More Praise for The Warren Buffett Way, First Edition

Chippewa,
founded in 1901 as a maker of boots for log-
gers, today makes sturdy hiking boots and quality outdoor
work boots. It was acquired by Justin in 1985.
•
Tony Lama,
which dates back to 1911, when Tony Lama,
who had been a cobbler in the U.S. Army, opened a shoe-
repair and boot-making shop in El Paso. The boots quickly
became a favorite of local ranchers and cowboys who valued
the good fit and long-lasting quality. In recent years, for
many the Tony Lama name has become synonymous with
high-end boots handcrafted from exotic leathers such as boa,
alligator, turtle, and ostrich, many with prices near $500. In
1990, Tony Lama Jr., chairman and CEO, agreed to merge
with archrival Justin.
Two groups of people buy Western-style boots: those who
wear them day in and day out, because they can’t imagine
wearing anything else; and those who wear them as fashion.
The f irst group is the heart of Justin’s customer base, but the
second group, while smaller, does have an impact on sales vol-
ume as fashion trends twist and turn.
When big-name designers like Ralph Lauren and Calvin
Klein show Western styles in their catalogs, boot sales climb. But
fashion is notoriously fickle, and the company struggled in the
late 1990s. After a peak in 1994, the sales of Western boots
began to decline. In 1999, Justin’s stock price dipped below $13.
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John Justin Jr. retired in April 1999, and John Roach, former
head of the Tandy Corp., came in to lead a restructuring. In just
over a year, the new management engineered an impressive
turnaround—adding new footwear products, consolidating the
existing lines to eliminate duplicate designs, and instituting effi-
ciencies in manufacturing and distribution. In April 2000, the
streamlined company announced first quarter results: footwear
sales rose 17 percent to $41.1 million, and both net earnings and
gross margins increased significantly.
Two months later, Berkshire Hathaway announced it had
reached an agreement to buy the company, prompting Bear
Stearns analyst Gary Schneider to comment, “This is good
news for employees. Management made all the changes last
year. They’ve already taken the tough measures necessary to
lower costs.”
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Today the boot division of Justin has 4,000 vendors and
about 35 percent of the Western footwear market; in stores that
specialize in Western apparel, some 70 percent of the boots on
the shelves are Justin brands. Most prices start at around $100.
In the higher price brackets (several hundred dollars and up),
Justin has about 65 percent of market share.
Acme Building Brands
The other division of Justin Industries is also a pioneer Texas
company that is more than a century old. Founded in 1891 in
Milsap, Texas, Acme became a Justin company in 1968, when
John Justin Jr. bought it. Today, Acme is the largest and most
prof itable brick manufacturer in the country.
Because long-distance shipping costs are prohibitive, bricks
tend to be a regional product. Acme dominates its region
(Texas and f ive surrounding states) with more than 50 percent
of market share. In its six-state area, Acme has 31 production
facilities, including 22 brick plants, its own sales off ices, and
its own f leet of trucks. Builders, contractors, and homeowners
can order bricks direct from the company, and they will be
delivered on Acme trucks. Acme sells more than one billion

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bricks a year, each one stamped with the Acme logo, and each
one guaranteed for 100 years.
Demand for bricks is tied to housing starts and, therefore,
subject to changes in interest rates and in the overall economy.
Even a run of bad weather can affect sales. Nonetheless, Acme
fared better during the techno-crazed 1990s than the boot
companies, and today is still the chief Justin money-maker. In
addition to its bricks, Acme Building Brands includes Feather-
lite Building Products Corporation (concrete masonry) and
the American Tile Supply Company, maker of ceramic and
marble tiles.
The Berkshire Deal
For years Justin was largely ignored by Wall Street. With just
two divisions, it was not large enough to be a conglomerate.
Yet, operating in two different categories made it something of
a puzzlement. As John Justin noted in 1999, just before he re-
tired, “The analysts who understand the footwear business
don’t understand the building materials business, and the other
way around.”
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Warren Buffett understands both. For one thing, Berk-
shire already owned several footwear companies, so he had
years to learn the industry. More to the point, he understands
stable, steady businesses that make products people never stop
needing.
And the timing was right. The company with a reputation
for more than 100 years of quality was facing rocky times; its
stock price had dropped 37 percent over the prior five years, and
there was pressure to split the company into two parts. Buffett’s
well-known preference for simple, low-tech businesses made
this a perfect f it.
When Buffett f irst met with John Justin in Fort Worth, he
remarked that the city reminded him of Omaha; he meant it as
a great compliment. When he looked into the two components
of the company, he saw something else he admires: franchise