- Prachi Singh |
Apex Global Brands, for its third quarter of fiscal 2020, reported revenues of 4.9 million dollars, a decrease of 16 percent compared to the same quarter in the prior year. On a year-to-date basis, revenues were 15.5 million dollars for the first nine months, a decrease of 15 percent reflecting decreases in royalties from the company’s Cherokee, Hi-Tec, Magnum and Interceptor brands and non-renewal of the company’s Cherokee license in South Africa at the end of fiscal 2019 and the disposition of the Flip Flop Shops franchise business in June 2018.
“Retail and industry headwinds continued to challenge our growth and profitability during the third quarter, resulting in an EBITDA debt covenant miss, to which our senior lender has agreed to forbear its rights under the senior secured credit facility through February 28, 2020,” said Henry Stupp, Chief Executive Officer of Apex Global Brands in a statement, adding, “The weakening of the British pound, increased U.S. tariffs and the impact of Brexit continued to hamper our progress in core markets. While recent news related to the elimination of tariffs and the strengthening of the British Pound are positives for our industry, these macroeconomic conditions have impacted our ability to return to revenue growth and increased profitability in the near term.”
Weaker British pound and euro negatively impacts Q3 revenues
The company said, recent strengthening of the British pound compared to the U.S. dollar will have a positive effect on certain of the company’s royalties, but during its third quarter, revenues continued to be negatively affected by the weaker British pound and euro in relation to the US dollar in comparison to the prior year. The company added that soft retail climate across Europe, the economic uncertainty regarding Brexit, global trade wars and increased tariffs on footwear and apparel also negatively affected the company’s revenues during the quarter.
Decreases in revenues were partially offset by revenues from the company’s new design services agreement with Walmart China. Although revenues from this agreement were lower than anticipated during the third quarter, retail performance in China has been trending positively.
As of November 2, 2019, Apex Global Brands had 45 continuing license agreements in approximately 140 countries.
Apex Global Brands reports Q3 net loss
The company further said that operating loss for the third quarter was 3.9 million dollars compared to 2.1 million dollars operating income in the same quarter of the previous year. Operating loss for the first nine months was 1.7 million dollars compared to 0.5 million dollars for the first nine months of the prior year.
Net loss from continuing operations was 6.8 million dollars for the third quarter or a loss of 1.23 dollars per diluted share compared to net income of 0.1 million dollars or 1 cent per diluted share. Net loss from continuing operations for the first nine months was 10.4 million dollars or a loss of 1.93 dollars per diluted share compared to 11.7 million dollars or 2.50 dollars per diluted share, in the prior year.
Apex Global Brands said, adjusted EBITDA decreased to 1.7 million dollars for the third quarter compared to 2.6 million dollars in the prior year, while adjusted EBITDA for the first nine months decreased to 5.4 million dollars compared to 6.7 million dollars for the first nine months of fiscal 2019.
The company is updating its guidance for its fiscal year ending February 1, 2020 to account for the continuing negative impact on its royalty revenues of economic uncertainty, Brexit, foreign currency fluctuations and other factors. Full year revenues are now anticipated to be in the range of 21 million dollars to 21.5 million dollars; and adjusted EBITDA is now expected to be in the range of 7.8 million dollars to 8.2 million dollars.