Cherokee Global Brands: Q4 net loss widens to 45.6 mn dollars

Revenues at Cherokee Global Brands for the fourth quarter were 6.9 million dollars from continuing operations, while net loss of 45.6 million dollars or 3.26 dollars per diluted share, the company said, reflected the impact of a one-time impairment charge of 35.5 million dollars against 11.1 million dollars or 0.96 dollar last year. For the full year, revenues were 29.4 million dollars from continuing operations, while net loss was 56 million dollars or 4.17 dollars per diluted share, including the one-time impairment charge against 7.9 million dollars or 0.84dollar per share. Adjusted EBITDA reached 3.9 million dollars compared to 14.9 million dollars in the prior year.

“2018 was a difficult year as we continued transitioning our namesake brand from our legacy partner and admittedly under-estimated the challenges of integrating Hi-Tec, a vast global operating business, into our historical licensing model,” said Henry Stupp, the company’s CEO in a media release, adding, “We converted our Hi-Tec indirect sales business to a fully licensed model, which resulted in a 60 percent reduction in headcount and a significantly improved cost structure.”

Cherokee’s performance across its core brand segments

Cherokee brand revenues for the fourth quarter were 2.4 million dollars, a decrease of 2.2 million from the fourth quarter in the prior year. Cherokee brand revenues for fiscal 2018 were 11.1 million dollars compared to 23 million dollars in the prior year. Cherokee said, for both the fourth quarter and fiscal 2018 the year-over-year declines reflect the transition of Cherokee brand’s US business from a direct-to-retail model, or DTR to a wholesale model.

The company has also announced a new partnership with Lidl, a German global discount supermarket chain, to launch a broad family-assortment of Cherokee lifestyle products in Lidl stores throughout Western Europe and Scandinavia in fall 2018.

Tony Hawk brand revenues for the fourth quarter were 1.4 million dollars, consistent with the same quarter of the prior year. For fiscal 2018, revenues were 5.5 million dollars compared to 5.1 million dollars in the prior year. Effective January 2018, the company completed the conversion of its Hi-Tec indirect sales to a licensed royalty model, with the International Brand Group assuming the legacy Hi-Tec distribution business in Latin America, Asia Pacific and Eastern Europe. Hi-Tec brand revenues for the fourth quarter were 2.7 million dollars compared to 1.2 million dollars in the fourth quarter of the prior year, which reflected only a partial quarter of revenue contribution from the company’s December 2017 acquisition of Hi-Tec, while Hi-Tec brand royalty revenues for fiscal 2018 were 9.7 million dollars.

Flip Flop Shops and other brand revenues for the fourth quarter were 0.4 million dollars compared to 1.2 million dollars in the fourth quarter of the prior year, while for the full year, brand revenues were 3.1 million dollars compared to 4.7 million dollars in the prior year.

Cherokee Global Brands updates FY19 outlook

Cherokee Global Brands said that it is updating its guidance for its fiscal year ending February 2, 2019, which accounts for the transition of Hi-Tec’s indirect sales to a licensing model. Revenues are anticipated to range from 29 to 31 million dollars, adjusted EBITDA is anticipated to range from 8 to 10 million dollars and SG&A run rate is expected to approximate 21 million dollars.

Picture:Cherokee Global Brands website