Cherokee Global in hot water

By

Jennifer Braun

Published
Jun 15, 2018

Cherokee Global Brands could potentially be in hot water, the company announced on Thursday. 

 
The global brand marketing platform, which owns brands like Cherokee, Carole Little, Tony Hawk Signature Apparel and Hawk Brands, Liz Lange, and Sideout, is facing liquidity challenges with recurring operating losses and negative cash flows.
 
Looking at the next twelve months, it says that it “has concluded that material uncertainties regarding its ability to meet its commitments to lenders raise significant doubt as to the ability of Cherokee Global Brands to continue as a going concern.” 

Still, the company said its will negotiate with its lender and with other potential sources of capital to address its debt. 
 
“We continue to take actions to resolve our liquidity challenges, and we’re optimistic that our efforts to resolve the noncompliance with our existing credit agreement will result in an acceptable outcome,” said Henry Stupp, chief executive officer, in a news statement. 
 
On Thursday, the company reported financial results for its first fiscal quarter ended May 5, 2018, including a double-digit drop in revenue to $5.4 million.

Operating loss amounted to $0.2 million, while the company recorded a net loss of $2.7 million, or $0.20 per diluted share. 

Earlier this month, Cherokee Global announced the sale of its franchise retail chain Flip Flop Shops to Bearpaw Holdings, LLC, where proceeds from the sale will go towards paying Cherokee's long term debt.
 
“With the sale of Flip Flop Shops complete, we look forward to leveraging our more focused platform to drive profitable growth within our existing brand portfolio and partners while building awareness and traction among new partners.”
 
“With this in mind, we are pleased to report that momentum with our Hi-Tec portfolio continues to accelerate – with licensed revenues increasing 58% year-over-year,” added Stupp.  

“It is increasingly apparent that our strategy to globalize Hi-Tec beyond footwear into a full family, lifestyle brand is proving successful.”
 
As part of the company’s restructuring efforts, it will also be cutting staff and lowering operating expenses. 
 
For fiscal 2019, revenues are anticipated to be in the range of $25 to $27 million.

Cherokee currently maintains license agreements with leading retailers and manufacturers that span approximately 80 countries and approximately 20,000 retail doors plus ecommerce.