Iconix’s Outlook for 2009 Positive

Iconix's Outlook for 2009 Positive
Iconix acquired 50 percent of Ed Hardy.

New York — Though its first-quarter earnings fell 5 percent, Iconix Brand Group exceeded market expectations last week and boosted its full-year earnings guidance.

Chairman and CEO Neil Cole cheered the rollout of the OP, Danskin and Starter footwear and apparel brands exclusively at Wal-Mart.

“Even in the current economic environment, many of our brands have gained market share as we continue to provide great marketing support and partner with leading retailers and wholesale licensees that have the capacity to drive significant volume,” Cole said last Tuesday in a conference call.

According to the CEO, a “bright spot” in the quarter was the Candie’s juniors’ brand, which announced in March an exclusive partnership with Kohl’s stores and is featuring pop star Britney Spears in a 2009 advertising campaign.

“There are great synergies between our Candie’s girls and Britney’s fan base, and the timing could not have been better, as the campaign launched with the debut of her new tour, which allowed us to integrate the Candie’s brand into all promotional activities,” Cole said on the call, adding that the brand’s performance was one of the main drivers in the decision to raise the company’s 2009 EPS forecast to $1.30 to $1.35 from $1.20 to $1.30.

Both Starter and Danskin have continued to perform well, Cole said, with annual retail sales for each expected to pass the $1 billion mark at Wal-Mart in the next few years.

The Rocawear brand also helped the quarter, seeing double-digit sales increases.

“Rocawear is doing really, really well,” Cole said. “[It’s the] No. 1 brand at Macy’s by far.”

Additionally, analysts reacted favorably to the company’s announcement that it would acquire 50 percent of Hardy Way LLC, owner of the Ed Hardy lifestyle brand, known for its tattoo-inspired designs, for $17 million. Royalty revenue from Hardy Way is expected to be about $10 million in 2009.

“This is a small deal for Iconix, but we like it very much, as it gets the company back on the acquisition horse with a very high-profile brand at a below-average deal multiple … a positive trend for acquirers that have liquidity or financing,” Todd Slater, an analyst with Lazard Capital Markets, wrote in a report.

And more deals could be announced soon.

“Further on the acquisition front, we are seeing more and more interesting opportunities, including some very large deals that we feel could be actionable this year,” Cole said.

For the period ended March 31, profits at the company dropped to $15.6 million, or 26 cents a diluted share, from $16.5 million, or 27 cents, a year ago. Analysts had predicted EPS of 23 cents. Revenues for the quarter fell 9 percent to $50.5 million from $55.7 million.

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