Cherokee Global Brands Reports Strong Fourth Quarter and Full Year Fiscal Year 2015 Financial Results

  • Q4 Revenues increase 18% to $7.5 million
  • Q4 Net Income increases 75% to $1.7 million, or $0.19 per diluted share
  • Full Year Revenues increase 22% to $35.0 million
  • Full Year Net Income increases 62% to $9.8 million, or $1.15 per diluted share
  • Cherokee Brand license agreement with Argos for the UK and Ireland; brand to debut in Stores Fall 2015

SHERMAN OAKS, Calif.--()--Cherokee Global Brands (NASDAQ: CHKE), a global marketer of style-focused lifestyle brands, today reported financial results for the fourth quarter and full year fiscal 2015 ended January 31, 2015.

Revenues for the fourth quarter increased 18% to $7.5 million, compared with $6.4 million in the prior-year period. The increase in revenues primarily relates to Tony Hawk signature brands and continued organic growth of Cherokee and Liz Lange branded products domestically and internationally.

SG&A expenses totaled $4.8 million, from $5.0 million in the prior-year period.

Operating income totaled $2.7 million, an improvement of 89%, compared with $1.4 million in the prior-year period. Operating margin was 36% versus 22% in the prior year period, demonstrating the significantly increased leverage in the business.

Net income totaled $1.7 million, or $0.19 per diluted share, compared with $1.0 million, or $0.11 per diluted share, in the prior-year period.

“Fiscal 2015 was a very positive year for Cherokee Global Brands during which we successfully executed against our long-term business strategy by growing both organically and through acquisitions. Revenues for the full year improved 22% and EPS increased nearly 60% on a year-over-year basis. In addition, we continued to carefully manage our expenses, generating improved operating and EBITDA leverage.”

Mr. Stupp continued, “International growth of the Cherokee brand is where we saw the majority of our organic growth in Fiscal 2015. We were able to successfully expand our namesake brand in the international marketplace by utilizing our proprietary 360 degree turnkey solution. With Cherokee’s high brand awareness in the UK, and the availability of our product development, marketing assets, and globally approved supply chain, Argos will be able to launch Cherokee branded products for the entire family online, in catalog and at more than 750 stores across the UK and Ireland this fall. Additionally, we are very confident that we will be able to ensure the availability of Cherokee branded product for adults and kids with a new retail partner in Canada prior to our year end.

“Looking back over the past year, we are very proud of the progress we have made. We remain on the right path to expand and develop our entire brand portfolio globally. In Fiscal 2016, we will continue to focus on executing our strategic plan while keeping our retail partners’, our shareholders’, and our employees’ interests front of mind,” Mr. Stupp concluded.

At January 31, 2015, the Company had cash and cash equivalents of $7.6 million, compared to $3.6 million at February 1, 2014.

Full Year Fiscal 2015 Financial Results

For the twelve months ended January 31, 2015 revenues increased 22% to $35.0 million, compared with $28.6 million in the prior-year period. SG&A expenses totaled $19.6 million, a 5% increase from $18.6 million in the prior-year period.

Operating income totaled $15.4 million, an improvement of 54%, compared with $10.0 million in the prior-year period. Operating margin was 44% versus 35% in the prior-year period.

Net income totaled $9.8 million, or $1.15 per diluted share, compared with $6.1 million, or $0.72 per diluted share, in the prior-year period.

Conference Call

The Company will host a conference call today at 1:30 pm. PT / 4:30 p.m. ET. A slide presentation will accompany the prepared remarks and has been posted along with the webcast link on Cherokee’s website.

To participate in the call, please dial (877) 407-0784 (U.S.) or (201) 689-8560 (International) ten minutes prior to the start time. The earnings call will also be broadcast live over the Internet and can be accessed on the Investor Relations section of the Company’s Web site at http://www.cherokeeglobalbrands.com.

For those unable to participate during the live broadcast, a replay will be through Thursday, April 30, at 8:59 p.m. PT / 11:59 p.m. ET. To access the replay, dial (877) 870-5176 (U.S.) or (858) 384-5517 (International) and use conference ID: 13601297.

About Cherokee Global Brands

Cherokee Global Brands is a global marketer and manager of a portfolio of Fashion and Lifestyle brands including Cherokee®, Carole Little®, Tony Hawk® Signature Apparel and Hawk Brands®, Liz Lange® and Sideout®, in multiple consumer product categories and sectors around the world. The Company has license agreements with premier retailers and manufacturers covering over 50 countries and 7,000 retail doors plus online business around the world including: Target Stores (U.S.), Kohl’s (U.S.), Argos & Sports Direct (UK, Ireland, and certain Central European countries), RT-Mart (Peoples Republic of China), Pick ‘n Pay (South Africa), Falabella (Chile, Peru and Colombia), Arvind Mills (India and certain Middle Eastern countries), Shufersal LTD. (Israel), Comercial Mexicana (Mexico), Eroski (Spain), Nishimatsuya (Japan), Magnit (Russia), Landmark Group’s Max Stores (certain Middle East and North Africa countries), and the TJX Companies (U.S., Canada and Europe).

Statements included within this news release may contain forward-looking statements for purposes of the safe harbor provided by the Private Securities Litigation Reform Act of 1995. When used, the words “anticipates,” “believes,” “expects,”“may,”“should,” and similar expressions are intended to identify such forward-looking statements. Forward-looking statements included in this press release (including, without limitation, express or implied statements regarding potential future business development) involve known and unknown risk and uncertainties that may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such risks and uncertainties, include, but are not limited to, the effect of global economic conditions, the financial condition of the apparel and retail industry, adverse changes in licensee or consumer acceptance of products bearing the Company’s brands, the ability and/or commitment of the Company’s licensees to design, manufacture and market Cherokee, Tony Hawk, Hawk, Liz Lange, Completely Me, Sideout and Carole Little branded products, the Company’s dependence on Target for most of the Company’s revenues and the Company’s dependence on its key management personnel. The risks included here are not exhaustive. A further list and description of these risks, uncertainties and other matters can be found in the Company’s Annual Report on Form 10-K for Fiscal Year 2015, and in its periodic reports on Forms 10-Q and 8-K.

Given these risks and uncertainties, you should not place undue reliance on forward-looking statements as a prediction of actual results. The Company disclaims any intent or obligation to update any of the forward-looking statements contained herein to reflect future events and developments.

CHEROKEE INC.

CONSOLIDATED BALANCE SHEETS

(amounts in thousands, except share and per share amounts)

 

January 31,
2015

February 1,
2014
Assets
Current assets:
Cash and cash equivalents $ 7,581 $ 3,634
Receivables 7,425 6,056
Income taxes receivable 919 252
Prepaid expenses and other current assets 431 293
Deferred tax asset   412   239  
Total current assets 16,768 10,474
Trademarks, net 39,821 40,683
Deferred tax asset 858 1,678
Property and equipment, net 1,165 1,222
Other assets   48   54  
Total assets $ 58,660 $ 54,111  
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and other accrued payables $ 1,720 $ 2,206
Current portion of long term debt 7,308 6,991
Income taxes payable 212
Deferred revenue—current 17 94
Accrued compensation payable   1,430   277  
Total current liabilities 10,475 9,780
Long term liabilities:
Long term debt 17,836 25,144
Income taxes payable 391 1,179
Other non-current   121   109  
Total liabilities   28,823   36,212  

Commitments and Contingencies

Stockholders’ Equity

Preferred stock, $.02 par value, 1,000,000 shares authorized, none issued and
outstanding

Common stock, $.02 par value, 20,000,000 shares authorized, 8,558,411 shares
issued and outstanding at January 31, 2015 and 8,403,500 issued and
outstanding at February 1, 2014

171 167
Additional paid-in capital 24,024 21,069
Retained earnings (deficit)   5,642   (3,337 )
Total stockholders’ equity   29,837   17,899  
Total liabilities and stockholders’ equity $ 58,660 $ 54,111  
 

CHEROKEE INC.

CONSOLIDATED STATEMENTS OF INCOME

(amounts in thousands, except per share amounts)

 
Three Months ended Twelve Months ended
January 31, 2015 February 1, 2014 January 31, 2015 February 1, 2014
 
Royalty revenues $ 7,538 $ 6,382 $ 34,968 $ 28,614
Selling, general and administrative expenses 4,606 4,669 18,648 17,630
Amortization of trademarks 233 283 932 995
 
Operating income 2,699 1,430 15,388 9,989
 
Other income (expense):
Interest expense (198 ) (149 ) (854 ) (520 )
Interest income and other income (expense), net (1 ) 2
 
Total other income (expense), net (198 ) (150 ) (854 ) (518 )
 
Income before income taxes 2,501 1,280 14,534 9,471
 
Income tax provision 840 329 4,714 3,397
 
Net income $ 1,661 $ 951 $ 9,820 $ 6,074
 
Basic earnings per share $ 0.20 $ 0.11 $ 1.17 $ 0.72
 
Diluted earnings per share $ 0.19 $ 0.11 $ 1.15 $ 0.72
 

Weighted average common shares
outstanding attributable to common
stockholders:

Basic 8,481 8,396 8,429 8,394
 
Diluted 8,680 8,420 8,543 8,409
 
Dividends declared per share $ 0.00 $ 0.00 $ 0.10 $ 0.30

Contacts

Cherokee Global Brands
Jason Boling, CFO
818-908-9868
or
Addo Communications
Patricia Nir/Kimberly Esterkin
310-829-5400

Contacts

Cherokee Global Brands
Jason Boling, CFO
818-908-9868
or
Addo Communications
Patricia Nir/Kimberly Esterkin
310-829-5400