Cherokee slashes losses as restructuring pays off

By

Robin Driver

Published
Apr 24, 2019

Sherman Oaks, California-based lifestyle group Cherokee Global Brands announced a fourth-quarter net loss of $0.6 million on Tuesday, a significant improvement from the loss of $45.2 million it reported in the prior-year period, achieved thanks to the company’s successful restructuring efforts.
 

This progress was made despite falling revenues, which decreased 11% from $6.9 million to $6.1 million in the fourth quarter ended February 2, 2019. This decline was due largely to the expiration or non-renewal of a number of licensing agreements, which was partially offset by a 12% increase in sales in the company’s Hi-Tec brand portfolio, as well as by additional revenues resulting from a new multi-year product development and design agreement signed by Cherokee with a major Chinese retailer.
 
Overall, the company’s restructuring plans resulted in a reduction of 56% in its quarterly selling, general and administrative expenses, which totaled $3.1 million, down from $7.0 million in the equivalent period in the previous year. Savings were principally made in payroll, professional fees and general operating costs.

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Cherokee’s SG&A expenses for the full fiscal year 2019 also reduced significantly to $14.6 million, a 42% decrease from the $25.4 million spent by the company in the prior year.
 
Here too, these savings helped to ensure that the group narrowed its net loss to $12.3 million, down from $55.9 million in fiscal 2018, despite a 17% decrease in annual revenues from $29.4 million to $24.4 million.
 
“Fiscal 2019 was a year of significant milestones for Cherokee Global Brands,” said the company’s CEO Henry Stupp in a release. “We delivered on three strategic priorities, including restructuring our business operations, shoring up our financial and liquidity positions and aligning our brand portfolio for future growth.”
 
“Our diversified brand portfolio, coupled with our 360-degree platform of capabilities, continues to distinguish us in the marketplace. Our subsequent shift from a direct-to-retail licensing model to one that encompasses wholesale and retail licensing partnerships allows us to grow our owned brands, while also creating and developing brands and products for others,” he added.
 
In fiscal 2020, Cherokee currently expects to see revenues in the range of $26.0 million to $28.5 million.