Cherokee Global Brands is moving away from a reliance on DTR licensing agreements toward a business mix that also includes licenses with wholesale manufacturers and making its design services available for retailers’ private label programs. While DTRs remain an “important tactic” in international markets for retailers lacking design and sourcing capabilities, it is not “the full solution anymore,” says CEO Henry Stupp. The company is working to expand distribution of its namesake brand, which is being sold through 3,000 stores and online in the U.S. In Europe, Cherokee’s DTR with the German grocery chain Lidl generated $1 million in royalty revenue in Q2 ended Aug. 4; the company also has an U.S. agreement with Stargate Apparel for Cherokee brand boys and girl’s sportswear and fashion clothing.

In August, Cherokee announced an agreement with Gordon Brothers that gives it a new $40 million three-year term loan and potentially broadens licensing for its brands. In addition to “potentially partnering” with Gordon Brothers on brand acquisitions, the companies will expand their reach by “leveraging” their respective “design platforms and business models,” Stupp said.

Cherokee’s net loss in Q2 ended August 4 doubled to $9 million from $4.6 million a year earlier. Net revenue declined 10 percent to $7 million, due largely to the ending of Tony Hawk (Kohl’s) and Liz Lange (Target) DTRs, CFO Steve Brink said. Cherokee also sold its Flip Flop Shops retail chain to Bearpaw Holdings in June, a business that generated $2.9 million in revenue in Q2 a year ago, Brink said.

Royalties from the Cherokee brand increased 9.5 percent to $3.53 million, while those from the Hi-Tec, Magnum and Interceptor labels rose 33.8 percent to $2.99 million. A Hi-Tec shop recently launched at Liberty of London; a “fully fixtured” version is being developed for other European retailers. The Interceptor brand continues with DTR sales of men’s work and tactical boots at Walmart in the U.S. and will add accessories in the fall, Stupp said. Walmart also is adding Interceptor to it Canada stores in the fall.

Royalty revenue from the Tony Hawk brand declined 90 percent to $145,000, due largely to the ending of its DTR with Kohl’s. Cherokee has reached new wholesale distribution pacts for Tony Hawk products, but whether those agreements will offset the loss of Kohl’s “has yet to be determined,” Cherokee said in an SEC filing.

Cherokee’s revenue in the U.S. dropped 59.4 percent to $1.5 million while revenue from Europe increased 70.5 percent to $3.5 million. In Latin America, revenue jumped 37.7 percent to $1 million, and there was a 29.1 percent decrease to $814,000 in Asia.

Contact:

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