Cherokee Global Brands, the American owner of the Hi-Tec, Tony Hawk and other brands, has lowered its financial projections, citing the difficult retail climate in the U.S. as well as Canada, where Sears has gone bankrupt.
The challenging retail climate is affecting Hi-Tec as it is transitioning to a new licensing mode. Its integration has been completed, but the management complained that its acquisition a year ago has been “more costly and time-intensive” than originally predicted.
Expenses of $2.2 million related to Hi-Tec's integration caused the group to suffer a net loss of $2.5 million for the quarter. Excluding this and other exceptional charges, Cherokee would have reported a net profit of $740,000, slightly higher than $700,000 in the year-ago period.
Including indirect product sales of $3.1 million for Hi-Tec, Cherokee reached consolidated revenues of $11 million during the quarter. Revenues from royalties increased to $7.9 million from $6.5 million.
Hi-Tec contributed a gross profit of $4.9 million in Cherokee's third quarter, ended on Oct. 28. Hi-Tec's Magnum and Interceptor brands accounted for licensing revenues of $3.2 million. The management also mentioned a very successful launch of Hi-Tec men's and women's apparel and accessories in Europe. The product lines will be introduced in the U.S. and Canada toward the end of next summer or in early autumn.
The company recently signed an agreement for the distribution of its Cherokee brand of apparel and accessories in about 30 European countries.