Iconix Brand Group Inc. reported total revenue for the third quarter was $24.5 million, a 31 percent decline, compared to $35.5 million in the third quarter of 2019.
Revenue across all segments was primarily negatively impacted by the effects of COVID-19 on the global economy. The 43 percent decrease in revenue in its Women’s segment was principal as a result of a decrease in licensing revenue from our Mudd and Joe Boxer brands. Revenue from the Men’s segment decreased 28 percent mainly due to a decrease in licensing revenue from its Buffalo and Umbro brands. Sales in its Home segment improved by 2 percent principally due to an increase in licensing revenue from its Charisma brand. International segment revenue declined 32 percent mainly due to decreases in Latin America and Europe.
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.
Operating income for the third quarter of 2020 was $66.4 million, as compared to an operating loss of $8.1 million for the third quarter of 2019. The third quarter 2020 results include $22.0 million of charges related to impairments and $74.1 million in gains on the sale of trademarks. The trademarks gain reflects the $59.6 million gain of the sale of 100 percent of its interest in Umbro China Ltd., and $14.5 million gain on sale of Starter China Ltd., each completed during the third quarter of 2020.
In the third quarter of 2020, the company recorded a non-cash trademark impairment charge of $4.8 million. The charge for the third quarter of 2020 was based on the impact of the COVID-19 pandemic on current and estimated future cash flows on the fair value of the Pony and Hydraulic indefinite-lived trademarks. The company recorded investment impairments of $17.1 million in the third quarter of 2020 as a result of exiting its Ecko Mark/Ecko joint venture in China and a reduction in the fair value of its Candies joint venture in China. The company recorded investment impairment in the third quarter of 2019 of $17.0 million related to the sale of its equity investment in Marcy Media.
Adjusted EBITDA in the third quarter of 2020 was $13.7 million, which represents an operating income of $66.4 million excluding net adjustments of $52.7 million. Adjusted EBITDA in the third quarter of 2019 was $20.9 million, which represents an operating loss of $8.1 million excluding net charges of $29.0 million. The change period in Adjusted EBITDA is primarily as a result of reduced revenue largely driven by the impact of COVID-19 on our business, somewhat offset by reduced expenses driven by the company’s cost reduction initiative.
Total SG&A expenses in the third quarter of 2020 were $9.9 million, a 62 percent decline compared to $26.3 million in the third quarter of 2019. The decline for the quarter was primarily driven by a decrease in professional fees, advertising costs and compensation expenses.
Bob Galvin, CEO, commented, “As we continue to navigate through the pandemic and the resulting economic conditions, the well-being of our employees, licensees and communities remains at the forefront. Despite COVID-19, we continued to expand our business, including a successful launch of Umbro products in Walmart. We have remained focused on building our pipeline of future business, as a result, we have signed 148 deals during 2020 for aggregate guaranteed minimum royalties of approximately $90 million. Moving forward, we will remain flexible to respond to changes in the economic and retail environments.”
Fiscal 2020 Outlook
Due to the impact that COVID-19 is having worldwide, 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, Iconix said it not able to estimate the full extent of the impact on Iconix’s operating results, cash flows and financial condition. Iconix will provide additional updates as the situation warrants.
Photo courtesy Iconix