5.11 Inc. is eyeing a new strategic move that has it exploring the public markets again.
The Irvine retailer and maker of tactical gear and apparel this month filed a confidential draft registration statement for an initial public offering with more details pending a review by the Securities & Exchange Commission.
5.11—one of Orange County’s largest apparel companies—could join a raft of OC companies turning to the public markets this year, including fitness franchisor Xponential Fitness Inc. (NYSE: XPOF), Irvine TV maker and media company Vizio Holdings Inc. (NYSE: VZIO), Aliso Viejo artificial lens maker RxSight Inc. (Nasdaq: RXST), Costa Mesa banking software maker MeridianLink Inc. (NYSE: MLNK), Foothill Ranch financial services firm loanDepot Inc. (NYSE: LDI), Irvine provider of cannabis software WM Technology Inc. (Nasdaq: MAPS) and several others.
Pat Maciariello, partner and chief operating officer of 5.11 parent Compass Diversified Holdings (NYSE: CODI) of Westport, Conn., declined to get into the specifics of 5.11 during a call with analysts last month outside of saying the company has begun to “explore strategic alternatives for 5.11.”
A time frame for the IPO moving ahead has yet to be disclosed.
Prior Consideration
5.11 had reportedly explored an IPO or sale in 2014 under then-parent TA Associates Management LP. A Financial Times article at the time estimated the apparel company’s valuation to be between $650 million to $800 million.
Two years later, Compass Diversified bought the 5.11 business, paying $408.2 million.
The 5.11 business, at the time of the deal, generated net revenue for the 12 months through April 30, 2016 of $293 million with earnings before interest, taxes, depreciation and amortization of $38 million.
5.11 would represent another divestiture for Compass, which sold its home and gun safe brand Liberty Safe and Security Products Inc. in July for $147.5 million to investment firm Monomoy Capital Partners.
The Compass business, which saw 2020 income of $27.1 million on net revenue of $1.6 billion, is a diverse one, ranging from circuit board maker Advanced Circuits to baby carrier and stroller brand Ergobaby.
Diversification
5.11 has scaled and diversified considerably since the time of the Compass acquisition.
5.11 today has nearly 100 company-owned stores averaging 4,000 to 4,500 square feet, with a growing e-commerce business. The aggregate of the direct-to-consumer businesses makes up 31% of the overall sales.
The company ended 2020 with net sales of $401.1 million, up 3.2% from 2019, driven by e-commerce and retail sales.
Sales for the first six month of 2021 were $210 million, up 14% year-over-year.
5.11 sales are the largest within the Compass business; the parent company is valued around $1.8 billion.
Wholesale generates 69% of the Irvine firm’s sales via accounts such as Grainger, Ace Uniforms, Amazon, Walmart, Bass Pro Shops, Dick’s Sporting Goods and Big 5 Sporting Goods. The company works with more than 14,500 government agencies or departments, according to Compass.
“We’ve been fortunate because we have different channels [of distribution],” co-founder and CEO Francisco Morales told the Business Journal in October.
While the business is growing, supply chain issues, namely with product sitting at the ports, continue to prove a challenge for 5.11 like many other companies.
From its inception in 2003 as a spinoff of outdoor apparel brand Royal Robbins, it’s focused on offering performance wear for law enforcement and the military before spiraling out into other growth opportunities.
It relocated headquarters from Modesto to Irvine in 2011 and also entered retail that same year with the opening of its first store.
The next year, the company bought technical apparel company Beyond Clothing LLC of Seattle.
The aspiration over the past couple years has been to continue growing out the network of retail stores, while also making a case for the company’s apparel in more mainstream consumer settings, broadening its customer base as it seeks to become what Compass said is a lifestyle consumer brand in an investor presentation in the fall.
“We don’t want to be just a transactional store,” Morales said last year. “We think the days of you just have to go to a store to pick something up, that model is in trouble. If you are a retailer that provides education, provides an experience, I think there is a big void in the market for that.”
