Iconix Shares Hurt by Sears Bankruptcy In Q3

In addition to a bad-debt charge of $8.2 million, the company lowered guidance on full-year forecasts.

Shares in Iconix Brand Group Inc. fell Friday after the company reported thirdquarter results that were impacted by the Sears Holdings Corp. bankruptcy filing last month.

Bob Galvin, chief executive officer of Iconix, said the filing “resulted in P&L charges, however, we continue to forecast debt covenant compliance.” The company posted an operating loss in the third quarter that included an $8.2 million bad debt expense due to the Sears bankruptcy.

Shares of Iconix dropped 17.7 percent to close at 17 cents in trading on the Nasdaq exchange. During the day’s trading session, shares of Iconic hit an intra-day low of 14 cents. Nearly 5.9 million shares changed hands and, according to Yahoo Finance, the company still has a market capitalization of $11.6 million.

The ceo said while the company’s domestic business didn’t progress as the company had hoped, the international business posted profitable growth. “We are critically evaluating our operational cost structure to ensure it is aligned with our current level of business and nearterm plans,” Galvin said.

He didn’t disclose when the company would be able to provide more details on its plan going forward. At least one analyst, Eric Beder at Small Cap Consumer Research, said he believes the core business has stabilized, owing in part to the growth in international sales. However, the analyst did note that there’s still a need for a debt stabilization plan. While the company said it remains in compliance with its debt covenants, there are financial concerns ahead. The company has paid $50 million in debt that, according to Beder, has a face value of $778 million, and there’s still an upcoming debt maturity of $476 million due in January 2020. He said the company is on track to do a reverse stock split that must be completed before Christmas 2018.

Iconix is projecting a stable cash position. For the three months ended Sept. 30, net income was $20.2 million, or a loss of 1 cent a diluted share, against a loss of $552.7 million, or $9.67 per share, a year ago. On an adjusted basis, diluted earnings per share from continuing operations were 2 cents for the quarter. Licensing revenues fell 13.1 percent to $46.2 million from $53.2 million.

Wall Street was expecting adjusted diluted EPS of 9 cents on revenues of $47.5 million.

The company lowered full-year guidance, due mostly to the Sears bankruptcy filing. The company is expecting a wider GAAP net loss of $105 million to $115 million, from a loss of $94.4 million to $104.4 million. On a non

GAAP basis, it is expecting net income at between $5 million to $15 million, down from prior guidance of between

$20 million to $30 million. The full-year revenue projection is now between $185 million to $195 million, down from $190 million to $220 million. And the company is expecting full-year free cash flow at $40 million to $50 million, down from prior expectations of between $50 million and $70 million.