• First quarter GAAP revenues of $10.7 million
  • Cherokee brand royalties increased 3% globally
  • First quarter GAAP net income totaled $2.6 million, or $0.29 per diluted share
  • Liz Lange Maternity license with Target Corporation renewed

SHERMAN OAKS, Calif., June 09, 2016 (GLOBE NEWSWIRE) -- Cherokee Global Brands (NASDAQ:CHKE), a global marketer of style-focused lifestyle brands, today reported financial results for the first quarter ended April 30, 2016.

"In addition to the positive sales results for the quarter, we were pleased to announce new direct-to-retail partnerships and the signing of a broad base of domestic licensees for our namesake Cherokee brand. We see these developments as strong indicators of the strength of our brand portfolio and the agility that our 360-degree platform brings to our partners," noted Henry Stupp, chief executive officer.

"We are pleased with the pace with which we are onboarding new retail partners and wholesale licensees as we transition our namesake Cherokee brand domestically. Through these partnerships, Cherokee will expand into more categories and realize significantly higher royalty contributions going forward. The acceleration of new domestic licensee partnerships is particularly exciting as it allows us to drive multiple revenue streams and further diversify our platform. We expect to launch the Cherokee brand across multiple categories in both national and regional brick and mortar stores and through e-commerce beginning Spring 2017."

"We are excited about the upcoming summer launch of the Tony Hawk brand with Walmart Canada which will feature the most comprehensive assortment of Tony Hawk product anywhere in the world.  In addition, the planned rollout of additional Flip Flop Shops franchise locations will build scale and further synergize our brand portfolio. Our recently announced launch with Cobian footwear for our Everyday California brand, which will launch within Flip Flop Shops, is a great example of how our brands logically support one another."

"We are embracing an unprecedented opportunity to diversify our brand portfolio, expand our category reach and grow our global distribution and I am confident that we are well positioned to build upon this positive momentum throughout the remainder of fiscal 2017," Mr. Stupp concluded.

First Quarter Fiscal 2017 Financial Results

GAAP revenues of $10.7 million increased 4.4% as compared to $10.2 million in the prior-year period.  The increase in GAAP revenues principally reflects the revenue contribution of Flip Flop Shops, which the Company acquired in October 2015, in addition to an increase of 3% in worldwide Cherokee brand royalties.

Selling, general and administrative expenses were $6.4 million, or 60% of GAAP revenues, compared to $4.4 million, or 43% of GAAP revenues, in the prior-year period. The $2.0 million increase in SG&A was primarily related to an increase in legal and due diligence expenses related to potential acquisitions, an increase in business development expenses related to the identification and establishment of new brand licensees in the U.S., an increase in stock based compensation and expenses associated with the franchising of the Flip Flop Shops brand, which was acquired in October 2015.      

Operating income totaled $4.3 million, or 40% of GAAP revenues, which is down from $5.8 million, or 57% of GAAP revenues, in the prior-year period. 

GAAP net income totaled $2.6 million, or $0.29 per diluted share, and included the aforementioned legal and due diligence and business development costs totaling approximately $0.7 million, or 7% of GAAP revenues, which reduced diluted earnings per share by an estimated $0.05. This compares to $3.6 million, or $0.41 per diluted share, in the prior-year period.

At April 30, 2016, the Company had cash and cash equivalents of $5.1 million, compared to $6.5 million at January 30, 2016.  Net debt totaled $16.3 million and the Company's leverage ratio was 1.6.

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 Global Brands' 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 website at http://www.cherokeeglobalbrands.com.

For those unable to participate during the live broadcast, a replay will be available through Thursday, June 16, 2016 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: 13637676.

About Cherokee Global Brands

Cherokee Global Brands is a global brand marketing platform that manages a growing portfolio of fashion and lifestyle brands including Cherokee®, Carole Little®, Tony Hawk® Signature Apparel and Hawk Brands®, Liz Lange®, Everyday California®, Sideout®, ále by Alessandra® and Flip Flop Shops®, a leading franchise retail chain, across multiple consumer product categories and retail tiers around the world. The Company currently maintains license and franchise agreements with leading retailers and manufacturers that span over 50 countries in 9,000 retail locations. Its retail, franchise and e-commerce platform partnerships include: Target Stores (U.S.), Kohl's (U.S.), Sears Canada (Canada), Walmart (Canada), Argos & Sports Direct (UK and Ireland), Flip Flop Shops® (U.S., Canada, Caribbean, Middle East and South Africa), RT-Mart (People's Republic of China), Pick 'n Pay (South Africa), Falabella (Chile, Peru and Colombia), Arvind Mills (India), Shufersal LTD. (Israel), Comercial Mexicana (Mexico), Nishimatsuya (Japan), Landmark Group's Max Stores (certain Middle East and North Africa countries), Reliance Trends Stores (India), Ahold (Czech Republic) 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, Liz Lange, Completely Me, Tony Hawk and Hawk Brands, Sideout, Everyday California and Carole Little branded products, the Company's dependence on Target for most of the Company's GAAP 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 2016, 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)
               
    April 30,   January 30,  
    2016   2016  
Assets              
Current assets:              
Cash and cash equivalents   $  5,099   $  6,534  
Receivables      10,892      7,365  
Income taxes receivable      223      707  
Prepaid expenses and other current assets      460      425  
Total current assets      16,674      15,031  
Intangible assets, net      52,984      53,195  
Deferred tax asset      1,001      1,136  
Property and equipment, net      1,068      1,151  
Other assets      36      35  
Total assets   $  71,763   $  70,548  
Liabilities and Stockholders' Equity              
Current liabilities:              
Accounts payable and other accrued payables   $  2,479   $  2,195  
Current portion of long term debt      8,471      8,456  
Deferred revenue—current      464      479  
Accrued compensation payable      720      891  
Total current liabilities      12,134      12,021  
Long term liabilities:              
Long term debt      12,939      15,068  
Other non-current      1,402      1,388  
Total liabilities      26,475      28,477  
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, 8,720,012 shares issued and outstanding at April 30, 2016 and 8,720,012 issued and outstanding at January 30, 2016      174      174  
Additional paid-in capital      28,458      27,822  
Retained earnings      16,656      14,075  
Total stockholders' equity      45,288      42,071  
Total liabilities and stockholders' equity   $  71,763   $  70,548  

 
CHEROKEE INC.
CONSOLIDATED STATEMENTS OF INCOME
Unaudited
(amounts in thousands, except per share amounts)
               
    Three Months Ended  
    April 30,   May 2,  
    2016   2015  
Royalty revenues   $  10,678     $  10,230    
Selling, general and administrative expenses      6,176        4,230    
Amortization of intangible assets      226        210    
Operating income      4,276        5,790    
Other income (expense):              
Interest expense      (197 )      (176 )  
Income before income taxes      4,079        5,614    
Income tax provision      1,498        2,043    
Net income   $  2,581     $  3,571    
Net income per common share attributable to common stockholders:              
Basic earnings per share   $  0.30     $  0.42    
Diluted earnings per share   $  0.29     $  0.41    
Weighted average common shares outstanding attributable to common stockholders:                          
Basic      8,720        8,565    
Diluted      8,833        8,761    

 
Investor Contact:Cherokee Global BrandsJason Boling, CFO818-908-9868Addo CommunicationsPatricia Nir310-829-5400

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