In reporting its latest quarterly results, Apex Global Brands said it is evaluating strategic alternatives, although its lenders agreed to extend their forebearance on a $40 million loan for three more months through March 31 in exchange for $2.5 million in additional fees.
Lower licensees’ sales due to the pandemic, couple with the non-renewal of certain Cherokee brand licensing deals, weighed on the revenues of the group, previously called Cherokee Global Brands. The parent company of Hi-Tec, Magnum and Tony Hawk saw its total net revenues fall by 17 percent to $4.1 million for its third fiscal quarter, ended on Oct. 30. E-commerce remained a bright spot.
Despite the lower revenues, the company’s adjusted Ebitda increased by 3 percent to $1,759,000. Apex also managed to narrow its quarterly net loss to $6.0 million from $6.8 million, thanks to cost-saving measures, which resulted in a 28 percent decrease in SG&A expenses. The company said it is also achieving increased efficiencies through the introduction of newer technologies, such as 3D product development and virtual brand showrooms, which make remote working more effective.
In addition, through the CARES Act, Apex received an income tax benefit of $9.4 million over the first nine months of the fiscal year, which also contributed to the lower quarterly loss, which included a goodwill impairment charge of $4.6 million versus a charge of $5.0 million last year.
The management has not provided any guidance for the full year due to the uncertainty surrounding the pandemic. It said that while it continues to seek new licensees for its portfolio of lifestyle brands - it recently signed several new licensing and distribution contracts for Hi-Tec with partners in Europe, North America and Asia - it may become increasingly difficult to obtain license renewals or new licensees going forward, an issue that would put significant pressure on the group’s business model.
