Iconix: Umbro Will Go Beyond Soccer Cleats

Iconix Brand Group plans to use soccer brand Umbro to enhance its athletic platform, and plans to turn it into a global lifestyle brand.
 
Speaking to analysts on a conference call last Thursday, Neil Cole, the firm’s chairman, president and CEO, said, “Umbro has an incredible footprint around the world, but most of it is functional. It’s a lot of cleats, what most people call boots, and soccer balls and shin guards. The big opportunity is expanding it more into lifestyle apparel and doing more functional sports, tracksuits and T-shirts.”
 
Umbro’s addition to Iconix’s portfolio will further diversify the firm into new markets and enhance its athletic platform, which combined with Starter and Danskin will represent approximately $2.5 billion in annual retail sales.
 
In terms of markets, the biggest opportunity is in South Americawith the next World Cup and Olympics happening in the region, said Cole.
 
In addition, “the U.S. is totally un-penetrated [with about] 3 percent of our total revenue coming out of the U.S., so we think we have a big opportunity there, especially with youth soccer, which is such a big business in America,” he added.
 
Umbro, an 88-year-old brand, generated approximately $900 million of worldwide retail sales in 2012. Having purchased it from Nike Inc. for $225million last month, Iconix expects the brand, which already has 30 licenses and is sold in over 100 countries, to generate approximately $40 million to $45million of royalty in 2013.
 
Analystswere upbeat on the firm’s outlook for 2013 with Umbro tucked under its arm.
 
Susan Anderson, analyst at Citi Investment Research, said, “[Iconix provided] solid revenue guidance though EPS seemed low given the Umbro acquisition.”
 
Eric Beder, analyst at Brean Capital, said, “Opportunities for Umbro to expand globally and in apparel arenas should push Iconix’s international sales to over 30 percent of total.”
 
Cole also said on the call that other acquisitions may be imminent.
 
“We have a very strong acquisition pipeline and continue to evaluate a number of opportunities that we believe would be great additions to our portfolio — a couple of which we believe could be actionable in the near future,” he said.
 
In the third quarter, Iconix’s net income rose 4.5 percent to $27.1 million or 38 cents, from $26 million, or 34 cents, while revenue slipped 6.6 percent to $86.6 million.