Johnnie-O Gets $108M Investment, Takes on First Institutional Investors

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Johnnie-O, whose surfer dude logo has become a recognizable symbol of “West Coast prep,” has taken on its first institutional investors to help fund the brand’s continued growth.

On Monday, the California-based label said it had secured an investment of $108 million from Wasatch Global Investors and Ares Management Corp. funds that gives them a minority stake in the business. Although this is the sixth time the brand has raised funding, founder John O’Donnell said, the other investments were small and came primarily from friends and family.

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O’Donnell said this investment was spearheaded by his brother-in-law Rob Berner, who serves as chairman, as well as the brand’s chief executive officer Dave Gatto. “We wanted to raise capital to support our wholesale accounts and offer some liquidity to our investors,” he said.

The brand was founded by O’Donnell in 2005 and started out with wedge-collar pique polo shirts. It has since expanded into a full lifestyle brand for men and boys. During the pandemic, the company experienced “superior financial performance and consistently high sales and profit growth,” according to the company and its new investors. “The mass casualization of America has allowed Johnnie-O the market opportunity to provide consumers of all ages with a broad range of unique upscale lifestyle apparel, wearable on numerous occasions, including at the office, on the golf course, on the beach or an evening out,” they added.

The e-commerce channel, in particular, has been growing rapidly, leading to sales and EBITDA growth of more than 80 percent in 2021, the company said, and it expects to continue to grow online as well as through wholesale channels as a result of this infusion of capital.

“We are excited to provide flexible capital in support of Johnnie-O’s strong growth plans,” said Brian Goldman, partner at Ares. “This investment dovetails with Ares’ strategy of investing alongside companies with strong brands, compelling track records and best-in-class management teams.”

Gatto added, “We are delighted to partner with such high-caliber firms as Wasatch and Ares as we continue to grow our brand and community and build the next great iconic American brand.”

O’Donnell said the funding will “continue to drive the momentum we have” and will allow the company to explore other growth opportunities including womenswear, international expansion and product extensions. The brand operates five retail stores with local partners in Arizona, Texas, Rhode Island and Florida and will soon be opening a unit in Fashion Island in Newport Beach, Calif., he said. The company is exploring adding a store in the Houston market.

O’Donnell, the brother of actor Chris O’Donnell of “NCIS Los Angeles” fame, grew up in a conservative household in suburban Illinois. An avid golfer since the age of 12, John O’Donnell played on the golf team at UCLA, where he majored in history and business. He continued to play after college, and participated in five USGA events as a top-ranked amateur. Eventually, he merged his sports and business backgrounds by joining Fox Sports Net Chicago to sell radio advertising. But the lure of the West Coast was strong and he returned to California, working in the Los Angeles office of the Golf Channel before joining Merrill Corp., a financial printing firm.

He rapidly became bored with the corporate lifestyle and created Johnnie-O, his nickname, as an alternative to the East Coast preppy brands such as Vineyard Vines. He started with polo shirts that he sold out of the back of his car and eventually expanded into other products for men and boys. Chris Knott, the founder of Peter Millar, serves as Johnnie-O’s chief merchandising officer and O’Donnell said he “drives all product and merchandising” for the company. “He’s such a talent and has such a feel for what’s coming.” He also credited Gatto, who was president of the outdoor portfolio for VF Corp. before joining Johnnie-O seven years ago, as integral to the success of the label.

“We have a world-class team,” O’Donnell said. And although he’s no longer working 60-hour weeks to build the company he created, he said he remains intimately involved with its “voice and messaging.”

Wasatch is a small-cap equity manager with $33 billion in assets under management. Ares is a global investment manager with $314 billion under management.

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