Cherokee Global Brands’ net loss nearly tripled to $2.5 million in Q3 ended Oct. 28 as its licensing program for the Cherokee brand expanded “slower’ than expected in North America, CEO Henry Stupp told analysts. Revenue in the quarter increased 70% to $11 million with the purchase earlier this year of footwear company Hi-Tec and its Magnum and Interceptor brands.

Cherokee brand-related revenue declined 35% in the quarter to $2.67 million, as the company’s licensing strategy shifted in the U.S. from retail DTRs to a more traditional wholesale model. Overall royalty revenue rose 21.3% to $7.88 million, including $3.2 million from the newly acquired Hi-Tec brands. The acquisition of Hi-Tec was “more costly and time intensive” than expected but will generate licensing revenue from new agreements in 2018, CFO Jason Bolling said. The Hi-Tec brand will be licensed into men’s and women’s apparel starting in fall 2018, Stupp said.

Target previously generated the bulk of Cherokee’s royalty revenue, producing $10.4 million in the year ended Jan. 28, the last year of the Cherokee DTR.

Cherokee’s Tony Hawk brand revenue rose 10% in Q3 to $1.4 million and retail sales were up 22% from a year ago at Walmart Canada, company executives said. The brand’s retail sales in Canada increased 20%, but fell short of Cherokee’s forecast given Sears Canada’s woes. Cherokee’s DTR with Kohl’s for Tony Hawk and Hawk Signature apparel ends in January. Cherokee gained the Tony Hawk DTR in acquiring the brand in 2014, but sales at Kohl’s haven’t met forecasts, company executives have said. Kohl’s accounted for 15% of Cherokee’s revenue in the nine-month period ended Oct. 28. Meanwhile, Q3 revenue from the Liz Lange maternity brand dropped to $67,000 from $577,000.

Cherokee also reached an agreement last month with lender Cerberus, waiving defaults of covenants governing its credit facility during periods prior to July 29. In addition to the revised credit agreement, Cherokee underwent a strategic review with an eye toward reducing expenses, including consolidation of Cherokee’s and Hi-Tec’s back office operations.

Contact:

Cherokee Global Brands, Henry Stupp, CEO, 818-908-9868 x200, henrys@cherokeeusa.com