Iconix Group, which owns the Danskin brand, announced on Monday that Walmart will not renew its brand license beyond January 2019, which Iconix said will ding the Danskin royalty revenue by $15.5 million in 2018.
That could make it "unlikely" that Iconix will be in compliance with certain financial debt terms in 2018, the company warned, adding that it has launched discussions with lenders for relief. The news drove Iconix shares down more than 60%.
Danskin will continue to be distributed to leading retailers including Lord & Taylor, Costco and T.J. Maxx, according to a company press release.
Iconix insists that the Walmart loss will, longer term, "provide an opportunity to relaunch and expand the core Danskin brand in other venues."
But the brand company has lost a few key distribution outlets in recent years. Target discontinued sales of its Mossimo brand and Walmart previously ended sales of its OP and Starter brands. Also on Monday, Iconix said that the Starter activewear brand will be sold exclusively through Amazon.
Target has replaced the Merona and Mossimo lines with new labels, A New Day and Goodfellow & Co., aimed at reviving its "cheap chic" image. Similar revamps to its kids apparel and home decor lines — Cat & Jack and Pillowfort — have performed well in recent quarters.
That may be Walmart’s hope for a Danksin replacement, according to Judge Graham, chief marketing officer at Ansira. Certainly the athleisure market that Danskin serves remains competitive.
"Walmart has been making major changes recently in an attempt to survive the chaotic retail landscape and compete with major e-commerce retailer Amazon," Graham told Retail Dive in an email, pointing to its acquisitions of Jet, Modcloth and Bonobos. "In addition, the retailer has completely restructured and streamlined its organizational structure to increase efficiency. I believe, in its state of major change, Walmart took a look at its relationship with Danskin and could be possibly entertaining the idea of owning an in-house brand as a potentially better, more lucrative option for the company itself."
That would give Walmart more control and potentially more profit because all of the sales would go directly to the retailer, according to Graham. "With the athleisure trend continuing to grow, Walmart is trying to stay on top of consumer trends, giving its customers the styles they want, while taking a bigger piece of the pie for itself," he said.
Walmart hasn’t fared as well as Target in its private-label efforts, however. A decade ago the retail giant installed design teams in New York City in an attempt to produce more fashionable apparel and home goods. But Walmart stumbled in those efforts, which were widely seen as contributing to a sales drop that had the big box retailer retreating from the program.