Iconix Brand Group, Inc., the parent of Starter, Pony, Umbro, Danskin, and a number of other lifestyle brands, reported sales in the second quarter fell 35.1 percent to $22.3 million compared to $34.4 million in the prior-year quarter.
Revenues primarily consist of royalties from licensed deals on its brands. The company’s brands include Mossimo, Ocean Pacific/OP, Danskin, Rampage, Joe Boxer, London Fog, Mudd, Candie’s, Buffalo, Starter, Rocawear, Zoo York, Ecko Unltd, Artful Dodger, Umbro, Lee Cooper, Ed Hardy, Pony. Royal Velvet, Canon, Fieldcrest, and Sharper Image.
Iconix said revenue across all segments was primarily negatively impacted by the effects of COVID-19 on the global economy. The 46 percent decrease in revenue in its Women’s segment was principally as a result of a decrease in licensing revenue from its Mudd and Candies brands. Revenue from the Men’s segment decreased 55 percent in the current quarter mainly due to a decrease in licensing revenue from its Buffalo and Umbro brands. Sales in its Home segment declined 12 percent principally due to a decrease in licensing revenue from the Canon brand. The International segment revenue declined 27 percent in the current quarter mainly due to decreases in Latin America and Europe.
Total SG&A expenses in the second quarter of 2020 were $15.0 million, a 9 percent decline compared to $16.4 million in the second quarter of 2019. The decline for the quarter was primarily driven by a decrease in advertising and compensation expense somewhat offset by an increase in bad debt expense.
In the second quarter of 2020, the company recorded a non-cash trademark impairment charge of $5.2 million. The charge for the second quarter of 2020 was based on the impact of COVID-19 and related Sears/Kmart store closures on current and estimated future cash flows primarily on the fair value of the Joe Boxer and Cannon indefinite-lived trademarks.
Operating income for the second quarter of 2020 was $3.5 million, as compared to an operating income of $18.6 million for the second quarter of 2019. The second quarter 2020 results include the $5.2 million of charges related to trademark impairments.
Adjusted EBITDA in the second quarter of 2020 was $11.4 million, excluding net charges of $7.9 million. Adjusted EBITDA in the second quarter of 2019 was $20.3 million, excluding net charges of $1.8 million. The change period-over-period in Adjusted EBITDA is primarily as a result of reduced revenue largely driven by the impact of COVID-19 on its business, somewhat offset by reduced expenses driven by the company’s cost reduction initiative.
GAAP net income attributable to Iconix for the second quarter of 2020 reflected a loss of $17.4 million, compared to net income of $1.3 million for the second quarter of 2019. GAAP diluted EPS for the second quarter of 2020 reflected a loss of $1.46 per share, compared to income of 12 cents per share for the second quarter of 2019.
Fiscal 2020 Outlook
Due to the impact that COVID-19 is having across the world, and the rapid and continuous economic developments, Iconix said it is not providing guidance for the fiscal year 2020 at this time. The impact of COVID-19 on its business could be material to its operating results, cash flows and financial condition. Due to the evolving and uncertain nature of this situation, the company said it not able to estimate the full extent of the impact on Iconix’s operating results, cash flows and financial condition.
Logo courtesy Iconix