Direct-to-consumer firm Solo Brands Inc. is planning an initial public offering that could see it raise in the vicinity of $100 million.
The regulatory filing has $100 million as a listing placeholder, meaning that the size of the IPO could change. The number of Class A common stock and the price range for the offering have not yet been determined.
Solo Brands started as Solo Stove, a camping firm focused on camp stoves and fire pits founded by two brothers in 2011. It expanded its outdoor lifestyle focus when it acquired Chubbies Shorts last month. Other firms Solo recently acquired include Oru Kayak and Isle paddle boards. Following the acquisitions, Solo Stove rebranded as Solo Brands.
“We created Solo Brands with a vision for a different approach to direct-to-consumer business—one that’s not only better for the customer, but better for the community at-large,” John Merris, CEO of Solo Brands and Solo Stove, said last month. “Each of these brands is amazing in its own individual way—but together we’ll be able to collectively offer a better customer journey—while doing more for the communities that built us.”
Solo said its brands have a history of giving back to their communities and working with organizations that support a variety of causes, whether expanding access to mental health care services or planing trees to offset carbon emissions and working to keep oceans and waterways free of pollution.
For the first six months of fiscal 2021, the Securities and Exchange Commission filing said pro forma net sales were $207.7 million. For the 12 months ended June 30, total sales were $254 million.
The filing said that Chubbies, a men’s clothing line for the weekend, operates in the $124 million U.S. online apparel and accessories market. Since the apparel brand’s founding in 2011, Chubbies has grown net sales from $2.4 million in 2012 to $44.1 million in 2020, representing a compound annual growth rate of 43.8 percent. “As part of the Solo Brands platform, we have significant room to expand the Chubbies brand reach,” the filing said. For the six months ended July 31, Chubbies posted sales of $49.9 million. Net income for the year ended Jan. 30, 2021 was $5.7 million. For the six months ended July 31, 2021, net income was $10.1 million. Both periods represent the company’s reporting of sales prior to its acquisition by Solo.
The filing noted that the company has a “scalable DTC platform,” and that its “plug and play” capability provides competitive advantages, “including an attractive financial profile and a unique ability to acquire and operate outdoor brands that broaden our product assortment and share our values of authenticity, product quality, and community.” The platform in turn creates a flywheel effect of rapid growth and robust free cash flow generation that allows Solo to reinvest in product innovation, strategic acquisitions and global infrastructure. Another benefit of the DTC model is the ability to communicate directly with customers, which provides real-time consumer insights and lets the company control pricing, Solo noted.
Solo said it acquires complementary brands that it believes it can optimize through its digital marketing and supply chain platform. “Our disciplined acquisition strategy focuses on profitable, rapidly growing digitally-native brands with disruptive product offerings,” the company said, adding that its platform can help drive scale for acquired brands. The brands in turn help Solo expand both customer reach and product offering.
Solo sees runaway growth for the outdoor market. The company said consumption in the U.S. sporting goods and outdoor reaction category grew 18 percent to $220 billion from 2019 to 2020, and is expected to continue growing, citing data from investment banking firm P.J. Solomon. Moreover, the Covid-19 pandemic has solidified consumer interest in the outdoors and its products, with 90 percent of consumers indicating an appreciation for outdoor spaces and 58 percent planning to invest in their outdoor living space in 2021, Solo said, citing a January 2021 survey by the International Casual Furnishings Association. In addition, younger consumers between ages 18 to 44 accounted for about 50 percent of the company’s website traffic in 2020. With millennials and Gen Z representing $1 trillion in spending power in the U.S. in 2020, Solo said spending is expected to continue to grow as millennials head into their peak consumption years.
The company operates three warehouse facilities in the U.S., and a fourth in The Netherlands. It is also currently expanding its largest fulfillment center, located at the company’s global headquarters near Dallas.
“We plan to replicate our successful U.S. DTC fulfillment model as we expand internationally and expect to maintain delivery standards similar to those we currently employ in the United States,” the company said.
While the digitally native platform is Solo’s primary sales channel, the company also works with wholesale distribution partners. Last year, 4.9 percent of revenue was generated from sales to Solo’s domestic retail partners.
In fiscal year 2020, U.S.-based customers represented over 95 percent of company sales. The company said it believes it can replicate the U.S. market strategy to increase international sales. It plans to enter new markets over the next three years, with a near-term and medium-term focus on Europe and Australia. “We intend to continue to explore establishing direct operations in additional new markets, including Africa, Asia-Pacific, the Middle East and South America, where we currently serve customers through international distributors,” Solo said.
Solo’s filing on Monday, along with that of Rent the Runway, indicates that the IPO market is still red hot. On Running, the Roger Federer-backed Swiss performance brand, raised $746.4 million last month. It joins Poshmark, Mytheresa.com, Dr. Martens, and ThredUp as firms that have successfully navigated the IPO waters since the start of 2021.