Cherokee Global Brands Reports Revenue and Earnings Growth for the Second Quarter Fiscal Year 2015 Driven by New Brands and International Business Expansion

  • Second quarter revenues increased 17% to $8.8 million
  • Second quarter net income increased 16% to $2.3 million, or $0.27 per diluted share
  • Year-to-date revenues were up 20% to $18.7 million
  • Year-to-date net income increased 64% to $5.8 million, or $0.69 per diluted share

SHERMAN OAKS, Calif.--()--Cherokee Global Brands (NASDAQ: CHKE), a global marketer of style-focused lifestyle brands, today reported financial results for the second quarter Fiscal 2015 ended August 2, 2014.

Revenues for the second quarter increased 17% to $8.8 million, compared with $7.5 million in the prior-year period. The increase in revenues relates to the recent Tony Hawk signature brand acquisition and continued organic growth of the Cherokee Brand internationally.

SG&A expenses totaled $5.1 million, a 19% increase from $4.2 million in the prior-year period. The increase in SG&A was due primarily to expenses related to the recently acquired Tony Hawk Brand and additional marketing to support the Company’s brands.

Net income totaled $2.3 million, or $0.27 per diluted share, compared with $1.9 million, or $0.23 per diluted share, in the prior year period. For the six months ended August 2, 2014 net income totaled $5.8 million, or $0.69 per diluted share, compared with $3.6 million, or $0.42 per diluted share, in the prior year period.

“We are very pleased with our top- and bottom-line results for the first-half of Fiscal 2015,” said Cherokee Chief Executive Officer, Henry Stupp. “Cherokee Brand revenues for our key global partners in Asia (Nishimatsuya and RT Mart), Latin America (Comercial Mexicana and Tottus/Falabella), and Canada (Target) have all continued to perform solidly as well as our Liz Lange brand on HSN.”

Mr. Stupp, continued, “We fully expect the second half of Fiscal 2015 will continue to show positive developments for Cherokee Global Brands through the execution of our strategic growth plan including the identification of new brand acquisitions and organic growth geographically as well as via category expansion of our existing brands. We believe, with both our organic and acquisition growth, Cherokee has fully transitioned into a growth company, and therefore the Board has decided, following our upcoming September 15th dividend payment, to discontinue paying cash dividends. Instead, the Company plans on reinvesting the funds from operations to further our growth strategy, rapidly pay down debt and acquire new brands.”

At August 2, 2014, the Company had cash and cash equivalents of $4.1 million, compared to $3.6 million at February 1, 2014.

Conference Call

The Company will host a conference call today at 1:30 p.m. 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, September 18, 2014, 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: 13588233.

About Cherokee Global Brands

Cherokee Global Brands is a marketer and manager of a portfolio of fashion and lifestyle brands including Cherokee®, Carole Little®, Tony Hawk® and Hawk Brands®, Liz Lange® and Sideout®, in multiple consumer product categories and sectors around the world. The Company has license agreements with best-in-class retailers and manufacturers covering over 40 countries around the world including Target Stores (U.S. and Canada), Kohl’s (U.S.), Tesco (U.K., 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 2014, 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
Unaudited

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

 
      August 2,       February 1,
2014 2014
Assets
Current assets:
Cash and cash equivalents $ 4,091 $ 3,634
Receivables 8,168 6,056
Income taxes receivable 252
Prepaid expenses and other current assets 489 293
Deferred tax asset   239   239  
Total current assets 12,987 10,474
Trademarks, net 40,263 40,683
Deferred tax asset 1,310 1,678
Property and equipment, net 1,384 1,222
Other assets   52   54  
Total assets $ 55,996 $ 54,111  
 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and other accrueds $ 1,728 $ 2,206
Current portion of long term debt 7,308 6,991
Income taxes payable 255 212
Accrued dividends 422
Deferred revenue—current 55 94
Accrued compensation payable   544   277  
Total current liabilities   10,312   9,780  
Long term liabilities:
Long term debt 21,490 25,144
Income taxes payable 438 1,179
Other non-current   108   109  
Total liabilities   32,348   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, 8,430,166 issued and outstanding at August 2, 2014 and 8,403,500 issued and outstanding at February 1, 2014

168 167
Additional paid-in capital 21,815 21,069
Retained earnings/(deficit)   1,665   (3,337 )
Total stockholders’ equity   23,648   17,899  
Total liabilities and stockholders’ equity $ 55,996 $ 54,111  
 
 
CHEROKEE INC.
CONSOLIDATED STATEMENTS OF INCOME
Unaudited
(amounts in thousands, except per share amounts)
 
      Three Months ended       Six Months ended
August 2,       August 3, August 2,       August 3,
        2014       2013       2014       2013
 
Royalty revenues $ 8,764 $ 7,495 $ 18,725 $ 15,548
Selling, general and administrative expenses 4,818 3,833 9,380 8,799
Amortization of trademarks   233     406     466     812  
 
Operating income 3,713 3,256 8,879 5,937
 
Other income (expense):
Interest (expense) (212 ) (123 ) (452 ) (255 )
Interest income and other income (expense), net       14        

5

 
 
Total other income (expense), net  

(212

)

  (109 )   (452 )   (250 )
 
Income before provision for income taxes 3,501 3,147 8,427 5,687
 
Income tax provision   1,249     1,209     2,583     2,127  
 
Net income $ 2,252         $ 1,938         $ 5,844         $ 3,560  
 
Basic earnings per share $ 0.27         $ 0.23         $ 0.70         $ 0.42  
 
Diluted earnings per share $ 0.27         $ 0.23         $ 0.69         $ 0.42  
 
Weighted average shares outstanding:
Basic 8,414 8,393 8,405 8,393
 
Diluted 8,457 8,405 8,439 8,404
 
Dividends declared per share $ 0.05 $ 0.00 $ 0.10 $ 0.10
 

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