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Can Iconix Bank on International Unit for a Turnaround?

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With a wide array of retail partnerships, Iconix Brand Group, Inc.’s ICON international segment continues to expand steadily. However, dismal results in the company’s men’s and home segments have been posing concerns for a while. Also, such headwinds have weighed upon the company’s stock that declined 21.2% in the past three months against the industry’s rise of 3.3%.

Weak Segments Hurt Revenues

Increased competition seems to have taken a toll on the company’s men’s and home segments. During fourth-quarter 2017, sales at the Men’s category declined 30% while revenues from the home segment dipped 6%. Consequently, net licensing revenues went down 11% year on year. Moreover, due to such dismal segment performances, Iconix’s top line fell 7%, 10% and 13% year on year, during the third, second and first quarters of 2017, respectively. Persistent declines in top-line performance compelled management to provide dismal view for 2018.  Management expects revenues in the range of $190-220 million, depicting a considerable fall from $225.8 million in 2017.



 

Can International Business Offer Respite?

Iconix’s international business has been growing at a steady pace, owing to well-chalked initiatives. Evidently, the company has undertaken several efforts to bolster its business in Canada, since its products are quite underpenetrated in the region. In 2017, Iconix purchased the remaining 50% interest in Iconix Canada. Also, the company’s 51% interest in the Buffalo brand (acquired in 2013) will solidify its position for organic growth in Canada and the United States.

Prior to this, in 2015 and 2014, the company acquired the remaining 50% stake in Iconix China and Latin America, respectively. It also established a joint venture in the Middle East and North America in December 2014. In January 2014, the company acquired 1% interest in Iconix Europe, thereby increasing its ownership to 51%. Apart from these, the company has international joint ventures in Australia, Israel and India. Courtesy of such efforts, revenues in the international segment grew 10%, 4% and 3% in the fourth, third and second quarters of 2017, respectively

Further, the company is expected to continue expanding its international footprint. Moreover, with more than 50 direct to retail partnerships and 400 licensees worldwide with several retail giants like Walmart WMT, Kohl’s KSS and Macy’s M, Iconix is expected to continue the expansion and fortification of its global position. We hope that such dedicated endeavors will aid this Zacks Rank #3 (Hold) company in combating the weaknesses across its men’s and home categories and uplift shareholders’ confidence in the stock.  You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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