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5.11 Tactical’s Target: Fast Growth at Retail

Irvine-based 5.11 Tactical, an apparel and gear designer outfitting soldiers, firefighters and police officers, has a mission of its own—it plans to grow its 13-store retail lineup at a pace of one or two additions a month this year.

“We have very aggressive five-year revenue goals,” said Chief Executive Tom Davin, who stayed on the job after leading the company through last year’s $401.8-million sale to Compass Diversified Holdings in Westport, Conn. “We are attracting a lot of new customers to the 5.11 brand who may have heard about it but wouldn’t necessarily go online and buy the product until they had the chance to try on the pants, the backpack or the boots.”

5.11 Tactical posted $212 million in sales for the nine months that ended Sept. 30, putting it on track to reach $300 million for last year. Its fourth quarter “is typically the strongest,” according to Compass Chief Executive Alan Offenberg, who added that most of 5.11’s “professional” accounts “traditionally spend a little higher in the fourth quarter in order to use up the remaining budget dollars.”

5.11 Tactical has 123 employees working at its Orange County headquarters and 550 companywide. It offers an array of products that are “battle-tested,” such as its stretchy Stryke pants. Its popularity with first responders has spilled over into the consumer market—including industrial workers and weekend outdoors enthusiasts.

The crossover trend prompted the company’s 2014 expansion into retail with pilot locations in Riverside and Las Vegas. The following two years it opened stores in Colorado, Texas, Australia, Florida and Utah. Its latest shop opened in July in Carson—just over the OC-Los Angeles counties line, where a digital billboard announces the brand’s presence to commuters on the San Diego Freeway these days.

“The response from customers has been so positive that we’ve decided OK, it’s no longer a test, we are going to do more retail stores,” Davin said. “We are going to open one to two stores per month in 2017, and we already have a very good pipeline—we got 11 locations that are under some sort of development.”

Stores in Commerce and Oceanside are under construction, and the company has signed leases for shops in Phoenix, Honolulu and Boston.

5.11 Tactical products will continue to be sold through other retailers nationwide.

The company supplies about 1,100 accounts, including Keystone Uniform Depot in Santa Ana and Covina and Galls LLC, which has stores throughout the U.S. The wholesale merchandise mix, however, is different—its “dealer partners” sell uniforms, and are mostly “targeting just police, fire, EMT,” Davin said. “They don’t really have a customer-facing storefront. Their stores are more in industrial areas, and unless you are a police officer or firefighter, you probably wouldn’t know about these stores. That’s why it’s very synergistic for us to open [company-owned] stores—those don’t sell uniforms.”

Exports go to another 90 or so countries.

“We are growing very well, despite the fact that the U.S. dollar is getting stronger, which impacts the purchasing power,” he said, adding that international operations account for about 25% of 5.11’s revenue, with Europe the leading offshore market.

“Business is very good in the Middle East, as well, and growing in Latin America and Asia, including Australia,” Davin said.

5.11 Tactical, which keeps a development center in Irvine, is consolidating two warehouses in Northern California and moving staff to a new, 400,000-square-foot facility in Manteca—a multimillion-dollar investment that will be about 30% larger than the two previous facilities combined, according to Davin.

Roots

Francisco Morales, son of a tailor, co-founded the company with Dan Costa in 2003. TA Associates Management LP in 2007 bought 80% of 5.11 Tactical and Invigour8 Trading Co. Ltd.—a sourcing company he and Costa founded in 2002—for $240 million. The Menlo Park-based private equity firm kept the management team in place. Davin joined the company as chief executive in 2010 after a five-year stint in a similar role at Panda Restaurant Group.

Morales remains with 5.11 Tactical as president.

Costa has since launched First Tactical in Modesto, a competitor with distribution in the U.S. and 15 countries, according to news reports.

5.11 Tactical’s senior leadership team retained a 2.5% share of the company after the sale to Compass, which added up to about $5.6 million, and represents “actual dollars we invested from our own pockets,” Davin said.

5.11 Tactical’s “market leadership, broad customer base, proven management team and compelling growth opportunities represent a strong addition to our family of leading middle market businesses,” according to Compass, which has a market value of about $1.1 billion and also owns Sterno Products, Clean Earth and Liberty Safe.

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