Cherokee Q2 revenues decline, Target to end ties with the brand

Cherokee Global Brands reported decline in revenue of approximately 3 percent to 8.5 million dollars for the second quarter Fiscal 2016 ended August 1, 2015. compared with 8.8 million dollars in the prior-year period. The company has attributed the decrease in revenues to the increased strength of the US dollar and lower sales of Cherokee-branded products in the UK and Canada.

Meanwhile, the company has also announced that Target Corporation will not renew the license of the Cherokee brand in the US, which will expire on January 31, 2017.

“The transitions in our business continue to present exciting opportunities. We now have a full-spectrum Cherokee platform partnership with Sears Canada after transitioning from a previous partner. We have achieved a similar scale of success with Argos in both the UK and Ireland after transitioning from another partner. Retail moves fast, and agility is the hallmark of Cherokee Global Brands' approach as we actively identify and engage with desirable new licensing partners that fully leverage our platform capabilities,” said Henry Stupp, Chief Executive Officer.

To establish new channels for the US market

The Target license, including the existing royalty obligations, will remain in effect and continue to generate revenues to Cherokee in fiscal 2016 and 2017. The Company does not expect the non-renewal to have any material impact on Cherokee Global Brands' revenue in fiscal 2016. The company will establish new channels for Cherokee branded products in the US in fiscal 2018. The license agreement with Target for the Liz Lange brand remains in place for now.

“Target Corporation has been a great partner for nearly 20 years. Moving forward, Cherokee Global Brands is in a strong position to enter into new platform partnerships that will expand Cherokee's presence in the US,” said Stupp, adding, “Large-scale retailers and wholesalers have frequently expressed interest in the Cherokee brand based on its multi-category relevance and high consumer awareness.”

Second quarter financial highlights

The reduction in sales, according to the company were due to the timing related to the termination of the Tescorelationship and the Argos launch in the UK this past July and in Canada due to the Target Canada bankruptcy earlier this year with the Sears Canada launch slated for February 2016.

Operating income totaled 3.1 million dollars, a decrease of 15 percent, compared with 3.7 million dollars in the prior-year period. Operating margin was 37 percent versus 42 percent in the prior year period. For the six months ended August 1, 2015, operating margin was 48 percent versus 47 percent in the prior year period. Net income totaled 1.9 million dollars, or 0.22 dollar per diluted share, compared to 2.3 million dollars, or 0.27 dollar per diluted share, in the prior-year period. For the six months ended August 1, 2015 net income totaled 5.5 million dollars, or 0.62 dollar per diluted share, compared with 5.8 million dollars, or 0.69 dollar per diluted share, in the prior year period.