Brooks Brothers CEO: Consumers defy spending slowdown for quality products

While the consumer picture is increasingly murky, shares of Target are lower on an earnings miss as CEO Brian Cornell cites continued soft trends in discretionary categories. My next guest knows a thing or two about consumer headwinds. He took the helmet Brooks Brothers just two months after they filed for bankruptcy in 2020. And then there was a pandemic. Nobody wore workwear. Brooks Brothers CEO Ken Ohashi joins me now. Ken, it's great to have you here. Welcome. Hi, Kelly. So great to be here. What a journey. And as your reward for navigating this now you get to head into this period that you just heard Matt described, which could be very complex to say the least, absolutely. I I think it's been interesting. We did have a strong quarter, the first quarter was very good for us really and what we're seeing from the consumer is, is that they are buying closer to need. So weather has had a tremendous impact for us in the first quarter. And the other thing that we're seeing is a good way, meaning if they all of a sudden need, yeah, they're buying, if the weather turns, they're out there buying the spring product. If the weather is colder, they're going to outerwear. So it is we're, we're seeing that pattern happening. And I think the other thing that's happening for us as a brand is we have an incredibly loyal consumer. As you can imagine, when Brooks Brothers 2 out of 3 customers is a loyal Brooks Brothers consumer and that consumer is spending more when they're coming into our stores. So we're seeing higher conversion in our stores when that customer does come in. It's probably fair to describe your typical customer is, is fairly affluent. You know, higher income. Sure. What, what is the prognosis for how you expect their spending? What the, what do you think that looks like for the rest of the year? Are you concerned? I think we're planning the business conservatively and I think one of the things that's happened over the last few years is many of you know coming out of COVID, we had a lot of supply chain disruption and I think we've cleaned that all up and actually supply chain is probably smoother than ever. So we're leaving a little more open to buy conservative like planning conservatively and if the trends accelerate, we're able to chase into those businesses. I think the one thing that is very interesting is the consumer is willing to pay for quality and value and doesn't seem to have price resistance when you're offering that quality and value equation. And the other piece that we're seeing is 20/22/23 as there was this mass return to the offices, people were plunging their wardrobes, they were buying that white shirt, they were buying that Navy suit. And now customers are coming back and saying give me more fashion, I want something different. And and I think that's where we're really doubling down as we look at fall and spring 25 and I noticed that lululemon, those shares are down today. Their Chief Product Officer is on the out. What's happening in terms of the fashion mix these days, you know, athleisure, is that over? What are, what are people seeking out? Do you think there's a sea change? I think we're in an exciting time. We just launched our performance line this quarter. It's doing tremendously well. I think consumers really love the technical fabric and that aspect of athleisure, but then putting it into more cleaned up silhouettes. So we're at an exciting time for Brooks Brothers. I think it's an area that we can continue to grow and develop. You guys are also very mall based which you know I don't know if you can see that as a blessing, as a curse is just and Simon has been an investor is through part of all this, have they not, We have 100 stores with Simon, OK. So what does the mall presence look like in the years to come? Is it kind of status quo or should we expect some big changes? We want to continue to open more stores. We believe in malls, in malls and we believe in brick and mortar. I mean that the suiting is the foundation of the Brooks Brothers business and that process happens best live, right. Our online suiting penetration is relatively low. The separates business is OK, but when you're going to purchase the suit, you really want that store experience and you get the full breadth of the brand experience when you come into our stores. I'm looking back to see this company we filed Chapter 11 years past, it was sold for around 303 hundred $20 million something like that. I mean can you talk about what annual sales are now at this point where as a as a brand globally we're nearing a billion dollars and we are back to 2019 levels in the US So that is tremendous for us. But the mix of the business is completely different. When we first purchased the business, less than 20% of the business was what I consider casual sportswear, now it's 42%. Wow, slim fit represents 45% of our business and it was under 15% when we got here. So we've made tremendous progress. I would say modernizing a 200 year old brand is Simon trimming their position because they've feel as though they've, you know, as a sign of success or as a sign of of what I think I think for a Simon. So there's two components. There's an IP holding side to it and there's an operating side to it. Simon continues to be our partner and the 50% partner on the operating side of the business, which I run right, Exactly where will Brooks Brothers be in a couple more years, do you think? And what and if we do face all of a sudden a recession, is it just, OK, bring it on, I mean, how do you, do you plan for anything like that now or no, I think we continue to have opportunity and store growth. I think we have continued opportunity from a product perspective always anchored in quality. But I think this performance piece can really scale. I'm very excited about the women's business. I have, I think we have tremendous opportunity there. We're launching me to measure for women's in the fall, which I think there's a lot of white space there. And then there's other verticals like uniform and wholesale that we're also exploring right now. Very interesting. Ken, again, I have to applaud you for leaving this business out of bankruptcy through a pandemic and to this point. Thank you for joining me today. I really appreciate it. Thank you.