Sequential Brands Group Inc. is the latest company to take a major hit from the coronavirus, and the brand management firm is expecting an even steeper decline in the second quarter.
On Friday, Sequential reported that on a generally accepted accounting principles basis, the loss from continuing operations for the period ended March 31 was $85.3 million, or $1.30 per diluted share, compared with a loss from continuing operations in the prior-year quarter of $4.8 million or 7 cents per diluted share. Included in the figure for this year were noncash impairment charges of $85.6 million for indefinite-lived intangible assets related to the trademarks for the company’s Jessica Simpson, Gaiam, Joe’s and Ellen Tracy brands.
Total revenue from continuing operations for the first quarter was $20.2 million, down from $25.5 million in the prior-year quarter.
In a conference call, David Conn, chief executive officer, said despite starting the year with “momentum,” that included extension of the Jessica Simpson brand and new deals for Caribbean Joe and Ellen Tracy, the COVID-19 pandemic led the company’s retail partners to place all orders on hold. Coupled with the uncertainty about consumer spending going forward, Conn said Sequential has drawn on a revolver of $14.1 million “to bolster liquidity,” Conn said, and also “proactively implemented significant compensation reductions,” cut its marketing expenditures and deferred all spending deemed non-essential.
The company ended the quarter with $13.3 million in cash on hand, which, when added to its cash from operations, “will be sufficient to satisfy our anticipated working capital requirements for at least 12 months,” it said.
Further, Conn said Sequential continues to explore either divestitures of its existing brands or potential acquisitions “to best position the company for long-term success.”
On a positive note, Conn said because its active brands — And1, Avia, Gaiam and SPRI — are all sold in the mass-market channel, they’ve managed to “perform well” since the lockdown closed most other retailers. He said in particular, SPRI and Gaiam’s exercise equipment, Avia’s activewear and And 1’s underwear and socks were strong sellers in the quarter.
“While the coronavirus pandemic has significantly impacted the U.S. economy and the apparel and accessories industry, we plan to weather the storm by remaining laser-focused on managing cash in-flows, instituting further expense reductions, and negotiating short-term lender relief,” he said. “I believe that the steps we are taking, coupled with our diversified portfolio of brands and channels of distribution, will assist us in tackling these challenging times while we also explore opportunities that best position the company for long-term success and maximize value.”