Apex Global Brands Inc
Q4 2018 Earnings Call Transcript

Published: 20 Apr 2018

[Operator:]

Greetings, and welcome to Cherokee Global Brands Fourth Quarter Fiscal 2018 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded and the company will not be taking questions. I would now like to turn the conference over to your host, Laura Bainbridge of Addo Investor Relation. Please go ahead.

[Laura Bainbridge:]

Thank you and good afternoon. Speaking today will be the company's Chief Executive Officer, Henry Stupp; and Chief Financial Officer, Steve Brink. You can find accompanying slides for today's call on Cherokee's Investor Relations website. 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 reasons, 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 includes a discussion of non-GAAP financial measures as that 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 www.cherokeeglobalbrands.com. And with that, I'll hand the call over to Cherokee's Chief Executive Officer, Henry Stupp.

[Henry Stupp:]

Thanks, Laura, and good afternoon everyone. It’s a pleasure to speak with you today and update you on the many positive recent developments at Cherokee Global Brands. I’ll get to our corporate highlights in a moment, but first I am pleased to introduce Steve Brink who joined us as Chief Financial Officer in January. On behalf of our Board of Directors in Cherokee Global Brands, we couldn't be more thrilled to have him on the team. Steve has served in several senior management positions with both public and private global apparel companies. He’s a proven financial leader, with an extensive industry experience. As we look towards our next phase of growth, Steve's track record of scaling global brands and extensive M&A experience will prove invaluable. Steve hit the ground running at the beginning of the year and has been heads down ever since, shoring up our financial controls and reviewing our financial plans. He’s quickly established himself as a capable and forward thinking leader within our financial organization, as you'll hear for yourself in a few moments. Turning our attention to corporate developments. It’s been some time since we last spoke, and I'm pleased to share several business highlights and accomplishments since our last quarter. Knowing that store growth is no longer a given, and that further consolidation attrition will be an everyday retail reality, we embarked on a mission to build Cherokee Global Brands into a diversified global enterprise. Along the way, we have navigated our share of hurdles, including a disruptive US retail environment and the loss of a legacy partner for the Cherokee brand in the United States. Still, we've remained steadfast in our mission to balance our portfolio, secure key partnerships and identify new revenue streams that will drive the business forward. I am pleased that despite strong headwinds, Cherokee Global Brands is today more diversified than ever before across categories, geographies, channels, business models and consumer touch points. We’ve built a strong foundation that will broaden our customer base and introduce new revenue streams for years to come. While our financial results have been disappointing as we transition to new partnerships and business models, we’re on track with several foundational goals, including our ongoing global expansion. Refining our domestic licensee base and completing an important and highly complex global acquisition, all of which we’re executing in a challenging retail environment. Despite these gains, we know we still have work to do, and we're confident that the steps we're taking now will drive growth for Cherokee Global Brands for years to come. Specifically, our increased focus on financial controls, our continuing emphasis on improving liquidity and unlocking the potential of our high growth trends. I'll discuss these actions in more detail. On the financial front, Steve and our accounting team, has introduced additional controls to improve our financial and accounting practices. Over the last year, we’ve bolstered our financial leadership team and we are taking a more disciplined approach to financial planning and revenue forecasting. Steve will share more detail on this shortly. Turning to our business platform. We have the unique dual premise of portfolio and platform, which represents major points of market differentiation and allows us to flex our capabilities to navigate industry shifts and support our partners’ priorities. Our 360 degree platform will continue to drive the goals that we have set for our portfolio of high equity brands. On the brand front, we have fully integrated the Hi-Tec portfolio of brands, and eliminated the indirect sales of Hi-Tec products through distributors. I’ll share more on this in a minute. In keeping with our focus on diversification, we’re aggressively pursuing new revenue opportunities for the Hi-Tec portfolio, primarily through geographic and category expansion. For example, early on, we identified the rapidly growing casual lifestyle segment as a major opportunity and to that end, we're pleased that our expansion into apparel and accessories is well underway. We also see the casualization of fashion building momentum on a global scale, and we are well positioned to take advantage as we focus on parlaying Hi-Tec’s legacy footwear business into multi-category lifestyle opportunities. To align with the high value we place on agility, we've also taken steps to focus Hi-Tec from a business model perspective. In this fast paced retail environment, maintaining an indirect sales business proved to be unnecessarily burdensome for our business model. So we’re pleased to have transitioned away from it in favor of the full licensing model that is our core strength. International Brand Group, led by long term Hi-Tec Executive Ed van Wezel, will take over the Hi-Tec indirect sales and distribution business. So it is in good hands and well positioned to scale, as we focus our attention on licensing expansion. This has allowed us to further our goal of streamlining operations, focusing our resources, lowering our SG&A and reducing head count. We are already seeing concrete outcomes from this transition, including a 60% reduction in headcount and significantly improved cost structure. At the same time, we're looking at streamlining our portfolio and have clearly defined our strategic brand priorities. Our dual focus is on scaling our high growth brands, while preserving and protecting brands that are core to our overall portfolio. We’ll explore opportunities to divest brands that no longer align with these priorities, with any sale of assets further improving our liquidity while reducing debt. And lastly, we are better leveraging our platform to drive growth with our existing brand portfolio and partners, while making us relevant to new partners, particularly by providing private brand development support. Our dual platform and portfolio business model continues to distinguish us in the marketplace, enabling us to flex both our brand assets and our product and brand development capabilities. This has never been more relevant as retailers seek to balance national brand recognition with the margin benefits and differentiation inherent with private brands. Their vision, agility and scale that we bring on both fronts, allows retailers to offload the heavy lifting, regardless of how they weight their portfolios in any given time. By thinking as they do, we are well positioned to meet retailers where they are and to help them get where they want to go next. Fiscal 2018 was not without its challenges, yet we are improving our financial position. We have a more experienced management team in place. Our cost structure is controlled. Our integration work is complete, and we are now ready to pivot our focus and energy towards growth. Steve will be integral to supporting this foundation and securing our financial stability. In other organizational news, we appointed Mark Conway to the newly created role of Chief Brand and Revenue Officer late last year. Mark has been spearheading the expansion and diversification efforts I outlined earlier, and has built a solid marketing infrastructure to support our brands, and deliver retail relevant tools to our best in class licensee base. In his role, Mark overseas new business development, strategic brand planning, e-commerce and marketing, and will manage development and oversight with his team of Cherokee Global Brands licensee partnerships worldwide. Through these combined responsibilities, Mark will have a total view of our customers across all brands, categories, business models and touch points, allowing us to seamlessly accelerate our global business development goals. To support these efforts, we've appointed Nadine Iacocca as Vice President of Global Marketing. Nadine’s solid brand management experience will be invaluable as we accelerate the penetration of our brands on a global scale and her involvement is already making a positive impact on our licensee and retail relationships. With that, I’ll hand the call over to Steve to review our financials in greater detail, as well as update you on our outlook for fiscal 2019. Steve?

[Steve Brink:]

Thanks, Henry. It's great to be here today. Hello everyone. It's been a busy few months, so there's a lot to cover today. I’ll start with the transition of our Hi-Tec sales model which we completed in January and has a significant impact on our financials. Secondly, I'll explain the non-cash impairment charge outlined in today’s release. And lastly, I’ll cover our fourth quarter and full year results, along with our updated outlook for fiscal ’19. So let's start with the conversion of Hi-Tec’s sales model. As noted in today’s release, we completed the transition of our Hi-Tec business to a licensed royalty model when we sold the remaining Hi-Tec sales and distribution business this past January to the International Brand Group, IBG for short. When the company acquired Hi-Tec in the fourth quarter of fiscal ’17, most of the distribution operations were sold and converted to a royalty model at that time. However, we were still selling product ourselves to distributors in Latin America, Eastern Europe and Asia pacific. With the sale of this distribution business to IBG, these territories now have also been converted to a royalty model. IBG is now our licensee and when they sell product in these territories, we earn royalties. This transition has a notable effect on our financials. The indirect sales and cost of goods sold previously reflected in our P&L for sale in these territories are now classified as discontinued operations. You will see corresponding re-classifications in our balance sheet and also in our cash flow statements. Going forward, you will only see royalty in our P&L from these territories, no product sales. As part of this transition, we also restructured our Hi-Tec operations in Amsterdam. The overall result was a 60% reduction in headcount and a significant reduction in our cost structure. We now have a team that’s focused solely on our licensing business and we have new licensee in International Brand Group that has a tremendous history with Hi-Tec and its global sales and distribution business. With its expertise, IBG plans to grow the Hi-Tec portfolio brands in Latin America, Eastern Europe and Asia Pacific territories. The discussion around the trade mark impairments is a bit more technical. As required under accounting standards, we perform an annual evaluation of our goodwill and indefinite lived trademarks. Indefinite lived trademarks is a specific accounting term that basically means we don't amortize the cost of the trademark, but instead do an annual impairment test. The test is based on a discounted cash flow model that estimates the fair value of these intangible assets, and the overall results have to be generally in line with our market cap. The starting point in the calculation is our latest revenue projections, which based on current information, were significantly lower this year compared to the projections used in the past. These current estimates of fair value are less than book value when the impairment charge is necessary The conclusion this year was that the trademarks related to four of our brands were impaired, specifically Tony Hawk, Liz Lange, Flip Flop Shops and Everyday California. So we recorded a non-cash impairment charge of $35.5 million. We have other brands that are also indefinite lives such as Cherokee, Hi-Tec, Magnum and Interceptor. These trademarks are not impaired. Going forward, we will be amortizing the remaining book value of the trademarks related to Tony Hawk, Liz Lange, Flip Flop Shops and Everyday California. Now let’s turn to our financial results for the quarter. Revenues for the fourth quarter was $6.9 million, compared to $8.4 million in the prior quarter. This decrease included the decline in Cherokee brand revenues of $2.2 million, which was partially offset by the revenue increase from Hi-Tec, Magnum and Interceptor, which were up $1.4 million compared to the partial fourth quarter in the prior year. You may recall that the company acquired Hi-Tec in the middle of the fourth quarter of fiscal 2017. So we had a full quarter of Hi-Tec results in our fourth quarter fiscal ’18, compared to only a partial fourth quarter in fiscal ’17. The decline in Cherokee brand revenues in the fourth quarter reflects the ongoing transition to our new wholesale licensee partners in the US from the direct to retail model used in the previous years. Through the end of fiscal ’17, the company earned substantial royalties from its primary DTR license agreement with Target in the United States. Beginning with fiscal ’18 when the Target agreement ended, the company has been transitioning from this DTR license to a wholesale model. We now have license agreements with a number of manufacturers and wholesalers who sell Cherokee brand products. These licensees are experts in their categories and they’re distributing Cherokee goods to various retailers in the US, including major e-commerce platforms, that is Amazon, Walmart.com and others. It's been a difficult transition, but we believe our royalties from these licensees will grow over time as Cherokee brand product begins to get traction with these new retail partners and our customers. In addition to this impact on our Cherokee brand royalties, our royalty revenues from Liz Lange also declined. Target began transitioning away from Liz Lange products in the latter half of fiscal ’18, and its DTR license has also now ended. Now let's look at expenses. You'll see in our P&L that we’re separating out the various components of our operating expenses. So it’s easy to see what’s continuing and what’s not, and also easier to see the non-cash charges such as stock options and stock warrants, restructuring charges, depreciation and amortization and the impairment charge I mentioned earlier. Selling, general and administrative expenses line item now represents our normal operating expenses. So on that basis, SG&A for the fourth quarter was $6.9 million, compared to $5.7 million in the fourth quarter of the prior year. This increase is basically due to having Hi-Tec in our results for the full quarter this year, which is only the partial quarter the year before. We took some significant steps in the fourth quarter to better align our expenses with our needs going forward. So we expect this SG&A number to be lower in future quarters. Some of those steps resulted in the restructuring charges you see in our P&L, which was $2 million in the fourth quarter of fiscal ’18. This includes severance for people in Amsterdam and also in our US headquarters. We continued to incur expenses in the fourth quarter related to the Hi-Tec acquisition and integration. Those costs are reflected in the business acquisition and integration cost line item in our P&L, in total, $2.2 million for the quarter. Going forward in fiscal ’19, we expect these costs to be significantly less because the Hi-Tec integration is substantially behind us. Fiscal ‘18’s fourth quarter also includes a non-cash stock warrant charge related to our debt refinancing, along with a normal non-cash charge related to stock options. These charges were $1.5 million in total for the quarter. The operating loss for the fourth quarter was $41.4 million, compared to the $9.8 million loss in the fourth quarter of the prior year. Clearly, a non-cash impairment charge and these other notable charges, have substantial impact on our reported profits. Net loss for the quarter was $45.6 million, or $3.26 per share on a diluted basis, compared to a net loss of $11.1 million and $0.96 per share in the fourth quarter of the prior year. Another change you’ll see in this year’s earnings release and 10-K is the presentation of adjusted EBITDA. This non-GAAP measure, along with the break out of the P&L items I already discussed replaces the various other non-GAAP measures the company reported in the past. The reconciliation within the press release that’s arriving at adjusted EBITDA, start with operating profit, then add back the various non-cash charges and business acquisition and integration costs. Alternatively, you can start with revenues and subtract SG&A. For the fourth quarter, adjusted EBITDA was essentially break even. Now let’s look at the full year. For fiscal ’18, revenues were $29.4 million compared to $34 million in fiscal ’17. Once again, the decline reflects the transition of our Cherokee brand to a wholesale model from the DTR license agreement with Target in the US. This was partially offset by the full year contribution from Hi-Tec, Magnum and Interceptor. Cherokee brand revenues were down $11.9 million, while Hi-Tec, Magnum and Interceptor added $8.5 million. I should just declare at this point that the major impact in the Cherokee transition in the US is behind us from a financial reporting perspective. Fiscal ’18 included no royalty revenues from Target related to Cherokee’s primary license with them, while fiscal ’17 included 10.5 million. On the expense side for fiscal ‘`18, SG&A totaled $25.4 million compared to $19.1 million in the prior year. The year over year increase is primarily due to the operating expenses related to the Hi-Tec portfolio brand. As I mentioned, we had a full year of expenses in fiscal ’18 compared to only a partial quarter in fiscal ’17, which resulted in an increase in SG&A of $7.2 million. Business acquisition and integration cost amounted to $7.5 million for the full year. And restructuring charges were $2.1 million for the full year. It’s been an expensive transition, but we are now moving forward with a solid team of licensees in place for the Hi-Tec portfolio brand and also for Cherokee, and we believe we can build on this base going forward. You’ll also see a $3.8 million charge in fiscal ‘18 for stock warrants and stock options. Stock warrants were issued in fiscal ’18 related to the amendments of the company's credit agreement, resulting in a non-cash charge of $1.3 million for the year on top of the normal non-cash stock compensation expense. Including the non-cash impairment charge I already discussed and these other costs, the operating loss for fiscal ’18 was $46.4 million compared to an operating loss of $4.2 million in the prior year. The net loss for the year was $56 million or $4.17 per share on a diluted basis, compared to a net loss of $7.9 million in fiscal ’17 or $0.84 per share on a diluted basis. After adding back the non-cash charges in the business acquisition and integration costs, fiscal ’18 adjusted EBITDA was $3.9 million compared to adjusted EBITDA of $14.9 million in the prior year. This decrease was primarily due to the transition from the Target DTR license to a wholesale model which I discussed earlier. We’re looking forward to realizing the potential of this new model with our new partners. We ended the year with cash on hand of $3.2 million. We also ended the year with $49.5 million of debt. Let me stop at this point and address the going concern matter. One of the early projects we launched when I started with Cherokee back in January, was to re-project our operating results. Along with that was the go forward cash forecast that we built from the bottom up. Of course, these projections are then compared to the covenants required by our trade agreement. Our trade agreement has several key financial covenants. We have minimum EBITDA covenants for the first three quarters of fiscal ’19. Then for the fourth quarter of fiscal ’19, we start again with the typical leverage ratios and fixed charge coverage ratios. Our credit agreement also has a liquidity covenant. It requires us to maintain $2 million of liquidity, either in the form of cash or availability under our revolving credit facility. Our current forecast indicates that we can meet the EBITDA levels required in fiscal ’19 and the leverage and fixed charge coverage ratios. But we don't think we can stay in compliance with our liquidity covenant for the next 12 months unless we increase our liquidity. This is primarily due to working capital factors relating back to fiscal ’18. We need to fund the restructuring obligations that we incurred in the fourth quarter of fiscal ’18, along with certain other obligations that arose last year. Based on this, which we disclosed in Note 1 to our financial statements, Deloitte has inserted an explanatory paragraph in the audit opinion about the company’s ability to continue as a going concern. Having this explanatory paragraph in the audit opinion when we file our 10-K will itself result in a breach of a covenant in our credit agreement. We are in the midst of negating with Cerberus to amend our credit agreement and give us the incremental liquidity that we need, either through an increase in our borrowing capacity, or through additional liquidity from another lender. We fully expect these discussions to result in an acceptable amendment. Now let’s turn to our fiscal ’19 guidance. Our updated guidance reflects the conversion of Hi-Tec’s sales to a licensee model with IBG. Essentially both revenue and operating expense will be lower from this, and there's an increase in royalty revenues. The projected net effect on fiscal ’19 is basically neutral at the EBITDA line. While it's still early in the year, the new license agreement with legal, and the recent wins that our licensees are having, give us increasing confidence that we can achieve our revenue plan for the year. We continue to build our base, both domestically and internationally through further product expansion and territory expansion as Henry will discuss shortly. On the cost side, I mentioned earlier that our headcount has been reduced, which will result in less SG&A going forward. For fiscal 19, which ends on February 2, 2019, we currently expect revenues to range from $29 million to $31 million. Adjusted EBITDA is expected to range from $8 million to $10 million and accordingly, our SG&A run rate is expected to approximate $21 million. In summary, despite some of the integration and restructuring challenges the company faced this past year, we believe we now have the proper people and processes in place to move forward in a healthy way. We significantly improved our internal control processes and our forecast methods. Unfortunately, this resulted in the going concern disclosure that I discussed as we solve things with Cerberus, our lender. We will continue to look at our infrastructure and other ways to improve our efficiencies, while still being able to build our brands and support our licensees. Our brand portfolio is strong and we’re operating with increased financial discipline and effectiveness. Now I'll turn the call back over to Henry.

[Henry Stupp:]

Thank you, Steve. As I alluded to earlier, it's been a productive few months for the company. Cherokee Global Brands is more diversified than ever before. Today, more than half of our licensing revenues are generated outside of the United States, with best in class licensees, franchisees, retail partners and distributors. Together with our licensees, we have built a rapidly growing e-commerce business. Our flexible platform of capabilities and portfolio of high equity brands, will enable us to scale revenues through branded sales, and also through private brand development opportunities. I’ll now share some brand updates with you, starting with our namesake Cherokee brand, which delivered royalty revenue of $11.1 million during fiscal 2018, a decrease of $11.9 million from the prior year, largely due to the transition from Target stores, our legacy domestic partner. We’re pleased to announce at this time, a partnership with Lidl, a global supermarket chain based in Germany that operates over 10,000 stores across Europe and the US. Lidl offers a wide selection of grocery and consumer goods, including apparel. And despite the challenging overall retail environment, is experiencing solid growth and market share gains in their native territories. We identified Lidl as a key global partner and are excited to be scaling our iconic Cherokee brand to over 20 countries in Europe and Scandinavia, and further diversifying our channels of distribution with this innovative and rapidly growing retailer. Our initial launch with Lidl for fall and winter will be one of our most comprehensive yet, offering a full assortment of Men’s, Women's and Children's apparels and accessories. We very much look forward to bringing Cherokee’s iconic styles and great value to Lidl’s customers for many years to come. Outside of Europe, we're seeing continued strong in key international markets. As we anniversary the integration of Soriana and Comercial Mexicana, we’re anticipating a strong uplift in Latin America sales in particular, and expect to expand to an additional 200 Soriana locations during fiscal 2019. We're also seeing strong growth in India, where revenues were up 14% in fiscal 2018. Like Latin America, India offers an attractive socioeconomic and demographic consumer base that gravitates towards our specialty, which is authentic family inspired lifestyle brands. Turning our attention to Cherokee brand in the US. Our transition away from our legacy relationship towards new wholesale model, has taken longer than anticipated, but we are on steady progress. Hereto, diversification will be our driver. New points of distribution, new channels, new categories and with new wholesale licensee and retail partners. Currently, a comprehensive assortment of men’s, women's and children's apparel and accessories is available across proximately 4,500 doors and through our ever expanding e-commerce partnerships. Consumer reaction has been positive and demand for our school uniforms, infant and toddler, boys and girls collections, along with our sleepwear and essentials program such as socks and underwear, are showing steady growth. We have developed a multitude of distribution strategy for some categories, and expect to shares some exciting retail and category expansion news, particularly related to the expansion of certain ladies categories that leverages the over 40 year history of the Cherokee of California brand. As we’ve gained more distance from our legacy partner, we're seeing greater traction and conviction among our licensees and retail partners as reflected in order size and in reorder frequency. I'll turn now to our online expansion, where we're particular excited by how our products are performing and growing relationships with major online platforms such as Amazon.com and Walmart.com. Over the last few months, we’ve bolstered our e-commerce offering and built a much broader and deeper selection of inventory in order to support this growing business. You can see by some of the images on their websites that the product looks great. And I can assure you that the value proposition is strong and all important customer views are quite positive. Our commitment to building and scaling our brands through these large scale partnerships, along with our focus on developing additional growth channels such as specialty retail, will support Cherokee’s full family offering for our next 40 plus years. We’re focused on building upon the progress we've made over the past 24 months with the Cherokee brand. Not only navigating the transition away from our old partnership, but also building new opportunities that will diversify and sustain our business for the long term. These new opportunities will be supported by new partnerships. And today we're excited to announce that Stargate Apparel is now on board for the distribution of our boys four to 20 and girls four to 16 sportswear and fashion categories. Our relationship with Stargate spans over 20 years and they were a significant early supplier to our legacy retail partner. They are true industry leaders in their categories, and we're thrilled to have their talented team supporting our growth plans. We select our licensee partners based on their ability to bring category expertise and significant reach across brick and mortar and e-commerce. The dozen licensees that are now working - that we are now working with, are truly best in class on both fronts. Turning our attention now over to our Tony Hawk brand. We generated a net license revenue of $5.5 million in fiscal 2018, an increase of 8% over fiscal 2017. Revenue growth continues to be led by strong international demand, and we’re seeing particularly strong performance in Canada through our relationship with Walmart. Although a small base, fiscal 2018 revenues more than doubled, which speaks to the power of the Tony Hawk brand, and we expect the momentum to continue as we continue to expand our category offerings, which will enable us to achieve deeper penetration within the 400 retail locations that carry Tony Hawk products in Canada. Walmart has proven to be a strong driver of our global expansion. Our relationship with Walmart Chile and Argentina are particularly strong, where demand continues to build in both regions. Product sell-through is robust and Walmart is responding with continued repeat orders. And in Europe, we’re in advanced discussions and expect to finalize a comprehensive pan-European license for the Tony Hawk brand. Through the Tony Hawk Pro and Tony Hawk signature collections, we shall after a complete assortment of men's and boy's apparel for wear and accessories, aimed at both the better and value and tiers of retail. Finally in, Asia we're completing discussions with partners in both China and Japan. We’ll soon announce deals on our go to market strategy, which will be a combination of shop-in-shops and freestanding stores. Domestically, three core licensees are supplying an expanded apparel assortment for men's and boys’ apparel and accessories. And we are in discussions to add a master footwear partner shortly. I’ll turn now to our Hi-Tec portfolio brands. Net license revenue for the year was $9.7 million, led once again by the performance of our Hi-Tec Magnum and Interceptor brands. As Steve noted, revenue from indirect product sales are now presented as discontinued operations. Beginning with the US and Canada where we now offer a complete collection of men's and women's footwear, apparel and accessories, our domestic footwear licensee continues to build momentum with existing partners, as well as successfully introduce Hi-Tec products into new distribution channels, supported by new marketing initiatives. In the fourth quarter, we were pleased to see positive sales indicators. We have planned several new footwear initiatives for 2019, including the launch of Hi-Tec XT or extra tough, in addition to our Halo HTS74 heritage sneaker program, a new wear-to-work crossover sub-brand called Urban X. These expanded footwear collections directly address market trends that are driving the industry, and will be additive to our core business. The strength and experience of our licensee and its management team will further ensure that full potential of the Hi-Tec brand is realized. Looking ahead into calendar 2019, we're planning on an expanded footwear, apparel and accessory offering amongst multiple channels, with a fully integrated marketing plan. Retailer interest has been strong, and we've received several meaningful commitments from leading department store, special retailers for the apparel and accessory categories, in addition to our legacy footwear business. We’re also continuing to scale our e-commerce offering through our major e-commerce partners, including Amazon.com, Shoe.com, Zappos.com, et cetera. And in Europe, our licensees are building strong momentum on the heels of our fall launch of men's and women's Hi-Tec apparel and accessories. We’re in advanced discussions to finalize our Asian distribution strategy and expect to be in market with a comprehensive selection of apparel and accessories within the year. These programs will be in addition to our already established footwear business in many Asian territories. Sales of our Interceptor branded footwear program at Walmart doubled in fiscal 2018. We’re building on this momentum through new product launches and category expansion, including cool weather accessories and replenishable essentials like socks. Our planned expansion to Walmart Canada later this year will round out the growth picture. And finally, with respect to Flip Flop Shops, we delivered fiscal 2018 revenue of $1.4 million and a same store comp increase of 6.6% from the prior year. During fiscal 2018, we closed several underperforming locations and accelerated our diversification efforts by introducing new formats, including shop-in-shops, freestanding stores and our new floating retail concept, measures that should improve the overall performance and profitability of the brand. After a disappointing fiscal 2018, we’re increasing the pace of new shop openings and new formats, and partnering with a new master franchisee in additional territories. Our partnerships with leading outdoor retailers in the final stages for the development of approximately 20 new Flip Flop shop- in-shops set to launch this June. In summary, we made significant progress in fiscal 2018 and year to date. We shored up our financial controls and new cost structures in place, and we are improving our liquidity. We concluded our integration of the Hi-Tec portfolio acquisition and position our legacy brands for growth through diversification, with our operating model now posed to execute with greater efficiency and profitability. And with a talented and experienced business development and marketing leadership in place, we’re optimistic about our prospects in the year ahead and beyond. Fiscal 2019 will be characterized by diversity, stability, sustainability and profitability. We appreciate your continued support and encouragement as we transform and build momentum for Cherokee Global Brands. Thank you for your attention and for joining us on today's call. We look forward to keeping you posted on our progress in the quarters ahead.