SUNLAND, Calif. -- Cherokee Inc., which emerged from Chapter 11 bankruptcy in June, said it is dropping men's wear from its apparel division to focus exclusively on women's and girls' apparel.
The men's wear line, introduced in March 1992, has accounted for only a slim percentage of the division's sales. In the second quarter ended Nov. 27, however, the price tag for this move and other restructuring charges -- $6.1 million before taxes -- put the firm in the red.
Before the charge, operating income in the quarter was $838,000, but after the charge the firm posted a loss of $4.9 million. A year ago the company lost $5 million. Sales in the second quarter ended Nov. 27 declined 19.1 percent, to $26 million from $32.2 million.
In the six months, the net loss was $4.6 million after the charge, against a loss of $9.3 million. Sales in the half slipped 17.9 percent, to $60.1 million from $73.1 million.
Joe Elles, president of the apparel division since Sept. 1, said in an interview, "We have exited the men's business completely because we're focusing all our resources on the female consumer, starting with girls all the way up to women."
Elles said casual women's apparel is the company's strength and will be the primary focus of the new line. He admitted that business has not been great but is optimistic about rebuilding brand market share. The firm is also shifting its distribution channel to emphasize more moderate department stores, including J.C. Penney, Belk Stores, May Department Stores, Mercantile Stores and Federated Department Stores. It also will no longer do private label merchandise, as it had in the past for discounters.
Bryan Marsal of Alvarez & Marsal, interim chief executive since the resignation in October of Robert Margolis, said the restructuring charge includes severance payments, writedowns of discontinued inventory, leases, equipment and other assets the company no longer needs.
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