Iconix Being Investigated by SEC

Iconix Brand Group, which owns a number of labels started in California, announced on Dec. 28 it received a formal order of investigation from the Securities and Exchange Commission.

The SEC is investigating the accounting done for forming certain joint ventures in China and Latin America. Iconix, based in New York, said it planned to fully cooperate with the SEC. News of the SEC investigation caused the company’s stock to plunge by 20 percent on Dec. 29.

The brand-management company has had a difficult year as revenues and profits have tumbled. Longtime Chief Executive Neil Cole, who founded the company in 2005, left on Aug. 7, months after the departure of Iconix’s chief financial officer, Jeff Lupinacci, and its chief operating officer, Seth Horowitz.

After a special committee of the company’s board conducted a review in November of the accounting treatment related to certain transactions, the company said it planned to restate historical financial statements for fiscal years 2013 and 2014 and the first half of 2015.

Iconix doesn’t believe the adjustments will affect fiscal 2013 but that operating income for fiscal 2014 will be reduced by $6 million. In addition, the company’s operating income for the first half of 2015 should increase by approximately $1.5 million.

Cooperating with the SEC has been expensive. The company said that during the third quarter of 2015 it spent $7.1 million on professional fees to pay for continuing correspondence with the SEC staff.

Iconix also revised its guidance for 2015. It now believes licensing revenue in 2015 will range from $370 million to $380 million instead of $410 million to $425 million.

Iconix’s brands include Ocean Pacific, Mossimo, Ed Hardy, Bongo, Badgley Mischka, Joe Boxer, Modern Amusement, Rampage, London Fog, Candie’s, Danskin, Fieldcrest, Waverly and Sharper Image.