Cherokee Global Brands reported that first-quarter sales increased with the help from the Flip Flop Shops, while net income fell.
Net income for the quarter fell to $2.6 million, or 29 cents a diluted share, down from $3.6 million, or 41 cents, a year ago. Earnings were reduced by 5 cents as a result of the legal, due diligence and business development costs that totaled $0.7 million. The FactSet estimate was for earnings per share of 39 cents. This miss caused the stock to drop over 8 percent in after-hours trading to $12.89.
Revenue for the three months ending April 30 increased 4.4 percent to $10.7 million from $10.2 million a year earlier. This beat the FactSet estimate for sales of $10.4 million. Cherokee was helped with the acquisition of Flip Flop Shops, which it acquired in October 2015. There was also an increase in Cherokee brand royalties of 3 percent.
“In addition to the positive sales results for the quarter, we were pleased to announce new direct-to-retail partnerships and the signing of a broad base of domestic licensees for our namesake Cherokee brand,” said chief executive officer Henry Stupp. “We are excited about the upcoming summer launch of the Tony Hawk brand with Wal-Mart Canada which will feature the most comprehensive assortment of Tony Hawk product anywhere in the world.”
Cherokee said its Tony Hawk sales at Kohl’s were flat. On a positive note, the Liz Lange brand was renewed by Target. Target had said it was winding down its relationship with Cherokee, but so far there has been little change. Cherokee said its products are still selling well in Target.
The company also recently revealed a launch with Cobian footwear in the Flip Flop Shops. Cherokee is also exploring placing stores in travel locations. Cherokee is launching an e-commerce version of Flip Flop Shops in the second half of the year.
The company did not give any forward guidance, but did say it was considering more acquisitions. The company plans on placing its products in over 800 bricks-and-mortar stores by spring 2017.