Iconix Brand Group Inc. has set its sights across the Atlantic.
This story first appeared in the December 23, 2009 issue of WWD. Subscribe Today.
In a move to increase the brand management firm’s international reach, the company said Tuesday it is launching Iconix Europe, its third overseas venture in a little more than a year, in partnership with London-based The Licensing Company.
“It’s a big market and it’s a market that’s tied very closely to the U.S.,” Iconix chairman and chief executive officer Neil Cole said. “We share music, we share movies and we share brands.”
The company, which counts Rocawear, Rampage and Marc Ecko among its holdings, began its global expansion in late 2008, when it joined with Silas Chou’s Novel Fashions to create Iconix China and with The Falic Group for Iconix Latin America.
In fiscal 2008, foreign business accounted for 9.6 percent of the company’s $216.8 million in revenues, according to its annual report. Cole said the international channel could eventually constitute one-fifth of the company’s business.
Cole suggested that the company would be on the lookout for brand acquisitions in its new market.
“We’re continuing to look for strong, iconic brands across the world,” he said. “There’s some great opportunities for European brands to do better in America than they’re doing here.”
Iconix capped a relatively quiet 2009 by acquiring a majority stake in Marc Ecko Enterprises in October, and Cole said his company has a “big war chest of cash to work with.”
In the meantime, Iconix will look to expand its brands’ programs in Europe. Under the terms of the new deal, a group of investors led by The Licensing Company and Albion Equity Partners acquired a 50 percent interest in Iconix Europe for $4 million. Iconix retained its own 50 percent stake in the venture and the rights to its first $6 million of distributions with amounts above that split between the parties.
Iconix Europe “will focus on launching and expanding the portfolio in Europe through its partners’ existing direct-to-retail relationships with top European retailers, including Sainsbury and Tesco, and making inroads into other major players,” Todd Slater, securities analyst at Lazard Capital Markets, wrote in a research note.
Iconix had been eyeing potential partners for months leading up to the agreement, and The Licensing Company had appeal partly because of its more than 20 direct-to-retail licenses, a business model Iconix has pursued in the U.S., Cole said. Iconix already has 11 existing licenses in Europe for brands such as Rocawear and Ocean Pacific, but Cole said there is room for improvement in its retail partnerships in the region.
“Our relationships weren’t honestly that good and that was a key factor in our decision to partner up,” he said.
Overseas expansion could provide other benefits, as well. The economic downturn hit later and shorter in the Europe than in the U.S., making it an attractive market for growth, said Bill Lewis, executive vice president at retail consulting firm Karabus Management.
“With the way the U.S. growth rate is running right now, international expansion is something that anyone with the supply chain capability is doing,” Lewis said.
By teaming with The Licensing Company in Europe and its other partners in Asia and Latin America, Iconix is doing the sometimes lengthy work of brand building abroad in a cost effective manner, said Marty Brochstein, senior vice president of industry relations and information at the International Licensing Industry Merchandisers’ Association.
“It brings them into marketplaces where they don’t have expertise and they’re leveraging The Licensing Company’s knowledge of the European marketplace,” he added. “[It’s] not just having boots on the ground, it’s having very experienced boots on the ground.”
Iconix said it expects to record a pretax gain between $5 million and $7 million related to the transaction. Shares of Iconix finished down 0.8 percent at $12.48 Tuesday.