Sequential Brands reported a loss of $24.2 million, or 38 cents a share, in the third quarter, after taking an impairment charges of $36.5 million to write-down the value of the trademarks of five of non-core brands: Revo, Nevados, Caribbean Joe, Franklin Mint, and FUL.
These brands account for approximately 3 percent of revenues based on full year 2017 forecasts. Said Karen Murray, CEO, on a conference call with analysts, “We continue to focus on managing our expenses and construction has begun on our reduced office space footprint.”
The loss in the quarter compares to earnings of $1.3 million, or 2 cents a share, a year ago.
Excluding the impairment charges and other non-operating expenses, non-GAAP net income for the third quarter 2017 was $6.5 million, or 10 cents per share, compared to $7.5 million, or 12 cents in the prior year’s quarter. Adjusted EBITDA for the third quarter of 2017 was $23.3 million, compared to $24.9 million in the prior year quarter.
Sales in the quarter slid 7.1 percent to 39.0 million.
Discussing some highlights in the quarter, Murray noted that the Active division “remains strong, performing above plan with consistent growth.”
She added, “AND1 continues to be a big driver and had successfully captured additional market share as a lifestyle brand. Plans are currently underway for a new marketing initiative celebrating AND1’s 25th anniversary in 2018 including a brand endorsement by a globally-recognized NBA player. We expect to have more information to share on this exciting initiative during the quarter.
“AVIA continues to exhibit strength at Walmart and we anticipate further growth in shelf space going forward.”
He added that during the quarter Jessica Biel became the first ever brand ambassador for Gaiam and will appear in a new marketing campaign this spring. Murray added, “We also plan to launch a capsule collection co-designed by Jessica Biel that is expected to debut in stores fall of 2018. We are excited about this partnership as it broadens the brand’s exposure to a wider audience and opens up the brand to more retail distribution.
“We are also on schedule to launch the GAIAM Yoga Experiential store inside New York City’s Lord & Taylor this month with plans to expand to additional stores next year. We continue to believe that we have only scratched the surface with the GAIAM brand as we see several opportunities to expand it globally and into new categories.”
In the Fashion division, the Jessica Simpson brand “continues to hold its own in this retail landscape,” while Ellen Tracy brand is finding growth in key categories including dresses, outerwear, handbags and beddings. Joe’s core business also continues to expand.
In the Home division, Martha Stewart launched apparel, garden and food and outperformed QVC’s expectations and continues to be a prime growth opportunity for Sequential Brands. Emeril is also gaining traction in Home.
Murray concluded, “While the quarter did not meet expectations, we are no less deterred about the work we are doing and the progress we are making. Growing our core brands and strengthening our capital structure are our main priorities heading into next year. We believe we are putting the right people and processes in place to deliver against our preliminary targets of high to mid single-digit revenue growth and low to mid single-digit adjusted EBITDA growth.”
For the year ending December 31, the company is now expecting revenue of $165 million to $169 million, adjusted EBITDA of $95 million to $98 million, and a GAAP net loss of $8.4 million to $10.4 million primarily due to the impairment charges taken in the quarter. Previously, it expected $170 million to $175 million in revenue, $98 million to $102 million of adjusted EBITDA, and 13.6 million to $16.2 million in GAAP earnings.
Photo courtesy AND1
