Iconix Brand Group has grown substantially in the past four years through an aggressive strategy of brand acquisition and a change in direction from operating company to brand management business. Up until 2004 the company operated two brands—Candle's and Bongo—and almost all production took place in-house. By the end of 2004 Iconix had licensed out all production of its brands, and by 2005 all income was in the form of licence revenues. Over the three years between November 2004 and November 2007, the company acquired a further 14 brand names and licensed out all production. The brand management model which Iconix employs is unique. It allows the company to concentrate on the value-added services of licensing and marketing, leaving responsibility for production to the licensee. This model brings about many advantages. In particular, the licence agreements which Iconix enters into include guaranteed minimum levels of royalty payments. Also, the model eliminates the need for inventories, and requires minimal working capital. As a result, Iconix has built up a large cashflow, which it has used to acquire more brands in order to increase its revenues and profits. Indeed, its net income doubled in both 2006 and 2007. Growth is expected to continue in the short to medium term—through further acquisitions, international expansion and product category expansion for each of its brands. Not surprisingly, revenue forecasts for 2008 show a 60% increase on 2007, and sustained long-term growth of 15%-20% per annum.
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