Iconix Brand Group, Inc. ICON has been in the red for a while, evident from bearish run in the market. Shares of this Zacks Rank #4 (Sell) stock have plunged 88% in a year, against the industry’s rally of 20.2%.
What’s Weighing Down the Stock?
Iconix’s performance has been sluggish, thanks to persistent softness in women's and men's segments. Notably, in third-quarter 2017, sales in the women’s and men’s categories declined 13% and 5% respectively. Earlier, these segments depicted a decline of 12% and 18% during second-quarter 2017, respectively.
The women’s and men’s segments businesses have mainly been marred by dismal brand performances, due to heightened competition in the retail market. Apart from the Danskin brand, the women’s segment performance was weakened by lower licensing revenues from OP brands and Mossimo during the third quarter. Additionally, in the men’s business portfolio, prolonged weakness in the Starter business has been a major drag. Consequently, the licensing agreement for this brand with Wal-Mart will not be renewed by the management.
Apart from these, revenues at the Home segment also fell 6% in the third quarter, causing total licensing revenues to tumble 12% year over year. Also, management expects revenues for 2017 at the lower end of its previous range of $225-$235 million.
To make matters worse, the company’s performance is also weighed down by debt. Iconix is striving to reducing its huge debt burden, through various initiatives. To this end, the company has already divested non-core brands such as Sharper Image, Peanuts Worldwide LLC and Strawberry Shortcake which have however weakened its top-line expansion capabilities. Until the third quarter, Iconix’s debt totaled $1,055 million.
Any Scope of Revival?
Considering the growth depicted by the international business segment, management is on track with expanding Iconix’s global footprint. Incidentally, Iconix’s international segment grew 4% and 3% in the third and second quarters of fiscal 2017, respectively. For 2017, the company projects international business to receive a boost from growth of global power brands such as Umbro and Lee Cooper and continued expansion of core brands which includes Starter, Ecko, OP Ocean Pacific and Zoo York. Moreover, the company purchased the remaining 50% interest in Iconix Canada from its joint-venture partner in July 2017. This is expected to strengthen the company’s business in the region in the forthcoming periods.
Although Iconix’s business growth strategies seem promising, we need to wait and see if they can manage to uplift business in the forthcoming periods. For now, investors may consider betting on the following stocks.
Nervous About Iconix? Check These Stocks Instead
A few better-ranked stocks worth considering in the same sector include Michael Kors Holdings Limited KORS, lululemon athletica inc. LULU and PVH Corp. PVH. While Michael Kors and lululemon sport a Zacks rank #1 (Strong Buy), PVH Corp carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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%.
lululemon came up with an average positive earnings surprise of 8.1% in the trailing four quarters. It has a long-term earnings growth rate of 12.8%.
PVH Corp pulled off an average positive earnings surprise of 2.6% in the trailing four quarters. It has a long-term earnings growth rate of 13%.
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