Why Iconix Brand Group Inc. Stock Tanked 22% in April

What: Iconix Brand Group's stock dove 22% lower in April, according to S&P Capital IQ data.

ICON data by YCharts.

So what: The drop came in response to news that yet another high-ranking member of the brand management company's executive leadership was suddenly leaving the business: Chief Operating Officer Seth Horowitz resigned in mid-April. Horowitz's exit closely follows the late March resignation of Chief Financial Officer Jeff Lupinacci, who himself only held the job for one year following the resignation of CFO Warren Clamen on March 18, 2014.

While management team exits don't by themselves demonstrate anything fundamentally wrong with a business, it's distressing news that executives aren't sticking around -- particularly within Iconix's financial accounting division.

Iconix books revenue by licensing its brands to partners around the world. But the company also profits from selling pieces of its global intellectual property, such as the Umbro or London Fog names, to other businesses. Because the value of those individual pieces is difficult to measure, profit from the property sales depends heavily on management's accounting judgment. Thus, investors must trust in the executive team. That's hard to do when management turnover is so high.

Now what: Iconix announced worse than expected first-quarter results on April 29. Sales fell 18% and profit came in at $0.54 per share, compared to the $0.68 per share that Wall Street was expecting. However, management reiterated its full-year guidance for sales of $500 million, which would represent 8% growth over 2014. Earnings should come in at $3.07 per share, compared to last year's $3.15 per share result.

The article Why Iconix Brand Group Inc. Stock Tanked 22% in April originally appeared on Fool.com.

Demitrios Kalogeropoulos owns shares of Apple. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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