David Unter is a numbers man, and the opportunity to join 5.11 Tactical in Irvine as chief financial officer late last year added up on paper.
The military gear and clothing manufacturer’s growth rate has been in the “mid- to high teens,” with an estimated annual revenue now around $300 million.
There’s potential for plenty more, too, according to Unter, who said he got some pointers beyond 5.11’s books at the Shooting, Hunting and Outdoor Trade Show in Las Vegas shortly after he joined the company.
“You walk in there, and you got all these hard-good companies—gun companies, hunting companies—it’s massive, and there’s really only one apparel brand in there, and it’s us. And we got this big booth there, and it’s packed full of people,” he said.
Unter, who helped Costa Mesa-based Volcom Inc. go public in 2005, compared the experience at the outdoor show to exhibiting action-sports merchandise at trade shows such as Surf Expo in Orlando, Fla., or Agenda in Long Beach, which usually feature numerous apparel companies and few hard-goods manufacturers.
“Imagine walking into [Agenda], and you got all surfboards and skateboards and only one apparel company,” he said. “You just look at that white space, and you go, ‘That is an opportunity for insane growth.’
“It’s almost like action sports 20 years ago, when it was just getting started, and the excitement and almost the cult-like feeling around action sports and how that created so many various companies and access to market for what the kids wanted. We kind of have that feeling over here—that there is this underserved market of first responders, particularly globally, and they had nobody pay attention to them from a true product-innovation and marketing standpoint.”
5.11 Tactical’s name was inspired by the Yosemite Decimal System for mountain climbing, which assigns grades to inclines—from 5.0 to 5.15—with 5.11 deemed nearly impossible to climb without ropes.
The company has 109 workers locally, good for the No. 25 spot on this week’s list of Orange County-based apparel makers (see list, page 14). It manufactures accessories and apparel that is “battle-tested” by members of the military, firefighters and police officers, such as its Flex-Tac pants, which are stretchy and have “covert” features such as hidden pockets.
Its product development division is in Irvine, but innovations also come from a Seattle-based subsidiary, Beyond Clothing, whose primary customer feedback generator is U.S. Military Special Operations Command.
“We think of it as R&D that pays for itself by working with these top-tier special ops groups,” said Tom Davin, 5.11 Tactical’s chief executive. “We get a lot of insights. There are people who go climb mountains for North Face or any of the outdoor brands, and that’s great—but at Beyond Clothing we have people who are going all over the world to places we can’t even talk about, or they stay out for weeks at a time under the harshest conditions, and they are carrying a lot of stuff. They got all of those battery and communication-management issues, and so when they give us feedback—talk about battle-tested.”
Retail Ops
5.11’s popularity with first responders is spilling over into the consumer market—including oil rig workers and weekend outdoorsmen—prompting the company to expand into retail.
Its first store opened in October in Riverside and “has done phenomenally,” Unter said. “It’s really serving that community extremely well, and that is a great example where we can grow the brand.”
Jeff Roberts, 5.11 Tactical’s vice president of retail—and another Volcom transplant—is looking for locations for an unspecified number of stores in the Western U.S. this year, according to the company.
Roberts also is working with the company’s wholesale dealers on improving presentation of 5.11 products and training their sales people.
5.11’s “first-responder” uniforms—minus agency insignia—are available via its wholesale dealer, Galls LLC in Lexington, Ky. 5.11 gear is prominent on Galls’ website, where 5.11 has more merchandise on display than competing brands such as DutyPro, Propper and Elbeco.
Outdoor enthusiasts can find the brand at St. Paul, Minn.-based Gander Mountain Co. retail stores, as well as those owned by Academy Ltd. in Katy, Texas, and Dick’s Sporting Goods Inc. in Coraopolis, Pa.
The outdoor category puts 5.11 up against apparel giants such as Baltimore, Md.-based Under Armour Inc., and Columbia Sportswear Co. in Portland, Ore., among others.
Crossover on Boots
Its industrial customers—including “oil well servicing companies in the Gulf Coast of Mexico or back in oil fields of North Dakota”—are looking for items such as “Taclite Pro” pants or composite safety-toe boots designed for police officers who stand on their feet for extended periods of time.
“It turns out they hold up pretty well for someone on the oil rig,” Davin said.
Industrial workers flock to W.W. Grainger Inc., a Chicago-based company that topped $10 billion in sales last year and has a store in Santa Ana.
“We’ve made a lot of headway with Grainger, and we’re becoming one of their important accounts,” he said, adding that 5.11’s main competitor there is workwear brand Carhartt Inc. of Dearborn, Mich., which has about 4,900 workers worldwide.
The workwear category is “less than 10%” of 5.11 Tactical’s current revenue, Davin said, but “it can be over 25% of our business in the future. So we see that as something that can be certainly over … $100 million in revenue for us.”
International Potential
There’s also a “ton of growth potential internationally,” according to Unter.
“We got strong business in South America and Mexico, Canada, Europe, and Asia Pacific, and we are just at infancy in some of those areas,” he said, adding that about 20% of the company’s revenue is coming from outside the U.S. market.
5.11 Tactical founders Dan Costa and Francisco Morales sold a majority stake in the company to Menlo Park-based private equity firm TA Associates Management LP in 2007.
Davin described it as a “long-term investor who is in no hurry,” and since the company is “growing well, there is no pressure,” or specific exit plan in sight.
“Our expectations are to grow mid- to high teens consistently, and we beat that handily last year,” he said.
