Iconix (ICON) Q4 Earnings & Revenues Top Estimates, Fall Y/Y

Iconix Brand Group, Inc. (NASDAQ:ICON) reported fourth-quarter and full-year 2017 results, with the top and bottom lines beating the Zacks Consensus Estimate. However, earnings and revenues declined year over year. The top line continued with its dismal run due to sluggishness in its Men’s and Home segments.

Let’s take a look at the company’s fourth-quarter and 2017 results as well as management plans for 2018.

Q4 Highlights

Iconix posted adjusted earnings from continuing operations of 6 cents per share, which surpassed the Zacks Consensus Estimate of a loss of a penny. However, the bottom line registered a considerable decline from 39 cents in the prior-year quarter. On a GAAP basis, Iconix incurred earnings from continuing operations of 40 cents per share versus a loss of $5.23 posted in the prior-year quarter.

Iconix Brand Group, Inc. Price, Consensus and EPS Surprise

Total licensing revenues of $52.3 million beat the consensus estimate of $51.5 million, but declined 11% year over year. Excluding the Sharper Images brand and Southeast Asia joint venture revenues, the top line fell nearly 2%. The downside was caused by lower revenues at the Men’s and Home segments, partially offset by revenue growth at International and Women’s segments.

Notably, the company’s Men’s and Home segments have been reporting weak performance for a while. Thanks to such dismal performance, Iconix’s top line fell 7%, 10% and 13% year on year, during the third, second and first quarters of 2017, respectively. The dismal trend has dented investor’s optimism on the stock. In fact, this Zacks Rank #4 (Sell) company’s shares have plunged 82% over the past year, against the industry’s rally of 16.4%.

During the fourth quarter, revenues at the Men’s segment dropped 30% to $8.2 million, while Home segment reported a decline of 6% to $6.1 million. These were offset by an increase of 10% in the International segment to $17.9 million and a 7% rise in the Women’s segment to $20 million.

The company reported operating loss of $18.3 million during the fourth quarter compared with the operating loss of $388.2 million in the prior-year quarter. Excluding charges related to trademark, investment impairments and loss on termination of licenses, the company‘s adjusted operating income was $12.6 million, depicting a decline of 32.6% from the prior-year quarter. Further, adjusted operating margin was 24%, down from 35% in the prior year quarter.

2017 Results

Iconix’s adjusted earnings from continuing operations for 2017 were 78 cents per share, down almost 40.5% from the prior year’s earnings of $1.31. On a GAAP basis, the company delivered a loss of $9.47 per share from continuing operations, wider than the loss of $4.86 a year ago.

Iconix’s full-year revenues were $225.8 million, down 11% year over year. Excluding the Sharper Images brand, Southeast Asia joint venture and Badgley Mischka revenues, the top line fell nearly 7%. The downside primarily stemmed from lower revenues in the Women’s, Men’s and Home segments and were partially offset by growth in the International segment.

Further, the company’s adjusted operating income for the full year was $113.1 million, declining almost 5.4% year over year. However, adjusted operating margin for 2017 was 50%, marking a 100 basis points improvement from the prior year’s adjusted operating margin of 49%.

Financial Update

The company ended the quarter with roughly $114.7 million of total cash and $827.2 million face value of debt. Further, Iconix generated nearly $10.3 million as free cash flow from continuing operations compared with $174.3 million in the year-ago quarter.

Outlook for 2018

Management commented that in 2017 the company was focused on refinancing and strengthening balance sheet. Additionally, the company was striving to restructure its business model. Further, management stated that during 2018 it will focus on managing its brands more effectively and explore growth opportunities.

Management projects full-year licensing revenues in the range of $190-220 million. Further, the company is on track with delivering savings close to $12 million in 2018. Additionally, management projects free cash flow in the range of $50-$70 million for 2018.

Stocks to Consider

Investors interested in the same sector may consider a few better-ranked stocks such as Delta Apparel, Inc. (NYSE:DLA) , Central Garden & Pet Company (NASDAQ:CENT) and Ralph Lauren Corp. (NYSE:RL) , all carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Delta Apparel came up with an average positive earnings surprise of 53.5% in the trailing four quarters. It has a long-term earnings growth rate of 15%.

Central Garden & Pet Company pulled off an average positive earnings surprise of 8.8% in the trailing four quarters. It has a long-term earnings growth rate of 10%.

Ralph Lauren delivered an average positive earnings surprise of 10.4% in the trailing four quarters. It has a long-term earnings growth rate of 10.2%.

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