Iconix Brand Group Inc. is seeking larger fish in the mergers and acquisitions pond.
Neil Cole, chairman, president and chief executive officer of the New York-based brand-portfolio manager, told analysts on a conference call following disclosure of the company’s better-than-expected third-quarter financial results that its experience with brands such as Peanuts and Umbro has intensified its interest in the categories of entertainment and sports for future additions.
“We are also looking at larger acquisitions than we have done in the past,” Cole said. “As we evaluate each opportunity, we believe a big advantage we have today is our worldwide footprint and our ability to plug a brand into our network and leverage our strong best-in-class partners around the world.”
He pointed out that Iconix has access to more than $500 million of capital, “plus the ability to further leverage our portfolio. But, as always, we will remain disciplined.”
In the three months ended Sept. 30, net income expanded 16.5 percent to $33.8 million, or 58 cents a diluted share, from $29 million, or 50 cents, in the year-ago period. Adjusted earnings per share of 73 cents a share was 10 cents better than the 63 cents expected, on average, by analysts tracking the firm.
Revenues, derived mainly from royalties, rose 6.1 percent to $113.8 million from $107.2 million a year ago. Operating margin contracted to 55.9 percent of sales from 57.4 percent in the 2013 period.
Seth Horowitz, chief operating officer, noted that the “solid performance of our [joint venture] partners across the portfolio resulted in double-digit organic growth in international in Q3.” Strength in global brands including Umbro, Lee Cooper and Peanuts helped elevate international revenues to about 40 percent of the total, he noted. Quarterly performance was highlighted by strength in women’s apparel, home and entertainment, but Horowitz pointed out sequential improvement in men’s apparel from the second quarter into the third.
The company reiterated revenue guidance for the full year at between $455 million and $465 million and raised its EPS forecast to a range of $2.61 to $2.65 from earlier estimates of between $2.50 and $2.60. It also provided initial guidance for fiscal 2015 for revenues of $485 million to $500 million and EPS of $2.82 to $3. Before the initiation of guidance, analysts on average expected EPS of $2.96 on revenues of $484.1 million.
Cole disclosed on the call that the company acquired a 51 percent stake in the Nick Graham brand for consideration of $6 million. The size and cost of the stake weren’t revealed when Iconix released details of the relationship earlier this month.