As we know, the apparel industry is highly competitive and promotional, and is sensitive to emerging fashion trends. The companies in the industry have a perishable inventory and have to find buyers for their expiring seasonal merchandise each season. In addition, the sluggish US economy combined with declining consumer spending and currency headwinds represents a threat to the firms operating in the industry.
I will analyze three well-known apparel companies and find out what their futures may look like.
Iconix Brand Group Inc (NASDAQ:ICON): New licences and new projects
Iconix Brand Group Inc (NASDAQ:ICON) licenses the Candie’s, Bongo, Badgley Mischka and Joe Boxer trademarks on a variety of footwear, apparel and fashion products.
The company’s fourth quarter earnings-per-share of $0.41 was flat year-over-year, but ahead of analyst’s estimates. Revenues declined 10.9% in the quarter compared to the same quarter in 2011, driven largely by a decrease in men’s business and a license transition of Royal Velvet brand.
The company had success in keeping a strong presence in both the US and Europe, and it has also increased its penetration in emerging markets. In addition, Iconix Brand Group Inc (NASDAQ:ICON)‘s top-line will grow as a result of new direct-to-retail agreements.
Growth will also come from the acquisition of the soccer brand Umbro and the lifestyle brand Lee Cooper for $72 million. Lee Cooper by itself is expected to generate $14 million in annual royalty revenues. The company also acquired the Peanuts brand and made an agreement with Twentieth Century Fox Animation to produce an animated film featuring Peanuts characters such as Charlie Brown and Snoopy. I find these projects to be very encouraging.
Guess?, Inc. (NYSE:GES): Poor performance and low sales estimates
Guess?, Inc. (NYSE:GES) designs, markets, distributes and licenses apparel and accessories for men, women and children. Its products are sold through retail, wholesale, e-commerce and licensing distribution channels.
The company’s fourth-quarter EPS of $0.95 was down 9.5% compared to the previous year earnings of $1.05 per share. Revenues were up 5.1%, reaching $815.1 million and exceeding management’s prediction of $780 to $800 million.
The slow recovery of the US economy and low consumer demand are both affecting Guess?, Inc. (NYSE:GES). Low traffic in stores in North America are a cause of concern for the company. However, the company’s long-term international expansion plans are inspiring. The company’s growing e-commerce business and presence in social networks also give investors hope.