Cramer Won't Recommend A Licensing Play, But This Article Will

| About: Iconix Brand (ICON)

The recent deal made by Liz Claiborne (LIZ) has led me to write this article about brand management company Iconix (NASDAQ:ICON). Last week shares of Liz Claiborne were up over 30% for a week and actually had their best performing day since 1987. The company sold off its namesake brand and Monet brand to J.C. Penney (NYSE:JCP). The same day it also announced it was selling Dana Buchman brand to Kohls (NYSE:KSS). Liz Claiborne also sold three minor brands to Bluestar Alliance and terminated an existing license for DKNY. The new company will be left with three brands: Juicy Couture, kate spade, and Lucky Brands. The company will change its name to account for the change and will be left as a brand with fast growing brands.

Iconix Brand Group is a brand management corporation. The company owns no inventory and has not actual retail stores. Management is responsible for maximizing revenue by licensing out owned name brands to retail stores and other companies. It would appear that Cramer and others are skeptical to recommend a company that does this because licenses are based on contracts and some brands could become worthless if they are not licensed out. Iconix was formed in 1993 with the purchase of Candies, a brand the company still owns. The company owns brands that have been around for hundreds of years.

Iconix Brands (Wholly Owned)

Badgley Mischka-Eveningwear Brand

  • Licensed to: Department Stores, non exclusive including Saks Fifth Avenue (NYSE:SKS) and Neiman Marcus, Home Shopping Network (NASDAQ:HSNI)
  • Company Founded: 1988 Iconix Acquired: 2004
  • Sells: Women's apparel and accessories

Bongo-California Lifestyle Brand

  • Licensed to: Kmart (subsidiary of Sears Holdings (NASDAQ:SHLD))
  • Company Founded: 1982 Iconix Acquired: 1998
  • Sells: Women's and children's casual clothing and accessories

Candies-Junior Lifestyle Brand

  • Licensed to: Kohls since 2005
  • Company Founded: 1981 Iconix Acquired: 1993
  • Sells: shoes, apparel, jewelry, clothing, curtains, and perfumes aimed at junior girls

Cannon-Home Textiles

  • Licensed to: Kmart and Sears
  • Company Founded: 1887 Iconix Acquired: 2008
  • Sells: textile products

Charisma-Home Textiles

  • Licensed to: Costco (NASDAQ:COST) and Department Stores
  • Company Founded: 1970s Iconix Acquired: 2007

Danskin-Women's Activewear

  • Licensed to: Sporting Good Stores, Wal-Mart (NYSE:WMT)
  • Company Founded: 1885 Iconix Acquired: 2007
  • Sells: yoga apparel, fitness apparel, dancewear, and activewear all aimed at women

Fieldcrest-Bed and Bath Textiles

  • Licensed to: Target exclusively
  • Company Founded: 1883 Iconix Acquired: 2007
  • Sells: towels, pillows, and bedding

Joe Boxer-Underwear and Sleepwear Brand

  • Licensed to: Kmart since 2001, entering Sears (SHLD) stores as well
  • Company Founded: 1985 Iconix Acquired: 2005
  • Sells: underwear, sleepwear, loungewear, and fashion accessories for women, men, and children

London Fog-Outerwear Brand

  • Licensed to: Department Stores
  • Company Founded: 1923 Iconix Acquired: 2006
  • Sells: raincoats, umbrellas, and travel luggage

Mossimo-Youth Brand

  • Licensed to: Target (NYSE:TGT) exclusively since 2000
  • Company Founded: 1986 Iconix Acquired: 2006
  • Sells: sportswear, denim, and fashion accessories

Mudd-Junior Apparel Brand

  • Licensed to: Kohl's exclusively since 2008
  • Company Founded: 1995 Iconix Acquired: 2006
  • Sells: footwear and denim products

Ocean Pacific-Sportswear Brand

  • Licensed to: Wal-Mart exclusively
  • Company Founded: 1960s Iconix Acquired: 2006
  • Sells: footwear, sunglasses, and kids' apparel

Rampage-Sportswear Brand

  • Licensed to: Department Stores including Macys (NYSE:M)
  • Company Founded: 1982 Iconix Acquired: 2005
  • Sells: sportswear, footwear, and swimwear

Rocawear-Urban Lifestyle Brand

  • Licensed to: Department and Specialty Stores
  • Company Founded: 1999 Iconix Acquired: 2007
  • Sells: apparel, footwear, accessories, and fragrances

Royal Velvet-Luxury Home Textile Brand

  • Licensed to: JCPenney (JCP) in a new deal in 2012, Bed Bath & Beyond (NASDAQ:BBBY)
  • Company Founded: 1954 Iconix Acquired: 2007
  • Sells: bedding, blankets, pillows, rugs, and towels

Starter-Team Sports Apparel

  • Licensed to: Wal-Mart
  • Company Founded: 1971 Iconix Acquired: 2007
  • Sells: athletic apparel and footwear

Waverly-Home Fashion

  • Licensed to: Jo Ann's, JCPenney, Lowe's (NYSE:LOW)
  • Company Founded: 1923 Iconix Acquired: 2008
  • Sells: tableware, home furnishings, fabric, and window treatments

Iconix Brands (Joint Ventures)

Scion

  • Artful Dodger Brand-Urban Apparel
  • Iconix owns 50%

Hardy Way

  • Ed Hardy Brands
  • Iconix owns 85%

IPH Unlimited

  • Ecko Brands and Zoo York
  • Iconix owns 51%

Material Girl Icon

  • Iconix owns 50%

Peanuts Holdings

  • Peanuts, Dilbert, Fancy Nancy
  • Iconix owns 80%

Has Over 1,000 licensing deals including:

  • MetLife Insurance (NYSE:MET) uses Snoopy and other characters to advertise its brand worldwide
  • Hallmark Cards has used the characters since the 1960s to sell a variety of items
  • Knotts Berry Farm Theme Park owned by Cedar Fair (NYSE:FUN) has a Camp Snoopy area which has licensed Peanuts characters since 1983
  • TV licensing for holiday specials

If you're still following this article after the list above you will notice that the company outright owns 17 brands and has joint ventures with several others. The company is diversified among licenses of clothes, bathroom accessories, bedroom accessories, home furnishings, fragrances, footwear, sport apparel, and travel accessories. Brands are aimed at men, women, and children throughout several retail outlets. Iconix brands has partnered with some of the best and biggest retailers in the nation while taking on no inventory, low overhead costs, and minimal employees.

In Fiscal 2010, four companies made up 39% of the company's revenue:

  • Wal-Mart 21%
  • Target 7%
  • Kohls 6%
  • Sears Holdings (Sears, Kmart) 5%

As you can see Iconix is dependent on having successful licensing contracts in place with leading retailers. Many of these licensing contracts have guaranteed minimum upfront payments whether a certain number of products are sold or not. The loss of any license could impact sales and cause shares to fall on this news and/or an earnings miss.

Items made by these licensees compete directly with other large clothing companies including Nike (NYSE:NKE), V.F. Corporation (NYSE:VFC), Guess (NYSE:GES), Hanesbrands (HNE), and Under Armor (NYSE:UA). Iconix has made numerous acquisitions throughout the company's history with the majority coming in the last four years. Iconix management has said that they are open to making more strategic acquisitions.

For the current fiscal year analysts are predicting earnings per share of $1.66, which would be a 15% increase from the previous year. Shares are currently trading at around eleven times price to earnings for this fiscal year. Shares actually trade for less than ten times the $1.84 per share analysts are calling for in fiscal 2012.

It is time to recommend this brand management company to everyone. The Liz Claiborne deal has shown how valuable a name that sells product can truly be. Iconix has brands that have been, currently are, and will be successful in the future. Shares have traded as high as $26.05 over the last fifty two weeks and actually are climbing up from their year low at the beginning of October of around $14. Shares of Iconix are due for a breakout and now is the time to get into this great company.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.