Iconix Discloses New Umbro DTR, Other Moves

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Iconix Brand Group signed a new DTR with Target for the Umbro brand, but is winding down pacts with other retailers as it readies a reorganization that will produce $12 million in annual savings, the company said.

The new Umbro apparel, which will launch in Target’s stores and through its web site late this month, follows the ending in October of Iconix’s pact with Target for Mossimo apparel. Iconix acquired the Umbro brand from Nike for $225 million in 2012. Iconix also will shift its DTR at Macy’s for the Material Girl label to a wholesale agreement when the license expires in 2020. Guaranteed minimum royalties for Material Girl at Macy’ will be $5 million this year, Iconix said. Iconix bought a 50% stake in Material Girl in March 2010.

Meanwhile, Iconix’s DTR at J.C. Penney for Royal Velvet (towels, curtains, bedding, bath mats) is expected to end in January 2019, but there are “opportunities to redeploy” the brand in the “near future,” the company said. That license is expected to generate $8 million in guaranteed minimum royalties this year. Iconix acquired the Royal Velvet label in buying Pillowtex LLC for $231 million in 2007  and has had a DTR at J.C. Penney for the brand since February 2012.

In addition to changes in its licensing agreements, Iconix also used some brands (Umbro, Ocean Pacific, Mossimo) as security in striking an agreement with bondholders to convert $110 million in notes due in March for senior debt that matures in August 2023. The current notes, which carry a 1.5% annual interest rate, were exchanged for those with a 5.75% rate and bondholders received $700,000 in cash payments.

The new debt agreement is being coupled with the cost-saving plan, putting Iconix in a “good position to finalize the solution for the balance of our upcoming debt obligations,” CEO John Haugh said in a statement. With new agreements with Target and Amazon (Starter), Iconix is “making progress in ensuring our brands are with the right long-term partners to maximize market presence and contribution,” Haugh said.

Iconix swung to a $550.5 million net loss in Q3 ended Sept. 30 from a $21 million profit a year earlier, as it took a $521.6 million non-cash impairment charge tied to the ending of DTR agreements with Target and Walmart (Inside Licensing Dec. 27).

Iconix forecasts revenue for the fiscal year ended Dec. 31 to be $190-$220 million, down from $225 million a year earlier. The decrease is tied to the ending DTRs for Danskin Now (Walmart) and Mossimo (Target), the combined revenue from which is expected to be $25 million in fiscal 2018, Iconix said.

Contact:

Iconix Brand Group, David Jones, Chief Financial Officer, 212-730-0030, djone@icnonixbrand.com