What are the projected costs of the partnership, including marketing and licensing fees, and how will they affect profitability?

Projected partnership costs

• Licensing fee: In a co‑branding deal of this type, the licensor (Uncrustables) usually receives a royalty of 5 %–10 % of net sales of the co‑branded line. Assuming Sunday Swagger will price the limited‑edition apparel at the upper‑mid range ($80–$150 per unit) and expects an initial sell‑through of 30 k units in the first quarter, the royalty would translate to $120 k–$240 k in the launch period.
  
• Marketing spend: A joint‑marketing push—social‑media influencer bursts, paid‑media, in‑store POP and cross‑promotion on Uncrustables’ packaging—typically runs at $0.5 – $1 million for a 3‑month rollout for a brand of Sunday Swagger’s size. This includes creative production, media buying, and event‑sampling costs.

Impact on profitability

• Margin compression: The royalty cuts the gross margin on the co‑branded SKU by roughly 5 %–10 % and the added $0.5–1 M marketing outlay further erodes net margin. For a product line that historically enjoys a 45 % gross margin, the partnership‑adjusted margin would fall to ~38 %–42 % on the co‑branded items.
• Revenue uplift vs. cost: The Uncrustables brand brings strong consumer awareness and a “fun‑factor” premium that can lift unit volume by 20 %–30 % versus a standard Sunday Swagger drop. If the incremental volume generates an extra $1.5 M in gross profit, the net incremental profit after licensing and marketing would still be positive (≈$200 k–$300 k) in the first quarter, assuming the brand‑lift targets are met.
• Bottom‑line outlook: As long as the partnership drives the projected volume lift, the modest royalty and marketing outlay will be more than offset, resulting in a net profit expansion of 3 %–5 % for the quarter. However, if sales fall short of the 30 k‑unit baseline, the fixed licensing and marketing costs will turn the co‑branded line into a short‑term drag on earnings.

Trading implication

• Short‑term catalyst: The announcement is a positive catalyst for Sunday Swagger (ticker SJM). Expect a modest price bump (≈3 %–5 %) as analysts upgrade the revenue outlook pending the launch.
• Risk: The key risk is volume underperformance; monitor early sales data and any revisions to the royalty rate. If the partnership fails to hit the 20 %–30 % uplift, the fixed costs could compress margins and pressure the stock.
• Action: For a neutral‑to‑bullish stance, consider a small‑position long ahead of the first sales window (next 4–6 weeks) with a stop just below the current support level to guard against a miss on the volume targets.