Iconix Beats, Raises Guidance

Iconix Brand Group Inc. (ICON - Analyst Report), a brand management company, delivered first quarter 2011 results.

New York-based Iconix’s earnings soared 25.0% in the quarter to 45 cents a share from 36 cents a share in the year-ago period, demonstrating steady organic strength across its portfolio of brands as well as strong margins. Earnings also surpassed the Zacks Consensus Estimate of 41 cents.

On a reported basis, including one-time items, earnings came in at 42 cents a share versus 33 cents delivered in the prior-year quarter.

Iconix raised its fiscal 2011 adjusted earnings forecast to $1.63 - $1.68 per share from the previous expectation of $1.53-$1.58 per share. The Zacks Consensus Estimate for fiscal 2011 is $1.54 per share. On a reported basis, the company projects earnings of $1.50-$1.55 per share, up from previously guided range of $1.40-$1.45 per share.

Total revenue for the quarter jumped 29.0% to $92.4 million from $71.7 million in the year-ago period, reflecting double-digit sales growth in the Direct-to-Retail segment.

Iconix also raised its revenue target to $355.0-$365.0 million from the earlier guidance range of $340.0-$350.0 million.

On a year-ago basis, EBITDA spiked 19.0% to $58.8 million in the quarter.

The company exited the year with free cash flow of $45.9 million. Capital expenditures for the quarter were $1.8 million.

For fiscal 2011, the company expects free cash flow in the range of $167.0 million to $172.0 million (previously $160.0 million to $165.0 million).

Iconix believes that it is well positioned to maintain its growth trends with the expansion of brands both in the U.S. and internationally and as well as acquisition of additional iconic brands. Recently, the company announced the acquisition of the Ed Hardy brand from Nervous Tattoo. Through this deal, Iconix will gain control of the licensing and marketing functions, and increase its total ownership stake in the Ed Hardy brand to 85%.

Stiff competition from Gap Inc. (GAP), Cherokee Inc. (CHKE - Snapshot Report) and The Jones Group Inc. (JNY - Snapshot Report) as well as integration risks are concerns.

Currently, ICON has a Zacks #3 Rank, implying a short-term Hold recommendation.

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