At CL King’s 15th Annual Best Ideas Conference 2017, Dave Jones, EVP and CFO of Iconix Brand Group, said many of the company’s active brands continue to offer the most growth potential for the company. Mossimo, Starter, Ocean Pacific, Umbro, Danskin and Pony were all called out.
Mossimo is being phased out of Target by the first quarter of 2019. Jones notes that like some other retailers, Target is focusing more on in-house brands. He said Mossimo probably remains Iconix’s “best and most recognized” brand with a broad demographic reach. Indeed, internal research found that shoppers would leave Wal-Mart to purchase Mossimo product at Target. The brand became an exclusive inside Target in early 2000.
Direct-to-retail nonetheless remains attractive to Target, with the discounter set to launch another one of Iconix’s brands as an exclusive. Iconix can’t mention the brand because the deal hasn’t been formally announced.
Iconix is still evaluating whether to shift Mossimo to another direct-to-retail relationship or traditional wholesale selling. But Jones indicated the tiered royalty rate was extremely low at Target with sales reaching $2 billion at retail. He suspects that Mossimo will be able to secure a higher rate with a new partner and $500 million in sales should provide a similar royalty income payback for Iconix.
Starter, as reported, is being phased out of Wal-Mart by mid-2018 and has found a new direct-to-retail partner to relaunch this fall. Jones said the company likewise can’t reveal the new partner’s name since the retailer is still preparing its relaunch but he referred to the new partnership as a “significant opportunity.” Jones noted that Starter will have a more premium positioning than it had at Wal-Mart with a goal of building the brand back to its premium logo wear positioning. The average unit prices for Starter at Wal-Mart were probably around $8.99 while the new deal brings AURs closer to $18.99, he noted.
Starter also has a “more premium” upstairs brand, Starter Black, that includes the iconic satin Starter jacket sold at wholesale channels to offer a second opportunity for the brand.
OP, or Ocean Pacific, is also being phased out of Wal-Mart by the end of 2017. The surf brand had been “very narrowly positioned” at Wal-Mart as a swim brand and is being repositioned toward a year-round California lifestyle brand. Demand for the brand was seen by a “highly successful” collaboration with Urban Outfitters last summer that was repeated this spring. A “very exciting” new partnership with a department store for a relaunch next summer will be announced soon.
Regarding Danskin, Jones said the brand “continues to do very well” at Wal-Mart under the exclusive Danskin Now name. As the company has previously indicated, sales at Danskin will be “down a little” in 2017 as the brand’s license agreement with Wal-Mart changed from a tiered to a flat royalty structure and volume will also be down slightly. However, Jones said Danskin’s sales are still over a billion across retail globally, it continues to have a “good, strong relationship” with Wal-Mart, and renewal talks are underway.
Pony, the sneaker brand, was acquired in February 2015, and “almost immediately” ran into problems with its licensee. But under a new management team, Iconix was able to resolve those issues and the licensee is now “probably one of our best licensees” with a “very strong” royalty rate. Pony continues to have “great brand recognition” and is being relaunched this fall in a collaboration with Joey Bada$$, a Brooklyn rapper with a strong social media following. Jones said the brand is seeing “really positive results” so far in its re-introduction and there’s “lots of opportunities” ahead for the brand.
Umbro, acquired from Nike in 2012, generates approximately $700 million in retail sales globally but its big opportunity remains the U.S., where it generates “almost zero” in revenues. The brand had partnered with Dick’s Sporting Goods and a few other specialty doors in recent years but they “haven’t really done much.” The brand is managed out of Manchester in the U.K. with Iconix overseeing design and sourcing. Jones noted that Umbro has “a couple of things in the works that are pretty substantial going forward,” although he did caution that typically long-lead times often delay their impact.
Companywide, Jones noted that sales are not only being impacted by its brands undergoing transitions but the recent sale of Sharper Image and its entertainment properties, Peanuts and Strawberry Shortcake.
He said the divestitures were part of management goal of becoming better “brand stewards” noted at its 2016 Investor Day. He said no brands are currently on the selling block while adding that “all are for sale at the right place if it means a lot more to them than it is to us.”
Sales continue to improve sequentially. Revenues dropped 11 percent in the first quarter and fell 7 percent in the second quarter. Sales are expected to slide mid-single digits in the second half as some initiatives gain traction.
Jones said that compared to its competitors in the brand-management space, Iconix has a larger international presence to support overseas growth. In total, it has 21 international offices across 18 countries.
Operationally, Jones said Iconix is increasingly negotiating direct-to-retail deals that give Iconix more control over development, sourcing and other aspects of the brand’s positioning in the marketplace. In both the case of Starter and Mossimo, the brands became “more commoditized” because it had ceded such control, Jones noted.
Jones also said that while more retailers are emphasizing in-house brands, many are still attracted to gaining exclusive brands under its direct-to-retail model because it reduces margin risk. Shoppers inside a Wal-Mart, for example, aren’t be able to use their smartphone to see how much a Danskin item costs at another retailer.
Iconix’s lineup of brands include Candie’s, Bongo, Joe Boxer, Rampage, Mudd, Mossimo, London Fog, Ocean Pacific, Danskin, Rocawear, Cannon, Royal Velvet, Fieldcrest, Charisma, Starter, Waverly, Zoo York, Umbro, Lee Cooper, Ecko Unltd., Marc Ecko and Artful Dodger. In addition, Iconix owns interests in The Material Girl, Ed Hardy, Truth Or Dare, Modern Amusement and Buffalo.
Photo courtesy Pony
