Iconix Brand Group Inc. might put itself up for sale, one of a number of strategic options the brand management firm has under review amid shrinking licensing revenue.
The owner of brands including Ed Hardy and Candie’s is also looking at recapitalizing its existing capital structure or selling off non-core assets.
The brand management firm said its board of directors on Friday determined that the company should “broaden” its review of strategic alternatives, according to a regulatory filing Monday with the Securities and Exchange Commission.
“The board has authorized management and its external advisors to consider a broader range of strategic alternatives, including a potential sale of the Company, merger or other business combination, a recapitalization of its existing capital structure, financings or re-financings of its existing indebtedness, sales of equity and equity-linked securities, dispositions of discrete brands and related assets, licensing or other strategic transactions involving the Company, or any combination of the foregoing,” the filing said. The company noted that the new board directive is in addition to its planned $62.5 million sale of its Umbro and Starter brands in China, announced in April.
The company said it doesn’t know if the broadened exploration of alternatives would result in any transaction or course of action, and there is no timetable in place for when it expects to complete the review.
“We are confident in the company’s strategy to continue to de-lever its balance sheet and rationalize our cost structure. While we have undertaken a number of actions toward positioning the company to drive growth and preserve operating leverage to achieve sustainable market leadership in the brand management sector, including recent asset sales, after careful consideration, our Board has determined that it is prudent at this time to undertake a broader strategic review in order to ensure that all available alternatives for the company are being evaluated to maximize value for our shareholders,” CEO Bob Galvin said. “As the Board conducts its review, we remain focused on executing on our strategy and continuing day to day operations as usual.”
Iconix has already retained Ducera Partners LLC as its financial advisor and Dechert LLP as legal counsel for the strategic review.
Iconix has long been considered the grandfather of the brand management model. It was once a footwear brand operating under the name Candie’s before transitioning to a licensed model. But in the past two years, the company has faced a string of operational snafus. In December, the company agreed to pay $5.5 million in civil penalties to resolve outstanding SEC claims over accounting irregularities involving former Iconix executives, though it hasn’t admitted to any wrongdoing.
Iconix’s portfolio of fashion brands includes Artful Dodger, Bongo, Buffalo David Bitton, Candie’s, Danskin, Ecko Unltd., Marc Ecko, Ed Hardy, Joe Boxer, Lee Cooper, London Fog, Material Girl, Op, Rocawear, Umbro and Starter, to name a few. It also has a collection of home brands that include Cannon, Fieldcrest, Royal Velvet and Waverly.
For the first quarter ended March 31, the company posted a 22.2 percent decline in licensing revenue to $28.0 million from $35.9 million. Iconix also posted a loss of $21.5 million, or $1.86 a diluted share, against net income of $17.9 million, or a loss of $0.01, in the same year-ago quarter. Galvin said in May that the company began the year focus on stabilizing its business, but the coronavirus has had a “meaningful near-term impact on our business and that of our licensees.”