Apex Global Brands sales decline 17% in Q3
Sherman Oaks, California-based Apex Global Brands, whose portfolio includes the Cherokee, Hi-Tec, Magnum and Interceptor brands, reported a 17% decrease in its third-quarter sales on Tuesday due to ongoing disruption caused by the Covid-19 pandemic.
For the third quarter ended October 31, 2020, the group’s revenues totaled $4.1 million, down from $4.9 million in the same period in the previous year. This decline reflected a decrease in sales of the products of Apex’s licensees due to the coronavirus crisis, as well as the non-renewal of certain of the company’s licenses.
Net loss for the quarter was $6.0 million, or a loss of $10.58 per diluted share, compared to a net loss of $6.8 million, or $12.35 per diluted share, in the prior-year period. The company was able to narrow its loss despite falling sales thanks in part to its cost-saving measures, which resulted in a 28% decrease in its selling general and administrative expenses year over year.
Furthermore, through the CARES Act, Apex received an income tax benefit of $9.4 million over the first nine months of the fiscal year, which also contributed to the improvements in its bottom line.
“Consistent with the overall retail sector, we continued to see challenges in the third quarter,” said Apex CEO Henry Stupp in a release. “Given the current macro conditions, we continue to make efforts to rationalize our costs and improve the efficiencies of our operations.”
Year to date, Apex’s revenues totaled $12.5 million, decreasing 20% from $15.5 million in the first nine months of the previous year. Net loss for the period was $9.2 million, or a loss of $16.34 per diluted share, compared to a net loss of $10.4 million, or $19.32 per diluted share, in the prior-year period.
The company also revealed that it has renegotiated its credit agreement with its senior secured lender, extending forbearance through December 31, 2020, or March 31, 2021, if certain milestones are met.
Looking to the future, Apex has not provided financial guidance for the fourth quarter or the full fiscal year. The company does, however, anticipate that, under the current circumstances, it may become increasingly difficult to obtain license renewals or new licensees, an issue that would put significant pressure on the group’s business model.
Further highlighting that its forbearance agreement will accelerate the maturity date of its senior secured debt if certain criteria are not met, Apex admitted that “there is substantial uncertainty about the potential success of the company’s efforts to find strategic alternatives to provide liquidity to refinance the debt on or prior to the maturity date.”
“The Covid-19 pandemic continues to impact our business. While our licensees and business partners are adapting, it remains difficult to predict the near-term impact, let alone the long-term impact, on our business,” explained Stupp.
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