As Sequential Searches for New Chief, Sales Beat Estimates But Struggles Remain

Uncertainty remains the theme for Sequential Brands Group Inc. as the firm continues to operate in transition mode.

The New York-based company —  parent to Jessica Simpson Collection, Heelys and DVS — posted third-quarter revenues that tumbled nearly 14% to $25.4 million, although it outpaced estimates of $23.7 million. It also recorded losses of $0.9 million, or $0.02 per diluted share on an adjusted basis, which was worse than the loss of $0.01 per share analysts had expected.

The report comes amid the management’s search for a new CEO. Last month, Sequential announced the departure of CEO Karen Murray, who also served as a director on the company’s board. (She continues to serve as a senior advisor to the firm.) Chad Wagenheim, EVP of strategic development and operations, was promoted to president and is assisting as the company looks for a successor to Murray.

“We’re excited by our CEO search and the progress we’ve made to lay the groundwork for 2020 as we transition to a leaner, more nimble operation,” chairman Bill Sweedler said in a conference call. “We have a collection of strong brands across the lifestyle and active categories, best-in-class wholesale and retail partners, the financial flexibility needed to execute against our growth strategy and a core talented team.”

During the quarter, the company signed new licenses in multiple categories for Jessica Simpson as well as secured new kids footwear deals for its Joe’s, William Rast and Caribbean Joe brands. It has also entered into partnerships for Ellen Tracy as it seeks to expand the label in select Scandinavian territories.

The ongoing transformation at Sequential started around mid-April when the firm sold the Martha Stewart and Emeril Lagasse Brands to Marquee Brands — the licensing company that owns Bruno Magli, BCBG and Ben Sherman. It closed the sale five months ago in a deal worth $175 million, plus an earn-out opportunity of up to $40 million if the business achieves certain financial goals.

The firm is also exploring strategic alternatives, sharing that it has been contacted by several interested parties. It shared that it could consider divesting one or more existing brands, acquiring new brands, a stock buyback program as well as other initiatives. (The board of directors is working with financial advisor Stifel on the process.)

“We continue to evaluate potential acquisition targets that fit well in our existing brand verticals,” Sweedler added.

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