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ICON: Where are the Slides?

OCTOBER 1, 2009


In the wake of yesterday’s negative pre-announcement I couldn’t help but take a look at a timeline of Iconix’s historical capital raises and acquisitions.  I also couldn’t ignore the fact that this timeline has typically followed a simple pattern.  Raise capital, make an acquisition, manufacture earnings, and thereby convincing shareholders that they could create more value by doing deals than investors could investing the capital on their own.  Perhaps this is the very root of why today’s 20+% sell off in the shares is so pronounced.  Was management anticipating an accretive and/or noteworthy acquisition to take place during the quarter after it raised $150 million on June 3rd?   I think so.

ICON: Where are the Slides? - Iconix 1

Whether a deal was or was not on the way, we can’t ignore the facts. Recall, that CEO Neil Cole and two directors sold 800,000 shares as part of the offering in early June.  The timing of those insider sales aren’t looking so good right now.  Third quarter guidance was then provided on August 4th, a time in which management would have had at least some visibility into the quarter and the acquisition pipeline.  That brings us to today, sort of…

Clearly something is amiss and credibility is plummeting by the minute.   As late as last week (September 23rd), the company republished its prior guidance in an investor presentation at Credit Suisse’s “Global Brands in China” Conference.  A quick download of the slides from that day in Shanghai could confirm this, although within the last 30 minutes it appears that the file has been removed!   That brings us to this morning, when ICON lowered its EPS expectations for the current quarter and the year, citing slightly weaker sales and higher than anticipated dilution from the equity offering for which they already provided guidance. 

ICON: Where are the Slides? - Iconix 2

If a deal was or is in the works (Mark Ecko Enterprises and Eddie Bauer both mentioned intra-quarter) it is taking longer to consummate.  Perhaps there is no deal at all.  Whatever the case may be, it is clear from the announcement that cash on the balance sheet is not a substitute for growth or consolation for a dilutive equity deal.  Credibility is now the single biggest factor impacting ICON and I am sure that today is just the beginning of a long road ahead for both the shares and management.


Some Notable Call Outs

  • In an effort and offer as many options as possible to cash strapped consumers, Best Buy is launching and testing some new initiatives for the holiday season.  The company is launching its “Pitch In” gift card on October 6th.  The reloadable card connects to an online wish list which in turn allows for friend and relatives to contribute an amount of their choice towards the purchase of a particular item.  Additionally, the company is testing layway in Michigan, but it is unlikely the program will be rolled out nationally before year-end.  Also keep an eye out on substantially increased utilization of Twitter and Facebook to generate marketing buzz.
  • Michelle Leder, our SEC filings expert discovered that Chicos filed an 8K that unredacts (removes sensitive information so that it may be distributed to a broader audience) certain portions of a $55 million credit agreement it entered into back in December. Companies don't unredact stuff voluntarily 8 months later, which means someone -- regulators or some AG -- was asking for this.


-Europe: EC plans anti-dumping on footwear - The European Union is going to extend its anti-dumping measures against Chinese footwear imports next month but the extension to the punitive tariffs will be for two years instead of the normal five, and will exempt children's footwear and sports shoes. Imports of shoes from Vietnam will be exempted from the extension.  <fashionnetasia.com>

-German Retail Sales Unexpectedly Drop on Joblessness; Jobless Numbers Likely to Rise - In Germany retail sales unexpectedly fell in August as concern about rising unemployment kept a lid on consumer spending. Sales, adjusted for inflation and seasonal swings, decreased 1.5 percent from July, when they rose 0.7 percent. Unemployment rose in September. Jobless numbers will likely swell in coming months as companies that are using government-sponsored work programs with shortened hours will be forced to cut jobs eventually, economists said. <bloomberg.com>

-China: Luxury auto brands eye 2nd-, 3rd-tier Chinese cities - Luxury automakers are casting their eye to second- and third-tier Chinese cities, when the markets of first-tier cities are becoming saturated, reported in the local press. Audi has shifted the focus of its China expansion from big cities onto small and medium cities. Last year, it located its first Asian city exhibition hall in Ningbo, a port city in the eastern Chinese province of Zhejjiang. <fashionnetasia.com>

-Crocs. Inc. Secures New Asset-Backed Credit Facility - Crocs, Inc. said it has entered into a new asset-backed revolving credit facility with PNC as of Sept. 25, 2009. The agreement provides for up to $30 million in revolving loans which may be used for working capital needs and other items, as stipulated in the agreement. Certain of the company’s subsidiaries were co-borrowers under the agreement.


-PepsiCo CEO to Spend More on Ads, Push Gatorade for Athletes - the world’s largest snack-food maker, plans to increase advertising spending next year and is readying new Gatorade products to boost consumption, Chairman and Chief Executive Officer Indra Nooyi said. PepsiCo maintained its ad budgets this year, taking advantage of media rates that declined 25 percent to 40 percent, Nooyi, 53, said yesterday in an interview in New York. The company also has shifted more of its spending to digital media, she said. <bloomberg.com>

Japan’s Tankan Survey Shows Companies Plan Deeper Spending Cuts - Japanese companies plan to deepen investment cuts as profits slump, inhibiting the recovery from the nation’s worst postwar recession, the central bank’s Tankan survey showed. Large businesses aim to cut spending 10.8 percent this year, more than the 9.4 percent planned three months ago. <bloomberg.com>

India: MMF textile exports grow despite downturn - Exports of Indian man-made fibre textiles have reached US$3481 million (Rs.15,863 crores) during 2008-09, representing a growth of nearly 4% in terms of US dollar terms and 18% in terms of rupee compared to that of the previous financial year.


-CIT Group Nears Bankruptcy Again - CIT Group Inc. is trying to hammer out a restructuring plan as bankruptcy once again loomed over the lender, a financial cornerstone to many fashion producers and retailers. At least some fashion companies have tweaked their agreements with CIT or made other financing arrangements. And if a deal can’t be worked out and the 101-year-old lender does become insolvent, it is now expected to have a relatively orderly bankruptcy, mitigating the impact on its clients, financial sources said. <wwd.com>

Bernard Chaus Inc. See Sales Slip - Bernard Chaus Inc. suffered deeper losses on lower sales during the fourth quarter and fiscal year as growth in its Kenneth Cole licensed business failed to compensate for declines in the Cynthia Steffe and private label product lines. According to the firm’s annual report, filed this week with the Securities and Exchange Commission, the net loss grew to $6 million, or 16 cents a diluted share, in the fourth quarter ended June 30, from a loss of $3.2 million, or 9 cents, in the year-ago quarter. <wwd.com>

-New pro Fowler signs with Puma for apparel and footwear -Fledgling professional Rickie Fowler, ranked as the nation's top amateur golfer the past two years, has signed on Puma Golf to wear its apparel and footwear. Fowler will be featured in Puma's Spring/Summer 2010 marketing campaigns for the brand, specifically for the golf category. <examiner.com>

-J.C. Penney rolls out digital coupons for cell phones - J.C. Penney Co. shoppers in Houston now can download digital coupons to their mobile phones, which can be scanned on the phone’s display screen at the cash register. The multichannel retailer will offer coupons nearly every week through the holiday shopping season. <internetretailer.com>

-Johnson Outdoors Inc. Refinances Debt - Johnson Outdoors Inc. has refinanced and restructured the company's debt, thereby reducing estimated 2010 borrowing costs by more than 40 percent compared with fiscal year 2009.The highlights of the debt refinancing include: Total debt availability of up to $84.9 million through two new credit facilities secured primarily by the Company's U.S. assets. All related loan agreements have been signed and closed. A revolving credit facility that provides financing of up to $69million which matures in 2012 with availability based on eligible account receivables and inventory. The new financing structure replaces the company's current amended credit agreements which were arranged by JP Morgan Chase and would have matured in 2010. <sportsonesource.com>

-Blacks Leisure to Close 89 Stores - Blacks Leisure, the U.K. outdoor chain, announced plans to close 89 stores across the group that have not "traded profitably for years". The firm, which operates Millets, Blacks and O'Neill shops, also said it plans to lay off 50 employees at its Northampton head office.

Last week, it called in administrators to its 11 O'Neill boardwear stores - threatening 90 jobs. It also said a drop in sales during the downturn meant it would breach the terms of its bank loans. Pasted from <sportsonesource.com>

-K-Swiss Partners with LA Marathon - In support of its recent focus on the technical running market, K-Swiss Inc. has agreed to a multiyear deal with the Los Angeles Marathon to become the official footwear and apparel sponsor. The partnership includes a collaborative effort between K-Swiss and the marathon to produce a full collection of apparel, which will be sold at retail, online and at K-Swiss’ managed and owned stores in Asia. The collection will also sell on race day through various retail “pop-up” stores, as well as at the Expo, a two-day health and wellness convention that coincides with the March 21, 2010, marathon. <wwd.com>

-Hugo Boss signs Graeme Black to drive womenswear - Hugo Boss has named London-based designer Graeme Black as creative consultant for the Boss Black women’s collection. Black, who will continue to design his signature label, began working for the German company in the spring. Black has collaborated with director of Boss Black womenswear, Karin Busnel. <drapersonline.com>

-Gucci Snake Bag Draws Ire in China as Wage Gaps Widen - At China’s newest Gucci store, in Shijiazhuang, snakeskin purses sell for the equivalent of $4,390, about twice the city’s per capita annual income. Next door at Brooks Brothers, button-down shirts go for $190. “Shijiazhuang is becoming very well off,” Brooks Brothers saleswoman Wang Weixia, 24, says of the provincial capital, 291 kilometers (181 miles) southwest of Beijing. “A few years ago it was poor and backwards.” <bloomberg.com>

RESEARCH EDGE PORTFOLIO: (Comments by Keith McCullough): WRC, NKE, PSS

09/30/2009 10:21 AM


Keeping a trade a trade. Levine doesn't want me to be short into the analyst event (Friday), and I don't need to be. (easing margin compares here, both current qtr and next). Everything has a time/price. Covering red. KM

09/30/2009 10:37 AM


Another lower all time high for Nike. Great company, great people, and a great price to sell into. McGough owns this debate. The intermediate term view from this price is negative. KM

09/30/2009 03:28 PM


McGough has had me wait, patiently, here on price. His analysis is crystal clear and there is a catalyst next week (see his note on PSS today). Buying red. KM


DECK: Peter Worley, President of Teva, sold 1,500 shares ($128k), 5% of total common holdings.

FINL: Bill Kirkendall, Director, sold 6,000 shares ($60k) after excising the right to buy 5,000 shares, 95% of total common holdings.

GES: Michael Relich, SVP & CIO, sold 1800 shares ($67k), less than 9% of total common holdings.


  • Michael Steinberg, Director, sold 6,750 shares ($189k) after exercising the right to buy 6,750 shares, nearly 60% of total common holdings.
  • Alan Gold, Director, sold 6,700 shares ($188k) after exercising the right to buy 6,700 shares, nearly 35% of total common holdings.


  • Steven Nelson, Vice President, bought 240 shares (nearly $4k), less than 1% of total common holdings.
  • William Dillard, CEO, bought 740 shares ($11k), less than 1% of total common holdings.
  • Robin Sanderford, Vice President Tampa Division, bought 370 shares ($6k), less than 1% of total common holdings.
  • Paul Schroeder, Vice President, General Counsel, bought 450 shares ($7k), less than 1% of total common holdings.
  • Jamie Freeman, Senior Vice President, CFO, bought 560 shares ($8k), less than 1% of total common holdings.
  • Drue Matheny, Executive Vice President, bought 530 shares ($8k), less than 1% of total common holdings.
  • Kent Burnett, Vice President of Phoenix Division, bought 450 shares ($7k), less than 1% of total common holdings.
  • David Terry, Chairman of St. Louis Division, bought 200 shares ($3k), less than 2% of total common holdings.
  • Ales Dillard, President, bought 660 shares ($10k), less than 1% of total common holdings.
  • Burt Squires, Corporate Vice President of Stores, bought 350 shares ($6k), less than 1% of total common holdings.