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Monday, May 29, 2023

Apparel Company 5.11 Ready for IPO

“Always Be Ready” has been 5.11 ABR Corp.’s long-running tag line. The tactical gear maker is now readying for a new goal: Wall Street.

The company’s registration statement for an initial public offering was made available last week following a confidential filing in August.

The filing—the first proposed IPO for an Orange County-based retailer or apparel company in years—didn’t include price-per-share estimates and included a $100 million placeholder amount.

5.11 may have an enterprise value around $1.2 billion, according to a recent estimate by an Oppenheimer & Co. analyst.

The potential IPO comes as the company looks to further expand beyond its core consumer base of military and first responders to target more mainstream users of its cargo and uniform pants to grow sales.

Total sales last year for the company grew 3.2% to $401.1 million, with net income growing from $4.1 million in 2019 to $10.3 million last year.

The growth is being fueled by a diversification strategy of 5.11’s shopper base that began in 2011 as the company looked to make inroads with the everyday user via a direct-to-consumer channel that encompasses its online shop and brick-and-mortar fleet of 85 stores at the end of September.

Direct-to-consumer accounted for 43% of 5.11’s overall sales in the first nine months of this year.

“Remarkably, even with this tremendous growth, we believe we are still in the early stages of achieving our full potential with everyday, lifestyle consumers,” co-founder and CEO Francisco Morales noted in the company’s prospectus.

Morales went on to say “there is significant opportunity to grow through driving greater brand awareness.”

Spokespeople for 5.11 declined comment, citing its quiet period.

Functional Durability

The tactical apparel company is part of Westport, Conn.-based Compass Diversified (NYSE: CODI), which bought 5.11 in 2016 for $408.2 million.

The company owns nearly 98% of 5.11’s common stock, and will continue to hold a majority stake in the business once it goes public, according to the IPO filing.

Compass, a multi-brand portfolio owner, also owns Newport Beach-based Lugano Diamonds & Jewelry Inc. The high-end jeweler sold a majority stake in its business in September in a deal that gave it a $256 million enterprise value.

5.11’s business launched in 2003, born out of a spinoff from the Royal Robbins Co., which makes apparel for outdoor enthusiasts.

The company thinks its emphasis on fit and fabrication has helped it land contracts with groups ranging from law enforcement professionals and the federal government, to lawyers and teachers seeking product Morales said is “functional, versatile and durable.”  

Morales, the son of a master tailor in Venezuela, studied the textile and clothing business in the U.S.

“At the time, I was unaware that the craft I learned would allow me to serve a greater purpose; to serve those who serve by designing and developing mission ready 5.11 apparel, footwear and gear for professionals. I also didn’t know then that these same products would transcend the professional user for who they are designed and appeal to a massive audience of everyday, lifestyle consumers who desire innovative, functional and quality products,” Morales said in the company’s filing.

5.11 had reportedly weighed its options for an IPO or sale in 2014, when it was owned by TA Associates Management LP. The Financial Times estimated the company’s valuation at the time to be in the range of $650 million to $800 million.

Year of the IPO

5.11’s potential IPO would join a number of other OC companies that have gone public this year.

Last week, Irvine electric vehicle maker Rivian Automotive Inc. went public with a big splash, raising nearly $12 billion as its market cap soared past $100 billion, making it the most valuable publicly traded company in Orange County.

There’s also Irvine fitness franchisor Xponential Fitness Inc. (NYSE: XPOF), Vizio Holdings Inc. of Irvine (NYSE: VZIO), Costa Mesa-based MeridianLink Inc. (NYSE: MLNK) and loanDepot Inc. (NYSE: LDI) of Foothill Ranch, to name a few. 

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