NEW YORK — With new labels and a favorable legal settlement under its belt, Cherokee Inc. capped off its seventh year of rising sales and earnings.

The Van Nuys, Calif.-based licensor and brand management firm finished its fourth quarter with net income moving ahead 9.3 percent to $2.6 million, or 30 cents a diluted share, from $2.3 million, or 28 cents, a year ago. Sales for the three months ended Feb. 1 advanced 12.3 percent to $7.1 million from $6.3 million in the final quarter of the previous year.

Selling, general and administrative expenses shrank by 100 basis points to 32.1 percent of sales, or $2.3 million. The improvement resulted from an arbitration panel’s decision that Cherokee is entitled to recover legal expenses incurred as a result of its arbitration with Mossimo.

As reported, the two firms were embroiled in a dispute over $2.7 million in finder’s fees related to the Cherokee-brokered Target-Mossimo license. In a filing with the Securities and Exchange Commission, Cherokee said it registered, as of the end of the year, outstanding accounts receivable for Mossimo of $3.2 million, including $108,000 in interest and $410,000 in legal fees awarded through arbitration.

"The Cherokee brand continues to gain strength worldwide as a result of the successful launch of Cherokee-branded products at Tesco and our ongoing relationships with Target, Zellers and Carrefour," said chairman and chief executive Robert Margolis, in a statement.

Worldwide sales of Cherokee-branded products by licensees exceeded $2.3 billion last year.

In its last fiscal year, the firm grew its Sideout brand and acquired the trademarks of CL Fashion Inc., including the Carole Little, Chorus Line brands, All that Jazz and Molly Malloy brands. The firm also signed a retail direct license agreement with TJX Cos. for the Carole Little brand.

Overall profits increased 8 percent in 2002 to $13 million, or $1.54 a diluted share, from $12.1 million, or $1.46, in 2001. Sales for the 12 months ascended 8 percent to $33.1 million from $30.7 million the previous year. Revenues from Target Stores totaled $21.4 million, or about 65 percent of the firm’s top line.

Additionally, Cherokee noted it reduced its long-term debt by $10.5 million last year and expects to have fully repaid its secured notes by early next year.

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