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Wal-Mart to Drive Iconix Growth

Iconix Brand Group Inc. anticipates overall revenue growth in 2009 with Wal-Mart's help.

Iconix Brand Group Inc. anticipates overall revenue growth in 2009, with the bulk coming from the relationship of its brands with Wal-Mart Stores Inc.

This story first appeared in the February 25, 2009 issue of WWD.  Subscribe Today.

However, stripping out gains from the OP, Danskin Now and Starter brands carried at Wal-Mart, the company expects business to be weaker “across the board,” Neil Cole, chairman, president and chief executive officer, told analysts on a conference call Tuesday.

Net income for the fourth quarter ended Dec. 31 fell 10.9 percent to $17.1 million, or 28 cents a diluted share, identical to analysts’ consensus estimate from Yahoo Finance. Year-ago quarterly profit was $19.2 million, or 31 cents a share, but came to 27 cents a share excluding a one-time gain of 4 cents a share related to the company’s litigation over its Bongo brand. Revenues grew 14.4 percent to $54.3 million, from $47.4 million.

“As 2008 unfolded, it became more and more evident that we were heading into one of the most challenging economic times of our generation,” Cole said, adding that Iconix’s direct-to-retail brands, which are licensed directly to retailers, are becoming “a much larger percent” of its revenue. They accounted for about 25 percent of royalties in 2008 and should be “well over 50 percent in 2009,” he said.

“We’re thinking that each business is going to be challenged with what’s happening with the consumer,” Cole said. “Especially in the first half of the year, we’re projecting…5 to 10 percent down on each brand. Hopefully, we’re going to get some surprises.”

Nonetheless, Cole said investors would see revenue growth in the second half as Wal-Mart expands internationally and Iconix completes the transition of its Mudd brand to a direct-to-retail licensing relationship with Kohl’s Corp.

For the year, profits rose 10 percent to $70.2 million, or $1.15 a share, versus $63.8 million, or $1.04 a share, in 2007. Revenue jumped 35.5 percent to $216.8 million from $160 million.

Iconix affirmed its full-year guidance of earnings per share between $1.20 and $1.30, excluding a change in accounting policy related to convertible debt, on revenues of $210 million to $220 million.

The company’s shares closed Tuesday at $8.52, down 13 cents or 1.5 percent, in Nasdaq trading.