Iconix Brand Sells Off the Sharper Image

This post was originally published on this site

Iconix Brand Group (NASDAQ:ICON) recently announced it’s parting ways with its Sharper Image home-goods company, as the company is executing plans that were highlighted at its investor day back in November. Investors reacted positively to the news and the stock popped as much as 7% the day of the announcement. Here’s what shareholders need to know.

ICON Chart

Details of the deal

On Dec. 30, Iconix announced it had entered an agreement to sell Sharper Image for $100 million in cash. The rights to the eclectic gift retailer and related intellectual property, like the sharperimage.com store, were sold to ThreeSixty Group, a California-based supplier and distributor of consumer goods.

Sharper Image

Iconix purchased Sharper Image in the fall of 2011 for $65.6 million in cash, and will likely record a gain on the deal for the current quarter. The gain was not factored into guidance last given in November, so expect an update during the next quarterly report. However, the company expects 2017 earnings to be unaffected by the sale.

This is the second brand the company parted ways with in 2016. The first was the Badgley Mischka luxury designer back in March. Iconix made $16 million on that sale.

Why this makes financial sense

Since new management took over in the last year, Iconix has been undergoing a strategic review of its financial position and the brand licenses that it owns. Back in November, new CEO John Haugh outlined his team’s findings and a fresh strategy for the company going forward.

Part of the presentation highlighted nine brands that management has labeled “incubate” — brands that need to gain traction in the marketplace, or be spun off. Included in the list were Ed Hardy, Rampage, Zoo York, and the largest brand in the group, Sharper Image.

It therefore comes as no surprise that Iconix decided to look for a buyer. In times past, the company had relied on a passive strategy of acquiring brands and letting them do their thing. Haugh’s new idea is to take a more active approach to brands already in the Iconix stable that have growth potential, and cut the ones that don’t fit the bill.

Another big priority for management is continuing to shore up the financial well-being of the parent company. When new management took the reins, Iconix was in poor shape, with looming debt liabilities coming due. Haugh and company secured a $300 million loan to take care of debt that was due in June 2016, but top of mind now is $295 million due in March 2018.

The cash generated from the Sharper Images sale, along with additional cash, will be used to pay down $115 million of debt.

Iconix Brand Group

A company on the mend

Offloading Sharper Image makes a lot of sense, especially when considering the proceeds will be used to solve the ever-important debt problem. Don’t be surprised if more brands Iconix has labeled as being on the bubble are given the ax.

With the company making headway in its recovery, 2017 is poised to be the year where Iconix returns to growth. Several brands in the portfolio, like Danskin, Umbro, and Strawberry Shortcake, are expected to expand and provide organic revenue growth through the next few years.

As Iconix filters out names it no longer needs, management has said it will be looking to make new acquisitions that mesh with their goals within the next couple of years. This small-cap retail-goods manager is worth keeping an eye on as its recovery continues to unfold.

Nicholas Rossolillo owns shares of Iconix Brand Group. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Be Sociable, Share!

Related Posts


MarketTamer is not an investment advisor and is not registered with the U.S. Securities and Exchange Commission or the Financial Industry Regulatory Authority. Further, owners, employees, agents or representatives of MarketTamer are not acting as investment advisors and might not be registered with the U.S. Securities and Exchange Commission or the Financial Industry Regulatory.

This company makes no representations or warranties concerning the products, practices or procedures of any company or entity mentioned or recommended in this email, and makes no representations or warranties concerning said company or entity’s compliance with applicable laws and regulations, including, but not limited to, regulations promulgated by the SEC or the CFTC. The sender of this email may receive a portion of the proceeds from the sale of any products or services offered by a company or entity mentioned or recommended in this email. The recipient of this email assumes responsibility for conducting its own due diligence on the aforementioned company or entity and assumes full responsibility, and releases the sender from liability, for any purchase or order made from any company or entity mentioned or recommended in this email.

The content on any of MarketTamer websites, products or communication is for educational purposes only. Nothing in its products, services, or communications shall be construed as a solicitation and/or recommendation to buy or sell a security. Trading stocks, options and other securities involves risk. The risk of loss in trading securities can be substantial. The risk involved with trading stocks, options and other securities is not suitable for all investors. Prior to buying or selling an option, an investor must evaluate his/her own personal financial situation and consider all relevant risk factors. See: Characteristics and Risks of Standardized Options. The www.MarketTamer.com educational training program and software services are provided to improve financial understanding.

The information presented in this site is not intended to be used as the sole basis of any investment decisions, nor should it be construed as advice designed to meet the investment needs of any particular investor. Nothing in our research constitutes legal, accounting or tax advice or individually tailored investment advice. Our research is prepared for general circulation and has been prepared without regard to the individual financial circumstances and objectives of persons who receive or obtain access to it. Our research is based on sources that we believe to be reliable. However, we do not make any representation or warranty, expressed or implied, as to the accuracy of our research, the completeness, or correctness or make any guarantee or other promise as to any results that may be obtained from using our research. To the maximum extent permitted by law, neither we, any of our affiliates, nor any other person, shall have any liability whatsoever to any person for any loss or expense, whether direct, indirect, consequential, incidental or otherwise, arising from or relating in any way to any use of or reliance on our research or the information contained therein. Some discussions contain forward looking statements which are based on current expectations and differences can be expected. All of our research, including the estimates, opinions and information contained therein, reflects our judgment as of the publication or other dissemination date of the research and is subject to change without notice. Further, we expressly disclaim any responsibility to update such research. Investing involves substantial risk. Past performance is not a guarantee of future results, and a loss of original capital may occur. No one receiving or accessing our research should make any investment decision without first consulting his or her own personal financial advisor and conducting his or her own research and due diligence, including carefully reviewing any applicable prospectuses, press releases, reports and other public filings of the issuer of any securities being considered. None of the information presented should be construed as an offer to sell or buy any particular security. As always, use your best judgment when investing.