Iconix Brand Group Inc. reported sales for the fourth quarter of $33.9 million, a 22 percent decline compared to $43.2 million in the fourth quarter of 2019.
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.
By operating segment, Women’s sales dropped 20.6 percent to $8.44 million from $10.6 million a year ago. Men’s segment sales were down 35.3 percent to $7.32 million from $11.3 million a year ago. Home revenues grew 62.3 percent to $5.76 million from $3.5 million a year ago. International sales were down 30.1 percent to $12.4 million from $$17.7 million.
Revenue across all segments, except its Home segment, was negatively impacted by the effects of the coronavirus pandemic on the global economy. The 21 percent decrease in revenue in the Women’s segment was principal as a result of a decrease in licensing revenue from its Mudd and London Fog brands partially offset by an increase in its Danskin Brand. Revenue from the Men’s segment decreased 35 percent mainly due to a decrease in licensing revenue from its Buffalo and Ecko Unltd brands partly offset by an increase in its Umbro brand. Sales in its Home segment improved by 62 percent principally due to an increase in licensing revenue from its Charisma and Canon brands, partially offset by a decrease in its Fieldcrest brand. The International segment revenue declined 30 percent mainly due to decreases in Latin America and Europe.
For the twelve months ended December 31, 2020, total revenue was $108.6 million, a 27 percent decline, compared to $149.0 million in the twelve months ended December 31, 2019. The decrease was primarily driven by decreases in its Woman’s, Men’s and International segments as a result of the negative impacts of the coronavirus pandemic on the global economy
Total SG&A expenses in the fourth quarter of 2020 were $17.4 million, a 27 percent decline compared to $23.9 million in the fourth quarter of 2019. The decline for the quarter was primarily driven by a decrease in professional fees, advertising costs and bad debt expense.
Total SG&A expenses in the twelve months ended December 31, 2020 were $59.4 million, a 30 percent decline compared to $84.7 million in the twelve months ended December 31, 2019, as we have aligned its costs to the current business level. The decline was primarily due to decreases in advertising expense, compensation costs and professional fees.
Trademark, Investment and Asset Impairment
In the fourth quarter of 2020, the company recorded a non-cash trademark impairment charge of $11.3 million. The charge for the fourth quarter of 2020 was mostly based on the current and estimated future cash flows on the fair value of the Candies and Rampage indefinite-lived trademarks. The company recorded investment impairments of $2.4 million in the fourth quarter of 2020 as a result of a reduction in the fair value of its Candies joint venture in China. In the fourth quarter of 2019, the company recorded a non-cash trademark impairment charge of $65.6 million, primarily related to the write-down in the Joe Boxer and Mudd trademarks in the Women’s segment and Fieldcrest in the Home segment. The company also recorded a non-cash investment impairment charge of $9.6 million in the fourth quarter of 2019 due to impairment of the company’s investment in MG Icon, which owns the Material Girl trademark, and an asset impairment charge of $1.8 million related to the consolidation and partial sublease of its New York office space.
Total trademark, investment and asset impairment for the twelve months ended December 31, 2020 was $54.7 million as compared to $94.0 million for the twelve months ended December 31, 2019.
Operating income for the fourth quarter of 2020 was $2.6 million, as compared to operating loss of $60.4 million for the fourth quarter of 2019. The fourth quarter 2020 results include $13.8 million of charges related to impairments. Adjusted EBITDA in the fourth quarter of 2020 was $18.4 million, which represents operating income of $2.6 million excluding net adjustments of $15.8 million. Adjusted EBITDA in the fourth quarter of 2019 was $21.1 million, which represents an operating loss of $60.4 million excluding net charges of $81.5 million. The change period-over-period in Adjusted EBITDA was primarily as a result of reduced revenue largely driven by the impact of the COVID-19 pandemic on its business, somewhat offset by reduced expenses driven by the company’s cost reduction initiative.
GAAP net loss attributable to Iconix for the fourth quarter of 2020 reflected a net loss of $14.1 million, compared to a net loss of $93.0 million for the fourth quarter of 2019. GAAP diluted EPS for the fourth quarter of 2020 reflected a loss of $1.06 per share, compared to a loss of $7.94 per share for the fourth quarter of 2019.
GAAP net loss attributable to Iconix for the twelve months ended December 31, 2020 reflected a net loss of $7.3 million, compared to a net loss of $109.5 million for the twelve months ended December 31, 2019. GAAP diluted EPS for the twelve months ended December 31, 2020 reflected a loss of $0.60 per share compared to a loss of $10.37 per share for the twelve months ended December 31, 2019.
Bob Galvin, CEO commented, “Our entire organization committed to delivering the best possible results for our licensees and our shareholders this past year and I want to thank each of our associates for their dedication during this very difficult period. We operated at a high level throughout the pandemic due to our consistent focus on our business objectives. While we are hopeful that the pandemic will subside in 2021, we will continue to address the many pandemic-related challenges we face between now and then, and, at the same time, continue to focus on realizing the opportunity that exists for our brands through focusing on building our pipeline of future business. We had great success during this pandemic year, as we signed 190 deals for aggregate guaranteed minimum royalties of approximately $134 million, approximately the same amount that we signed in 2019.
Galvin continued, “We have also made great strides to de-lever our balance sheet. From December 31, 2019 to today, through proceeds from assets sales and cash flow, we have reduced our Term Loan balance by over 52 percent, or approximately $92 million.”
Fiscal 2021 Outlook
Due to the impact that COVID-19 is having worldwide and the rapid and continuous economic developments, the company is not providing guidance for fiscal year 2021 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, it is not able to estimate the full extent of the impact on Iconix’s operating results, cash flows and financial condition. Iconix said it would provide additional updates as the situation warrants.
Photo courtesy Iconix/Umbro