Cherokee Inc (NASDAQ: CHKE) is having an incredibly strong start to the trading session this morning, and for good reason. The company released its earnings results, exciting investors and sending the stock screaming for the top. Today, we’ll talk about:
- The financial results;
- what we’re seeing from CHKE stock; and
- what we’ll be watching for ahead.
CHKE Reports Financial Results
As mentioned above, Cherokee is having an incredibly strong start to the trading session this morning after reporting its financial results from the second quarter. Here’s what we saw from the report:
- Revenue – In terms of revenue, Chrokee announced that it had earned $7.1 million during the second quarter. While revenue was down significantly from the same quarter one year ago, the figure also came in nearly 20% ahead of analyst expectations.
- Earnings – When it comes to earnings, CHKE did not disappoint. During the quarter, the company reported a loss, adjusted for restructuring costs and non-recurring expenses, in the amount of $0.01 per share. Analysts were expecting that the company would generate a loss of $0.05 per share.
In a statement, Henry Stupp, CEO at CHKE, had the following to offer:
It has been a very productive first-half of fiscal 2019… We restructured and realigned our business operations, converted our remaining indirect sales business to a licensing model, shored up our financial and liquidity position, divested non-core assets, and positioned our brands and licensees for future growth. We enter the back half of fiscal 2019 with a streamlined organization, and importantly, an energized sales and marketing focus. We are encouraged by the performance of our expanded licensing network, which is delivering more brands across more categories and in more countries. While we have much work ahead of us, the team is delivering, and we are optimistic as we enter the second half of fiscal 2019.
\Our 360° platform is driving growth in new and exciting areas. Our unique approach enables us to flex both our owned, high-equity brands as well as design and develop exciting products for new and existing retail partners, further leveraging our brand development capabilities. The scalability, relevance and vision of our brands are leading us to be a more agile and responsive company than ever before. We are confident that this agility will translate into new revenue streams and increased stability in the future. Continued category, partner, channel, and geographic diversification will all remain priorities for our core brands, in addition to reviewing our portfolio for opportunities to divest non-core assets.
Through the successful re-financing of our debt facility in August, we were able to replace our former credit facility in its entirety through a new agreement with Gordon Brothers Finance Company and Gordon Brothers, and increase the participation interests of our subordinated lenders. The new facility increases our financial flexibility, adding over $5 million in liquidity which will support the advancement of our strategic objectives.
What We’re Seeing From The Stock
One of the first lessons that we learn when we start to work in the market is that it’s important to watch the news. After all, the news moves the market, and there are few bits that have the potential to lead to a positive move quite like positive earnings. In the case of Cherokee, that’s exactly what investors got. So, it comes as no surprise that they are excitedly sending the value of the stock to the top. Of course, our partners at Trade Ideas were the first to alert us to the gains. Currently (9:45), CHKE is trading at $1.14 per share after a gain fo $0.27 per share or 31.03% thus far today.
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What We’ll Be Watching For Ahead
Moving forward, the CNA Finance team will continue to keep a close eye on CHKE. In particular, we’re interested in following the story surrounding the company’s continued work to restructure. While the quarter was impressive, revenue was cut nearly in half year over year, which is a big concern. Nonetheless, we’ll continue to follow the story closely and bring the news to you as it breaks!
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