It’s been 10 months since Francisco Morales stepped in as chief executive of 5.11 Tactical, the Irvine-based manufacturer of apparel and gear for military and law enforcement officials.
Recent sales results point to improving fortunes for Orange County’s 18th-largest apparel company by local employee count.
The company Morales launched in 2003 with Dan Costa saw strong first-quarter growth; revenue increased by nearly 5% to $88 million and pre-tax earnings were up about 41% year-over-year.
The quarterly earnings exceeded expectations, according to Pat Maciariello, chief operating officer for Westport, Conn.-based Compass Diversified Holdings LLC (NYSE: CODI), the owner of 5.11, speaking last month during the company’s latest earnings call.
“You don’t want to make decisions based on one quarter, but all the work we’re doing is paying off,” Morales told the Business Journal last month at the company’s headquarters near the intersection of MacArthur Boulevard and the Costa Mesa (55) Freeway.
More work’s in store.
5.11 Tactical set out to increase its retail locations two years ago and has since grown from 13 stores to 52, including one that opened last month in El Paso, Texas.
The company plans to continue its retail expansion in the U.S. this year by opening at a pace of one store per month, according to Morales, who succeeded Tom Davin in the chief executive role last year.
5.11 has eight locations in the state. Its closest stores are in Oceanside and Riverside. Its products are sold in about a dozen outdoor and sporting goods stores in Orange County, like Big 5 Sporting Goods, according to its website.
The company also wholesales to more than 2,100 accounts, such as uniform shops and specialty chains including Turner’s Outdoorsman.
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Morales previously served as president for 5.11, which employs close to 1,000 companywide, including nearly 150 in Irvine.
When he stepped into his new role last August, he immediately worked on creating a five-year strategy built on its retail expansion, and a renewed commitment to soldiers, firefighters and police officers.
“Maybe I’m a little bit different than a CEO coming in from the outside,” he said. “I was here already.”
“The task on hand was to build a multiyear strategy. I just built the leadership team [and] reset the vision and mission of the company so we have a very clear true north.”
“Our vision is to build an iconic global consumer brand rooted in serving public safety and the military.”
Revenue for the company topped $350 million last year, according to Compass Diversified regulatory filings.
There’s more room to grow.
The domestic professional public safety market for tactical soft goods is estimated by 5.11 officials to be a $1.7 billion sector, consisting of sales to active-duty military, law enforcement, private security, fire, corrections officers and emergency medical services.
Products it offers range in price from pants that can cost between $50 and $270, to shoes and boots ranging from $100 to $150, plus an assortment of outerwear and other gear that often run $100 or more.
Opening Doors
5.11 said it has a plethora of products that are “battle-tested” with design input from professionals and military personnel like its Stryke Pant made of patent-pending stretch fabric that’s stain and soil resistant with 12 pockets.
Its tactical gear and accessories are used by numerous government agencies including the Federal Bureau of Investigation and U.S. Secret Service. It says it works with more than 12,500 governmental departments.
Notable partnerships include a recently inked deal to design and supply uniforms for NYPD officers catered to their specifications such as pockets designed to fit the dimensions of ticket books.
“We’re converting more and more agencies from their antiquated uniforms to uniforms that have performance attributes like stretch, durability [and] fabrics that are 40% lighter, but stronger than what they wear,” Morales said.
The growth of its business with first responders has fueled its popularity with consumers such as outdoor enthusiasts and fitness junkies.
For example, Morales said its Tactec Plate Carrier vest, starting at $200, was “born from the war” and made to carry ballistic plates.
The vests have since become a go-to accessory for CrossFit enthusiasts; they pack the vests with weights for high-intensity training and workouts.
“It’s surprising,” he said. “Stuff that is hardcore, built for professionals find its way to the consumer.”
That’s what pushed the firm to open its own stores starting in 2014 with pilot locations in Riverside and Las Vegas. It ramped up its brick-and-mortar plans in 2017. At the time, Davin told the Business Journal customer feedback was strong so it decided to stop testing and start opening more locations.
5.11 Tactical now operates 47 company-owned stores while an additional five are franchised locations.
It also consolidated two warehouses in Northern California last year and moved into a new 400,000-square-foot facility in Manteca, about 30% larger than its two previous facilities combined.
Getting the warehouses consolidated, along with implementing a new enterprise resource planning system, has allowed the company to focus on its core business of late, leading to stronger sales and profitability, Maciariello told analysts last month.
“We remain optimistic about the prospects for 5.11 as we continue to drive operational efficiencies and to satisfy the changing needs of our core first responders and military customers and drive revenue growth through our consumer lifestyle product line,” he said.
Always Ready
Operating retail stores present a different set of challenges for a company whose business is rooted in wholesale.
Morales said that’s why it spent the past six months adding to its retail team led by Jeff Roberts, who joined in 2014 after serving as vice president of global retail for action sports apparel and accessories manufacturer Volcom Inc.
He added that the company has the support of Compass Chairman Matthew Hyde, whose stints have included chief executive of boating supply and fishing retailer West Marine Inc. and executive vice president of Recreational Equipment Inc.
Compass bought 5.11 Tactical in 2016 for $401.8 million from TA Associates Management LP.
5.11 is the largest of five branded consumer groups that fall under the umbrella of Compass, which has a market value of $1 billion.
Climbing Roots
Morales, the son of a tailor, brings his own skillset to 5.11.
The Venezuelan native initially thought he would be manufacturing jeans, but after moving to the U.S. at 19 for college to study textiles, he landed a job at L.L. Bean where he “fell in love with technical apparel,” and then moved on to work at Dicks Sporting Goods.
Morales later joined Costa’s business Royal Robbins, an outdoor and travel clothing company, in the early 2000s.
The pair decided to create products for law enforcement and military, first creating pants for the FBI, before spinning off 5.11 from Royal Robbins as a separate entity in 2003.
The company’s name dates back to the mid-1970s: 5.11 is named after the difficulty level in the Yosemite Decimal System rating scale for rock climbing, according to Compass regulatory filings.
In 2012, 5.11’s corporate headquarters was relocated from Modesto to Irvine.
Cult of Shoppers
The manufacturer remains on the lookout for ways to better the in-store experience for customers. A recent example was the March launch of the Always Be Ready Academy, or ABR Academy.
The program, hosted at company-owned stores, offers free instructional events by certified experts on readiness skills in areas of trauma care, self-defense, everyday/concealed carry, fitness and outdoor adventure.
“Our 5.11 ABR Academy program will transform our stores into more than just a point of sale,” Roberts said in a statement. “They’ll serve as the interactive consumer destinations we always intended for our stores to be.”
Morales emphasizes that the company’s consumer-facing business will not detract from its core business of catering to first responders, especially since that’s how the company got its start.
“When we [established] 5.11 as a company in 2003, there was a global cult following because you couldn’t buy our pants unless you trained [with the FBI],” Morales said. “So there was a lot of pent-up demand once we made these products available.”