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Iconix (ICON) Tops Q4 Earnings, Stock Down on Weak Sales
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Shares of Iconix Brand Group, Inc. dipped 0.33% on Feb 22 after this clothing brand licensing company reported mixed fourth-quarter 2016 results. While earnings beat the Zacks Consensus Estimate, revenues lagged the same.
Quarter in Detail
Iconix reported fourth-quarter adjusted earnings of 38 cents per share, which beat the Zacks Consensus Estimate of 15 cents by 153.3%. Earnings grew approximately 52.0% from the year-ago period, mainly due to higher operating income and improved margins.
Total licensing revenues of $87.1 million lagged the Zacks Consensus Estimate of $89.0 million by 2.13% and also declined 8% from the year-ago quarter. In the fourth-quarter 2016, the company benefited from foreign currency exchange rates which were primarily related to the Yen.
Also, revenues in the prior-year's fourth quarter included approximately $1.3 million of licensing revenues from the Badgley Mischka brand, which was sold in first-quarter 2016. Excluding Badgley Mischka and the currency impact, revenues were down approximately 7% for the quarter.
Both Candies brand at Kohl's stores and the Bongo brand at Sears posted weak sales in the quarter. In the fourth quarter, royalties were also negatively impacted by Danskin Now's tiered royalty structure, which hit a lower royalty rate earlier this year when compared to the earlier figure, driven by higher overall Danskin Now sales of Walmart.
While the Home and International category witnessed growth, Womens, Mens and Entertainment segments declined on a year-over-year basis. The Entertainment segment was down 20% in the reported quarter. Home segment increased 9%, backed by strong partnerships including Royal Velvet at JCPenney, Charisma at Costco and Fieldcrest at Target International category grew 28% driven by new deals in key markets such as China, Southeast Asia and Brazil. On the other hand, Women’s declined 17% and Men’s fell 10%.
We note that Iconix has delivered sluggish results throughout 2015 and in the first nine months of 2016. Shares of this clothing brand licensing company have been underperforming the industry since the past two years due to near-term headwinds. The stock declined 73.4% in comparison to the Zacks categorized Shoes & Retail Apparel industry over the same time frame, which showcased growth of 12.4%. While the industry is part of the bottom 9% of the Zacks Classified industries (234 out of the 265), the broader Consumer Discretionary sector is also placed at bottom 19% of the Zacks Classified sectors (14 out of 16).
Adjusted operating income (excludes the impact of the impairment charges related to certain of the company's trademarks and goodwill) grew 46% to $57.4 million in the quarterprimarily related to the gain related to the Sharper Image brand divestiture. Operating margin increased 240 basis points to 66%, driven by the men's segment.
Full-Year 2016 Results
In 2016, Iconix posted adjusted earnings of $1.37 per share, which beat the Zacks Consensus Estimate of $1.11 by 23.42%. Earnings grew 3.01% from the year-ago period.
Total licensing revenues of $368.5 million lagged the Zacks Consensus Estimate of $370.0 million by 0.41% and also declined 3% from the year-ago period.
Iconix Brand Group, Inc. Price, Consensus and EPS Surprise
The company ended the year with $326.7 million total cash (including restricted cash of approximately $177.3 million) and $1.3 billion face value of debt. In 2016, the company generated approximately $250.8 million of free cash flow, a 24% increase as compared to approximately $202.4 million in 2015.
2017 Guidance Provided
Iconix expects full-year licensing revenues in the range of $350−$365 million. This compares to revenue of approximately $359 million in 2016, which excludes revenue from the Sharper Image brand.
The company expects full-year adjusted EPS guidance in the range of 70−85 cents per share, compared with 78 cents in 2016, when excluding gains from the sale of the Sharper Image and Badgley Mischka brands. The Zacks Consensus Estimate is pegged at $1.00 per share, above the company’s guidance range.
For the full year, the company expects free cash flow in a range of $105−$125 million for the year.
Our Take
We note that the company has been witnessing sluggishness in the women's and men's segments in the eight straight quarters. Also, it expects other headwinds like higher expenses and transition costs to hamper its profitability.
Last year, Iconix sold the rights to the Sharper Image brand and related intellectual property assets to ThreeSixty Group, the brand's largest licensee, for $100 million in cash to pay the company’s debt partially, which totaled $1.29 billion as of September end.
The debt-ridden company, at present, is planning a sale of its majority stake in Peanuts Worldwide LLC, which owns the rights to cartoon strip characters Snoopy and Charlie Brown. Besides Peanuts, Iconix is also looking to sell its Strawberry Shortcake brand, which is based on a character that rose to fame in the 1980s as a doll for young girls.
All these factors clearly signal that the company is currently not in good shape and we expect the negative impact of these factors to hurt profitability.
While Francesca's Holdings has expected long-term earnings growth of 13.75%, Zumiez and Genesco expect long-term earnings growth of 15.0% and 9.5%, respectively, for the next three to five years.
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Iconix (ICON) Tops Q4 Earnings, Stock Down on Weak Sales
Shares of Iconix Brand Group, Inc. dipped 0.33% on Feb 22 after this clothing brand licensing company reported mixed fourth-quarter 2016 results. While earnings beat the Zacks Consensus Estimate, revenues lagged the same.
Quarter in Detail
Iconix reported fourth-quarter adjusted earnings of 38 cents per share, which beat the Zacks Consensus Estimate of 15 cents by 153.3%. Earnings grew approximately 52.0% from the year-ago period, mainly due to higher operating income and improved margins.
Total licensing revenues of $87.1 million lagged the Zacks Consensus Estimate of $89.0 million by 2.13% and also declined 8% from the year-ago quarter. In the fourth-quarter 2016, the company benefited from foreign currency exchange rates which were primarily related to the Yen.
Also, revenues in the prior-year's fourth quarter included approximately $1.3 million of licensing revenues from the Badgley Mischka brand, which was sold in first-quarter 2016. Excluding Badgley Mischka and the currency impact, revenues were down approximately 7% for the quarter.
Both Candies brand at Kohl's stores and the Bongo brand at Sears posted weak sales in the quarter. In the fourth quarter, royalties were also negatively impacted by Danskin Now's tiered royalty structure, which hit a lower royalty rate earlier this year when compared to the earlier figure, driven by higher overall Danskin Now sales of Walmart.
While the Home and International category witnessed growth, Womens, Mens and Entertainment segments declined on a year-over-year basis. The Entertainment segment was down 20% in the reported quarter. Home segment increased 9%, backed by strong partnerships including Royal Velvet at JCPenney, Charisma at Costco and Fieldcrest at Target International category grew 28% driven by new deals in key markets such as China, Southeast Asia and Brazil. On the other hand, Women’s declined 17% and Men’s fell 10%.
We note that Iconix has delivered sluggish results throughout 2015 and in the first nine months of 2016. Shares of this clothing brand licensing company have been underperforming the industry since the past two years due to near-term headwinds. The stock declined 73.4% in comparison to the Zacks categorized Shoes & Retail Apparel industry over the same time frame, which showcased growth of 12.4%. While the industry is part of the bottom 9% of the Zacks Classified industries (234 out of the 265), the broader Consumer Discretionary sector is also placed at bottom 19% of the Zacks Classified sectors (14 out of 16).
Adjusted operating income (excludes the impact of the impairment charges related to certain of the company's trademarks and goodwill) grew 46% to $57.4 million in the quarterprimarily related to the gain related to the Sharper Image brand divestiture. Operating margin increased 240 basis points to 66%, driven by the men's segment.
Full-Year 2016 Results
In 2016, Iconix posted adjusted earnings of $1.37 per share, which beat the Zacks Consensus Estimate of $1.11 by 23.42%. Earnings grew 3.01% from the year-ago period.
Total licensing revenues of $368.5 million lagged the Zacks Consensus Estimate of $370.0 million by 0.41% and also declined 3% from the year-ago period.
Iconix Brand Group, Inc. Price, Consensus and EPS Surprise
Iconix Brand Group, Inc. Price, Consensus and EPS Surprise | Iconix Brand Group, Inc. Quote
Other Financial Update
The company ended the year with $326.7 million total cash (including restricted cash of approximately $177.3 million) and $1.3 billion face value of debt. In 2016, the company generated approximately $250.8 million of free cash flow, a 24% increase as compared to approximately $202.4 million in 2015.
2017 Guidance Provided
Iconix expects full-year licensing revenues in the range of $350−$365 million. This compares to revenue of approximately $359 million in 2016, which excludes revenue from the Sharper Image brand.
The company expects full-year adjusted EPS guidance in the range of 70−85 cents per share, compared with 78 cents in 2016, when excluding gains from the sale of the Sharper Image and Badgley Mischka brands. The Zacks Consensus Estimate is pegged at $1.00 per share, above the company’s guidance range.
For the full year, the company expects free cash flow in a range of $105−$125 million for the year.
Our Take
We note that the company has been witnessing sluggishness in the women's and men's segments in the eight straight quarters. Also, it expects other headwinds like higher expenses and transition costs to hamper its profitability.
Last year, Iconix sold the rights to the Sharper Image brand and related intellectual property assets to ThreeSixty Group, the brand's largest licensee, for $100 million in cash to pay the company’s debt partially, which totaled $1.29 billion as of September end.
The debt-ridden company, at present, is planning a sale of its majority stake in Peanuts Worldwide LLC, which owns the rights to cartoon strip characters Snoopy and Charlie Brown. Besides Peanuts, Iconix is also looking to sell its Strawberry Shortcake brand, which is based on a character that rose to fame in the 1980s as a doll for young girls.
All these factors clearly signal that the company is currently not in good shape and we expect the negative impact of these factors to hurt profitability.
Zacks Rank & Key Picks
Iconix currently has a Zacks Rank #4 (Sell).
Some better-ranked stocks in the retail sector are Francesca's Holdings Corp. , Zumiez, Inc. (ZUMZ - Free Report) and Genesco Inc. (GCO - Free Report) . All the three stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
While Francesca's Holdings has expected long-term earnings growth of 13.75%, Zumiez and Genesco expect long-term earnings growth of 15.0% and 9.5%, respectively, for the next three to five years.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?
Who wouldn't? Last year's market-beating Top 10 portfolio produced 5 double-digit winners. For example, oil and natural gas giant Pioneer Natural Resources and First Republic Bank racked up stellar gains of +44.9% and +44.3% respectively. Now a brand-new list for 2017 has been hand-picked from 4,400 companies covered by the Zacks Rank. See the 2017 Top 10 right now>>