Sequential Brands Group Weighs CBD for Non-Martha Stewart Brands

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Sequential Brands Group, having secured a licensing deal for CBD-related products for Martha Stewart, is weighing striking similar agreements for its other brands, CEO Karen Murray said in releasing Q4 earnings.

The recent pact with Canopy Growth Corp. for Martha Stewart CBD products is structured similarly, in terms of royalties and minimum guarantees, to other agreements Sequential has for the brand, Murray said. The companies will develop products this year starting with pets, and then adding items for humans. The first revenue is expected in 2020, Murray said.

“I think this is a great opportunity for many of our other brands, particularly in the activewear arena,” Murray said. Sequential’s activewear brands include Avia, And1 and the yoga label Gaiam, which has been rapidly expanding in apparel, including a broad collection at Kohl’s.

The potential for spreading CBD across its Sequential’s brands comes as the company sharpens strategy around activewear/athleisure products and seven brands: And1, Avia, Joe’s, Martha Stewart, Gaiam, Emeril Lagasse and Jessica Simpson, which renewed a footwear agreement with the Camuto Group. The focus on activewear/athleisure could involve investments in or acquisitions of other activewear/athleisure companies, Murray said.

The company has already sold some labels – it took a combined $6.4 million loss in selling the Ful (backpacks) and Revo (eyewear) brands — and is “evaluating opportunities for all our brands,” Murray said. It has six other brands: Linens ‘n Things, William Rast, Franklin Mint, Heelys, Ellen Tracy and Caribbean Joe.

Sequential has a DTR for the Avia brand at Walmart, having paid a licensee $4.2 million in Q3 ended Sept. 30 to terminate an agreement and switch to the DTR. With actress Vanessa Hudgens serving as Avia’s new brand ambassador, Sequential is developing new Avia premium apparel that will target specialty retailers in 2020, Murray said.

The company also registered strong sales of And1 men’s and boys apparel at Walmart in the U.S. in Q1. Licensee Beiying Sports Technology also is readying an “aggressive rollout” for the And 1 brand in China where it has opened six stores and has men’s and women’s footwear, apparel and accessories.  Gaiam, which has actress Jennifer Biel as a brand ambassador, also is expanding in licensing with Mindful Inc. launching organic celestial teas at Amazon’s Whole Foods, Murray said.

Sequential’s Q4 net loss narrowed to $1.3 million from $162 million a year ago, despite $3.2 million in legal costs tied to a suit stemming from its 2015 Martha Stewart acquisition. The year-earlier loss included a $304 million charge tied to a goodwill adjustment related to federal tax reform. Revenue rose 6.3% to $49.9 million.  Total guaranteed minimum royalties over the life of existing agreements stood at $300 million as of Dec. 31, down from $325 million on Sept.30 and $379.5 million on Feb. 28, 2018.

Contact:

Sequential Brands Group, Peter Lops, CFO, 646-564-2577