Earnings Review and Free Research Report: Cherokee Reported Better Than Expected Royalty Revenue

LONDON, UK / ACCESSWIRE / September 29, 2017 / Pro-Trader Daily has just published a free post-earnings coverage on Cherokee Inc. (NASDAQ: CHKE), which can be viewed by registering at http://protraderdaily.com/optin/?symbol=CHKE, following the Company’s release of its financial results on September 07, 2017, for the second quarter fiscal 2018. The Company’s total revenue increased 64.8% on a y-o-y basis. Our daily stock reports are accessible for free, and with those to look forward today you also will be signing up for a complimentary member’s account at:

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Earnings Reviewed

For three months ended July 29, 2017, Cherokee’s total revenue increased 64.8% to $13.96 million from $8.47 million in Q2 FY17. During Q2 FY18, the Company’s royalty revenue decreased 5.4% to $8.01 million from $8.47 million in Q2 FY17. The royalty revenue surpassed analysts’ expectations of $7.82 million.

During Q2 FY18, Cherokee’s gross profit increased 7.7% to $9.13 million from $8.47 million in Q2 FY17. For the reported quarter, the Company’s gross margin decreased 3460 basis points to 65.4% of revenue from 100% of revenue in Q2 FY17.

During Q2 FY18, the Company’s adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) decreased 66.2% to $1.19 million from $3.53 million in Q2 FY17. For the reported quarter, the Company’s adjusted EBITDA margin decreased 3310 basis points to 8.5% of revenue from 41.6% of revenue in Q2 FY17.

For the reported quarter, Cherokee’s selling, general, and administrative (SG&A) expenses increased 73.3% to $9.90 million from $5.71 million in Q2 FY17. The increase was primarily due to the operating expenses relating to the Hi-Tec portfolio of brands and the $1.8 million of integration related expenses. During Q2 FY18, the Company’s amortization expenses decreased 10.9% to $203,000 from $228,000 in Q2 FY17.

During Q2 FY18, Cherokee’s operating loss was $971,000 compared to operating income of $2.53 million in Q2 FY17. For the reported quarter, the Company’s adjusted operating income was $805,000 compared to $3.17 million in Q2 FY17. During Q2 FY18, the Company’s adjusted operating margin decreased 3100 basis points to 6% of revenue from 37% of revenue in Q2 FY17.

During Q2 FY18, Cherokee’s net loss was $4.63 million compared to net income of $1.52 million in Q2 FY17. For the reported quarter, the Company’s adjusted net loss was $589,000 compared to adjusted net income of $1.91 million in Q2 FY17. During Q1 FY18, Cherokee’s diluted EPS was negative $0.36 compared to positive diluted EPS of $0.17 in Q2 FY17. For the reported quarter, the Company’s adjusted diluted EPS was negative $0.05 compared to positive adjusted diluted EPS of $0.22 in Q2 FY17. Adjusted diluted EPS was below analysts’ expectations of $0.00.

Balance Sheet

As on July 29, 2017, Cherokee’s cash and cash equivalents decreased 56.2% to $3.67 million from $8.38 million in Q4 FY17.

During Q2 FY18, the Company’s receivable decreased 32.9% to $14.66 million from $21.87 million in Q4 FY17.

For the reported quarter, the Company’s net inventory decreased 57.8% to $661,000 from $1.57 million in Q4 FY17.

Outlook

For FY18, Cherokee expects gross profit to be in the range of $39.0 million to $41.0 million and adjusted EBITDA to be in the band of $10.0 million to $12.0 million.

Stock Performance

At the close of trading session on Thursday, September 28, 2017, Cherokee’s stock price declined 6.45% to end the day at $2.90. A total volume of 261.50 thousand shares were exchanged during the session, which was above the 3-month average volume of 152.69 thousand shares. At Thursday’s closing price, the stock’s net capitalization stands at $40.43 million.

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