Cherokee Inc. (NASDAQ:CHKE) Q1 2020 Earnings Conference Call - Final Transcript

Jun 18, 2019 • 04:30 pm ET


Cherokee Inc. (NASDAQ:CHKE) Q1 2020 Earnings Conference Call - Final Transcript


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Greetings and welcome to Cherokee Global Brands First Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Kimberly Esterkin, Director, Investor Relations.

Kimberly Esterkin

Thank you and good afternoon. Speaking today will be the Company's Chief Executive Officer, Henry Stupp; and Chief Financial Officer, Steve Brink.

Before I hand the call over to Management, please note that on this call certain information presented contains forward-looking statements. Forward-looking statements are neither a prediction nor a guarantee of future events or circumstances and are based on currently available market, operating, financial and competitive information and assumptions. Our actual results could differ in a material manner from those expressed in such forward-looking statements for any reason, including those listed in the Company's SEC filings. The Company assumes no obligation to update any such forward-looking statements. Please also note that past performance is not a guarantee of future results.

Further, this conference call include a discussion of non-GAAP financial measures as the term is defined in Regulation G. The most directly comparable GAAP financial measures and information reconciling these non-GAAP financial measures to the Company's financial results prepared in accordance with GAAP are included in the earnings release, which is posted on the Company's website at

And with that, I'll hand the call over to Cherokee Global Brands' Chief Executive Officer, Henry Stupp.

Henry Stupp

Thank you, Kim. And good afternoon, everyone. We appreciate your support on today's earnings call.

As we complete the first quarter fiscal year 2020 and enter into the second, we remain focused on delivering on our pledge to think like a retailer and connect with consumers. Even as retailers, strategies diverge significantly from the past in order to establish new and diversified revenue streams. Our ability to diversify our portfolio across geographies, customers, categories and consumer touch points along with our focus on driving profitable growth led to a 14% improvement in adjusted EBITDA and a 12% decline in SG&A year-over-year. And while our bottom line performance continues to improve due to cost saving measures, our royalty revenue for the quarter was somewhat lighter than anticipated, taking into effect non-renewed or expired licenses and the divestiture of Flip Flop Shops.

With that said, we've decided to adjust our guidance for the fiscal year. Although, we now have stronger control of our expenditures and profitability than ever before, macro forces namely the threat of tariffs and Brexit have resulted in lower top line growth. We think it prudent, therefore, to revise our guidance at this time and are lowering our revenue and EBITDA estimates for the fiscal year. Steve will get into the specifics later in the call.

Despite these market conditions, from an operational standpoint, Cherokee Global Brands continues to benefit from the combination of our portfolio of high equity brands and our platform of capabilities that