Although Target Corp. is not renewing its licensing deal with Cherokee Global Brands, the company said there are other suitors in the wings.
As it reported softer sales and earnings for the second quarter, Cherokee said Target “has elected not to renew the license of the Cherokee brand in the U.S., which will expire at the end of its current term on January 31, 2017.”
“The Target license, including the existing royalty obligations, will remain in effect and continue to generate revenues to Cherokee in fiscal 2016 and 2017,” the company said, adding that it does not expect the nonrenewal to “have any material impact on Cherokee Global Brands’ revenue in fiscal 2016.”
The company posted a 3 percent sales decline to $8.5 million in the quarter from $8.8 million in the same period last year as net income dropped to $1.9 million, or 22 cents a share, from $2.3 million, or 27 cents.
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The company said it “anticipates that it will establish new channels for Cherokee branded products in the U.S. that will be available in fiscal 2018. The license agreement with Target for the Liz Lange brand remains in place at this time. The nonrenewal does not have any impact on other licenses of the Cherokee brand to other partners around the world.”
Henry Stupp, chief executive officer, said the company expects to expand the brand in the U.S. “Large-scale retailers and wholesalers have frequently expressed interest in the Cherokee brand based on its multicategory relevance and high consumer awareness,” Stupp said. “In the end, though, consumers make brands successful, and we know that Cherokee has a unique connection with many millions of consumers in the U.S. and around the globe.”
Target, meanwhile, said it has plans to explore new brands. “Over the years, Target has worked with partners like Cherokee to build a reputation for providing our guests with high-quality, stylish products for a great value,” said Stacia Andersen, senior vice president of apparel and accessories at Target. “As Target prioritizes signature categories, including kids and baby, we are looking at our business in new ways. We look forward to building on an already strong foundation, and are excited to introduce several new brands in the future.”
Stupp went on to say the company now has a “full-spectrum Cherokee platform partnership with Sears Canada after transitioning from a previous partner. We have achieved a similar scale of success with Argos in both the U.K. and Ireland after transitioning from another partner.”
The company said in its report that the drop in sales was “principally due to the increased strength of the U.S. dollar and lower sales of Cherokee-branded products in the U.K. and Canada. The reduction in sales was due to the timing related to the termination of the Tesco relationship and the Argos launch in the U.K. this past July and in Canada due to the Target Canada bankruptcy earlier this year with the Sears Canada launch slated for February 2016.”