Iconix Brand Group Inc.
(
ICON
) posted first quarter 2012 results with adjusted earnings of 43
cents a share, down 4.4% from 45 cents per share in the year-ago
period. Earnings also missed the Zacks Consensus Estimate of 46
cents. The weak results were driven by revenue declines, primarily
in men's brands of Rocawear, Ecko and Ed Hardy. In addition, the
transition of Royal Velvet brand to
J.C. Penney Company, Inc.
(
JCP
) acted as a significant driver of the decline in the quarter.
Quarter in Detail
Total revenue in the quarter also declined 4.0% to $88.5 million
from $92.4 million in the year-ago period. Revenue also missed the
Zacks Consensus Revenue Estimate of $95 million.
On a year-ago basis, EBITDA decreased 3.4% to $56.8 million in
the first quarter. EBITDA margin, however, expanded 50 basis points
to 64.2% from 63.7% in the prior-year period.
Iconix exited the quarter with free cash flow of $47.4 million,
as compared to $44.9 million at the end of the fourth quarter of
2011. Under the $200 million share repurchase program which was
authorized in October 2011, Iconix repurchased $54 million of
Iconix stock at a weighted average price of $17.12 in the reported
quarter.
Guidance
Iconix revised its guidance for fiscal 2012 at the first quarter
conference call. The company now expects its adjusted earnings
(excluding non-cash interest related to ASC 470 and non-cash
non-recurring gains and charges) in the range of $1.65 - $1.74 per
share from the prior guidance of $1.77 - $1.84 per share. Iconix
also lowered its revenue target to $340 - $350 million from $370 -
$385 million in 2012. For fiscal 2012, the company expects its free
cash flow in the range of $174 - $181 million, which was earlier
projected in the range of $187 - $194 million.
The guidance cut was in response to weak demand for some of the
men's brands such as Rocawear, Ecko and Ed Hardy. The company
projects lower revenue from these brands by almost $20 million in
2012 as compared to 2011. The transition of Royal Velvet brand to
JCPenney is also expected to negatively impact the fiscal 2012
results by $14 million.
In addition, the company's international initiatives did not
consummate as was expected. Moreover, Iconix's 50-50 joint venture
in India is still pending, and now the company expects to close the
deal in the second quarter of 2012; later than prior expectations
of the first quarter. Iconix expected the joint venture to add $5 -
$6 million to revenue or 4 - 5 cents to earnings per share, had the
deal been closed as expected in the first quarter.
We believe that Iconix is going through a difficult phase in the
near term, but the company is well positioned to maintain its
growth trends with the expansion of brands both in the U.S. and
internationally over the long term.
Iconix, which competes with
Gap Inc.
(
GPS
),
Cherokee Inc.
(
CHKE
) and
The Jones Group Inc.
(
JNY
), currently holds a Zacks #3 Rank (a short-term 'Hold' rating). On
a long-term basis, the stock holds a Neutral rating.
CHEROKEE INC (
CHKE
): Free Stock Analysis Report
GAP INC (
GPS
): Free Stock Analysis Report
ICONIX BRAND GP (
ICON
): Free Stock Analysis Report
PENNEY (JC) INC (
JCP
): Free Stock Analysis Report
JONES GROUP INC (
JNY
): Free Stock Analysis Report
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