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Cherokee Inc. is departing from its traditional licensing model as its reenters Japan after a long absence.
This story first appeared in the December 15, 2011 issue of WWD. Subscribe Today.
The Van Nuys, Calif.-based brand management company has licensed Nishimatsuya Chain Co. Ltd. to manufacture and, through its nearly 800 retail stores and Web site, sell Cherokee brand children’s wear in Japan. The launch, to include apparel, accessories and footwear for children and babies, is scheduled for Dec. 21. It incorporates the direct-to-retail, or DTR, licensing approach pioneered by Cherokee in its relationship with Target Corp. and since used by companies such as Iconix Brand Group Inc.
According to Henry Stupp, chief executive officer of Cherokee, the arrangement is the first in which Cherokee has formed an alliance with a specialty retailer charged with carrying merchandise for a specific age bracket, in effect paving the way for subdivision of the DTR model. “This is a retailer that typically hasn’t had branded apparel and we can be a very important part of their business,” he told WWD. “Rather than tie in with a big-box retailer, we have secured a great partner in children’s and we’re now looking for a comparable adult partner we could work with similarly, and someone in the home market as well. Specialty markets hold a lot of promise for us.”
He described Nishimatsuya as “efficient and well run, with expansion plans to grow into a more than 1,000-unit chain.”
Hisato Hasegawa, managing director of Nishimatsuya, commented, “The Cherokee brand is a leading classic American family brand that enjoys global success, and we are looking forward to introducing the Cherokee brand to the Japanese market. We feel strongly that Cherokee will benefit Nishimatsuya in our strategy to offer our customers international brands that provide reliable, high-quality products at affordable prices.”
Stupp, who succeeded Robert Margolis as ceo of Cherokee in August 2010, noted that the company hasn’t in any way abandoned its reliance on DTR partnerships with mass-market stores but is instead approaching its international licenses in a more pragmatic manner. In Brazil, he noted, no one retailer commands more than a 4 to 5 percent market share, so the company is investigating a wholesale licensing arrangement. “If you want scale, scope and penetration, you have to be open to a different model,” Stupp said.
He added that the company continues to negotiate a new working agreement for Canada where its current licensee, Zellers Inc., has sold 189 leases to Target, which will begin opening converted stores under the Target name in 2013.
Earlier this month, the company said that its profits for the third quarter ended Oct. 29 fell 54 percent, to $1 million, on a 21.8 percent dip in royalties, its sole source of revenue. While royalties from Tesco, its licensee for the U.K. and Central Europe, fell 43.2 percent, its royalty revenues from Target were up 15.4 percent and international royalties apart from Tesco rose 2 percent.
The new approach at Cherokee follows a lengthy period of research and reflection, much of it involving Sally Mueller, the former Target executive who subsequently joined Cherokee as chief brand officer and who has worked with Stupp on providing its licensees with a greater range of marketing, promotion and positioning materials to aid in the licensor-licensee relationship.
“I don’t believe in transactional licensing,” he said. “I believe in a fully engaged process.”