Iconix Brands' Q3 results hindered by Royal Velvet transition in JCP
Home & Textiles Today Staff -- Home Textiles Today, November 1, 2012
New York -- Iconix Brand Group Inc. suffered some revenue blows in its third quarter, spurred in part by the ongoing transition of its Royal Velvet brand into JCPenney.
As Neil Cole, chairman and ceo, explained: Strength in most of the company's portfolio during the quarter "continued to be offset by the transition or Royal Velvet and declines in our men's business."
Royal Velvet was moved from Bed Bath and Beyond to JCP amid the company's second quarter, and Iconix warned last quarter that this shift was expected to "significantly impact" business through yearend.
JCP's Royal Velvet-branded goods- including not only its signature towels but also recently added and expanded product categories like soft window treatments, furniture pieces and other home products - have already begun rolling out to the store.
Cole said that, so far, "It looks phenomenal. They've done a really great job executing it and we see it only getting better. It is definitely a little lower than we anticipated, but it's doing better" than other areas in JCP currently.
He added, "We are happy with the way [JCP] is executing [Royal Velvet], and we definitely see it growing from here."
For its third quarter, ended September 30, total revenue decreased 6.5% to $86.6 million from $92.7 million a year ago. On a non-GAAP basis, net income declined 4.7% to $28.7 million compared to approximately $30.1 million in the prior year quarter, and diluted earnings per share was $0.41 versus $0.40 in the prior year quarter. GAAP net income for the quarter came to $27.1 million, a 4% increase from the year-ago's $26.0 million, and GAAP diluted EPS was $0.38 compared to $0.34.
Year to date, total revenue dipped 2.0% $268.7 million compared to $274.3 million for the prior year period. On a non-GAAP basis, net income for the nine months came to $93.1 million, down 3.2% from $96.2 million last year, and diluted earnings per share was $1.28 versus $1.27. On a GAAP basis, net income sank 15.8% to $83.3 million versus $98.9 million, and GAAP diluted earnings per share was $1.15 versus $1.31 for the prior year period.
Looking ahead, Iconix has several initiatives lined up that are aimed at growth, Cole noted.
"Over the past few weeks we have announced several exciting initiatives, including the acquisition of Umbro and the launch of a new Peanuts movie that we believe position our company for long term growth," he said. "We also remain focused on international expansion, which we now believe can grow to approximately 40% of our business. In addition, we have a strong acquisition pipeline and continue to evaluate a number of opportunities that could be actionable in the near-term. With 29 brands in our portfolio, inclusive of Umbro, that represent over $13 billion in annual retail sales, we believe our company is stronger than ever and we look forward to continuing to grow our business and deliver value to our shareholders."
The company said it is reaffirming its full year 2012 guidance and expects to achieve the higher end of its revenue guidance of $340 million to $350 million. However, the company expects its non-GAAP diluted EPS and GAAP diluted EPS to be at the low end of its guidance of $1.65 to $1.74 and $1.48-$1.57, respectively, based primarily on certain financing and acquisition related costs anticipated in the fourth quarter.
For 2013, Iconix's guidance calls for the following: Revenue in the range of $395 million to $405 million; non-GAAP diluted EPS of $1.85 to $1.95; and 2013 GAAP diluted EPS of $1.75 to $1.85.
In other news, the company announced during the call that Yehuda Shmidman, who has served as the company's coo since July 2010, "has left the company to pursue other opportunities," Cole said. "We have no plans to replace him right now."
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