Shares of Iconix Brand Group Inc. ICON fell 8.8% in yesterday’s trading session, as investors were dismayed by the company’s soft preliminary third-quarter 2017 results.
However, figures are yet to be reviewed and finalized by the company. Iconix expects filing third-quarter results in the upcoming days, post completion of impairment testing.
Let’s take a look into the current projections issued by the company.
Third Quarter Preliminary Results
Iconix expects licensing revenues for the quarter at approximately $53.2 million, down 12% from the prior-year quarter. The Zacks Consensus Estimate for the quarter is currently pegged in-line with management expectations.
The company expects selling, general and administration expenses to decline 28% to reach $21.5 million during the quarter. However, following the impairment testing of intangible assets and goodwill, the company expects charges worth $500-750 million associated with the women's segment.
Considering all factors, the company expects adjusted earnings of 24 cents per share during quarter, improving 33% from the prior-year quarter’s earnings of 18 cents. However, the Zacks Consensus Estimate for the quarter is currently pegged lower at 8 cents.
Iconix Brand Group, Inc. Price, Consensus and EPS Surprise
On a GAAP basis, the company expects a loss of 10 cents from continuing operations for the third quarter.
Factors Likely to Impact Third Quarter
Iconix has been struggling with men’s and women’s segments for a while, thanks to tough retail market conditions. This trend is likely to continue and hurt quarterly performance.
Additionally, the company’s performance is likely to be weighed down by debt. Iconix has a huge debt burden and resorting to various initiatives to reduce the same. To this end, the company has already divested non-core brands such as Sharper Image, Peanuts Worldwide LLC and Strawberry Shortcake.
Owing to such headwinds, shares of the company have lost 74.8% in the past six months against the industry’s gain of 13.8%.
However, we believe this Zacks Rank #3 (Hold) company’s strategic partnerships and consistent efforts toward international expansion will improve performance in the long run.
Do Consumer Discretionary Stocks Interest You? Check These
Investors interested in the same sector may consider stocks such as Michael Kors Holdings Ltd. KORS, Deckers Outdoor Corp. DECK and Ralph Lauren Corp. RL. While Ralph Lauren and Deckers Outdoor sport a Zacks Rank #1 (Strong Buy), Michael Kors carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Ralph Lauren came up with an average positive earnings surprise of 11.6% in the trailing four quarters. It has a long-term earnings growth rate of 15%.
Deckers Outdoor pulled off an average positive earnings surprise of 88.3% in the trailing four quarters. It has a long-term earnings growth rate of 10.7%.
Michael Kors delivered an average positive earnings surprise of 23.7% in the trailing four quarters. It has a long-term earnings growth rate of 7.5%.
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