Iconix Brand Group
Iconix Brand Group (ICON) is a brand management company based in the United States. The company owns brands in the clothing, footwear, home furnishings, textiles and fragrances. Its brands are licensed to stores. Iconix, as a licensing company, is not exposed to some of the same risks of store traffic, seasonality, store rent or inventory. The company depends on the signing of licensing contracts to generate revenue.
Iconix International Plans
In 2011, approximately 83% of sales were based in the United States. Iconix also has its brands in China, Latin America and Europe through subsidiary segments.
The most recent announcement for Iconix was a new joint venture with Reliance Brands. Reliance Brands, which is a subsidiary of Reliance Industries, will license twenty brands from Iconix into a new company. The new company will be 50% owned by Reliance Brands and 50% owned by newly formed Iconix India. There are no details of the brands or financial amounts. Reliance Brands Chief Executive Officer did, however, state that his company paid a "significant upfront amount" for the new venture. This bodes well for Iconix and the likely financial impact in 2012.
Iconix China saw the launch of five brands in 2011. The brands included: Rampage, London Fog, Rocawear, Candies and Badgley Mischka. The company also signed a deal to bring Royal Velvet to the most populous country. All said, Iconix China has 200 stores with Iconix brands present and plans to expand that number to 1000 over the next three years. The London Fog brand has 100 retail stores of stores within store concepts in China.
In China, China Outfitters Holdings licenses the London Fog brand from Iconix. China Outfitters Holdings went public in Hong Kong recently. The partnership between Iconix China and China Outfitters, which began in April 2009, saw Iconix China the beneficiary of ownership shares. Iconix sold 54% of the shares they received and will realize a $6 million pre-tax gain on the sale.
Iconix has listed India, the middle East, South East Asia, Russia, and Japan as key markets to expand into over the next several years.
I broke down the list of brands owned in an article found here. Since that article, the company also purchased The Sharper Image brand.
One of the key strengths in Iconix brands portfolio is the diversification across price ranges and customer demographics. In a presentation, the company broke down some of their customers by class:
Luxury: Bloomingdale's, Neiman Marcus
The following represents some renewals that were made in 2011:
|Joe Boxer||Sears, K-Mart||12/31/15||Exclusive brand to both|
|Candies||Kohls||01/29/16||Exclusive brand to both|
|London Fog||The Bay||01/31/18||Also includes sportswear|
Outlined by Iconix is a four part growth strategy consisting of:
1. Increase Sales From Existing Partnerships
2. Pursue New Licenses/Partnerships
3. Expand Internationally
The fourth quarter saw Iconix, with a 23% rise in net income to $27.2 million. Earnings per share came in at $0.36, a 20% increase from the prior year's period of $0.30. The company beat analyst's expected $90.6 million with a total reported amount of $99.5 million. For 2011, Iconix reported net income of $126.1 million on revenue of $369.8 million. Revenue represented an eleven percent increase for the fiscal year. Earnings per share were $1.67 for 2011, which hit close to the top end of the company's forecasted $1.63-$1.68 range.
Iconix has forecasted earnings for 2012 in the $1.77-$1.84 range. This represents a price earnings of 10.3x-9.9x, based on a price of $18.28 at the time of writing. The range also represents an increase of 6%-10% from 2011's earnings per share. Six analysts on Yahoo are calling for $1.80 per share in 2012, which is close to mid range of the company's forecast.
Iconix Brand does own 50% of the Material Girl brand started by Madonna. Madonna, the recent Super Bowl halftime performer, is releasing a new cd and worldwide tour. These two items could represent a great impact for sales of the MG brand.
Iconix Brand Group represents a different way to play the retail segment. The company has continually acquired brands and signed new licensing deals. Most of the company's forecasted 2012 revenue is already booked through long term signed deals. Look for the recent joint venture and continued international expansion to carry Iconix stock forward through the year around reported quarterly earnings.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in (ICON) over the next 72 hours.