Cherokee’s Earnings Down but Beat Expectations

Cherokee Global Brands reported quarterly earnings that beat analyst estimates, attributing the gain in part to the recent acquisition of retailer Flip Flop Shops. The Sherman Oaks fashion licensing company on Thursday reported net income of $1.4 million (16 cents a share) for the fiscal fourth quarter ending Jan. 30, compared to net income of $1.7 million (19 cents a share) for the year ago quarter. Revenue increased by 4 percent to $7.8 million. Analysts on average expected net income of 13 cents on revenue of $7.37 million, according to Thomson Financial Network. The company attributed the revenue gain in part to the contribution of Flip Flop Shops, a specialty footwear chain that Cherokee acquired last October and has expanded both domestically and internationally using the franchise model. Cherokee also made arrangements with new U.S. licensees for its Cherokee brand, a big feat considering it will lose its Target Corp. contract for U.S. stores in February. Earlier this year Cherokee announced new license agreements with four fashion companies – M. Hidary & Co., a casual and sportswear manufacturer in New York; Bentex Group in Vernon, which produces clothes for newborns and children; New York-based H.I.S. International Group, which specializes in apparel for children; and Dreamwave Apparel, a swimwear and sleepwear distributor in New York. Each apparel company will begin distributing Cherokee branded products to specialty and mass retailers by February when the Target Corp. contract officially ends. For the year, Cherokee reported net income of $8.4 million (95 cents a share), down about 14 percent from the previous year. Revenue was $34.7 million, down about 1 percent. “Reflecting on the fourth quarter and full year, we were pleased with our ability to successfully navigate through the many changes that impacted our business,” said Henry Stupp, Cherokee chief executive. “We enter fiscal 2017 with a strong, unlevered balance sheet that will allow us to capitalize on prudent acquisitions while continuing to drive organic growth, particularly in the U.S. as we move forward with our licensing partners for our namesake Cherokee brand.” Results were announced after market close. Shares closed up 15 cents or 1 percent to $16.77 on the Nasdaq.