Cherokee reports Q2 GAAP net loss of 4.6 mn dollars

Consolidated second quarter revenues, including the contribution from Hi-Tec at Cherokee Global Brands, were 14 million dollars. On a year-over-year comparable basis, royalty revenues excluding Hi-Tec were 5.6 million dollars compared to 8.5 million dollars in the prior-year period due to the decrease in North America revenues related to the wholesale transition of the Cherokee brand in the US. GAAP net loss for the quarter totalled 4.6 million dollars or 0.36 dollar per diluted share, compared to GAAP net income of 1.5 million dollars or 0.17 dollar per diluted share, in the prior-year period.

“Having weathered a few headwinds during the first half of fiscal 2018, we remain focused on fully realizing upcoming opportunities through our strategic business model,” commented Henry Stupp, the company’s Chief Executive, in a media release, adding, “The financial integration of our Hi-Tec acquisition and filing delays presented challenges; however, with the support of new additions to our accounting team we are well positioned to make clear progress against our strategic goals.”

Review of Cherokee’s Q2 and H1 performance

During the quarter, the company said, some of the decrease was offset by global revenue increases, particularly in Asia, South America and South Africa. Hi-Tec revenues totalled 8.3 million dollars and included 5.9 million dollars in indirect product sales related to distribution and government contracts as well as 2.4 million dollars in royalty revenues stemming from new and existing licensing deals for the Hi-Tec portfolio of brands. Gross profit from Hi-Tec indirect product sales was 1.1 million dollars and is inclusive of 4.8 million dollars in cost of goods sold.

For the six month period, GAAP consolidated revenues were 25.1 million dollars compared to 19.2 million dollars in the prior-year period. Cherokee Global Brands revenues, excluding Hi-Tec, were 10.8 million dollars compared to 19.2 million dollars in the prior-year period.

GAAP operating loss for the quarter was 1 million dollars, compared with GAAP operating income of 2.5 million dollars in the prior-year period. GAAP operating loss for the six-month period totalled 3.1 million dollars compared with GAAP operating income of 6.8 million dollars in the prior-year period. Non-GAAP operating income for the quarter was 0.8 million dollars, compared with Non-GAAP operating income of 3.2 million dollars in the prior-year period. Non-GAAP operating income for the six-month period was 0.9 million dollars compared with 8.2 million dollars in the prior-year period.

For the six-month period, GAAP net loss was 7.9 million dollars or 0.61 dollar per diluted share compared to GAAP net income of 4.1 million dollars or 0.47 dollar per diluted share in the prior-year period.

Non-GAAP net loss for the second quarter totalled 0.6 million dollars or 0.05 dollar per diluted share compared to non-GAAP net income of 1.9 million dollars or 0.22 dollar per diluted share, in the prior-year period. For the six-month period, non-GAAP net loss was 1.5 million dollars or 0.11 dollar per diluted share compared to non-GAAP net income of 5 million dollars or 0.56 dollar per diluted share in the prior-year period.

Adjusted EBITDA was 1.2 million dollars for the second quarter, compared to 3.5 million dollars in the prior-year period. For the six-month period, adjusted EBITDA totalled 1.9 million dollars, compared to 8.9 million dollars in the prior-year period.

Cherokee updates fiscal 2018 outlook

The company updating its previously issued guidance for the fiscal year 2018 ending February 3, 2018 said that it now expects gross profit for the full fiscal year to be in the range of 39 - 41 million dollars, which is inclusive of royalty revenues from the Hi-Tec brand portfolio of approximately 12 million dollars and gross profit generated from indirect product sales of approximately 7 million dollars. Adjusted EBITDA for the full fiscal year is anticipated to be in the range of 10 - 12 million dollars.

Picture:Cherokee website

 

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