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.
In yet another fashion show shuffle, @elleryland is moving its show in sync with the Paris couture calendar — though the brand is still keeping one foot on the city’s ready-to-wear schedule. Their runway show in January will coincide with the launch of a new strategy: designing two main collections each year instead of four, which will then be released in four drops. “As we all know, the system needs to change. We need to show sooner to give time back to artisans and designers to do what they do best — create,” said founder Kym Ellery. #wwdnews #wwdfashion (📷: @kukukuba)
@maxmara’s classic 101801 coat was the cornerstone of its pre-fall 2018 collection. The design team expanded the traditional double-breasted, kimono-sleeved style into a trapeze coat, lean belted styles and a peacoat and presented them in monochromatic looks – like the camel one pictured here. #wwdfashion #prefall18 (📷: George Chinsee)
The @cfda has shifted the dates of #NYFW, with Men’s showing on February 5 through February 7, and Women’s will directly follow, running from February 8 through 14. The preliminary schedule will be released on the CFDA’s web site in the next few days, but Mark Beckham, VP of marketing for the CFDA, revealed that @rafsimons will be back to close the men’s-specific part of the week with a show on February 7 #wwdfashion (📷: Kelly Taub)
@ferragamo is introducing a new space dedicated to the development of women’s and men’s leather good samples. The laboratory, which is created eco-friendly materials and designed to reduce the environmental impact of the manufacturing processes, will allow the company to expand its accessories offering through traditional artisanal approaches. #wwdfashion (📷: @aitorrosasphoto)
How does a “regular, degular, schmegular” girl from the Bronx, N.Y., become a Grammy-nominated artist with a certified platinum record in less than a year? Call it the @iamcardib come up. The 25-year-old has become a musical sensation, and the fashion world is taking note. “If I could describe her style I would say drama. She’s really into the dramatics,” says Cardi B’s stylist @kollincarter. See how Carter styles her bold and out there looks with the link in bio. #wwdfashion
“There is no formula. There is no guideline. I can watch Ted Talks all day, but there is no one who can advise me on exactly what it is I should be doing,” said @ronniefieg, CEO of @kith, in an interview with WWD’s @ariahughes at the brand’s new SoHo office in Manhattan. Head to WWD.com to see how Fieg went from hanging out in shoe stockrooms at 13 to building his own business. #wwdfashion (📷: @weston.wells)
@fearofgod and @maxfieldla have teamed up on a pop-up installation. The store, located in the gallery space across from Maxfield’s Melrose Ave location, is the site of the brand’s House of God pop-up in which Fear of God founder @jerrylorenzo has created a church-inspired installation. A dozen vintage church pews sit in front of an LED screen playing 90s gospel singers in an effort to re-create an environment akin to a Southern Baptist Church, Lorenzo explained. Read more about the pop-up on WWD.com #wwdfashion (📷: Jennifer Johnson)
Known for his sleek, sophisticated American glamour, Norman Norell is the subject of an upcoming exhibition at @fitnyc. “Norell: Dean of American Fashion,” which runs from February 9 through April 14, will feature approximately 100 ensembles and accessories. His best work is exemplified by the designer’s glittering “mermaid” gowns frosted with thousands of hand-sewn sequins – like the one pictured. (📷: William Helburn) #wwdfashion
For pre-fall 2018, @balmain didn’t let go of the glitz. A crystal embroidered baseball jacket priced at around $40,000 hangs in the “couture” section of the brand’s first men’s pre-collection. Sporting the words “Balmain Army” across the back, the item took around two months to make. “When it was completed, it was like Christmas, it was like, ‘It’s done, it’s exactly what I wanted,’” said Balmain’s creative director @olivier_rousteing during a tour of the collection in a Paris showroom on Monday. #wwdfashion