Dave Powers: The Meteoric Rise of Hoka Running | E1098

Harry Stebbings 0:00 Who's your biggest competitor, Dave? Is it Nike? Is it Adidas?

Dave Powers 0:03 You know, it's (censored) . That's the one that really drives us internally.

Harry Stebbings 0:06 Hoka shoes was bought for 1.1 million in 2012. Now it's doing $1.4 billion in revenue in 2023. This is Dave Powers. He is the president and CEO of Deckers Brands, the parent company of brands like Hoka, UGG, and Teva.

Dave Powers 0:21 The DTC model is hard to keep sustained because you're spending so much on marketing. The minute you pull that marketing away to make profit, your sales line drops.

Harry Stebbings 0:30 How fast is brand decline, do you think?

Dave Powers 0:33 It's quick. It catches you off guard. And the worst thing is you have all the inventory planned for growth, and all of a sudden, it slows down, and that's when you're in real trouble.

Harry Stebbings 0:41 If you can be CEO of any other company for a day, what would it be and why? (laughs)

Dave Powers 0:46 (laughs) This is gonna sound stupid, but...

Harry Stebbings 0:50 Dave, I am so excited for this. You don't understand. I normally interview, you know, uh, software founders or venture capitalists. Now I get to interview, you know, bloody one of the kind of h- I don't know how to say this, but one of the people behind my favorite brands. So thank you so much for joining me today.

Dave Powers 1:07 Yeah. No, thank you, Harry. It's a pleasure to be here, and, um, it- it's even better to know that you're such

Dave Powers 1:11 a fan of Hoka.

Harry Stebbings 1:12 I mean, for sure. Uh, now, my question to you is, we had a little chat, and you said, um, that you maybe didn't know (laughs) what you wanted to do early in your career in terms of it starting at 28, but when you were a child, what did you wanna do when you grew up?

Dave Powers 1:25 Oh man, you know, I don't know that I had one thing. I remember early on thinking I wanted to be a race car driver. Like, I was really into, you know, race cars a- as a kid and stuff, but I don't think that was a serious... Looking back on it now, I always did have a creative side to me, and I was always building things and creating things. Um, and then when I got into like, you know, a little bit older and heading into high school, I started really paying attention to music and fashion, and then I started my own magazine and in, uh, college around punk music and, and, uh, was really into like what people were wearing, and then that just kind of progressed. But I had no idea that I could build a career out of any of these things, and so they were just kind of side hobbies that I, you know, I knew I liked but I didn't think I could build a, uh, a career out of them, and that didn't happen until my mid-20s where I realized, "Hey, I actually can, can focus on this stuff and make, make a living out of it."

Harry Stebbings 2:22 Uh, I mean, it's just a shame TikTok wasn't around. I can see you as an influencer back in the day. Um, but... (laughs)

Dave Powers 2:28 (laughs) Yeah, that'd be interesting.

Harry Stebbings 2:29 But I want to zoom forward a little bit because you obviously spent time at Converse and at Timberland, and I think that we're shaped a lot by some of the experiences we have. If you were to take them in isolation, what's the single biggest takeaway from each and how do they impact how you think today leading Deckers?

Dave Powers 2:45 Yeah, that's a good question. You know, Timberland, I had just come off of, uh, 10 years at Gap, which was all about retail and stores, and, you know, when I went to Timberland, I think the thing I took away is that the brand, at the end of the day, really is everything. You need to have a clear under- understanding of, you know, who are y- what your brand stands for, who it's going after, what are the things that make it special, you know, and then you need to obsess it every day so every single decision needs to go through that filter. And, and the way we looked at the brand at Timberland, you know, and our founder and CEO at the time would say, "Hey, every product we make is a boot, whether it's a jacket or a backpack or a pair of jeans," and, and what he meant was everything has to have the same qualities as our original boot that the company was founded on. It's durable. It's quality. It's per- had, you know, a high level of protection and, and, um, from the environment, um, and so that was a really hard filter for us to make everything (laughs) you know, represent the qualities of the boot, and oh, by the way, it's gotta be sustainable. But it gave us all a really clear filter as to what we needed to create for product for the consumer, who we were going after, and then how we would communicate to the consumer. So, you know, I, I look at that brand now, and I'm like, "Man, it's really just so simple. Just go back to what the boot did in the first days of the company and, and lean on that, and really obsess about your consumer," and I think that's the biggest thing I took away from Timberland.

Harry Stebbings 4:13 Oh, there's so many things for me to dig into there. I'm gonna let you go on Converse, and then I'm gonna d- dig into them, okay? So Converse.

Dave Powers 4:19 (laughs)

Harry Stebbings 4:19 What was that?

Dave Powers 4:20 Converse was really about, you know, tuning into who your consumer is and why they love your brand. You know, we, when I went to Converse, we were developing the first retail concept, and we spent a lot of time, you know, months and a lot of money spending time with consumers understanding what it is they loved about our brand. Once we figured that out, it just unleashed this whole opportunity of connection with our consumer. It was all around the idea of unleashing creativity because what we found is that consumers love the brand because it makes them feel creative for whatever reason. People used to write on, you know, their Converse Chuck Taylors. I used to do that when I was a kid in classrooms, and we just obsessed around the consumer, and we created experiences around what those consumers were into and why they love the brand, and I think so the biggest thing I learned there was really just you have to obsess the consumer, and you have to bring those experiences to them. Um, but on a, you know, on a leadership side, Timberland, I learned the power of service and giving back to your employees and community. At Converse, I learned that, um, I hate a political environment, and it's a very unhealthy way to

Dave Powers 5:34 work in a business.

Harry Stebbings 5:36 How do you prevent political environments from happening, that it's kind of so innate in humans that we want more power? Often, that comes with competition. How do you prevent them happening?

Dave Powers 5:45 You can't flip a switch, and I tell people at Deckers all the time, the reason I'm at Deckers is I'm trying to get away from companies that are political and cutthroat, competitive and siloed, and I just wanna come d- and work to some- at a company that I just feel comfortable being myself at and do my own thing every day, and I want everybody in the company to feel that same way. So...... starts at the top, you know, you gotta show up in your authentic way and just be yourself, much like, you know, you are on, on the podcast here. And, and then allowing others to do it. But you also have to be really, really critical on who you hire, and spend a lot of time on who you kind of let into the company. And I, I kind of consider myself the bouncer, uh, of the company. It's say, you know, you can come in and join the club, 'cause we think you'll fit in and be additive to our culture, and hey, sorry, you know, we're not for you.

Harry Stebbings 6:36 How fast are you to remove someone from the club if you don't feel they're a fit?

Dave Powers 6:40 It's a good question. Um, it takes, you know, six to 12 months. But usually what happens is kind of organ rejection. It's not me identifying somebody, it's the, you know, it's the company and the employee saying, "Hey, this person is just not, you know, able to work the way we work, they're not good to work with, they're not collaborative, you can't trust 'em." And so it kind of bubbles up and it's like, all right, so what are you gonna do about it? And, um, you know, that's kinda how it happens.

Harry Stebbings 7:06 Dave, what have been some of your biggest hiring mistakes? So like for me, as an example, I've often looked, especially as a young founder, looked at a great logo and gone, "They must be brilliant," and actually they weren't a fit.

Dave Powers 7:19 Yeah.

Harry Stebbings 7:19 What are some of your biggest hiring mistakes?

Dave Powers 7:22 You know, I think that you get caught up in their experience versus their values. I think that's the biggest thing. And I've hired a few people over my, over my course of my career that I was just influenced by others that really thought they were, you know, the best candidate, and I kinda went along with it, versus really, you know, putting my foot down and saying, "Hey, I just have a funny sense about this person," or, "These are red flags for me." I just need, and I've learned, I gotta be firmer in my convictions and my beliefs about how this person is going to add or detract from our culture separately from, hey, they have the level of experience

Dave Powers 8:00 that we're looking for.

Harry Stebbings 8:01 Can I be honest? I don't like culture. I find that everyone's like, so, "Oh, we're, we're..." You know, all the corporate PR teams that, "Oh, how we build this inclusive culture and, and empowering of..." You know, I'm like, great. And then I listen to Yves Chinoir who I know you're a fan of the Patagonia brand and everything that's imbued in that. I honestly listen to it and I think, huh?

Dave Powers 8:23 (laughs)

Harry Stebbings 8:23 Like, you wanna have a culture where people go surfing when they want to. And there's just like, it's all about happiness. And I sound like Scrooge-

Dave Powers 8:32 Yeah. Yeah.

Harry Stebbings 8:32 ... but it's also about winning and grind. (laughs)

Dave Powers 8:36 Yep.

Harry Stebbings 8:37 To what extent are you like, I take Yves Chinoir's philosophy, or I, I don't and I actually go down on the more mercenary route?

Dave Powers 8:47 Yeah, that's a great analogy, and I've always looked up to Yvon in that regard. But I think the difference for us is that we do both. Like when we say our culture is kind, as an example, and people say that about us, or sometimes we're too nice or... But I say also, but we're killing it, and we work our butts off, and we are determined to win. When you look at our, our values of our company, it's yes, treat others with respect, et cetera, but, um, we are here to win, and we are, uh, an ambitious and competitive group of people. But it's just about how we do it, we do it as a team more like a, you know, a healthy professional sports team than a team of people that are just focused on delivering.

Harry Stebbings 9:30 I, I agree, and I get that. I think that's what is described as, what is it, uh, that velvet fist in an iron glove, I think, is the terminology.

Dave Powers 9:38 Yeah, something like-

Harry Stebbings 9:39 Or whatever it is.

Dave Powers 9:39 Yeah. Yeah.

Harry Stebbings 9:40 Something, something like that.

Dave Powers 9:41 A lot of people say cultures are secret sauce, and I, I hear you, you don't wanna overplay culture and the importance of it. At the end of the day, the goal here is let people just be themselves and work how they wanna work and how they work best, and don't try to make them fit into a mold that is unnatural because that's where they start, um, worrying more about what you think about them than doing a good job.

Harry Stebbings 10:03 What do you mean they worry more about what you think about them? Sorry.

Dave Powers 10:05 You know, in my, (clears throat) my career early in the days at Gap, you know, and, and even at other companies I was at a little bit, but it was mostly like, hey, we're a certain mold, you have to dress a certain way. If you're gonna get ahead, you know, you have to have these perfect presentations, you know, and if there was any bad comments from somebody in the company, you know, you heard about it immediately, and so-and-so didn't like this when you did that. And it's just like, you're always walking on eggshells, and you were so nervous about being judged that you couldn't focus on your job. That's what I talk about when I'm just saying, "Hey, just come be yourself. Everybody's welcome. Do your thing. But do hard, hard work."

Harry Stebbings 10:42 Are you a harsh critic on yourself? When you said about being judged, I always... We, we chatted before the show.

Dave Powers 10:48 Yeah.

Harry Stebbings 10:48 And people judge me, sure, I don't blame them. I'm a knob most of the time, um, (laughs) but-

Dave Powers 10:54 (laughs)

Harry Stebbings 10:54 ... like I judge myself more than anything else.

Dave Powers 10:57 It's not something I think about that often, but I do have, you know, high standards for myself of, you know, integrity and, and how I show up for others, yeah, I would say yes. Yeah. And I don't like to lose either.

Harry Stebbings 11:09 Uh, w- we mentioned obviously kind of you're killing it. Um, I, I wanna start on that bluntly because the rise of HOKA has been insane. I listened to a show you did in 2021, and you were like, "Oh, HOKA's like killing it." And I was like, (laughs) "If you'd only seen the two years that's to come, my friend," right? (laughs)

Dave Powers 11:29 Yeah. (laughs) Yeah. Be careful what you say in that...

Harry Stebbings 11:30 Uh, and so my ques- Yeah, and so my question to you is, what has caused this huge surge in the HOKA brand?

Dave Powers 11:36 It's been a fascinating journey to watch. When I came into the company, we didn't own HOKA yet, so we had just bought it a year after I got here and, you know, it was, it was, um, odd decision to a lot of people in the company, like, "What are we gonna do with this, this shoe? It's-"

Harry Stebbings 11:52 No, can you take me to that actually? That's too interesting 'cause you bought it and it was like tiny. It was a small acquisition. I can't remember what it was like two or three million or-

Dave Powers 11:59 Yeah. It was couple million dollars, you know.

Harry Stebbings 12:01 Yeah.

Dave Powers 12:01 And, and the reason was our, our CEO at the time, Ainhell, and, you know, he was a former runner, and he felt like we needed an athletic brand in our portfolio, which is true, but when he showed up with that, and we, (laughs) and we saw this, this, you know, crazy looking moon boot-We were all like, "Uh, is this the sh- is this the performance brand we're talking about?" But (clears throat) I give, you know, the teams a lot of credit in the early days. They were able to put that on people's feet that could really put it to the test, and those are hardcore ultra-runners. And, you know, the feedback that came back was amazing, and it was like, "I don't know what's in this thing, it's ugly as hell, but man, it really performs." And so we knew we had something there that, um, we could build off. Because great brands are meaningful and important to their consumer. And it's almost, you wanna build a brand that your consumers can't live without. And so when we started really digging into the technology, uh, and the performance of HOKA, and involving the design, we were able to get more shoes on more core, hardcore athletes' feet. And that's how it all really kinda started. It was word of mouth within a very small niche industry that this is the greatest innovation in our lifetime in, in running. And, and we became really important to the run specialty channel, and we kind of built it from there.

Harry Stebbings 13:22 Was the growth continuous? Or were there moments like, I think with UGG there was with Oprah, where it was kind of much more step function-like, where it suddenly increased? How was that growth curve?

Dave Powers 13:33 Yeah, there was, there was high growth but really small numbers at the beginning. But then, and this is where a lot of companies, I think, you know, and I've learned f- from my mistakes here is, you start chasing a number versus healthy sustainable growth. And so we actually went through a s- period early on where we had a lot of marked down inventory in the channel, we were selling off-price to people, and it was because we were trying to chase a growth number. So fortunately, we recognized that early on, and we pulled back inventory, you know, we closed accounts that we didn't want to be in, um, and we had to

Dave Powers 14:10 reset it.

Harry Stebbings 14:10 Why is bad to chase a growth number? If we think about HOKA, I could argue that actually you're getting it on more feet, more people see the value of it, and they sell more friends, and then you get more word of mouth. Why is growth bad?

Dave Powers 14:24 Yeah, no, that's ... I mean, that's the, the tricky part. 'Cause you want to do that, right? You want to grow faster, you wanna use word of mouth, you wanna use distribution. But if you overdo it too soon, you could end up with, you know, extra inventory in the channel that you have to mark down-

Harry Stebbings 14:41 Mm-hmm.

Dave Powers 14:41 ... and then it becomes this brand that used to be versus a brand that could be.

Harry Stebbings 14:45 So you have to manage supply on a per channel basis to make sure you don't have an imbalance of supply and demand and then lead to price reductions and, um ...

Dave Powers 14:53 Absolutely. Yep, yep.

Harry Stebbings 14:55 How do you, how do you do channel forecasting on a supply side basis?

Dave Powers 15:00 I mean, it's, it's, you know, you really gotta sweat the details on that. You have to look at every door you're gonna be in, how much inventory you want them to have, estimated rates of sell through, and then, you know, where you wanna place big bets on additional inventory or, you know, stay tight. You know, we always buy a little more for upside, hoping that we can get some at once upside business. But it's a delicate skill that you have to have to be able to manage the demand and supply in a healthy way.

Harry Stebbings 15:26 Is there a case of being careful not to try and push channels where your margin is higher? Obviously when you're in, like, wholesale, your margin's gonna be lower than when you're doing D2C through the HOKA website.

Dave Powers 15:40 Yeah.

Harry Stebbings 15:40 Is there a challenge of, like, y- you skewing where you prefer to go because of the margin? And how do you think about that?

Dave Powers 15:48 Yeah, that's a great question. You know, our DDC channel is our most profitable channel, right? Margin and profit. And so ideally, we want as much of our business to go through that channel as we can, 'cause that's best for the bottom line. But, you know, you're only gonna get so much reach, and you have to spend a lot more marketing dollars to, to drive that. And we, you know, our, our, we have tremendous relationships with our wholesale partners, and we spend our time working with the ones that we think represent the brand really well. And we say no to more, uh, you know, more accounts than we say yes to. We're really selective. But we need wholesale. We need it. They need us. It, it creates awareness and, you know, for the, for the brand, and it allows people to try product on in real life. And I think a lot of the consumers ultimately come to our DDC channel, where we can cultivate that lifetime value as well.

Harry Stebbings 16:41 Can I ask you, in terms of, like, working with retailers and wholesalers, what was the biggest challenge? Is it, like, brand maintenance, given the fact you don't own

Harry Stebbings 16:49 that experience? What are your biggest lessons, w- in terms of challenges in working with those retailers and wholesalers?

Dave Powers 16:55 I think our biggest challenge is, is, um, finding partners that can represent and, and showcase the brand in a way that we feel is right for the brand. So what do I mean by that? So, you know, if you went into a multi-brand environment and you saw HOKA sitting on a shelf with no signage and just a bunch of shoes next to, you know, a bunch of other brands, that's not, that's not good enough for us, you know. If, if you want our brand, we wanna make sure that you're presenting it with storytelling, the right signage, the right fixturing. Ideally, we'd love, you know, little mini shop-in-shops where you can fully tell the extent of the brand. And, you know, we got in a lot of trouble back in the days with UGG because we just sold our basic product to everybody and just let them do what they wanted with it. And that worked for a while, but then it really hurt the brand. And so for HOKA, it's such a rich story that we feel needs to be tell, and the technolo- told, and the technology is so unique that we don't want it, just have it sitting on a shelf with no level of service or storytelling to go with it.

Harry Stebbings 18:00 One thing that I, I, I think a lot about with HOKA actually is the challenge that you face now where you've become too mainstream.And what I mean by that, and, and let me explain because it's a good thing in ways as well.

Dave Powers 18:11 Yeah, yeah.

Harry Stebbings 18:11 But you mentioned ultra-marathon runners, hardcore runners. Hoka's not that anymore. Hoka's also mothers picking up children from school and teenagers who, uh, are, are not ultra-runners.

Dave Powers 18:24 Yeah. (laughs)

Harry Stebbings 18:24 Uh, so how do you think about the challenge of expanding TAM to pretty much everyone, but retaining that hardcore runner community as well?

Dave Powers 18:33 Yeah. I would argue that we are still incredibly important to that s- core runner. You know, just this summer, um, you know, between August and September, the, the winner of the ultra-marathon, the UTMB ... Not the ultra-marathon but the Ultra Trail Mont Blanc in Chamonix, you know, the winner of that race was wearing Hoka. And two weeks later, the winner of the Ironman Championships in Nice was wearing Hoka. And so we, we still spend a lot of time and prioritize that community, and with... When we build product, it's focused on those athletes. It just so happens that a lot of the technology around cushioning and comfort and, you know, rebound works for everyday life, whether you're, you know, a nurse, or you're a construction worker, or you're a mom on her feet all day. It's the technology that those people love for every day, even though they're not gonna run, you know, a 12-mile trail race in it.

Harry Stebbings 19:29 And so as adoption then becomes mass market, you keep messaging the same-

Dave Powers 19:34 Yeah.

Harry Stebbings 19:34 ... on the ultra-runners.

Dave Powers 19:35 Yeah.

Harry Stebbings 19:35 And if other people like it, great, but you're not gonna change messaging. Is that right?

Dave Powers 19:40 Yeah. We, you know, we still speak to an everyday, you know, athlete, right, in some of our communication, but it's more around inspiring and what we call, you know, you know, the joy of performance, have fun with performance. So yes, we speak to the hardcore athletes, we build product for the hardcore athletes, but we allow others to come into the brand and be part of it in a way that's true to what their ambitions are. However they wanna wear it, it's up to them, but we're not gonna market, mass market to the casual consumer out there. We're, w- that's not who we are. We're a performance brand through and through.

Harry Stebbings 20:16 And I think everyone wants to be an athlete, and so-

Dave Powers 20:20 (laughs) That helps. (laughs) Yeah.

Harry Stebbings 20:21 (laughs) I mean, not, not, not everyone is as athletic as me and you. They, you know ... It's, it's-

Dave Powers 20:25 Yeah, yeah. Yeah. (laughs)

Harry Stebbings 20:25 ... the joy of being young and charismatic. Um, I spoke-

Dave Powers 20:28 (laughs)

Harry Stebbings 20:28 ... to Maha Ibrahim before, um-

Dave Powers 20:31 Hmm.

Harry Stebbings 20:31 ... and she actually told me that I should ask about Asian expansion. I'm intrigued by this. Uh, maybe it's applied to Hoka,

Harry Stebbings 20:38 maybe it's applied to UGG. Don't fucking know, to be honest, but I wanna ask it.

Dave Powers 20:42 (laughs)

Harry Stebbings 20:42 I'm intrigued. When we talk about growth of markets, I think of Asia in particular here, how do, has Asian expansion factored into the growth story, and how do you think about it given so many others have struggled?

Dave Powers 20:53 Asia has some of the best athletes in the world as far as trail running and road running, and so, you know, early on we developed what we called a playbook for Hoka to go to market with, and it really was be meaningful and important to the best athletes in those sports in your market. So early days in Japan, we focused on, you know, being, being on shoes worn at marathons and trail races and, and cultivating those athletes, and working only with the run specialty channel. You couldn't find our product anywhere else. And that was, that was our success in the US, is really kill it in the run specialty channel and the core outdoor channel, and then you can move out beyond that. So that was the formula we took to Asia. We've taken that to China. We have fantastic distributor partners in Thailand, Indonesia, Philippines, y- Australia, Korea.

Harry Stebbings 21:46 So what is it about playbooks replicable across countries? You know, running communities are different, I'm sure, um, the way that people run in terms of time of day, their relationship to running is different. Are playbooks replicable across country?

Dave Powers 22:01 Yeah, because it's more a- each brand has its own personality. The playbook I'm talking about is really around distribution and how you, um, build, uh, brand love, and then roll it out to more, you know, more points of access.

Harry Stebbings 22:14 How do you do that, Dave?

Dave Powers 22:16 Do what?

Harry Stebbings 22:17 Distribution, build brand love, build seeds of community.

Dave Powers 22:21 You gotta start with the core runners and, and the r- run specialty channels. You know, if you are an athlete or you're a runner and you go into a, a running store, best hope is that the salesperson on the floor pulls your shoe out of the backroom and try, and says to the consumer, "You need to try this on." That's where it all came down to for us, is the salespeople started recommending Hoka to people because of the way it performed.

Harry Stebbings 22:48 Mm-hmm.

Dave Powers 22:48 That's where it's all, that's where it happens. And then it just kind of builds from there. But if ... You have to win market share in that channel and be important in that channel before you can expand out, and, you know, I think with our technology and our performance, we've been able to do that.

Harry Stebbings 23:03 Pffft, I'm gonna go there. Fuck it. Why not?

Dave Powers 23:05 (laughs)

Harry Stebbings 23:05 Um, I had David Allemann on the show from On Running.

Dave Powers 23:08 Yep.

Harry Stebbings 23:08 And he spoke about his co-founder being an athlete and them really seeding the kind of pro and very hardcore athlete community. And I thought about it when you said about kind of the winner of the ultra, uh, wearing Hokas. How do you think about that? Because you both seem to take that very, "We're here for the pros. We're worn by pros." How do you assess that landscape today, and is it only On and, and you going for the pro down? How do you feel about that?

Dave Powers 23:39 Um, no. I mean, that's not unique to Hoka or On. I mean, every, you know, performance brand aspires to that same thing, right? And you can either do it by signing up, you know, top athletes or you can also do it by being important to every athlete. So I think the formula there is, "Hey, yes, we wanna be at the podium. We wanna, we wanna be on the best athletes in the world." But I think one of the most inspiring things I've ever seen is, you know, from 11:00 to midnight-... at the Ironman Championships where the last finishers are coming in. You know, some of them have disabilities, some of them are 70-plus and older, and most of those people are wearing Hoka. And that's the difference. Yes, the top 10 people, maybe you'll get one person wearing Hoka. But when you see the everyday athlete choosing Hoka because of how it delivers performance for them and, and allows them to do things they never thought were possible, that's where the magic is.

Harry Stebbings 24:39 So I spoke to... Again, I, I mentioned Maha earlier. I spoke to her and she said, "You know, it's a really interesting landscape because most of the store brands are actually struggling intensely, um, except Nike." Nike is probably the one, um, uh, which is not. And then you have new entrants, On and Hoka, who are crushing.

Dave Powers 24:57 Mm-hmm.

Harry Stebbings 24:58 "Where do you see the footwear sneaker industry going in the next five years?" Was her question.

Dave Powers 25:02 Well, I think we're in a really, really exciting time for performance footwear in general. You know, when, when Hoka came onto the scene, you know, 10, roughly 10 years ago, the barefoot running was a massive trend, right? And, you know, so everybody was running in shoes that actually weren't good for them because-

Harry Stebbings 25:25 What a load of shit that was.

Dave Powers 25:26 Yeah. (laughs)

Harry Stebbings 25:26 I saw these, like, Vibrams and I was like, "They fit and, uh, my toes are separated? Sod off."

Dave Powers 25:31 Totally.

Harry Stebbings 25:31 (laughs)

Dave Powers 25:32 You know, and it was, it... You know, Nike went there with the Nike Free and started making this, you know, lower-profile product, and everybody just followed suit. So the next thing you know, you have a whole industry of, you know, running brands that are creating product for people that a- actually is not good for them from an injury standpoint,

Dave Powers 25:48 performance standpoints. Anyway, my point is, I think now with the, with the, um, availability of different compounds and carbon plates and all different ways of, you know, geometry and, and shoe-making, the sky's the limit on what you can do now with performance footwear. And I think it's just going... We're going into a new era of innovation and technology that we've never seen before. And a lot of the Chinese brands, you know, running brands like Anta, Li-Ning, 361, they're, they're creating incredible product. So I think you're gonna start seeing, you know, really next level super sneakers. I mean, look at the one Ad- Adidas just launched. You know, it's mea- meant to be worn once, one marathon, and then it's no good, right? But people are breaking records in it. So it's, we're pushing the boundaries of what performance can be and how footwear can help, and I think it's gonna continue for the next five to 10 years.

Harry Stebbings 26:44 How loyal are consumers? I had the founder of Allbirds on the show, Joey Zwillinger-

Dave Powers 26:49 Hmm. Yeah, yeah.

Harry Stebbings 26:49 ... and I said this to him, and he said, "Well, you know, the average US consumer has eight pairs of shoes." And I said, "Wow." "Well, eight pairs that they buy every year." I said, "Wow, that's a lot." Uh, my mother has about 30, so, you know-

Dave Powers 26:59 (laughs)

Harry Stebbings 26:59 ... wee my- be shrinking. Um, how loyal is the average consumer to running shoes?

Dave Powers 27:05 Well, traditionally, they're very loyal, you know, and it's hard to get a consumer that was running in ASICS for 10 years or Saucony for 10 years to switch brands. I think that's changing dramatically. I think people are open to trying different brands now. And obviously, you know, with Hoka and On, uh, disrupting the industry, so to speak, you have a lot more people venturing On and trying them out just 'cause they're hearing about it. But what we're finding is our fans of Hoka are diehard, lifelong fans. I mean, every time I travel and, and I'm wearing Hoka, I hear stories from people, "I have 10 pairs in my closet. I, you know, I can't wait for the next one to come out." It's, I always liken this brand to Patagonia, you know, and I, maybe I'm personalizing that, but I always just was obsessed with Patagonia and wanted more of their product and their brand. I think people feel that way about Hoka.

Harry Stebbings 27:56 Final one, and then we will discuss UGG, which I want to. But bluntly, uh, yeah, I, I don't know how to ask this kinda-

Dave Powers 28:02 (laughs)

Harry Stebbings 28:02 You need to beat On, right? It's a g- it's a, it's a competition.

Dave Powers 28:07 Sure.

Harry Stebbings 28:07 Do you feel that? And if so, what do you need to do to beat them?

Dave Powers 28:11 I mean, we don't wake up every day just thinking how we're gonna beat On and what is On doing. You know, I have a lot of respect for, um, the team there, what they've done to create that brand, how they built the product. It's fun to watch, honestly, um, as a competitor. But we're fighting for the same fame, same shelf space, market share consumer. So naturally, we're, you know, competitors, so to speak. But I think we both come at it with different approaches, different technologies, and we just gotta stay true to ourselves. Honestly, between the two of us, our market shares are still relatively small globally. There's so, so much potential for both brands to do incredibly well. Do we talk about, you know, beating them and, and performing better than them and staying ahead of them? Sure. Ev- ev- you know, we do that with every brand we compete with. But I think there's just tremendous opportunity for new fresh brands like On and Hoka to take massive market share. And, you know, if you look at where Under Armor used to be, Adidas used to be really important in running, Nike, I mean, these are massive businesses that if you take 10% share, that's billions of dollars.

Harry Stebbings 29:15 (laughs) Yeah, it is.

Dave Powers 29:16 You know?

Harry Stebbings 29:16 Um, I think that's what you forget when you actually do, respectfully, you do look at the market shares today and how much incumbents

Harry Stebbings 29:21 still have.

Dave Powers 29:21 Yeah.

Harry Stebbings 29:22 Yeah.

Dave Powers 29:22 Especially in, you know, Asia Pacific and Europe.

Harry Stebbings 29:24 Yeah.

Dave Powers 29:24 Yeah.

Harry Stebbings 29:24 I totally get you. Uh, so I, I actually, you know, before this kind of, um, tweeted about the two best consumer acquisitions in history and, you know, yours too being up there. You've got, as we said, you know, Hoka, uh, and that was more recently.

Dave Powers 29:39 Yeah.

Harry Stebbings 29:39 And then I thought, I think it was 1995, you paid about $14.6 million for, uh, to be precise.

Dave Powers 29:47 Yeah. (laughs)

Harry Stebbings 29:48 Uh, uh, (laughs) I don't think you were there at the time, uh, but, uh-

Dave Powers 29:51 (laughs)

Harry Stebbings 29:51 ... but you paid, like, $14.6 million for UGG-

Dave Powers 29:54 Yeah.

Harry Stebbings 29:55 ... um, UGG Boots most kind of famously known for. So, I guess my question to you is, what did Deckers get so right with UGG that's turned it into the transformational brand that it's been?

Dave Powers 30:06 That's a really interesting story, but it, it, it came down to... Originally, UGG, when Deckers bought it, was a brand for surfers, right?

Harry Stebbings 30:14 Mm-hmm.

Dave Powers 30:14 It was a boot that's...... you know, surfers in Australia and Southern California would wear after surfing. So it was a functional item, and that's how it was being sold as, you know, a, a boot for surfers and just that kind of lifestyle. And it's, it's legit. I mean, people still wear it that way and, you know, and I've done the same.

Harry Stebbings 30:33 Do all great brands start niche? When we look at HOKA, it's for ultras and for supreme runners. When we look at UGG, it's for, you know, surfers.

Dave Powers 30:41 Yeah.

Harry Stebbings 30:41 When we look at, like, you know, a lot of, like-

Dave Powers 30:43 Teva.

Harry Stebbings 30:43 ... I mean, Jesus, like Oakley sunglasses-

Dave Powers 30:46 Yeah.

Harry Stebbings 30:46 ... you know, were both, like, hardcore cricketers and, um, cyclists.

Dave Powers 30:50 Yep.

Harry Stebbings 30:50 Um, are great bands- brands built in niches?

Dave Powers 30:53 I think so. I think they're, they're a niche consumer need that hasn't been met yet, so to speak, or they're solving for a problem that, um, is meaningful to consumers. I think that's where all

Dave Powers 31:05 great brands start. I mean, if you look at Teva. When we bought Teva, that was the first sports sandal because river, you know, guides in the Grand Canyon were frustrated with their flip-flops falling off their feet, so they invented straps to put on the sandal, and that was Teva. And that was for a very, very specific consumer at the time, but, you know, look at it now. It's on runways. We just did a collab with Chloe. I mean, if you look at all the other brands, Birkenstock, Crocs, you know, most of them start with a real niche consumer and but something that's super important for that consumer.

Harry Stebbings 31:40 No, I, I, I get you totally.

Dave Powers 31:41 Yeah.

Harry Stebbings 31:41 So what did you do right with UGG? It started off as, like, a surfer brand.

Dave Powers 31:45 Yeah. And, you know, I think the team probably in the early 2000s made the pivot to positioning it as a kind of fashion staple and a, and a, you know, a, a cold weather staple, right? And that's where, um, the team started, you know, selling to Nordstrom's and some fashion accounts. You started seeing it showing up on celebrities in Southern California! And then the real turning point was when Oprah put it on, you know, her, uh, her list of favorite things for that year. I forget what year that was. I should know this. But that was when it really made the, the switch from a functional boot for surfers to a fashion icon, and that just opened up a whole nother world of opportunity for, uh, and total market TAM, I mean, if you think about it.

Harry Stebbings 32:35 I often think people over- overthink how much of a role being on, in the newspapers will have, or being in press will have.

Dave Powers 32:43 Mm-hmm.

Harry Stebbings 32:43 And actually they're in Vogue and, like, it doesn't actually make that much of a difference.

Dave Powers 32:46 Yeah. (laughs)

Harry Stebbings 32:47 When you have, like, Oprah put it in her list, do you just see it up and to the right for a continuous amount of time?

Dave Powers 32:53 At that time, yes. Oh, yeah. I mean, they were chasing business. It was, it was a freight strain and they were just trying to keep up for a good five years.

Harry Stebbings 33:02 Can I ask you again, uh, it's a really interesting comparison to HOKA. HOKA, we are for great runners. Well, not great, well, we offer, like, the hardcore runners and we stay there and we solve their problem. UGG is not that, but as you said, there was a positional reshift in terms of focus and the messaging to surfers-

Dave Powers 33:22 Mm-hmm.

Harry Stebbings 33:22 ... didn't continue. How do you think about that when you compare the two?

Dave Powers 33:27 To me, HOKA is... It's very polarizing from a- an aesthetic standpoint and a fashion standpoint. I've met very few people, if any, that have said they put it on and were disappointed. And at the end of the day, it comes down to how they feel and how they make you feel emotionally. That's what we've found in this- in our consumers is they love how it feels on their foot, but it also is, it's, and this is gonna sound corny, but it's like a warm hug or it's like a- their cozy blanket when they put it on. They just feel completely relaxed and really at ease when they wear the brand. And so we've been able to tap into those two insights to build what we are now, a $2 billion plus brand.

Harry Stebbings 34:15 Uh, can I ask you, we, we mentioned kind of about maintenance of brands. Um, it feels like... I'm in London, but, like, it feels like in London, I don't know, whatever that time period that was, 10 years ago-

Dave Powers 34:25 Mm-hmm.

Harry Stebbings 34:25 ... peak, and then it went through, like, a, bluntly, a deceleration period in terms of growth of UGG, and it wasn't as cool as it was. Where did it go off track there?

Dave Powers 34:36 Over distribution. So it was, you know, we were selling basically the same items. So the classic tall boot, you know, the original boot, plus a couple iterations of it, but basically one boot to every account that asked. And so when you walk down, you know, High Street, Regent Street, Oxford Street, and you looked in the windows, everybody had the same product and there was no differentiation. And so next thing you know, you know, then it also kind of became a, a chav boot, right? It was seen as lower market because everybody had it, it was off price, you could get it anywhere, and we lost the specialness

Dave Powers 35:15 of the brand, and it took us five years in the UK and Europe to get that back.

Harry Stebbings 35:20 When you say lose, how do you not lose the specialness of the brand but increase adoption, increase usage? 'Cause you're not gonna do a Chanel or a Patek Philippe and limit supply significantly.

Dave Powers 35:33 Yeah.

Harry Stebbings 35:33 So how do you do that without making it cheap, bluntly?

Dave Powers 35:37 What we ended up doing, and this is in the US and in Europe, is pulling back and, you know, and making it almost kind of disappear in the eyes of the consumer for a while. It was just an average boot at that, at the time. It was everywhere, it was nothing special. People were then making fun of it about, you know, basic bitch, right? And, like, you know, pumpkin spice lattes and chav consumers, and it was like people made fun of it. So we had to pull it all back, retrench, and then selectively start going back out to the right consumers, make sure the presentation was right, working with the right influencers to reposition it in a new way, and then innovate from there.

Harry Stebbings 36:15 How do you pull back? 'Cause you're consciously then saying, "We're gonna have reduced revenues, reduced profits."

Dave Powers 36:21 Yeah. Yep.

Harry Stebbings 36:21 And you have to be okay with that.

Dave Powers 36:23 Yeah, the goal was profit. So when we went through our journey back in 2016, when I came into the role between '16 and '17, we told the street we were gonna pull back on revenue growth, but we're gonna improve our profit profile. And so that gave us the air cover to do what we needed to do to be able to pull back distribution and, and tighten up our sales.

Harry Stebbings 36:46 How do you keep a team excited when you're pulling back in that way?

Dave Powers 36:51 Yeah, it's tough. You know, it, it's... We really have to give them something to believe in. We had a lot of turnover at that time, which I think, you know, was probably the right thing to do, definitely the right thing to do. You know, hated to see some of those people leave, but we needed fresh perspective on the brand. That creates new energy, it gives people the, a reason to believe, gives them purpose, and we were, you know, we were all in the fight together.

Harry Stebbings 37:14 I, I think that-

Dave Powers 37:14 But it's not easy (laughs) , I'll tell you.

Harry Stebbings 37:16 It, it's... Yeah, I'm, I'm sure it's not easy.

Dave Powers 37:18 (laughs)

Harry Stebbings 37:18 On the re-acceleration, talk to me about how one approaches that. Uh, if we start on product, is it keep same product? Is it innovate? Is it more SKUs, less SKUs?

Dave Powers 37:30 When, um... We brought in a new president around '16, '17 for the brand, and my remit to that person was just disrupt this brand. Like, you need to change people's perceptions of the brand. And I didn't have a, an idea of what that was gonna be, but it was basically like, get people to notice UGG in a new different way. And so, um,

Dave Powers 37:56 Andrea, who was the president at the time, you know, really ran with it and pushed the fashion envelope of it, pushed creativity, you know, brought in a lot of color, materials, different influences we partnered with, and next thing you know, it was like, "Oh, there's something happening at UGG. Like, there's something exciting going on with that brand." And then we s- started introducing, you know, iterations of the classics, a new product that still had some of the DNA of the original brand, and then so, you know, it just started changing people's perception, and at that time, we were cleaning up the marketplace to be able to go back out with the right people in the right locations with the right inventory. And now, um, you know, we have a new president of the brand, Ann, who's been here just over a year, and it's all about focus. We're reducing SKUs, we're innovating off the classic in really exciting ways, we're leveraging, you know, some of the best influencers in the world. There's so much excitement about the brand, one, but then we have so many best-selling styles now that allow us to reach different consumers, different wearing occasions. So people are buying... Traditionally, they would buy one boot every two and a half years, right, the classic boot, and now we have people buying UGG two or three times a year because they're buying different products. So, um, it's definitely on the upswing. And in the men's is a massive opportunity for us too.

Harry Stebbings 39:19 Can I ask, what are your lessons on the importance of a hero product? When you look at HOKA, UGG, the other brands you have, how much of a role do hero products play continuously, do you think?

Dave Powers 39:32 I mean, they're massive. I've, I've had the fortune of working at companies that were founded on a hero product, you know, the Yellow Boot-

Harry Stebbings 39:38 Yeah.

Dave Powers 39:38 ... at Timberland, the Chuck Taylor at Converse, right? They just allow you to do so many things because of the scale, the volume, the margin, the consistency of the business. If you don't have that, it's really hard to run a successful, you know, sustainable business. As long as you continue to stay true to what those products did in the first place and why consumers love them and you iterate off of those in a way that makes sense for the brand and the consumer, you should have a good run, you know? But you cannot underestimate how important those iconic styles are to the overall business. And, you know, I've, I've said to our team recently, "If you're looking..." You know, we have multi-brands at Deckers, right? Five brands all over the world.

Harry Stebbings 40:21 What was the top style? Like, number one driver of revenue.

Dave Powers 40:24 Uh, I don't know off- off the top of my head, um... Or I wanna share that information, but-

Harry Stebbings 40:29 (laughs)

Dave Powers 40:30 ... you know, the, the, the fact is that these styles are just super, super important and you have to treat them

Dave Powers 40:38 with the care and respect that they deserve 'cause otherwise you'll see, you know, you'll go where UGG went, you know, 2013 and '14, and it's not a good place to be as a brand. I think you're seeing a lot of brands out there today struggling because of that.

Harry Stebbings 40:52 And when, when you look at kind of those iconic styles, they allow you to charge premium prices. You know, people want-

Dave Powers 40:57 Yeah.

Harry Stebbings 40:58 ... Converses, not a ripoff of Converses by another brand.

Dave Powers 41:01 Yeah.

Harry Stebbings 41:01 And so you can put another whatever percent that is on top. I read a lot, um, especially about Bernard Arnault, and they say about your relationship to fashion, and particularly high fashion, is irrational. And he responded, "It's entirely rational. Luxury is the only place you can get luxury margins."

Dave Powers 41:19 Yeah. Yeah.

Harry Stebbings 41:20 Which I thought was brilliant.

Dave Powers 41:21 (laughs) Yeah.

Harry Stebbings 41:22 My, my question to you is, how do you think about getting luxury margins? And is that only available once iconic brands are built and hero products are made? And how do you feel when I say that about luxury margins?

Dave Powers 41:37 Well, I get it. You know, I've been... They've done an incredible job of maintaining... Well, first of all, demanding, you know, obscene margins (laughs) , right? Based on what... I know what those products cost and what they're getting for them. They're geniuses at building, you know, aspirational love for their consumers. And so, um, listen, if you can pull it off and you can sustain it, you've got an incredible business going, right? And, but the key is to create a product that has that level of positioning and aspiration and then maintain it. And that's really, really hard, really, really hard to do, but they do it with the whole brand, not just a few items.

Harry Stebbings 42:17 I'm intrigued. When, when we say about maintain it, you know, in the UK in particular, there were huge, huge love for Abercrombie and Hollister about 10 years ago and then just absolute obliteration of both brands.

Dave Powers 42:30 Yeah.

Harry Stebbings 42:31 You think intensely about brand, Dave. Is there anything that you think we'll take away from the brand build and brand destruction there?

Dave Powers 42:38 Luxury, in a way, has its own built-in defense mechanism where there's a certain type of consumer that can afford that product. And they're the ones that are wearing it around town, you know, and w- it's where you're seeing it. So it kinda stays up in that stratosphere because a lot of people, it's unattainable, right, from a price point. But when you look at an Abercrombie or American Eagle or even Gap, you know, when I was there. I remember I had a conversation at The Gap one time, um, over our g- our logo Gap sweatshirt. And the CEO, Micky, at the time was pissed off because I- he was like, "I see that on reality shows and, you know, talk shows and people in the audience." He's like, "It's starting to show up everywhere and on consumers that, you know, aren't good for the brand," so to speak, right? And so I think when you start looking at Abercrombie and American Eagle and, you know, even Gap at that time, it was the hot new thing until it wasn't. When it wasn't, it's because it was showing up on everybody all over the place. It became ubiquitous. There was nothing special about it anymore. Um, you started to see it on discount in the stores, and you could tell it was a brand that was slowing down and dying versus on the upswing.

Harry Stebbings 43:52 How fast is brand decline, do you think? If f- if they f-

Dave Powers 43:56 It's quick.

Harry Stebbings 43:56 Yeah. It's quick.

Dave Powers 43:57 It's quick, yeah. It, it catches you off guard. And the worst thing is you have all the inventory planned for growth, and all of a sudden, it slows down, and that's when you're in real trouble-

Harry Stebbings 44:06 I know.

Dave Powers 44:06 ... 'cause you gotta clear all that inventory, and it just makes it worse.

Harry Stebbings 44:09 But then there's also brand immortality, I think, which is like, you know, Balenciaga, I'm sure you, you know the brand.

Dave Powers 44:16 Yeah. Yeah, yeah.

Harry Stebbings 44:16 When it went through recently in the last year, I can't remember whenever it was, just brand destruction with some of their campaigns. Balenciaga, selling more than ever now.

Dave Powers 44:27 Yeah, yeah.

Harry Stebbings 44:28 Brand immortality. And so I guess my question is at what stage does a brand become too big to fail almost?

Dave Powers 44:35 I think it's really the legacy brands, you know? Newer brands, they don't have that longevity or the history, the archives that a lot of these luxury brands do, and they can reach back to their history as a way to go forward.

Dave Powers 44:48 If you're a young brand and you don't have that, you run the risk of just being, you know, a flash in the pan.

Harry Stebbings 44:54 Mm-hmm.

Dave Powers 44:54 But Balenciaga has such a history, you know?

Harry Stebbings 44:57 Mm-hmm.

Dave Powers 44:57 All those luxury brands do. And they also have a, just a baseline of consumers. They'll ebb and flow, and they'll grow and, you know, contract a little bit, but it's not... You're not gonna walk into a Balenciaga and see a Black Friday fire sale, ever.

Harry Stebbings 45:11 (laughs)

Dave Powers 45:11 (laughs) I hope.

Harry Stebbings 45:13 No, uh, I mean, I would love it in Chanel. It might make-

Dave Powers 45:15 Yeah. (laughs)

Harry Stebbings 45:15 ... my Christmas shopping a little bit cheaper.

Dave Powers 45:18 Right.

Harry Stebbings 45:18 But not Arnaud. Fuck you. Um... (laughs) Uh-

Dave Powers 45:21 Yeah. They protect it, you know?

Harry Stebbings 45:22 Uh, um, unbelievable. Uh, now, I, uh, my question to you is when we look at, you know, we discussed Hoka, we discussed UGG, two incredible acquisitions, uh, a- and, you know, you mentioned five brands in the portfolio. Why aren't you acquiring more, Dave?

Dave Powers 45:37 Yeah, you know, we get asked that question a lot, and we, we talk about it a lot internally. And the best answer is we don't need to right now. You know, we have such organic growth with UGG still, with Hoka, you know, with our smaller, but, you know, healthy Teva brand, that we feel we have a path where we could, you know, add billions onto our, our revenue today over the next five years-

Harry Stebbings 46:05 Mm-hmm.

Dave Powers 46:05 ... organically, which is the best way to grow a business because it's built in, the margins are there, it's not disruptive to the company, it's predictable, and the return on, you know, investment is massive versus overpaying for an acquisition that you're in the hole financially from day one, and you're spending the next five, ten years getting out of it before it pays off.

Harry Stebbings 46:26 I get you, and so that makes sense. So okay, let's not acquire because we have great assets which we actually can optimize and make into even better assets.

Dave Powers 46:34 Yep.

Harry Stebbings 46:35 Just pushing your strategic thinking here, why not cut two others? You mentioned Hoka. You mentioned UGG.

Dave Powers 46:42 Yep.

Harry Stebbings 46:42 You've got Teva. The two others I'm sure probably account for minimal revenue in the grand scheme now compared to the others. Why not cut them and just focus?

Dave Powers 46:51 Yeah, we just announced that we're going to, um, you know, look for a buyer for one of our brands, Sanuk, right?

Harry Stebbings 46:56 Yeah.

Dave Powers 46:57 And so we're really placing a bet on Teva. You know, when we look at acquisitions, um, we've looked at a, you know, a lot of smaller outdoor brands out there because we feel that's a, that's a category and a space that, uh, has opportunity. And honestly, when we looked at Teva and compared to all these, you know, these brands that we could've potentially purchased, Teva has the best global awareness. It has the best margins. It's, it's an iconic heritage brand. So we just, we're treating that as an internal acquisition. It's a good question. You know, we don't need the smaller brands to be successful. I like them because they're, you know, they have potential. Um, we learn from them. They're great development opportunities for employees. We can test a lot on these brands without making big, you know, mistakes. And you never know, you know, some of these smaller brands could end up being massive just like UGG and Hoka.

Harry Stebbings 47:50 Why didn't you buy Strava? If you think about the world that you do not currently own is the technology world, it's the online world. "We power your feet. Now we power your community."

Dave Powers 47:59 Yeah, you know, I had conversations with the founders there a couple times, um, not in that context, but just getting to know them and, you know, our brands partnering. And, you know, I know for them, they had... Really, I don't think they had any ambitions of being acquired and wanted to go down their path 'cause they saw a, you know, real great opportunity. And we figured it's better to partner with them versus acquire them. We're not a technology company. You know, you've seen folks like Under Armour and Lululemon acquire technologies. It's hard to do and, and keep it going and do it right, and I think we're better off just partnering with brands like that.... um, versus making major acquisitions.

Harry Stebbings 48:34 I get you, I get you, and you're absolutely right. I mean, I think some of those technology founders have done very well from those (laughs) acquisitions and you applaud them. Can I ask, when you look at two such high-growth brands in the portfolio, how do you trade off resources between each of them, given both of them probably being quite starved of resources just 'cause they're growing so fast?

Dave Powers 48:54 Mm-hmm.

Harry Stebbings 48:54 How do you manage that trade-off?

Dave Powers 48:56 Yeah, that's one of the things that we, you know, have done, I think, really well over the past six or seven years, is, is focus our allocations and resources against those two brands. You know, when I came into the CEO role in 2016, you know, we were, we were a company that kinda spread a little bit to everybody, right? So we had seven or eight brands. "Hey, everybody, here's what you need, each region, here's money, each channel." And what we've been able to do over the last five years is really focus our resources. You know, the good news is, we have very healthy profit margins. You know, we're an 18% operating profit.

Harry Stebbings 49:33 You don't need to tell me, but I'm just intrigued as, like, a software investor. What is, like, healthy margins in shoes and impashion?

Dave Powers 49:41 Above 10% is-

Harry Stebbings 49:43 Okay.

Dave Powers 49:43 ... is healthy, probably average 10 to 12. And, you know, so you have folks out there like Crocs, which is, you know, high 20s. But aside from that, you know, DICKIES at 18-plus percent is, is one of the top performers in that, in that place.

Harry Stebbings 49:58 So DICK- DICKIES, that's 18 blended. And I-

Dave Powers 50:01 Yeah.

Harry Stebbings 50:01 ... guess you have brands with different margins, obviously, respective of their different positionings.

Dave Powers 50:06 Yeah.

Harry Stebbings 50:06 Can I ask, which is the most high-margin brand?

Dave Powers 50:09 Initial margin is Hoka.

Harry Stebbings 50:11 Huh.

Dave Powers 50:12 But UGG is a close second. I mean, they're, they're both very, very healthy in the industry.

Harry Stebbings 50:16 That's fascinating. Are you seeing margin improvement over time? Or is there, like, margin maintenance and stability?

Dave Powers 50:22 Um, on occasions, you know, with air freight changes and material changes. But, you know, the real shift at a company level for us is full price sell-through in DDC. That's where we get our highest margins.

Harry Stebbings 50:33 Full price sell-through meaning you don't have a discount?

Dave Powers 50:36 Yeah. Yeah, minimal discounts.

Harry Stebbings 50:38 Gotcha.

Dave Powers 50:39 So initial margin, it's really about cost of materials, you know, retail price, transportation, logistics, et cetera. But net margin, ideally you want as few markdowns as possible and you wanna sell it through your profitable channel.

Harry Stebbings 50:52 Why are all DTC companies getting hammered, Dave?

Dave Powers 50:55 You know, we've looked at a lot of 'em, you know, and that, when that was really, you know, a happening sector, you know, we got caught up in it too. Like, "Hey, we need a DTC brand. How can we learn from them?" Et cetera. But what you find out after a while is the DTC model is hard to keep sustained because you're spending so much on marketing, you know, 25%, 30% of your revenue you're putting back into marketing to fuel the sales. The minute you pull that marketing away to make profit, your sales lines drops like a rock. And if you don't have wholesale, if you don't have other sources of revenue, your e-comm site quickly goes from high growth, you know, decent profit, low single digits if you're lucky, a lot of times negative, to just, you know, dropping like a rock from both bot- top line and bottom line. What people didn't appreciate at first is, if you take away that marketing spend, will the brand still stay on a positive growth trajectory? And what a lot of companies are finding now is that that doesn't, that's not the case, um, when you pull away that marketing. So I think there's a flaw in the model, unless you just have a brand that also is in wholesale, has the margin structure to be successful at wholesale, and is important enough on its own to sustain the growth versus just, you know, digital marketing spend.

Harry Stebbings 52:24 I'm always like, when you say about sustaining the growth, I'm like, well, you have word of mouth, you have people using wearing them, exposing them in public, you have repeat usage in a lot of these cases-

Dave Powers 52:33 Yep.

Harry Stebbings 52:33 ... for a lot of these. So I'm like, "I don't really think that's a good answer," if I'm honest. Maybe the product's just not that good.

Dave Powers 52:40 That's the separation between good and great, so to speak, right? Great product, great brand, meaningful to consumers, will, will outlast the marketing spend. If your brand and your product is interesting for a moment because you saw it on an Instagram feed and you clicked through and you bought it, and then you kinda forget about it or you weren't as excited when you got it at home, then it's not gonna last on its own.

Harry Stebbings 53:07 No, I, I, I totally agree with you. I think one thing, by the way, sorry, uh, never, ever, uh, but I think you should do more customer education around the durability of shoes. Like, I'm a big runner. Uh, running shoes, on average, is about 300 miles per shoe, and then you should probably sunset them.

Dave Powers 53:24 Yeah.

Harry Stebbings 53:24 Great. You know what that is? Fucking repeat usage for you-

Dave Powers 53:27 Yeah, yeah, yeah, yeah. (laughs)

Harry Stebbings 53:28 ... 'cause your runners are doing about 50 miles a week minimum.

Dave Powers 53:31 Right, right. Well, and that's why it's such a massive business. You know, when we used to sell UGG once every two or three years, $160 price point, now we're selling Hoka two to three times a year at $160 cent- price point.

Harry Stebbings 53:43 I buy a pair of Hokas a month.

Dave Powers 53:46 Once a month?

Harry Stebbings 53:47 Yeah, because-

Dave Powers 53:47 Yeah.

Harry Stebbings 53:47 ... I do 60, 70 miles a week. I'm easily hitting 250 miles a month.

Dave Powers 53:52 Yeah, there you go. Yeah.

Harry Stebbings 53:53 And that, and that-

Dave Powers 53:53 Or we use the loyalty program f- that you can get automatic deliveries or the next big, uh, launch earlier or special treatment as a loyalty member, and that's something we're working on.

Harry Stebbings 54:06 I, I mean, I'm an influencer, you know? Me and-

Dave Powers 54:08 Yeah. (laughs)

Harry Stebbings 54:08 ... Kipchoge are just up there together. We're basically pals.

Dave Powers 54:13 (laughs)

Harry Stebbings 54:13 Um, listen. Do you agree that the best CEOs are the best resource allocators? We mentioned Bernard Arnault earlier, we mentioned, like, luxury and margin. Do you believe the best CEOs are the best resource allocators?

Dave Powers 54:23 I think it's, it's a definitely a component of it. I don't think that's it. You can't, you know, just be good at the financial side of the business. You still have to motivate your teams, you have to, you know, make sure the product engine and the innovation engine, all those things...

Harry Stebbings 54:35 Is it hard for you motivating teams when one or two brands crush it? You know, when you have five kids-

Dave Powers 54:42 Yeah.

Harry Stebbings 54:42 ... and-

Dave Powers 54:42 Yeah.

Harry Stebbings 54:42 ... two get into Harvard and MIT, and the others get into community college?

Dave Powers 54:46 There's certainly some of that, you know, and, but we spend a lot of time just making sure that brands know their role in the portfolio, and, you know, that they're...... what their intentions are and what, what their purpose is and they focus on that. But I think more than anything else, we, we try to instill this philosophy that if, if, if some brands win and others don't, Deckers is still winning. You're part of Deckers first, you're part of your brand second, so to speak. And so if Deckers is, is winning, you're, there's still something to be excited and believe in. But yeah. There's always that level of, "Oh, I wish we'd got more attention, or we got more resources," or...

Harry Stebbings 55:25 Do you give a shit about the Deckers brand? And what I mean by that is like, the brands beneath it are what powers the revenue.

Dave Powers 55:31 Yeah.

Harry Stebbings 55:31 And you don't kind of wanna take away from them and push Deckers.

Dave Powers 55:35 No, not to the public. No. We're never, we're not trying to build a Deckers brand, but it's the company that people work for. That's the difference.

Harry Stebbings 55:42 So how do you think about that then? Because like I, I'm, um, I'm struggling with this today where I have 20VC which is like the brand, but it also needs to be separate because we have funds and it's, it's kind of brand confusion. And people are like, "Oh, you're the podcast, but you've got funds." Do you see what I mean? People are like-

Dave Powers 56:00 Totally.

Harry Stebbings 56:01 ... Deckers. You, you own Hok- uh, Hoka.

Dave Powers 56:04 (laughs) Yeah. Well-

Harry Stebbings 56:06 You worry about it.

Dave Powers 56:06 ... you know, we're, we're a holding company for the, for the brands, right? We're not expecting or trying to get consumers to know Deckers. That's not our goal. We want investors to know Deckers, and they do.

Harry Stebbings 56:20 Yep.

Dave Powers 56:20 But we're not pushing the Deckers name to consumers.

Harry Stebbings 56:23 Can I ask, I think something that's really revealing, and I just f- I love this as a question. What's been the best resource allocation decision you've made since being CEO, and what did you learn from it?

Dave Powers 56:33 I think the best decision we made was reallocating money from smaller brands, smaller businesses. You know, if you think about the complexity of our business globally, right? Seven or eight brands, global, three channels. Everybody needs a little bit of money to be successful. You know, what myself and the finance, uh, leaders at the time did in '16 and '17 was say, "Actually no, you don't all need that money. These two things need that money and we're gonna reset." That was the biggest reallocation success that we had. And then you just gotta put financial guard rai- rails around it going forward.

Harry Stebbings 57:13 How do you do that?

Dave Powers 57:14 Well, it just comes down to the, you know, I mean, tactically, you, you do it in a budgeting process and say, "Hey here, your goal is 15% operating profit for your brand. If you grow 3%, that's great because we're taking the resources and we're putting them against the biggest opportunities." We, we just gotta hold people accountable to their targets.

Harry Stebbings 57:33 There's always a flip side, my friend. What's the worst resource allocation decision you've made, and what did you learn from that?

Dave Powers 57:41 I think it was... You know, it's hard to say honestly, Harry. I think for a time we were starting to build a massive infrastructure in Asia. We had an office in Hong Kong when we were building out teams and we, we... At the team there, you know, we, they wanted to build a Deckers website and, and start selling online to all different countries and hired too many people and it was like, they had a vision for it and we kind of went with it for a while, or I did, and then it finally, I was like, "This is, this is not a game worth playing. We gotta cut our losses here. We need, we need the resources elsewhere." And so we ended up pretty much closing that office. We still have a small office there. We have a team that are managing the region, but that was just getting out of control. And that's what can happen when you get a big company and you're not disciplined on spend. Everybody can present a good reason why they need the funds, but at the end of the day, you gotta be super clear on where, where you're gonna get the biggest payback.

Harry Stebbings 58:33 Totally do. What's the hardest thing about your job today? Is that it or is it something else?

Dave Powers 58:38 Um, the hardest thing about my job today, it's honestly not the business. I always say the business is the easy part, it's the people. That is what keeps me up at night. You know, business is black and white. You're either, you know, you're making decisions on the fly that's best interests of the, of the business and the financials, but you know, keeping and attracting talent, to me, is my biggest concern right now.

Harry Stebbings 59:03 Uh, let's dig into that. Maha said that you're amazing at retaining talent, especially in hard times.

Dave Powers 59:09 Yeah.

Harry Stebbings 59:10 How do you retain talent in hard times? I tweeted the other day that little and often is my secret. I promote people and give them pay rises, small but often, like once every three months.

Dave Powers 59:22 Wow. That's interesting.

Harry Stebbings 59:24 But then they feel, they feel this constant momentum and this constant, "Oh, I got a promotion. Oh, I got a pay rise."

Dave Powers 59:30 Yeah.

Harry Stebbings 59:30 And, and then it's this feeling of constant forward progression.

Dave Powers 59:33 I mean, I've been that consumer. I mean, I've been that employee in the past where I, you know, in my early days at Gap I was getting promoted quite often, that was the culture, we were growing. For me, it fogged the fact that I hated the work environment.

Harry Stebbings 59:48 (laughs)

Dave Powers 59:50 And I just stayed on because I was progressing in my career even though I wasn't necessarily happy in my job. And I think at Deckers, we try to do both. We try to make sure that, you know, the company is a kind of company you want to work for first and foremost. And yes, not or, but and you can be financially successful. And I think that's what's special about what we've been able to do and, and retain people is there, there's a lot of reasons to really like Deckers beyond just the pay and the job. You know, we're, we're, we're a company that believes in service and having a higher purpose around giving back to communities and things of that sort and caring for each other.

Harry Stebbings 1:00:31 Well, how do you think about money today, Dave? It's a really strange topic that people often shy away from. Um, I think people are often afraid to admit that it's central to some people, others not. I'm just thinking of, you know, Patagonia and the inspiration that you take from them, but also the awareness of, you know, operating profits and fucking driving cash flow. How do you think about your personal relationship to money today? Like, I used to think it was everything, if I'm honest. Uh-

Dave Powers 1:00:57 Oh, yeah, yeah.

Harry Stebbings 1:00:57 I grew up without, I grew up without money and then-

Dave Powers 1:01:00 Yeah.

Harry Stebbings 1:01:00 ... I got a bit of money and realized that I was just as, you know-... lonely and- (laughs)

Dave Powers 1:01:05 Yeah. (laughs)

Harry Stebbings 1:01:06 ... and, and insecure. And I, it's really nice, but like, I, I-

Dave Powers 1:01:09 You're still growing up. (laughs) You're still young.

Harry Stebbings 1:01:12 I, yeah. Exactly.

Dave Powers 1:01:13 I, I look at money, and same for me, I grew up, you know, um, without a lot of money in, you know, a small town, and I, you know, obviously, now I've been successful, and it, it, it honestly, frankly, blows my mind.

Harry Stebbings 1:01:25 What blows your mind, the money or the success or?

Dave Powers 1:01:29 That my life has ended up where it is. I'm CEO of a company and, you know, financially successful. I mean, I, I never would have imagined any of these things happening.

Harry Stebbings 1:01:36 Why?

Dave Powers 1:01:37 A, I didn't know B, it was possible or it was something that I thought I could do. And then I just never thought I would be one of those people. It's not how I thought about myself. Meaning, not one of those people, but being a CEO of a company was not my aspiration growing up.

Harry Stebbings 1:01:53 Can I be so rude? So rude.

Dave Powers 1:01:56 Yeah, yeah, yeah.

Harry Stebbings 1:01:57 Would you blame your parents for that? And the reason I say that is-

Dave Powers 1:02:00 Yeah.

Harry Stebbings 1:02:00 ... just because like, I would want my children to know they can do anything, and that that president role, they can get if they work hard. Is that their fault?

Dave Powers 1:02:11 Uh, you know, we were just talking about this the other day with some friends, about this... I grew up in New England, you know, which is a part of the country in the US that's very kinda old school, conservative, set in its ways. And, you know, I'm one of the only or few people in my extended family that have left New England and, you know, pursued something beyond what was available to me there. So I think, I do think that there is a mentality in my parents that was like, "You can't do that." Like, "That's, that's crazy." You know? So I, I wouldn't blame them for it, but I think the, the, the small thinking was part of my family culture, for sure.

Harry Stebbings 1:02:49 What do you tell your kids today to avoid small thinking?

Dave Powers 1:02:53 I try to model, you know, opportunities for them, you know, I talk a lot about my, my job and the work and the travel, and, and I try to give them experiences globally that will open their eyes to possibilities. But it's up to them. I want my kids to be good humans and to be happy with themselves, and I don't care if that's being a woodworker or fishing guide or a CEO, it doesn't matter to me what they do, I just want them to be comfortable in their own path and be good humans.

Harry Stebbings 1:03:24 Oh, no, I want mine to found Decacorns. I'm much more precise-

Dave Powers 1:03:27 Yeah. (laughs)

Harry Stebbings 1:03:27 ... than you are. Uh-

Dave Powers 1:03:28 Yeah.

Harry Stebbings 1:03:28 ... my final question that I do have to ask. I, I love this one. If you could call yourself up the night before your wife had your first child 23 years ago, I guess, um, what would you tell yourself knowing all that you know now? Don't do it. (laughs) Don't do it. (laughs)

Dave Powers 1:03:45 Yeah, no, definitely do it. Do it. And be more in tune to it. Like, really, really tune into your kids. You know, it's hard when you have your own life and your own career and that comes first, which, you know, for my generation, it did. It's hard to also give that same level of energy and attention to a young baby or your kids growing up. I found it that, to be the challenge. That's changed over time for me, but that would have been my advice, is...

Harry Stebbings 1:04:17 Can you still be as efficient and as killer with kids as you are without them? Like I don't have kids today, I'm solely focused on myself, I'm extremely selfish-

Dave Powers 1:04:29 Yeah.

Harry Stebbings 1:04:29 ... everything I do, I do it to win. And you can't do that when you're a parent.

Dave Powers 1:04:34 No. I think you have to make some sacrifices. But it, it depends, and you know, it's all depends on what's important to you at the end of the day, you know?

Harry Stebbings 1:04:40 Did you have a moment when you were like, "Actually I would rather take a, a s- like, I'd rather take a slight hit there in order to have kids"? Like, was that a conscious realization?

Dave Powers 1:04:51 I wanna say probably every parent has that, "God, I wish I could spend more time with my kids or be there more for my kids, you know, that are in the workforce and working." Unfortunately, not everybody acts on it, or, or does the work to kind of balance it out, or has the, the opportunity to balance it out, because, you know, you're grinding it out just to make sure your family's taken care of. But I think every parent wishes they could spend more time with their kids,

Dave Powers 1:05:16 for sure. Yeah.

Harry Stebbings 1:05:17 Okay, we're gonna do a quick fire, Dave. So I say a short statement-

Dave Powers 1:05:20 I thought that was a quick fire. (laughs)

Harry Stebbings 1:05:21 No. I say a short statement and you give me your immediate thoughts. Does that sound okay?

Dave Powers 1:05:25 Yeah, cool. Let's go.

Harry Stebbings 1:05:26 You can be CEO of any other company for a day. What would it be and why?

Dave Powers 1:05:30 This is gonna sound stupid, but I actually think The Gap. I would love to go back to The Gap because it's just, it's such a shame to see how bad that business has become over the last 20 years. I would love to go back there for a day.

Harry Stebbings 1:05:45 Is it still g- is it still going?

Dave Powers 1:05:46 No. Maybe Gap, Inc., but the brand. It's still going, I don't think it's still growing. I mean, it's still, it's struggling, right?

Harry Stebbings 1:05:53 Sure.

Dave Powers 1:05:53 And so I'd love to go back there for a day to say, "Hey, what is actually going on here?" And then think about if you had carte blanche decisions to, that you could make, what would you do to, to get it on the right path?

Harry Stebbings 1:06:06 What is the right way to view competition?

Dave Powers 1:06:09 I think both as your, and this is a harsh word, but your enemy and your friend. Like, I think-

Harry Stebbings 1:06:13 Mm-hmm.

Dave Powers 1:06:13 ... if you're smart, you will learn from your competition as much as you try to take them down.

Harry Stebbings 1:06:18 Hm.

Dave Powers 1:06:19 'Cause if they're-

Harry Stebbings 1:06:20 Mm-hmm.

Dave Powers 1:06:20 ... if they're truly competitive, they're doing something right.

Harry Stebbings 1:06:23 Who's your biggest competitor, Dave? I find it helpful to, like, align a team around one and name them.

Dave Powers 1:06:29 Yeah.

Harry Stebbings 1:06:29 Is it Nike? Is it Adidas? Is it On?

Dave Powers 1:06:32 Well, for Hoka, it's, it's, you know, it's Nike. That's the one that really drives us internally, is hey, you know, we think that we could take s- a chunk of their business.

Harry Stebbings 1:06:43 Tell me, you can have dinner with anyone, dead or alive. Who would it be and why?

Dave Powers 1:06:48 I would say either Bono or Dave Grohl. Bono, you know, I just think he's just fascinating, the way that he has transformed himself from a punk kid in a garage band in Dublin to this global, international character that is, you know, beyond the music. What he's been able to do on a global stage for AIDS in Africa and et cetera, uh, and the amount of people that he's-... met with and worked with is fascinating to me.

Harry Stebbings 1:07:15 I, I, I totally agree when you think about kind of brand transition. Um, what's the best piece of advice you've been given?

Dave Powers 1:07:21 I don't know if it's advice, but it was a reminder that my dad used to say all the time, "Nobody's ever said life is gonna be easy."

Harry Stebbings 1:07:28 (laughs)

Dave Powers 1:07:28 You know, every time I'd come to him and complain, he'd be like, "Well, I don't know where you thought... (laughs) I don't know why you thought that was gonna be easy 'cause nobody ever said life was gonna be easy."

Harry Stebbings 1:07:37 What do you do to de-stress? Uh, you're CEO. There's a lot of shit that happens.

Dave Powers 1:07:41 Yeah.

Harry Stebbings 1:07:42 What do you do to just... (exhales)

Dave Powers 1:07:44 Alcohol helps (laughs) at the end of the day, unfortunately.

Harry Stebbings 1:07:48 (laughs)

Dave Powers 1:07:49 Um, I mean, in all seriousness, as a, anybody in a really high-stress job, and that could be at any level of your life, you know, any job in the world, you kind of develop healthy habits or coping mechanisms, right? Depends on how you wanna look at them. But for me, you know, coming home and, and having a beer after work, uh, but really exercise. Like, I love mountain biking, I love trail running-

Harry Stebbings 1:08:12 (sighs)

Dave Powers 1:08:12 ... I love music. Nothing helps like a beer. (laughs)

Harry Stebbings 1:08:15 (laughs) I love that. I was expecting like, "I go, and I do 13 miles, and I trail run."

Dave Powers 1:08:23 Yeah. (laughs)

Harry Stebbings 1:08:23 And it's like, yeah, Heineken. (laughs)

Dave Powers 1:08:24 I do whatever I need to get (laughs) through the day.

Harry Stebbings 1:08:28 That is amazing. Uh, Dave, w- where are you in 10 years' time? It's 2033. Are you still CEO of Deckers? Are you doing something else? What do you want for your 10 years?

Dave Powers 1:08:39 Yeah, 10 years is like a lifetime for me now. You know, I'm, I'm in my upper 50s and, um, you know, I, I still, whether I'm at Deckers or not, I, my, uh, ambition is to be doing something that is still super creative. You know, I think I, I need that in my life. I need creative outlets. I need to be able to, you know, explore that and push that. I'm not an artist or a musician or anything like that, but I have so many other creative interests. Um, and then, you know, it's something, something that is very purposeful and giving back.

Harry Stebbings 1:09:12 Has HOKA taken five billion from Nike in 10 years?

Dave Powers 1:09:16 Maybe not all from Nike, but it, it has the potential to be five billion on revenue, for sure.

Harry Stebbings 1:09:21 What was UGG in that time?

Dave Powers 1:09:23 It's hard to say. I think, you know, could we double the UGG business over time? I'm not putting timetables on anything, but I think the potential for that brand is there. Would I sign up for that today? No. Um, but I think that brand has unlimited potential when you think about what it can do for consumers and how much they love it. And it's our job to just get more UGG on more people's feet.

Harry Stebbings 1:09:46 Dave, I've absolutely loved this. You've been fantastic to have on. I, I can't thank you enough for putting up with my pressing questions.

Dave Powers 1:09:54 No, I love... This, this is great. I love your questions.

Harry Stebbings 1:09:56 You were fantastic, so thank you.

Dave Powers 1:09:58 Oh, thanks. (laughs) Yeah, real pleasure, Harry.