Lapping it up

With a Snoopy film in the works, fund managers bet on Iconix Brand Group Inc, which owns 80 per cent of the rights to the characters

By: Reuters

Mumbai | July 11, 2014 01:00 AM IST

5 min read

Snoopy

Fund managers are making a big bet on Snoopy, Lucy and Charlie Brown. With a big-budget Peanuts film set to appear in theaters next year, an unusually high number of U.S. mutual funds have been buying shares of Iconix Brand Group Inc, the little-known company that owns 80 per cent of the rights to the characters. The number of new funds owning shares swelled 36 percent last quarter, according to data from fund tracker Morningstar. That is a high number for a company with a market value of $1.9 billion and a slowing core business, fund experts say. Few consumers have ever heard of the New York-based company, though they are likely to be familiar with its roster of 35 brands, ranging from mass-market staples like Joe Boxer and Ed Hardy to Cannon linens and Material Girl, the line of apparel and accessories from Madonna and her daughter. But with many of its U.S. retail partners, such as Target, Macy’s and Sears Holdings Corp, struggling with falling traffic and weak consumer demand, Iconix is looking elsewhere to expand. “With what is happening in America we don’t see large growth there over the next couple of years, but we do see stability,” Chief Executive Neil Cole, the brother of fashion designer Kenneth Cole, told analysts after the company reported its quarterly results in April.

Peanuts Brand

Should the Peanuts movie prove to be a hit, it could help Iconix double its revenues, which hit $433 million in 2013, Cole told analysts. The company declined to comment on this story. Already, the brand has paid some dividends: Walt Disney Co’s ABC network renewed its long-standing contract to air the popular Peanuts holiday specials 18 months before it came due. Iconix recognised $17 million of the $21 million contract in the first quarter, which helped push revenue up 11 per cent to $116.1 million and non-diluted adjusted earnings per share to 72 cents, a 33 per cent increase from the same time last year. There is no telling how well the movie will be received, of course. For every hit like The Lego Movie, that has brought in $256.7 million at the U.S. box-office, according to Box Office Mojo, there has been a film like 2013’s The Lone Ranger, whose $89 million in U.S. box-office take paled against an estimated cost of $215 million. Though the percentage that Iconix could reap from next year’s film was not disclosed, the Peanuts brand should command a premium, said Charles W. Grimes, a Norwalk, Connecticut, attorney who specialises in character licensing and has worked with properties including Archie comics and Disney characters. It would “not be inconceivable” for the company to get an upfront fee of $10 million or more for the theatrical release of the film, plus additional fees once the box-office draw topped certain milestones, Grimes said. Iconix in all likelihood would get between 7 and 14 per cent of film’s merchandise tie-ins, such as T-shirts or toys, he said. Sesame Street Workshop, the non-profit company that owns the license to Elmo and the other Sesame Street characters, made $46.5 million from licensing in the year that ended June 30, 2013, according to its most recent financial statement. “Peanuts has a huge growth ahead of it,” said Cliff Greenberg, who manages $5.5 billion in the Baron Small Cap fund and has been buying shares of Iconix on dips in expectations that it will continue to expand its entertainment division. Chris Terry, an analyst at Dallas-based Hodges Capital, said his firm began buying shares approximately six months ago on expectations that the Peanuts license will pay off.

Risks Ahead

There is caution, however, in some quarters. The lack of clear numbers regarding Peanut’s contribution gives Steve Marotta, an analyst at C.L. King & Associates who covers the stock, pause. “The company is a bit of black box,” he said. He estimates that Peanuts is the most important individual brand to the company. Nevertheless, he has a “buy” rating on the stock, and a target price of $47, slightly above the median price of $46.50 among analysts tracked by Thomson Reuters.

Bong-throwing case against actress Amanda Bynes is dismissed

A case against American actress Amanda Bynes for possessing marijuana and throwing a bong out of an apartment window last year was dismissed by a New York judge. The prosecution and her lawyer Gerald Shargel agreed earlier this year that the case should be resolved by an adjournment and possible dismissal if she stayed out of trouble for six months and met court demands.
“We demonstrated that she was in compliance and as we expected the case was dismissed and sealed,” Shargel said. The 28-year-old actress did not appear at the hearing at Manhattan Criminal Court.
Bynes was arrested last May after an employee of the New York City building in which she has an apartment reported to police that someone had been smoking marijuana in the building.
She was taken into custody after she threw a bong, which is used for smoking marijuana, out a window of the 36th floor apartment.
Bynes gained fame as the 13-year-old star of The Amanda Show on the Nickelodeon TV network and in the 2010 film Easy A. Earlier this year she pleaded no contest to a 2012 misdemeanour charge of reckless driving with an alcohol component in Los Angeles. She was given three years’ probation and told to enter an alcohol education programs for three months.

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