Overheard On Wall Street: The Q1 Earnings Buzz

Wall Street had its share of first-quarter 2016 earnings to digest and dissect this week. Brand management firms Wolverine World Wide Inc., Iconix Brand Group Inc. and Sequential Brands Group Inc. along with handbag-and-accessories maker Kate Spade & Co. and athletic powerhouse Adidas Group all divulged their Q1 financials.

While the companies’ results differed across various facets of their businesses, compared to the fourth quarter of 2015, Q1 has generally delivered better outcomes for many footwear-and-apparel firms.

Here is what analysts had to say about the companies that reported this week.

Iconix Brand Group Inc.

“Successfully refinancing the $300 million [convertible note] due in June and, for the most part, satisfying the requirements of the SEC comment letter process are notable recent events, largely eliminating two material shareholder risks. Consistently generating organic growth and refinancing the $400 million [convertible note] due in March 2018 are the two primary outstanding factors standing between the stock’s current valuation multiple and an upward reversion to historical levels …  The overall portfolio, excluding fewer outliers, appears to be stabilizing. That’s the good news. Generating enough cash to satisfy the debt due in less than two years will be a challenge.” — CL King & Associates analyst Steve Marotta

Sequential Brands Group Inc.

[Sequential] posted another solid quarter with Q1 adjusted EPS of 4 cents handily beating our estimate, driven by much stronger than expected revenue of $34 million versus our $27 million estimate. [Sequential] demonstrated solid execution on geographic expansion opportunities as evidenced by the recent launch of And1 and Martha Stewart in Canada as well as the upcoming launch of active footwear by Jessica Simpson. As such, 2016 is setting up to be another year of high-single-digit (and likely higher) organic growth, driven by new product/category introductions and expanded distribution across channels/geographies.” — Canaccord Genuity Inc. analyst Camilo Lyon

Adidas Group

“We continue to applaud Adidas for the many steps taken over the last 18 months to bolster the business and improve its growth profile (new CEO, aggressive hires and sponsorships, buybacks, sale of lower growth business, etc.). That said, the stock remains neutral largely on valuation (50 percent to 60 percent premium to the five-year average).” — Susquehanna Financial Group LLLP analyst Christopher Svezia

Kate Spade & Co.

“[Kate Spade] is uniquely positioned as a growing, global, multichannel lifestyle brand. Key differentiating factors: diverse handbag assortment and novelty items, lower points of distribution at wholesale and shoulder pricing strategy maintaining [average unit retail]. While promos at outlet were necessary given challenged tourism, overall 19 percent comp was ahead of Street. Looking ahead, supply chain initiatives and more should drive [gross margin].” — Cowen & Co. analyst Oliver Chen

Wolverine World Wide Inc.

“We maintain our neutral [rating] on [Wolverine]. Though we continue to view FY16 guidance as potentially conservative and noted several positive takeaways from [the company’s] Q1 beat and management commentary, we still think a difficult broader retailer environment (especially in the U.S. and Europe) and competitive landscape for outdoor, lifestyle and athletic could put a damper on [Wolverine’s] merchandising momentum and strategic changes.” — Citi Research analyst Corinna Van der Ghinst

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