Helped by gains across its portfolio of fashion and sports brands, Iconix Brand Group reported earnings rose 22.0 percent in the third quarter, to $37.2 million, or 58 cents a share.
Excluding interest from convertible debt, earnings rose 15.7 percent to $38.3 million. EBITDA in the third quarter was approximately $65.5 million, essentially flat to the prior-year’s third quarter. Revenues rose 6.1 percent to $113.8 million.
Iconix said the top-line growth reflected positive results across its women’s, home, and entertainment businesses, but the gains were led by double-digit growth across its international portfolio.
On a conference call with analysts, Seth Horowitz, Iconixs COO, said its men’s fashion business improved from Q2 to Q3, as expected, with Rocawear, Ecko Unlimited, and Ed Hardy all experiencing levels of success with new licensees and diversified distribution. Danskin Now, an exclusive at Walmart as part of a direct-to-retail (DTR) partnership, also continues to be a top performer at the giant discounter, and continued strength is expected into 2015. Also performing well was Bongo and Joe Boxer at Kmart/Sears, and Royal Velvet in the home category at JC Penney.
Internationals double-digit organic growth was led by its top global brands, Umbro, Lee Cooper, and Peanuts, and a solid performance of its joint-venture partners. International revenue now represents approximately 40 percent of Iconixs business. It has over 30 international DTR partnerships, over 900 international licensees, and over 1,300 stores and shop-in-shops for its brands worldwide.
In the third quarter, Iconix signed a joint venture with Global Brands Group, a spinoff of Li & Fung, for Umbro and Lee Cooper in China.
For Umbro, China was a territory that Nike had previously operated, with over 1,200 retail locations at its recent peak. Nike sold Umbro to Iconix in December 2012. In 2013, Iconix received $19 million of revenue from Nike for a transition period of its directly operated territories. The new deal replaces the final remaining territories that Nike had operated. In the third quarter, Iconix recognized $18.5 million of revenue from Global Brands Group venture, and we believe there is tremendous opportunity for substantial revenue in the years to come, said Horowitz.
Other successes internationally include Lee Cooper DTR with Big W in Australia, and the continued success of Falabella with Ecko Unlimited and Mossimo in Latin America. Walmarts DTR brands-OP (Ocean Pacific), Danskin Now, and Starter-are gaining traction at the chains international stores.
Peanuts, benefiting from early excitement around the debut of a 3D premier movie likely late in 2015, signed 59 new deals in the third quarter, bringing the total new deals signed for Peanuts for the first nine months to over 180. Partners include Macy’s, Target, Forever 21, UNIQLO, and H&M.
Other brands owned by Iconix include Candie’s, Badgley Mischka, Rampage, Mudd, Mossimo, Zoo York, London Fog, and Sharper Image.
Regarding acquisitions, Iconix bought Nick Graham, a $6 million mens wear brand, in the quarter. But Neil Cole, Iconixs CEO, said the company is looking at larger acquisitions than it has done in the past. He added that the company is increasingly interested in entertainment and sports, as these categories has proven to be truly global in appeal, as seen with our Peanuts and Umbro brands.
Iconix has over $500 million of capital available to pursue acquisitions, plus the ability to further leverage our portfolio, said Cole.
Looking ahead, Iconix reaffirmed its full-year revenue guidance of $455 million to $465 million. It raised its EPS guidance to $2.72 to $2.77, up from $2.50-$2.60. The company also gave its initial guidance for 2015, expecting revenues in the range of $485-$500 million and EPS guidance of $2.90-$3.10.