CHEROKEE'S NEW TRAIL

Byline: Kim-Van Dang

LOS ANGELES--"Private label with a label."
That's the new concept Robert Margolis is pushing. The recently re-installed chief executive officer at The Cherokee Group here has devised a plan to maximize the moderate brand's potential while minimizing its overhead. In June, he began to unveil it to a handful of major retailers with whom he hopes to form "strategic alliances."
"Conventional changes are history," he said. "This is a new world."
Essentially, Cherokee is offering key stores a chance to license its name for a wide range of categories, including women's, men's and children's apparel as well as home textiles, athletic footwear, fashion accessories and even cosmetics.
Unlike other brands that delve into licensing, however, the company will align itself with a group of independent contractors and not incur its own manufacturing costs, Margolis explained. That's the "short term" plan, anyway, he said, adding that he is considering many opportunities as he winds down current production. The savings would be passed on to retailers and consumers, he said.
The Cherokee agreements promise retailers a 27 percent reduction in cost of goods, a 22 percent reduction in consumer prices and a 6 percent increase in gross margin. Additionally, the firm will "pre-source" for its retail "partners" and create "control systems" for synergy of graphics, color, image, packaging, quality and consumer marketing, he said.
So far, of the nine retailers who have seen the plan, two have signed on, three are looking over its legal aspects, three are in discussions and one has said no, Margolis reported, refusing to disclose any names for another two months, when he hopes to have more definitive contracts in hand.
Alluding to Nordstrom's recently announced licensing deal with Calloway Golf and Wal-Mart's with Kathie Lee Gifford, Margolis said that conditions are ripe for his plan.
"We didn't invest in Cherokee so that we could try to swim against the tide," he said, referring to his investment group's 25 percent stake in the company. "With all the retail consolidations today, middle men are being cut out."
Last week, the Cherokee chief appointed Patricia Warren--previously executive vice president of merchandising for Carter Hawley Hale--as president of the company, and Barry Forman, an apparel manufacturer, as marketing vice president for international and special projects.
While they line up licensing agreements, Margolis is buying the company some time. That involves liquidating assets. He said he is striking a deal to sell the firm's uniforms division for $11 million to Michael Singer, president of the division; that transaction is expected to be completed by July 31.
Margolis said he is also in talks with Tokyo-based Suzuya, a 10-year Cherokee licensee, about an $8 million Japan master license buyout. And, as reported, he hopes to sell Cherokee's 105,000-square-foot headquarters in Sunland, Calif., for $5 million. Unloading Cherokee's inventory would net the company another $10 million, he said.
While this year's operating expenses are budgeted at $25 million, only $5 million is earmarked for next year, Margolis said. Slashing overhead means reducing staff.
Cherokee's work force, which numbered 400 during Margolis's first tenure--from early 1981 to October 1993--was cut in half during his absence. Another 40 have left since his return on May 5, and yet another 40 are slated for dismissal within a few months, he said. Warren said layoffs are scheduled around shipping dates, adding that those affected have been notified and offered severance packages.
Margolis is in the midst of relocating the remaining 120 employees to his 15,000-square-foot complex in Van Nuys, Calif. That facility also holds 16 employees of The Wilstar Group--a bottoms manufacturer. Margolis is president of that company but has limited his duties to buying fabric. Jay Kester, his founding partner in Cherokee Apparel back in 1981, is Wilstar's vice president.
"When I went into retirement, I played a lot of golf," Margolis said. "But I saw that I wasn't going to make the seniors tour. I missed this industry. This is the biggest opportunity of my career. It comes with baggage, but I'm on my home court, and I'm happy to be here."

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