Iconix Eyes Growth Avenues

NEW YORK — Direct-to-retail sales helped boost the bottom line at Iconix Brand Group Inc., where second-quarter profit jumped 32 percent.

The New York-based licensing company’s direct-to-retail brands, including Candie’s, Starter and Joe Boxer, made up 55 percent of sales during the period, up from 46 percent in the previous quarter. During last year’s second quarter, the category comprised just 27 percent of Iconix’s portfolio.

Neil Cole, CEO and chairman, said during a conference call with analysts that direct-to-retail brands “were the primary driver of our growth this quarter. … [Those brands] should continue to provide growth in the future as we expand into new categories, and benefit [us] as our partners open new doors.”

Candie’s, he continued, was a bright spot during the period. “We believe that the success we are having with Candie’s speaks to the strength of our direct-to-retail business model,” said Cole.

In addition, two of the company’s labels recently expanded their footwear offering: Joe Boxer, which retails directly at Kmart; and Starter, which sells at Wal-Mart stores. “Wal-Mart has virtually nothing in footwear,” said Eric Beder, associate director of research at Brean Murray, Carret & Co. “Footwear seems like the next big opportunity for a lot of [Iconix’s] brands.”

Beder also called out the company’s direct-to-retail launch of Mudd at Kohl’s late last month. Iconix executives described Mudd as the casual counterpart to Candie’s, noting that the brand is already in all Kohl’s doors with apparel, handbags and footwear, and there are plans to expand into all 30 categories, similar to Candie’s.

The company’s wholesale brands had mixed results for the quarter, but Ed Hardy, which was added recently through a partnership with Christian Audigier, was up 50 percent in royalties compared with the second quarter of 2008.

Cole also discussed the likelihood of an acquisition in the near term. “We have about five deals that are at the top of our pipeline that we are working on and negotiating,” he said, noting a target value of $20 million to $60 million for possible portfolio additions. “We are trying to stay away from anything under $20 million because it doesn’t move the needle.”

Robert Drbul, an analyst at Barclays Capital, expects to see an acquisition by the end of the year. “[We] are optimistic in the company’s ability to take advantage of any attractive opportunities,” he wrote in a research note.

For the three months ended June 30, Iconix reported a 32 percent increase in net income to $19.3 million, or 30 cents a diluted share, from $14.6 million, or 24 cents a share, a year ago.

Sales in the quarter rose 9 percent to $56.4 million from $51.7 million in 2008.

For the first half of 2009, Iconix’s profits jumped 12 percent to $34.9 million, or 56 cents a share, from $31.2 million, or 51 cents, in the comparable period.

Sales in the six months slid 0.4 percent to $106.9 million from $107.4 million.

The company raised its revenue guidance for the year to the $223 million-to-$230 million range. It had previously expected full-year sales figures to be between $218 million and $225 million.

It reaffirmed its full-year EPS forecast of between $1.30 and $1.35.

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