Iconix Brand Group 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 direct-to-retail (DTR) agreements with Target and Walmart. Iconix’s revenue fell 12% to $53.1 million.

The largest portions of the charge were tied to womenswear ($227.6 million), menswear ($135.9 million) and home ($69.5). Iconix’s DTRs with Walmart for Ocean Pacific and Starter ended in June and this month, respectively, Iconix said in an SEC filing. And a DTR for Danskin Now at Walmart ends in January 2019, lowering Iconix’s projected royalty revenue by $15.5 million next year. A Mossimo DTR with Target ended in October and is expected to reduce royalty revenue by $10 million in 2018, Iconix said.

Iconix also took a $103.9 million goodwill impairment charge against Q3 earnings, due to a write-down tied to a decline in net sales in menswear and womenswear and the company not being able to gain new agreements with guaranteed minimum royalties. The largest of the charges was in womenswear ($73.9 million).

Iconix’s womenswear business posted a $281.8 operating loss against a $21 million operating profit a year earlier as revenue fell 13% to $21 million.  The menswear segment reported a $132.1 million Q3 operating loss, reversing a $7.4 million operating profit a year ago as sales dropped 4.9% to $11.3 million.

The home segment had a $91.2 million operating loss against an $8.4 million profit a year earlier as revenue declined 28.7% to $7.3 million. Iconix’s Q3 revenue also was minus the $2.3 million the Sharper Image delivered a year ago. Iconix sold the Sharper Image brand to the ThreeSixty Group late last year.

Iconix also recorded a $900,000 gain on the sale of the Badgeley Mischka and Sharper Image brands for Canada and a $2.8 million loss on the termination of a Rocawear license tied to a lawsuit. The company had more than 50 DTRs and 450 licenses as of Oct.1, and $530 million in total guaranteed royalty revenue.

Meanwhile, former licensee Signature Apparel filed a claim against Iconix with the U.S. Bankruptcy Court, New York, seeking $70 million in damages and legal fees. Earlier this year, U.S. Bankruptcy Court Judge Robert Grossman found “Real Housewives of New Jersey” star Chris Laurita and Iconix liable for fraud and negligent misrepresentation for diverting some of Signature’s assets. Iconix “strong disagrees” with the damages being sought by Signature and doesn’t believe “additional damages are warranted,” the company said. Signature produced licensed juniors’ apparel. Iconix’s Rocawear brand.

Signature filed for bankruptcy in 2009 and a year later, Anthony Labrosciano, who was appointed to oversee the case, sued Laurita, alleging he used company funds to pay for private jets and lavish vacations. Grossman found Iconix liable for aiding and abetting Laurita’s breaching his fiduciary duty to Signature. Grossman ordered Laurita repay $2 million in consulting and other fees.

Contact:

Iconix Brand Group, David Jones, Chief Financial Officer, 212-730-0030