Cherokee Global Brands Reports Revenue and Earnings Growth for the Second Quarter Fiscal Year 2015 Driven by New Brands and International Business Expansion

SHERMAN OAKS, Calif.--(BUSINESS WIRE)--

Cherokee Global Brands CHKE, a global marketer of style-focused lifestyle brands, today reported financial results for the second quarter Fiscal 2015 ended August 2, 2014.

Revenues for the second quarter increased 17% to $8.8 million, compared with $7.5 million in the prior-year period. The increase in revenues relates to the recent Tony Hawk signature brand acquisition and continued organic growth of the Cherokee Brand internationally.

SG&A expenses totaled $5.1 million, a 19% increase from $4.2 million in the prior-year period. The increase in SG&A was due primarily to expenses related to the recently acquired Tony Hawk Brand and additional marketing to support the Company's brands.

Net income totaled $2.3 million, or $0.27 per diluted share, compared with $1.9 million, or $0.23 per diluted share, in the prior year period. For the six months ended August 2, 2014 net income totaled $5.8 million, or $0.69 per diluted share, compared with $3.6 million, or $0.42 per diluted share, in the prior year period.

“We are very pleased with our top- and bottom-line results for the first-half of Fiscal 2015,” said Cherokee Chief Executive Officer, Henry Stupp. “Cherokee Brand revenues for our key global partners in Asia (Nishimatsuya and RT Mart), Latin America (Comercial Mexicana and Tottus/Falabella), and Canada (Target) have all continued to perform solidly as well as our Liz Lange brand on HSN.”

Mr. Stupp, continued, “We fully expect the second half of Fiscal 2015 will continue to show positive developments for Cherokee Global Brands through the execution of our strategic growth plan including the identification of new brand acquisitions and organic growth geographically as well as via category expansion of our existing brands. We believe, with both our organic and acquisition growth, Cherokee has fully transitioned into a growth company, and therefore the Board has decided, following our upcoming September 15^th dividend payment, to discontinue paying cash dividends. Instead, the Company plans on reinvesting the funds from operations to further our growth strategy, rapidly pay down debt and acquire new brands.”

At August 2, 2014, the Company had cash and cash equivalents of $4.1 million, compared to $3.6 million at February 1, 2014.

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's 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 Web site at http://www.cherokeeglobalbrands.com.

For those unable to participate during the live broadcast, a replay will be through Thursday, September 18, 2014, 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: 13588233.

About Cherokee Global Brands

Cherokee Global Brands is a marketer and manager of a portfolio of fashion and lifestyle brands including Cherokee^®, Carole Little^®, Tony Hawk® and Hawk Brands®, Liz Lange^® and Sideout^®, in multiple consumer product categories and sectors around the world. The Company has license agreements with best-in-class retailers and manufacturers covering over 40 countries around the world including Target Stores (U.S. and Canada), Kohl's (U.S.), Tesco (U.K., Ireland and certain Central European countries), RT-Mart (Peoples Republic of China), Pick ‘n Pay (South Africa), Falabella (Chile, Peru and Colombia), Arvind Mills (India and certain Middle Eastern countries), Shufersal LTD. (Israel), Comercial Mexicana (Mexico), Eroski (Spain), Nishimatsuya (Japan), Magnit (Russia), Landmark Group's Max Stores (certain Middle East and North Africa countries), 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, Tony Hawk, Hawk, Liz Lange, Completely Me, Sideout and Carole Little branded products, the Company's dependence on Target for most of the Company's 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 2014, 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)
				August 2,					February 1,
				2014					2014
Assets
Current assets:
Cash and cash equivalents				$	4,091				$	3,634
Receivables					8,168					6,056
Income taxes receivable					—					252
Prepaid expenses and other current assets					489					293
Deferred tax asset					239					239
Total current assets					12,987					10,474
Trademarks, net					40,263					40,683
Deferred tax asset					1,310					1,678
Property and equipment, net					1,384					1,222
Other assets					52					54
Total assets				$	55,996				$	54,111
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and other accrueds				$	1,728				$	2,206
Current portion of long term debt					7,308					6,991
Income taxes payable					255					212
Accrued dividends					422					—
Deferred revenue—current					55					94
Accrued compensation payable					544					277
Total current liabilities					10,312					9,780
Long term liabilities:
Long term debt					21,490					25,144
Income taxes payable					438					1,179
Other non-current					108					109
Total liabilities					32,348					36,212
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, 8,430,166 issued and outstanding at August 2, 2014 and 8,403,500 issued and outstanding at February 1, 2014					168					167
Additional paid-in capital					21,815					21,069
Retained earnings/(deficit)					1,665					(3,337	)
Total stockholders' equity					23,648					17,899
Total liabilities and stockholders' equity				$	55,996				$	54,111

CHEROKEE INC.
CONSOLIDATED STATEMENTS OF INCOME
Unaudited
(amounts in thousands, except per share amounts)
				Three Months ended												Six Months ended
				August 2,						August 3,						August 2,						August 3,
				2014						2013						2014						2013
Royalty revenues				$	8,764					$	7,495					$	18,725					$	15,548
Selling, general and administrative expenses					4,818						3,833						9,380						8,799
Amortization of trademarks					233						406						466						812
Operating income					3,713						3,256						8,879						5,937
Other income (expense):
Interest (expense)					(212	)					(123	)					(452	)					(255	)
Interest income and other income (expense), net					—						14						—						5
Total other income (expense), net					(212	)					(109	)					(452	)					(250	)
Income before provision for income taxes					3,501						3,147						8,427						5,687
Income tax provision					1,249						1,209						2,583						2,127
Net income				$	2,252					$	1,938					$	5,844					$	3,560
Basic earnings per share				$	0.27					$	0.23					$	0.70					$	0.42
Diluted earnings per share				$	0.27					$	0.23					$	0.69					$	0.42
Weighted average shares outstanding:
Basic					8,414						8,393						8,405						8,393
Diluted					8,457						8,405						8,439						8,404
Dividends declared per share				$	0.05					$	0.00					$	0.10					$	0.10