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Will Weak Segments Weigh Upon Iconix's (ICON) Q2 Earnings?

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Will Weak Segments Weigh Upon Iconix's (ICON) Q2 Earnings?

Iconix (ICON) struggles with weak Men's and Home segments. However, savings initiatives and strong global business networks are tailwinds.

Iconix Brand Group, Inc. ICON is set to report second-quarter 2018 results on Aug 8, before the market opens. The company’s bottom line outpaced the Zacks Consensus Estimate significantly in the trailing four quarters. Let’s take a sneak-peak into what’s in store for Iconix this time around.

Partnerships & Savings Efforts Bodes Well

Iconix prides on having a widespread network of partnerships and licensees across the globe. In fact, the company has over 50 direct to retail partnerships and more than 400 licensees worldwide with several retail giants like Kohl’s KSS and Target TGT. In fact, the launch of the Starter brand in collaboration with Amazon AMZN during 2017 and the multiyear agreements with Target (in relation with the Umbro brand), depict the company’s ability to develop long-term partnerships. These licensees and partnerships are formed to produce and sell quality products in the categories and distribution channels of their specific expertise.

With a wide array of retail partnerships, Iconix is also well placed for expanding its international footprint. Revenues in this segment surged 29% during first-quarter 2018, following an increase of 10%, 4% and 3% in the fourth, third and second quarters of 2017, respectively. Going ahead, the company plans to continue expanding its international footprint through strategic partnerships, buyouts and joint ventures.

In addition to these, Iconix has been on track with rightsizing expense structures. Accordingly, the company aims to deliver savings close to $12 million in 2018. Further, the company has been taking significant steps to further improve financial flexibility and strengthen its balance sheet.

Iconix Brand Group, Inc. Price, Consensus and EPS Surprise

Iconix Brand Group, Inc. Price, Consensus and EPS Surprise | Iconix Brand Group, Inc. Quote

Weak Segments Likely to Linger

While the company has been benefiting from a wide array of retail partnerships and strong international operations, its Men’s and Home segments have been posing concerns for a while. In first-quarter 2018, sales at the Men’s category declined 41% while revenues from the Home segment dipped 11%. In fact, Women’s segment also was soft this time, with sales down 2%. Transition of the company’s Danskin, Ocean Pacific and Mossimo DTR's into the Women’s segment also dragged sales during the period.

Such segmental weaknesses are likely to persist in the upcoming period and mar the company’s overall performance. Sadly, management expect revenues for 2018 in the range of $190-220 million, depicting a considerable decline from $225.8 million reported in 2017. This dismal view also eclipses our expectations for the to-be-reported quarter.

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