Iconix Brand Group’s direct-to-retail (DTR) licensing agreements with Target (for Mossimo) and Walmart (Starter and OP) will be ending.

The move came as the retailers sharpen their focus on private label and amid shrinking shelf space for the Iconix brands, which combined generated just under $40 million in annual retail sales, Iconix executives told analysts as the company reported quarterly earnings.

Among the developments:

• The Starter brand, an apparel DTR at Walmart since 2007, had seen shelf space shrink in recent years, Iconix CEO John Hough told analysts. Iconix acquired Starter from Warnaco in 2006. Iconix’s menswear-related revenue fell 31% to $5.4 million in Q2 ended June 30; about half decline was tied to Starter. Iconix has since found a new (undisclosed) licensee for Starter and will relaunch the brand this fall, said Hough, adding that Walmart is expected to complete the sell-off of Starter apparel by mid-2018. “The brilliance of a relationship with someone like Walmart is they are a great partner, but they can be rough on the royalty rate,” Hough said. “As we have a chance to reposition” Starter, the revenue generated by the Walmart DTR doesn’t have to be matched for Iconix “to get back to its former royalty rate.”
• Iconix plans to relaunch OP as a lifestyle brand. It was launched with lifestyle products in 1972 and Iconix acquired it in 2006. At Walmart, OP was “narrowly positioned” as a swimwear brand. Iconix launched sales of OP apparel through Urban Outfitters this summer — a seven-piece collection sold under the “OP for UO” banner. Iconix has a new OP program with a “leading” department store chain for summer 2018, Hough said.
• The 17-year Mossimo apparel DTR at Target (which Iconix assumed when it bought Mossimo in 2006) will formally end in October 2018; Iconix expects to have a new licensee on board for a spring 2019 collection, Hough said. The departure of Mossimo from Target comes as the retailer launches nearly a dozen new private label brands including A New Day women’s clothing and JoyLab athleisure apparel. Iconix will continue its DTR at Target for Fieldcrest towels, sheets and comforters.Contact: David Jones, Chief Financial Officer,212-730-0030, djones@iconixbrand.com
• Iconix swung to a $16.3 million Q2 net loss from a $10.6 million profit a year earlier, taking a $23.2 million charge in terminating licensing agreements for one of its brands, which it didn’t identify. It also incurred $13.9 million in expenses in paying off $295 million in convertible notes due in 2018. The company also lowered its revenue forecast for 2017 to $225-$235 million from $235-$245 million owing to the timing of some licenses, Chief Financial Officer David Jones said. Iconix posted $245 million in revenue in 2016.

Contact: David Jones, Chief Financial Officer,212-730-0030, djones@iconixbrand.com