Iconix Brand Group Inc. said Wednesday that its second-quarter profits grew nearly 70 percent as it agreed to convert its majority stake in the Zoo York brand to full ownership.

This story first appeared in the July 28, 2011 issue of WWD. Subscribe Today.

The company acquired a 51 percent stake in the Zoo York brand when it took a majority stake in Marc Ecko Enterprises in October 2009. Iconix said that it has agreed to pay $18 million for the remaining 49 percent of Zoo York it doesn’t currently own. Distribution of the brand, licensed to Li & Fung, is focused on midtier retailers such as J.C. Penney Co. Inc. and Kohl’s Corp.

On a quarterly conference call, Neil Cole, chairman and chief executive officer, told analysts that expectations for the brand in 2012 include retail sales of $150 million and $8 million in royalty revenue. Royalties were already consolidated into Iconix’s results because it held a majority stake in the brand.

In a review of operations, Yehuda Shmidman, chief operating officer, acknowledged that the company’s urban brands, including Rocawear and Ecko, “remain challenged” but said the Material Girl program with Macy’s “had a strong quarter” as the program expands into beauty, intimates and sleepwear for fall.

“In our traditional licensing model, our higher-end and better fashion brands, including Badgley Mischka and London Fog, also performed well,” he said, also noting progress for the Mudd brand at Kohl’s and Bongo at Kmart and Sears.

In the three months ended June 30, the New York-based brand management and licensing firm generated net income of $41.5 million, or 55 cents a diluted share, up 69.3 percent from the $24.5 million, or 33 cents, tallied in the 2010 period. Excluding one-time gains, earnings per share came to 43 cents, matching the analysts’ consensus estimate.

Revenues in the quarter rose 17.5 percent to $89.3 million from $76 million while selling, general and administrative expenses were up 20 percent to $31.7 million from $26.4 million. Revenues fell short of the consensus estimate of $92.8 million and shares of company fell $1.74, or 6.9 percent, to $23.53 in Nasdaq trading Thursday.

“As our brands gain momentum both domestically and internationally, we continue to demonstrate the power of our business model,” Cole said. “In addition to our strong performance in the first half of this year, we also strengthened our balance sheet and increased our ownership in two of our brands.”

The company recorded a noncash gain of $21.5 million related to an adjustment in the accounting of its transition to a controlling interest in the global license of the Ed Hardy brand.

In the year’s first half, net income expanded 48 percent to $73 million, or 97 cents a diluted share, from $49.3 million, or 66 cents, in the first half 2010. Revenues were up 23 percent to $181.6 million from $147.7 million.

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