Cherokee Inc. said Tuesday that it hired Goldman, Sachs & Co. to investigate options for maximizing shareholder value, which could include a sale of the company.
The California-based licensor and brand manager said in a statement that it would not comment further until Goldman Sachs completes its analysis and its own board approves any transaction, "if that occurs." Investors praised the move by sending shares up 6.5 percent, closing at $34.50. The 52-week high is $48.76, while the low is $29.50.
Cherokee has licensing agreements with companies such as Target Corp. in the U.S.; Tesco in the U.K., Ireland, Asia and Europe, and Zellers in Canada. Eric Beder, equity analyst at Brean Murray, Carret & Co., said in a research note that a sale of the company was unlikely. He has a "hold" rating on shares of Cherokee.
In its most recent year-end period, Cherokee posted a 90 percent gain in earnings to $34.8 million, or $3.93 per diluted share, from $18.3 million, or $2.07, on sales that soared 79 percent to $76.6 million. Chief executive officer and chairman Robert Margolis, who owns 12.2 percent of Cherokee shares and was ranked fourth in WWD's list of the 10 highest-paid executives of an American vendor for 2007 at an estimated $8.8 million (including a $8 million bonus), is believed to be looking to monetize his stake in the company, according to Beder.
Beder said Cherokee lacks hidden value that will earmark it for an acquisition. "While we salute management for doing everything in its power to maximize shareholder value, we view the chances of a completed transaction as remote, at best, and the ability for the company to achieve a material premium beyond the current stock price as limited," Beder said. "We believe, for a number of reasons, that when Cherokee is viewed as a potential buyout or acquisition target, much of the luster of [the company] dissipates. We remain on the sidelines."
Recently, Cherokee has been exploring several more international opportunities in addition to its pre-existing licensing agreements with Tesco and Zellers, as a way of safeguarding it against the falling U.S. dollar. In October, the company announced an agreement with Arvind Mills Ltd., India's largest integrated textile company and retailer.Meanwhile, its sales relationship with Target Corp. is slipping. In 2000, sales to Target made up 66 percent of Cherokee's total revenue. That number is now down to 24 percent. A similar relationship with Zellers may also affect its takeover desirability, despite an indication of further diversification, Beder said.
Assouline is paying homage to the late Azzedine Alaïa with a reprint of "Alaïa Livre de Collection.” The book is comprised of photographs of the designer's summer 1992 runway show with models Christy Turlington Burns, Naomi Campbell and Tyra Banks, pictured here at right. #wwdfashion #alaia #tyrabanks
Fall 2018 accessories take on a painterly hue, with Nebulas Blue among Pantone’s top 10 colors of the season. (📸: @jonghyupstudio ; editor: @twallz21 ; stylist and set designer: @haideefindlaylevin ) #wwdaccessories
@americanapparelusa is relaunching the brand outside of the U.S. today, opening its online store to more than 200 countries. The company is also contemplating a return to brick-and-mortar, though details have not been confirmed. In tandem with the expanded distribution is a recasting of a social media ad campagn, called “Back to Basics,” pictured here, with a focus on diversity and a cast of models above the age of 21. Read more on WWD.com #wwdnews #wwdfashion
Exclusive: @britneyspears is continuing to expand her brand. The pop icon, who appears in @kenzo ’s latest campaign, is partnering with Epic Rights to launch a line of branded merchandise. Read @hernameislex ‘s story, link in bio. #wwdnews #britneyspears
The Duchess of Cambridge channeled Princess Diana’s look upon giving birth to Prince Harry, when she and the Duke of Cambridge departed the hospital with the new baby Prince this afternoon in London. #wwdeye #princeofcambridge
The new Prince of Cambridge has arrived! The Duke and Duchess of Cambridge posed with the 8-pound newborn. She wore a look from one of her go-to designers, @jennypackham. Tap link in bio for more. #wwdeye #princeofcambridge
Jewelry label @alisonlou has made a name for itself with fine jewelry that speaks to the Millennial market. Now @twallz21 reports that the label is bringing those playful ideas to a new affordable line of lucite hoops with the launch of Loucite by Alison Lou. Here’s a look from the line modeled by @emrata. #wwdaccessories
@sarahjessicaparker and @gilt are teaming up on a bridal ready-to-wear line. Tomorrow, Parker will launch SJP by Sarah Jessica Parker Bridal — and as part of the launch, Gilt will offer 15 exclusive styles from the SJP by Sarah Jessica Parker footwear collection that were designed to complement the new line. Made out of 10 styles, the line is designed for a variety of occasions, from bridal showers to receptions. Get more details on WWD.com #wwdfashion