March 20, 2015

Iconix Brand Group Inc. Current Recommendation

NEUTRAL

Prior Recommendation

Outperform

Date of Last Change

05/14/2014

Current Price (03/19/15)

$33.99

Target Price

$36.00

(ICON-NASDAQ) SUMMARY Iconix s earnings and sales exceeded the Zacks Consensus Estimate in the fourth quarter of 2014. The company also raised its earnings guidance for the fiscal year. Fourth quarter earnings of $0.56 per share increased 4% year over year, driven by solid revenues and lower share count owing to share buybacks. Iconix s revenues grew 7% driven by the company s positive results across the Women's, Home and Entertainment businesses. The strong performance by the acquired Peanuts brand, increasing market share of its core brands and international expansion through joint ventures contributed to sales growth. Overall, we are impressed with the company s recent acquisitions and new licensing partnerships with top retailers in the U.S. to increase its brand presence. The company s consistent expansion in the U.S., Europe and in emerging markets is also appealing. However, currency headwinds and a volatile retail environment may continue to hinder earnings growth.

SUMMARY DATA 52-Week High 52-Week Low One-Year Return (%) Beta Average Daily Volume (sh)

$44.22 $33.00 -15.41 1.60 904,294

Shares Outstanding (mil) Market Capitalization ($mil) Short Interest Ratio (days) Institutional Ownership (%) Insider Ownership (%)

48 $1,632 17.22 N/A 7

Annual Cash Dividend Dividend Yield (%)

$0.00 0.00

5-Yr. Historical Growth Rates Sales (%) Earnings Per Share (%) Dividend (%)

10.4 17.5 N/A

P/E using TTM EPS

12.2

P/E using 2015 Estimate

11.0

P/E using 2016 Estimate

10.3

Zacks Rank *: Short Term 1 3 months outlook

2 - Buy

Below Avg.,

Risk Level * Type of Stock Industry Zacks Industry Rank *

Mid-Value Shoes&Rel Apprl 100 out of 267

ZACKS CONSENSUS ESTIMATES Revenue Estimates (In millions of $)

2013 2014 2015 2016

Q1

Q2

Q3

Q4

Year

(Mar)

(Jun)

(Sep)

(Dec)

(Dec)

105 A

115 A

107 A

105 A

433 A

116 A

119 A

114 A

112 A

461 A

112 E

121 E

134 E

133 E

500 E 522 E

Earnings Per Share Estimates (EPS is operating earnings before non-recurring items, but including employee stock options expenses)

Q1 (Mar)

2013 2014 2015 2016

Q2 (Jun)

Q3 (Sep)

Q4 (Dec)

Year (Dec)

$0.54 A

$0.72 A

$0.59 A

$0.54 A

$2.39 A

$0.72 A

$0.75 A

$0.73 A

$0.56 A

$2.78 A

$0.75 E

$0.86 E

$0.83 E

$0.66 E

$3.10 E $3.31 E

Projected EPS Growth - Next 5 Years %

* Definition / Disclosure on last page

© 2015 Zacks Investment Research, All Rights reserved.

www.Zacks.com

111 North Canal Street, Chicago IL 60606

15

OVERVIEW Founded in 1978 and headquartered in New York, Iconix Brand Group is a brand management company engaged in licensing, marketing and supporting a diversified and growing consumer brand portfolio by providing licenses. The company has a diversified portfolio of over 35 brands and a growing global platform that includes over 50 direct-to-retail partnerships and over 1,100 licensees worldwide. Some of the iconic consumer brands include Candie s, Bongo, Badgley Mischka, Joe Boxer, Rampage, Mudd, London Fog, Mossimo, Zoo York, Sharper Image, Umbro etc. The company offers its products worldwide through retail and wholesale licenses across various categories, including footwear, fashion accessories, sportswear, home products and décor, beauty and fragrance, and in the case of Sharper Image brand, consumer electronics and novelty products. The company, through its wholly-owned subsidiary, Bright Star, also arranges for the manufacture of footwear products for the mass market and discount retailers under their private label brands. Bright Star has no inventory and earns commissions on sales.

REASONS TO BUY Building Brand Portfolio through Acquisitions: Iconix has a diversified portfolio of brands. Iconix builds its portfolio by acquiring new brands which enhances the company s brand management expertise and existing infrastructure. In early-March, Iconix acquired the Strawberry Shortcake brand from Cleveland-based American Greetings. The acquisition of the Strawberry Shortcake brand will help the company in expanding its presence in the entertainment business. In Feb 2015, Iconix Brand also announced the acquisition of the North American rights to the athletic brand PONY from Symphony Holdings, Limited. This will boost its existing sports platform, which includes the Danskin, Starter and Umbro brands. Iconix entered the entertainment industry in 2010 with the acquisition of 80% of the controlling stake in the Peanuts brand. Since the acquisition, Iconix has positioned the brand well for strong growth in 2015 and 2016. Peanuts has a strong diversified global licensing platform with over 700 licensing agreements. An animated film, "The Peanuts Movie," will be released by 20th Century Fox in Nov 2015 in over 75 countries. In 2014, in addition to the renewal of its agreements with two key licensees, MetLife and ABC, the company signed hundreds of new licenses around the world. Going ahead, the company expects to continue to deliver strong growth both organically and inorganically through such acquisitions. It also plans to continue to balance acquisitions with share repurchases to increase value for its shareholders. Expanding Direct-To-Retail (DTR) Licensing Agreements: Iconix has over 50 international direct-toretail partnerships and more than 1100 licensees and agreements with several retail giants like WalMart Stores Inc., Target Corp., Kohl s Corp., and Macy s, Inc. In 2014, Iconix signed its fourth DTR with Walmart for the Waverly brand. The company also renewed some of the largest direct-to-retail licenses, including Mudd with Kohl's, Material Girl with Macy's, Danskin Now with Walmart and with Target in 2014.

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Iconix makes use of the brand name of these retail giants as well as their floor space. Moreover, the long-term agreements and brand exclusivity contracts are incentives to retailers who make efforts to promote Iconix products, which in turn help to boost sales. Formation of International Joint Ventures: The company has been executing its global brand expansion plans through the formation of international joint ventures. The company has been forming international joint ventures since 2008 and seeks to monetize its brands through these ventures, which have contributed meaningfully to its revenues. In Mar 2015, Iconix acquired the remaining 50% stake in the China joint venture to become the sole owner of Iconix China. In Dec 2014, the company also established a joint venture in Middle East and North America. In Feb 2014, Iconix had acquired the remaining 50% of the Latin America joint venture. With the complete ownership and control of Iconix Latin America, Iconix royalty revenues increased more than 300% in the region, particularly in Brazil, Mexico, Chile and across Central America. In Jan 2014, the company acquired a 1% interest in Iconix Europe, thereby increasing its ownership to 51%. In the third quarter of 2014, Iconix expanded its Southeast Asia joint venture partnership with Global Brands Group to include additional territories and brands, as a result of which the company experienced solid gains in both the top line and equity earnings. In fact, Iconix is expected to get significant revenues in China from this joint venture through its brands Lee Cooper (acquired in Feb 2013) and Umbro (acquired in Dec 2012) in 2015. Besides these, the company has four other international joint ventures in Canada, Australia, Israel and India. Moreover, the company expects the international business to leverage its existing joint ventures, pursue new DTR opportunities and establish new partnerships in 2015. Returns Value through Share Repurchases: The company has been returning value to its shareholders in the form of share repurchases. In 2014, Iconix bought back a total of 5 million shares for $193.4 million. Since initiating the share repurchase program in Oct 2011, the company has repurchased approximately 29.1 million shares for $773.2 million. Going ahead, the company plans to continue to create shareholder value through a combination of acquisitions and continued share repurchases.

REASONS TO SELL Challenging Retail Environment: Iconix doesn t manufacture anything as it licenses out the brands to retailers. This makes the company largely dependent upon the health of the retail industry, which is in turn dependent upon consumer confidence and spending patterns. Though the companies are witnessing gradual recovery in the macro-economic environment, it may take time for the situation to improve fully. Huge Cash Outflows: Since Oct 2004, the company has acquired numerous iconic brands directly or through joint ventures and increased the total number of licenses from approximately 18 to over 1,100, resulting in huge cash outflows. Also, the company has a share repurchase program in place which is using a chunk of the cash flows. In the fourth quarter of 2014, Iconix had free cash flow of $46.3 million compared with $61.8 million at the end of the third quarter of 2014. The decline might be due to huge investments in its international business and increased marketing investments in certain brands, including Royal Velvet, Buffalo and Umbro. Though these investments would aid to the company s growth over the long-term, it would continue to dampen the liquidity of the company in the near term.

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Competition from Peers: The company faces severe competition from various domestic and foreign brands. Iconix Rampage brand competes with Guess in the category of mid-tier jeanswear; Joe Boxer competes with Hanes and Jockey while Badgley and Mischka compete with other couture apparel and bridal brands of Carolina Herrera and Oscar de la Renta in the luxury market. The brands compete in terms of fashion, quality, price and advertising. The company also competes with traditional apparel and consumer brands and with other brand management companies for acquisitions.

RECENT NEWS Iconix Brand Buys Remaining 50% Stake in China JV

Mar 17, 2015

Iconix Brand Group has acquired the remaining 50% interest in Iconix China from its joint venture partner Novel Fashion Brands Limited, owned by the Chou family, for $56.4 million. The acquisition was financed with $40.4 million cash and $16 million through the company's common stock. Iconix China was formed in Sep 2008 and has successfully launched nine brands with more than 900 standalone stores, shop-in-shops and counters throughout China. China has significant growth opportunities. Besides the above joint venture, Iconix s business strengthened in China through its three global brands, Peanuts, Umbro and Lee Cooper. The Peanuts brand has a strong diversified global licensing platform with over 700 licensing agreements, which position it well for strong growth in 2015 and 2016.

Iconix Completes Purchase of Strawberry Shortcake Brand

Mar 6, 2015

Iconix Brand Group has completed the acquisition of the Strawberry Shortcake brand from Clevelandbased American Greetings for $105 million in cash. American Greetings sells cards and wrapping paper and also owns characters like Care Bears and Holly Hobbie. The iconic Strawberry Shortcake character first showed up on greeting cards in 1980 and subsequently featured on products as varied as pajamas, cosmetics and food. Strawberry Shortcake is now a global brand with over 350 licensees and generates approximately 50% of its revenues from international markets. The acquisition of the Strawberry Shortcake brand, announced in early-Feb, is a strategic fit to Iconix, which is keen on expanding its presence in the entertainment business. Like Peanuts, the Strawberry Shortcake brand is also expected to help in expanding the Iconix entertainment platform with possible clothing, toys, TV shows and movie deals. In February, other than the purchase announcement of Strawberry Shortcake, Iconix Brand also announced the acquisition of the North American rights to the athletic brand PONY from Symphony Holdings, Limited for $37 million. This will boost its existing sports platform, which includes the Danskin, Starter and Umbro brands.

Iconix Beats on Fourth Quarter Earnings & Revenues; Raises EPS View

Feb 26, 2015

Iconix Brand Group reported solid fourth-quarter and full-year 2014 results, wherein both earnings and sales exceeded the respective Zacks Consensus Estimate on the back of increasing market share of its core brands and international expansion through joint ventures.

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Quarter in Detail The company reported fourth-quarter adjusted earnings of $0.56 per share. Adjusted earnings were ahead of the Zacks Consensus Estimate of $0.54 by 3.7% and increased 4% from the year-ago level. The upside can be attributed to increased revenues and lower outstanding share count owing to share buybacks. Total revenue of $112.4 million beat the Zacks Consensus Estimate of $110.0 million by 2.2% and also increased 7% year over year. Top-line growth can be attributed to growth in licensing revenues, which increased 16%, offsetting the decline in other revenues. Positive results across the Women's, Home and Entertainment businesses as well as international expansion aided the results. Strong performance by the acquired Peanuts brand, increasing market share of its core brands and international expansion through joint ventures contributed to sales growth. On a year-over-year basis, earnings before interest, taxes, depreciation and amortization (EBITDA) declined 16% to $60.1 million, while EBITDA margin declined to 45% from 57% in the prior-year quarter, due to growth in the Peanuts brand which operates at a lower average margin. Full-Year 2014 Results In 2014, Iconix reported adjusted earnings of $2.78 per share, which were ahead of the Zacks Consensus Estimate of $2.75 by 1.1% and increased 16% from the year-ago level. Earnings were within the company s guided range of $2.72 $2.77 per share. Total revenue of $461.2 million also beat the Zacks Consensus Estimate of $459.0 million by 0.5% and increased 7% year over year. Revenues were within the company s guided range of $455 $465 million. Financial Update Iconix exited the quarter with free cash flow of $46.3 million compared with $61.8 million at the end of the third quarter of 2014. The decline might be due to huge investments in its international business and increased marketing investments in certain brands, including Royal Velvet, Buffalo and Umbro. During 2014, Iconix repurchased 5 million shares for $193 million. Since initiating the share repurchase program in Oct 2011, the company has repurchased approximately 29.1 million shares, which represent approximately 40% of its shares outstanding. Guidance for 2015 Raised Following better-than-expected fourth-quarter and full-year 2014 results and the recent PONY and Strawberry Shortcake purchase deals, Iconix raised its earnings and revenue guidance for 2015. The company expects adjusted earnings in the range of $3.00 $3.15 per share, up from the earlier expectation of $2.90 $3.10. The company expects revenues in the range of $490 million to $510 million, up from the prior guidance of $485 million to $500 million. The company also provided free cash flow guidance in the range of $208 million to $218 million. Iconix anticipates improved top and bottom lines this year on the back of steady expansion in the domestic licensing business, rapid growth in the international business, the upcoming Peanuts movies and the benefits of the recently announced Strawberry Shortcake and PONY acquisitions.

Equity Research

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VALUATION Iconix s current trailing 12-month earnings multiple is 12.2x, representing a discount of 36.5% to the industry average of 19.2x. Over the last five years, Iconix s shares have traded in the range of 9.0x to 17.6x trailing 12-month earnings. Based on 2015 earnings estimate of $3.10, the stock is trading at 11.0x a 41.8% discount to the industry average of 18.9x. At the end of the fourth quarter of 2014, the P/B multiple of the stock was approximately 1.5x, a 46.4% discount to the industry average of 2.8x. The trailing 12-month ROE of the stock is 14.2%, which is same as the industry average. Our target price of $36.00 is based on approximately 11.6x our 2015 earnings estimate. On a P/B basis, the price target is based on a P/B multiple of approximately 1.84x.

Key Indicators

P/E F1

P/E F2

Est. 5-Yr EPS Gr%

P/CF (TTM)

P/E (TTM)

P/E 5-Yr High (TTM)

ICONIX BRAND GP (ICON)

11.0

10.3

15.0

8.7

12.2

17.6

9.0

Industry Average S&P 500

18.9 16.7

16.2 15.6

13.1 10.7

14.1 14.5

19.2 18.3

42.4 18.4

9.8 12.0

20.7 28.5 57.5 22.0

12.9 7.1 13.5 13.9

Steven Madden Ltd (SHOO) 19.9 16.9 15.0 19.1 21.5 Deckers Outdoor Corp (DECK) 15.6 14.1 14.0 17.9 15.9 Francesca s Holding Corp (FRAN) 17.0 15.7 21.2 11.9 18.2 Weyco Group Inc (WEYS) 13.8 16.8 TTM is trailing 12 months; F1 is 2015 and F2 is 2016, CF is operating cash flow

P/E 5-Yr Low (TTM)

P/B Last Qtr.

P/B 5-Yr High

P/B 5-Yr Low

ROE (TTM)

D/E Last Qtr.

Div Yield Last Qtr.

ICONIX BRAND GP (ICON)

1.5

2.1

0.8

14.2

1.3

0.0

7.8

Industry Average S&P 500

2.8 6.2

2.8 9.8

2.8 3.2

14.2 25.4

0.3

0.6 2.0

20.9

Equity Research

EV/EBITDA (TTM)

ICON | Page 6

Earnings Surprise and Estimate Revision History

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DISCLOSURES & DEFINITIONS The analysts contributing to this report do not hold any shares of ICON. The EPS and revenue forecasts are the Zacks Consensus estimates. Additionally, the analysts contributing to this report certify that the views expressed herein accurately reflect the analysts personal views as to the subject securities and issuers. Zacks certifies that no part of the analysts compensation was, is, or will be, directly or indirectly, related to the specific recommendation or views expressed by the analyst in the report. Additional information on the securities mentioned in this report is available upon request. This report is based on data obtained from sources we believe to be reliable, but is not guaranteed as to accuracy and does not purport to be complete. Because of individual objectives, the report should not be construed as advice designed to meet the particular investment needs of any investor. Any opinions expressed herein are subject to change. This report is not to be construed as an offer or the solicitation of an offer to buy or sell the securities herein mentioned. Zacks or its officers, employees or customers may have a position long or short in the securities mentioned and buy or sell the securities from time to time. Zacks uses the following rating system for the securities it covers. Outperform- Zacks expects that the subject company will outperform the broader U.S. equity market over the next six to twelve months. Neutral- Zacks expects that the company will perform in line with the broader U.S. equity market over the next six to twelve months. Underperform- Zacks expects the company will under perform the broader U.S. Equity market over the next six to twelve months. The current distribution of Zacks Ratings is as follows on the 1014 companies covered: Outperform - 15.3%, Neutral - 77.9%, Underperform 6.2%. Data is as of midnight on the business day immediately prior to this publication. Our recommendation for each stock is closely linked to the Zacks Rank, which results from a proprietary quantitative model using trends in earnings estimate revisions. This model is proven most effective for judging the timeliness of a stock over the next 1 to 3 months. The model assigns each stock a rank from 1 through 5. Zacks Rank 1 = Strong Buy. Zacks Rank 2 = Buy. Zacks Rank 3 = Hold. Zacks Rank 4 = Sell. Zacks Rank 5 = Strong Sell. We also provide a Zacks Industry Rank for each company which provides an idea of the near-term attractiveness of a company s industry group. We have 264 industry groups in total. Thus, the Zacks Industry Rank is a number between 1 and 264. In terms of investment attractiveness, the higher the rank the better. Historically, the top half of the industries has outperformed the general market. In determining Risk Level, we rely on a proprietary quantitative model that divides the entire universe of stocks into five groups, based on each th stock s historical price volatility. The first group has stocks with the lowest values and are deemed Low Risk, while the 5 group has the highest values and are designated High Risk. Designations of Below-Average Risk, Average Risk, and Above-Average Risk correspond to the second, third, and fourth groups of stocks, respectively.

Research Analyst

Sneha Nahata

Copy Editor

Debasmita Banerjee

Content Ed.

Shikha Kansal

QCA

Kinjel Shah

Lead Analyst

Sneha Nahata

Reason for Update

4Q14 Earnings

Equity Research

ICON | Page 8