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Why Iconix Brand Group Inc. Shares Tumbled Today

By Jeremy Bowman - Mar 29, 2016 at 11:48AM

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The licensing group sold off on a weak earnings report.

Eckō Unltd

Image source: Ecko.com. Ecko is an Iconix brand.

What: Shares of Iconix Brand Group (ICON) were getting dumped today after a disappointing fourth-quarter earnings report last night. As of 11:28 a.m. ET, the stock was down 9.9% and had fallen as much as 12.7% earlier in the morning.

So what: The fashion licensing company missed earnings estimates by $0.02, posting an adjusted earnings per share of $0.25. Without adjustments, however, the company recorded a net loss of $263 million, or $5.44 per share. Revenue declined 1% $94.7 million but beat expectations of $93.3 million.

Iconix has been plagued by an accounting scandal that saw the ouster of its CEO, CFO, and COO last year, and is in the process of rewriting financial statements for the past two years, which caused the extreme loss in the quarter as the company took goodwill impairment charges on several brands. Interim CEO Peter Cuneo acknowledged that 2015 had been "a challenging year," but noted the company delivered free cash flow of $189 million for the full year, refinanced $300 million in debt, and brought in a permanent CEO, John Haugh.  

Now what: With the restatement, debt refinancing, and an incoming CEO announced, things appear to be looking up for Iconix. However, the company lowered its guidance for the current year, which was likely the main reason for the stock's decline. 

Management reduced EPS guidance from $1.35-$1.50 to $1.15-$1.30, but held revenue guidance steady at $370 million-$390 million. Though Iconix's growth prospects look dim at the moment, the stock looks like a bargain based on conventional metrics. I'd expect shares to rebound over the long term.

Jeremy Bowman has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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