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Cherokee Inks Sideout Licenses

Pacts cover eyewear, hosiery, loungewear and other categories.

LOS ANGELES — Cherokee Inc. has unveiled a string of new licensing deals for its Sideout brand as it seeks to replace the revenue lost after former licensee Mervyns filed for bankruptcy and shut down.

On Monday, Van Nuys, Calif.-based Cherokee said it inked a deal with Pan Oceanic Eyewear to produce sunglasses and swim and snow goggles for the U.S. market. On June 10, Cherokee said Wiesner Products received the U.S. license to make men’s, women’s and children’s hosiery, while Mystic Apparel, a subsidiary of Wiesner, was granted the U.S. rights to develop loungewear, sleepwear, underwear and accessories for juniors, young men and children. On June 7, Cherokee said it signed a licensing agreement with Star Ride Kids to produce boys’ woven tops, bottoms and swimwear in the U.S.

In its annual report filed with the Securities and Exchange Commission on April 15, Cherokee said it has filed a claim for past royalties due in the Mervyns bankruptcy proceedings, and expects to receive a partial recovery of this claim during its fiscal year ending Jan. 29. Cherokee also said in the filings that licensing revenue from Mervyns totaled $355,000 in fiscal 2009, and $904,000 in fiscal 2008.

Cherokee Inc.’s first-quarter earnings fell 23.9 percent on lower royalties and a higher tax rate.

In the three months ended May 1, the net income dropped 23.9 percent to $2.9 million, or 33 cents a diluted share, from $3.8 million, or 43 cents, in the same quarter last year.

The firm said it benefited in the 2009 quarter from an “unusually low” effective tax rate of 33.7 percent, versus 40.3 percent in the just-concluded period. Income before taxes declined 15.6 percent to $4.9 million from $5.8 million a year ago.

Revenues, which Cherokee derives solely in the form of royalties, declined 7.3 percent to $8.2 million from $8.9 million.

The firm previously disclosed that royalties attributable to its Cherokee license with Target dropped to $13.2 million last year from $15.2 million in 2008 and $17.3 million in 2007. The current license with Target expires at the end of January 2012, but renews automatically for one-year terms if Target pays the minimum guaranteed royalty of $9 million for the preceding year and doesn’t notify Cherokee of its intention to terminate the relationship during the preceding February.