Consumer Stocks Drifting With Mid-Size Declines

Consumer stocks were mostly lower this afternoon, with shares of consumer staples companies in the S&P 500 sinking more than 0.6% while shares of consumer discretionary firms in the S&P 500 were dropping nearly 0.3%.

In company news, shares of Cherokee Inc (CHKE) fell to their lowest price in at least two decades on Friday, sinking nearly 25% to $3.50 apiece after the apparel-maker last night reported a Q2 loss, reversing its year-ago profit, and said it was not in compliance with certain covenants of its credit facility with Cerberus Capital.

The downbeat news upstaged better-than-expected adjusted financial results during the three months ended July 29. Excluding one-time items, the non-GAAP net loss at the company was $0.05 per share, down from net income of $0.22 per share during the same quarter last year but still beating the Capital IQ consensus expecting a $0.07 per share non-GAAP net loss. Total revenue from last year to $14.0 million, also topping the analyst mean expecting just $7.8 million

On a GAAP basis, the company also swung to a Q2 net loss, posting a $0.36 per share net loss during May-through-July reporting period compared with GAAP net income of $0.22 per share last year.

Cherokee did not specify what covenants were out of compliance at the company as of July 29 but said it was working with Cerberus to resolve the issue.

In other sector news,

(+) ZUMZ, (+21.0%) Narrows Q2 net loss by a penny from last year to $0.02 per share following a 7.8% sales increase to $192.2 mln. That beat Street views expecting a $0.06 per share net loss on $192.1 mln in revenue. Guides Q3 sales above consensus. B Riley raises investment rating to Buy from Neutral.

(-) AOBC, (-17.3%) Q1 non-GAAP EPS of $0.07 misses Capital IQ consensus by $0.04 per share. Net sales fall 37.7% to $129 mln, also lagging the $147.2 mln consensus. Q2, FY18 profit and sales forecasts all shy of estimates.

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