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Target Helps Boost Cherokee Net

Royalties associated with Target's U.S. stores accounted for 55 percent of revenues in the second quarter.

Target Corp. was very good to Cherokee Inc. in the second quarter.

Net income for the three months ended Aug. 3 expanded 20.5 percent, to $1.9 million, or 23 cents a diluted share, from $1.6 million, or 19 cents, a year ago.

Revenues, all derived from royalties, were up 18.9 percent to $7.5 million from $6.3 million in the 2012 period. Royalties from Target for use of the Cherokee brand in the U.S. were up 31.7 percent to $4.1 million from $3.1 million, and expanded their share of total revenues to 55 percent from 49 percent.

Cherokee said that Cherokee’s growth at Target and the addition of Liz Lange were the largest contributors to the increase in the top and bottom lines, with a 47 percent revenue increase at Tesco and expansion of its international licensee roster also contributing to the uptick. Target is the exclusive U.S. retailer of Liz Lange, which was acquired by Cherokee from Bluestar Alliance LLC for $14 million last September.

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Henry Stupp, chief executive officer, said that the devaluation of several foreign currencies, including the Japanese yen, cut into results by about $131,000. Results were also limited by the early closure of Zellers in Canada, although Target already has assumed rights as licensee in the Canadian market.

“We are pleased with our ongoing refinement of our operating model and going forward we will continue to execute against our long-term strategic growth plan, as well as evaluate new acquisition opportunities to generate value for both our shareholders and retail partners,” Stupp said.

In addition to Cherokee and Liz Lange, Cherokee’s brand portfolio includes Sideout and Carole Little, as well as Completely Me, a Liz Lange sportswear offshoot.

In the first six months of 2013, net income declined 3.2 percent to $3.6 million, or 42 cents a diluted share, from $3.7 million, or 44 cents. Excluding costs associated with a review of internal controls, earnings per share for the most recent quarter were 50 cents. Revenues were up 12.5 percent to $15.5 million from $13.8 million.