A beaming Blake Mycoskie was in his element sitting across from Jimmy Fallon on “The Tonight Show” last month.
Dressed in his new uniform — a T-shirt emblazoned with “End Gun Violence Together,” a Saint Laurent blazer, jeans and his company’s shoes — the Toms founder laid out the case for the game-changing Bipartisan Background Checks Act. Mycoskie passionately recounted his day, where hours earlier, he and hundreds of supporters rallied lawmakers in Washington, D.C., around the legislation, which would pass in the House of Representatives.
The appearance marked Mycoskie’s second time on the show in just three months, illustrating Fallon’s commitment to supporting social causes. “It was a surreal experience. No one goes back on so fast, especially if you’re not a president or a celebrity,” said the natural orator, who is back in the driver’s seat as he leads a dramatic evolution of the company’s cause-based mission.
Since his first late-night visit in November, Mycoskie and his team have repositioned the Toms business and made the new mission their primary focus. First Toms donated $5 million to organizations such as March for Our Lives, Everytown for Gun Safety and Moms Demand Action. Then the company embarked on a cross-country road trip to encourage consumers to use their voices to send 750,000 postcards to Congress.
Make no mistake — this isn’t just a passion project or annual giving endeavor. The entrepreneur is banking on the daring move, and other issue-focused initiatives that will follow, to help transform a brand in financial turmoil. The stakes have never been higher, but Mycoskie is determined. “I’m competitive. I like to win,” he said.
The executive is taking a page from his original strategy, which put the brand on the map in 2006. At that time, he was working with interns out of his Venice Beach, Calif., apartment and personally fitting poor children in Argentina with Toms’ classic Alpargatas canvas shoes.
Mycoskie’s simple idea — sell a pair of shoes, give a pair away — resonated with millions of consumers and pioneered a (now oft-copied) one-for-one business model that eventually expanded to provide water and eyesight to people in need.
To date, Toms has donated more than 88 million pairs of shoes and will continue to build on that number. “We broke all these records in sales [during the first six years]. So much of what drove that was grassroots activations,” Mycoskie recalled. “Then, when we got big and everyone was celebrating us as this great footwear business, we started suffering. We did all these things to make our shoes better, but far fewer people bought them.”
By the executive’s own account, the concept that the brand became famous for eventually started to hold it back. “We have a formula, but it only works if it’s fresh, provocative, radical and somewhat newsworthy — that’s what drives people to join,” he said.
With renewed vigor, Mycoskie is leading the charge at a crucial time for Toms and Bain Capital. The private-equity firm bought a 50 percent stake from Mycoskie in 2014, partly with debt issued through Toms. (Mycoskie retained ownership of the other half.)
But since the deal — which valued Toms at more than $600 million — growth has stalled significantly at the company, which has been dogged by bankruptcy rumors and negative credit ratings. (Toms declined to reveal its 2018 revenues, but a Moody’s report said net sales for the one-year period ended Sept. 30 were about $336 million.)
“It’s been sobering. Our worst time was about two years ago. We weren’t in a great place with our lenders,” Mycoskie said. “But our business has been a lot healthier during the past five quarters. We’re not kicking ass, but we’re not on the verge of bankruptcy.”
Hard Lessons Learned
When Bain and Toms initially teamed up, the growth strategy seemed clear: get the fundamentals down, make higher-quality shoes, hire more-seasoned leadership.
“The thesis was wrong. We did all those things, and it just didn’t work,” Mycoskie said. “The sell-through hasn’t been good because we haven’t engaged people.”
At the same time, retail consolidation continued to sweep across the industry, and the digital revolution was dramatically reshaping the landscape. Competition was also heating up, with sneaker stalwarts like Vans surging and upstarts such as Allbirds and Greats landing on the scene with their own unique brand of storytelling.
No longer dominating the conversation, Toms started to move in different directions around 2013 — dipping in and out of trends, unveiling buzzy designer collaborations and pushing into new categories like eyewear, coffee and bags. (Today, footwear accounts for more than 90 percent of sales.)
To support the expansion, it rolled out traditional marketing campaigns and unveiled expensive lifestyle shoots. “We did all the same s**t that every other footwear company does,” Mycoskie said. “That f**cked us. That’s not what built us in the first place or why people buy our shoes.”
Jim Alling, the former Starbucks and T-Mobile executive who has been at the business helm of Toms since 2015, acknowledged that the brand spent too much time innovating its future collection — and not on evolving its mission. “You have to be great at footwear, but what distinguishes us is our total story,” he said.
As sales turned south and top retail partners began to trim orders, the company reduced its head count by 25 percent two years ago — a move that immediately improved profitability.
“Those were the hard things we did,” Mycoskie recalled. “For the past year, we’ve been really stable and moving in the right direction. Bain has been incredibly patient and supportive. But I don’t think any of us had confidence we had a big growth period ahead until all of this happened in November.”
The Big Moment
That month, after Mycoskie decided to take action following a mass shooting at a bar in Thousand Oaks, Calif. — which is located near both his home and Toms’ corporate campus — he was all-in.
“I had built this organization for a reason, and if it sat dormant, why the hell did we do it? Luckily, I got the support from Bain and Jim, and that’s all I needed. When I told them I wanted to do something radical, they said to go for it. They trusted my instincts more than I did.”
Mycoskie said he understood the move to curb gun violence could be risky at a time when many corporate leaders are still reluctant to address politically charged issues. (The exec later teamed up with top brass from Dick’s Sporting Goods, Levi’s and RXR Realty to pen an open letter to Congress ahead of a House vote on the subject.)
But he soon discovered that universal background checks are an issue most people strongly believe in, regardless of their political affiliation. When Toms measured social media sentiments, about 11 percent of people reacted negatively, while 75 percent were extremely positive, and the rest were apathetic.
Four months in, the company said the new platform has generated 59 billion media impressions. New account openings have increased 20 percent, compared with this time last year. U.S. online sales, which account for about a third of the overall business, are also up compared with 2018.
The founder said he’s met with a number of people — across many ages and demographics — who recently have bought their first pair of Toms.
“Young people are probably most passionate about this issue, but it affects everyone,” he said. “We’re connecting with consumers who never would have cared otherwise. … Hopefully, by June or July, we’ll be able to translate this heat into growth in our wholesale channels. That will show more strength in the brand.”
Most retail execs said it is too early to speculate how much the new mission will drive business, but overall, they are bullish on the idea.
Mario Gallione, president of teen retailer Journeys, applauded Toms for taking a stand on an issue that its customers say is a point of stress and anxiety in their lives. “We are inspired by our brands that do good, and because we have such extensive reach, we can help our partners communicate their cause messaging,” Gallione said.
For some smaller independents, the initiative has become a centerpiece of their in-store marketing efforts.
For example, the Nao Leigh boutique of Rock Hill, S.C., set up a Toms “End Gun Violence Together” display, hired a graduate student to paint its window for the cause and invited a local news station to cover the effort.
“We knew we had to jump on board with this campaign to engage our community and to raise awareness on what we are actually voting for,” said Amy Naoum, owner of Nao Leigh. “What a positive, realistic and immediate way to make an impact on gun violence. Toms’ initiative and passion for this serious matter made it clear why we support and love the brand.”
With its storied heritage, Toms is smart to take a distinct view on social issues, according to Michael Dart, a partner at A.T. Kearney and author of “The New Rules of Retail.” “The brand can’t follow the latest fad or fashion. To some degree, that was where they tried to move, and that was inconsistent with the core part of Toms,” he said.
In addition to gun control, there are many causes consistent with Toms’ founding principles, Dart said. For a company that is closely tied to Argentina and South America, he suggested the firm could use its voice to address the challenging situation at the U.S. border.
The Road Ahead
While Mycoskie and the team continue to fight for universal background checks — the bill faces sizable hurdles in the Senate — Toms is actively rallying its consumers in Europe to join the brand in tackling homelessness and supporting female empowerment and social entrepreneurship.
It will also maintain its commitment to donating shoes, clean water and helping correct people’s sight, and the company plans to address more burning topics in the U.S.
“Now there’s something to talk about,” Mycoskie said. “It’s not going to turn the whole business overnight, and I’m not saying to the footwear community, ‘We’ve cracked it,’ but it’s exciting that when you do something important and right, it’s good [for sales].”
Mycoskie is candid about the challenges ahead as a $307 million loan — an amortization brings it down a little each year — comes due in October 2020. “That’s a very big moment for us financially,” he said. “We need to prove this business model, get growth going and get the debt renewed.”
The company’s short-term performance will undoubtedly shape its long-term fate with Bain and other potential investors. “I’m hell-bent on staying independent,” Mycoskie said, noting that if the firm can get back on track, an IPO is still a possibility in the future.
As Toms navigates this complex path, Mycoskie understands he is an important piece of the equation. “The company needs me more than ever — as a spiritual guide, not in an operational role. I’m [coming out of] a hibernation period of three or four years. My wife and I had two kids, built a home and started a new chapter in our lives,” he explained. “Without me involved, I think we lost a lot. We realized the missing ingredient was my passion and my ability to activate people.”
The serial entrepreneur also is thinking about his aspirations. “Another company is inside me, for sure. I don’t know if it will happen right away, but I’m interested in how to help people stop the self-inflicted pain we create in our lives,” Mycoskie said, declining to reveal details.
For now, though, he plans to settle into his new hometown of Jackson, Wyo., and focus on Toms’ next high-stakes move. “If we were writing a Hollywood screenplay, this would be the second act,” Mycoskie said. “This is the moment where we’ll have triumph or disaster.”