receive responses nationwide of, ‘That’s cool, where can I get it?’ Or, ‘That’s horrible, why would Justin ever make anything like that?’” Watson offers. “We’ve got to be able to address those types of instantaneous positives and negatives.” Watson particularly likes the speed of social media. “It allows you to take new ideas—of any size—and rapidly pursue and target customers,” he says. “And you can do so at a reduced cost, in both money and time. It’s a phenomenal tool going forward.”

The disruption caused by social media is causing disruption—a lot of it positive—in manufacturing. For starters, Watson says faster consumer responses create the need to react quicker. It’s prompted Justin Brands to re-evaluate its entire manufacturing process. The fact that the head of the division is retiring is also incentive for Watson to focus on that arm of the business for the rest of this year. “We’ve manufactured, for the most part, the same way since 1879, and I want to see what we might be able to do differently,” he says. “Is there any positive disruption that we could implement, be it techniques, standardization, new technologies, new equipment, etc.? We are really looking to bring our manufacturing into the 21st century.”

A key element of the manufacturing effort is Justin Brands’ continued commitment to U.S. production. It’s no patriotic marketing gimmick, as half of Justin Brands’ dollar volume of goods sold is made stateside in its four factories. That volume, Watson adds, has risen substantially over the past few years. “We’ve never had less than three U.S. factories, but we’ve been increasing our production and are meeting daily about adding second shifts as well as installing machinery that improves efficiencies, which would make us more price competitive,” he says, lamenting that it’s not easy to find people skilled in boot making. Justin Brands currently employs about 800 people in its Texas and two Missouri factories and recently acquired Highland Shoe Factory in Maine. The latter specializes in handsewn products. Watson says in addition to a potential Highland Shoe brand down the road, it will manufacture western uppers. “We just sent them an order for 500 uppers and they were thrilled,” he reports. “We had HR representatives go there recently and talk about benefits and the possibility of hiring more employees. They were ecstatic. It was great to see.”

In his 21st year with Justin Brands and totaling 34 years in the shoe business, Watson has had the fortune of seeing many great things over his career. But, like a lot of execs in this industry, he had no intention of entering the shoe business, let alone making a career of it. While pursuing his first love—playing baseball—Watson needed a way to pay for basic living expenses while attending minor league tryouts. He took a job working the floor of a local western store in Houston. As fate—and good timing—would have it, the year was 1980, which also happened to be when Urban Cowboy hit the big screen. The owners began opening new outlets to keep up with the stampede in all things western. “We had about 12 stores at the time and they needed new management,” Watson recalls. “They asked if I would be interested in becoming an assistant manager and, with my limited baseball abilities, my options were, well, limited,” he adds with a laugh.

Not long after, the manager of the store Watson was working at had taken ill and would be out for an extended period of time. It became trial by fire as Watson learned the ropes during a very robust holiday period followed by the annual, and very busy, Houston Rodeo. Watson met a lot of important industry people at trade shows and those calling on his store. Several broached the topic of his crossing over to wholesale. Watson, just 23 at the time, was intrigued as he was enjoying the western industry immensely. “I loved the consumer that was shopping for western product. Buying cowboy boots is a fun deal. It’s not like we were selling life insurance,” he says. “Plus, back then, there were a lot of mom-and-pop businesses in retail and wholesale. They were just real people, and I loved the entire culture.”

Watson made the jump into wholesale as a sales rep job covering Texas with the Crown Boot Company. A natural salesman, it wasn’t long before he caught the attention of Nocona, where he made the move to run its Texas territory. A few years later, it was on to Lucchese as vice president of sales and marketing. At age 30, Watson jumped at the opportunity to work on the big picture aspect of building a brand. “As a rep, you are pretty much resigned to working in a defined geographical boundary where you are given a price list, a set of samples and a program,” he says. “But if you hold the meeting, you can create the direction. I enjoyed creating those tools rather than being issued them.”

Watson created some pretty successful tools during his six-year tenure at Lucchese. In that period (1987-’93), sales skyrocketed from $3 million annually to $22 million. In addition to expanding distribution, he credits the introduction of new styles (particularly the Roper silhouette) as well as the addition of dress shoes, leather goods and shirts. “Lucchese was known as a custom brand and extremely boutique in its distribution,” he says. “We created stock styles and generated a day-to-day business for our retailers.” Next came Justin Brands. Approached by the owners to come on as national sales manger, Watson viewed the company as the “pinnacle” in the western market and Justin, specifically, as the “ultimate” western brand. “It was the place everyone wanted to be,” Watson says. Like his previous stint, success quickly ensued—enough where he was named president of Justin Brands in 1998, a year after the launch of what has since become a “huge” business in Justin Original Workboots.

Watson has no intentions of moving elsewhere any time soon. He’s at the helm of four powerhouse brands and, as a Berkshire Hathaway-owned company, has the financial resources to grow the labels as well as make an acquisition if its the right fit. In fact, Watson is exactly where he believes he fits best: removing obstacles so each brand can reach its fullest potential.

Looking back on his career, Watson says he took a pay cut with each new job. While he advises against that strategy for the “weak of heart,” it’s a reflection of his big picture approach to business. “I did it for the opportunities to grow in my career,” he says. Watson’s embrace of positive disruption represents a similar embrace of opportunities for growth. Coupled with the growing popularity of heritage brands, western fashion, U.S.-made goods and work boots, it’s easy to see why he believes the best is yet to come for Justin Brands. “We foresee no let up in sight, and we have little intention of slowing down anytime soon,” Watson says.

How’s business?
Great, which is due to good management, of course (laughs). Seriously, it’s a combination of offering quality products, addressing the made-in-the-U.SA. demand with our four factories, having great relationships with our retail partners and, in the last couple of years particularly, a proactive outreach to connect with consumers through social media.

A lot of what you mentioned involves business fundamentals. Might there be other factors in play contributing to Justin Brands’ six-year run of double-digit gains in sales and revenues?
It’s multi-pronged. We’ve got established, iconic brands and a wider population that has become more familiar with them. While we are garnering more shelf space, as new consumers enter into our respective markets they are more familiar with our brands.

Is there any other kind of macro fashion influence fueling interest in Justin Brands and the western category as a whole?
Right now, the boot business is particularly strong. There’s an increased fascination with western culture and America in general. That ties very well into what we stand for with respect to our heritage. It may sound a bit corny, but I think a lot of people aspire to that independent, “go west young man” lifestyle and attitude as well as the outdoors in general. It’s grounded in individuality. And our brands play right into that whole sentiment. In addition, consumers today are looking for authentic brands and products. When you take all our brands—Justin founded in 1879, Chippewa in 1901, Tony Lama in 1911 and Nocona in 1925—it amounts to more than 450 years of brand equity. So that Americana, feel-good aspect combined with our rich heritage and authenticity plays well to what is growing audience.

Having lived through the Urban Cowboy craze, is this current run close?
The current, what I call, Taylor Swift Effect of sundresses paired with cowboy boots, has been huge. If you go to a college football game today, almost every young woman is wearing that look. And when the young women are wearing those boots, it’s okay for the young men to wear boots as well. It’s a clean, clean look. We’ve also had the Garth Brooks era and there was a period when vintage cowboy boots from the ’40s and ’50s were all the rage in ’06 and ’07, but they haven’t equaled the Taylor Swift Effect. What’s more, our recent growth has not been driven by any one brand or style. It’s women’s fashion all the way to men’s work boots. It’s across our portfolio’s spectrum.

That sort of reach is rare, right?
It is. We have high heel, pointed toe women’s boots and low heel, broad square toe men’s cowboy boots selling well. We have cowhides, ostrich skin and caiman skin styles selling well. We’ve got kids’ boots all the way to steel toe, waterproof and insulated boots performing well. Chippewa is experiencing double-digit growth with its loggers, hikers, packers and motorcycle boots. We even have casual chukkas that are selling well. It might create a mix in manufacturing that’s tough for us to manage, but we’re not running strictly black ropers.

It’s expanding your retail distribution, yes?
Absolutely. Our current client list amazes me. Our brands are selling in Nordstrom, Buckle, Dillard’s, boutiques and pro golf shops as well as traditional outlets like Tractor Supply. I struggle to find other brands that translate to such a breadth of retail, which gives you the scope of products we are offering. That breadth in styles along with our authenticity, heritage and strong commitment to offering made-in-the-U.S.A. products are all factors that play into our success.

How much is this commitment to making products in the U.S. aimed at the patriotic appeal of your customers?
There’s always been dyed-in-the-wool types that check the label of where a boot is made. But there’s also a growing patriotic feel-good element among consumers in general. And there’s plenty of people overseas that seek out the Made in U.S.A. logo for authenticity reasons. Beyond those factors, making product here allows us to be quicker to market and we can control our quality better. We also use our own factories as product development centers where we experiment with new leathers and constructions. While we still have to make money, there are distinct competitive advantages to having domestic manufacturing.

Not to mention providing jobs to all those people and their families.
Absolutely. I visited our factories recently and I wish you could have seen the look in the eyes regarding how much this means to them. This is their livelihoods, and we’re going to do everything we can to protect that and, by extension, their families. Yet it’s just good business. We are not doing this as charity. They don’t want to do it as a charity, either. They are proud of the products they make. But you can’t work three days a week and support a family. So we are going to make sure we have a system in place to develop sustained growth in our U.S. factories. It’s got to be a win-win for everybody.

Does it surprise you that, coming out of one of the worst recessions in history, consumers are willing to pay $100 more for American-made boots?
There are a lot of people who buy quality and will spend extra for it. I’ve talked with plenty of consumers that say they went through three pairs of $99 boots and would have been better off buying that $189, higher-quality boot. I’d say the leading purchase decision is quality followed by value and then patriotism. The latter is icing on the cake, mostly. But regardless of where our product originates from, our goal is to always be best in class. For example, there’s a lot of brand loyalty for Justin and that consumer has told us they would like to stay in the brand all day, but they can’t afford $189 work boots. That forced us to source that product overseas, but I contend that we are still the best in class in that price range. And an added value, for our retailers, is that we carry more than one million pairs of boots in stock. They can order from us on Monday at 8 a.m. and the boots can be shipped that day or the next. We commit to inventory, which helps with their turns.

Speaking of brand extensions, Justin entered the golf business last year. How’s that going?
So far, so good. It goes back to the guy who wants to stay in our product all day. If a guy wears our exotic boot or work boot on the job, he may also wear our snake boot when he’s bird hunting. Or, he’s an attorney who rides a Harley on the weekend and wears our Chippewa motorcycle boots. Same goes for golf: We are pairing exotic leathers that we have used for 100 years in cowboy boots and are offering high-end golf shoes. We’ve been receiving calls from our retailers saying the customer wants it in a dress shoe, too. We are playing on our quality, heritage and tradition to crossover into this market.

The same can be said of Justin’s extension into work boots, which is not an easy category to break into.
When we launched our Justin Originals Workboots division in ’97 it was a huge challenge. Wolverine and Red Wing are iconic brands in that space. But we felt we are really one of the original work boots, hence the name. In 1879, the blue collar man was often wearing cowboy boots. Again, our authenticity was a huge factor in our gaining a presence in this market. And we’ve come a long way since then. It probably will become our second largest business in time (it represents about 30 percent of current overall sales) as work boots are a $1 billion category annually. I don’t think all of western retailing amounts to that much, and I’m including buckles, hats, jeans and shirts in that figure. The opportunities in work are limitless when you consider it from a global perspective. And we’re not as dependent on western fashion, whereas the work category is always a necessity. There’s huge upside going forward. We’re struggling to keep up with the growth, but we’ll make it happen.

What impact is the western market’s increasing crossover appeal into mainstream fashion having on your business?
Western has really become a lifestyle and is more about classic looks than just a trend for a season. In general, people are seeking authentic items that work for their lifestyle. They are pairing it often with a fashionable shirt and jeans. Same goes for work boots. We see a lot of college kids around Texas wearing 501 button up Levi’s and a pair of our work boots. They are attending TCU or SMU—they are not on any job site.

What are the biggest challenges facing Justin Brands right now?
Meeting the increasing demand for our products and staying relevant to the consumer. That goes back to this digital disruption and being able to keep step with the rapidly changing needs of the market and consumers. It requires good customer service, quality products and communicating directly with consumers. And while you gain efficiencies with these new technologies, they bring new sets of challenges. The ability to be quicker to market, quicker to address trends, replenishment capabilities, EDI, B2B websites, numerous consumer websites, etc.—they all involve new skillsets and finding those people to do the job. I can assure you, the only thing that’s constant around here is change.

What do you love most about your job?
It’s humbling and exciting all at the same time. I get to deal with iconic brands that are known around the world and work alongside a lot of really smart people. My job, primarily, is to remove obstacles and get their plans implemented. It’s cliché, but it’s a global economy now and that makes it all the more challenging. For example, we are drop-shipping individual pairs all over the world to online customers rather than shipping truckloads of orders to Cavender’s, for example. That’s much more difficult to do. But that relates back to the opportunities digital disruption can offer: We would have never gotten that sale from the guy in Norway shopping a Cavender’s catalog. There’s not a slow day around here. But, if I ever need to, I can call Warren Buffet for a little advice.

Any other advantages to being a Berkshire Hathaway-owned company?
Probably just that: Whether I call or not, knowing that I can pick up the phone and talk to one of the smartest people in the galaxy is pretty comforting. The other benefit is we’ve got a pretty good bank in Warren Buffet if we need added capital to make an acquisition. We are looking every day. Obviously, a strategic buy in the western market makes sense but, hey, I’m all ears.

The March 2024 Issue

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