CHEROKEE EARNINGS UP IN QUARTER, YEAR
NEW YORK — Strong profit margins and trimmed expenses pushed Cherokee Inc.’s earnings higher for the fourth quarter and year.
For the three months ended Feb. 3, the Van Nuys, Calif.-based licensing company reported net income of $2 million, or 25 cents a diluted share, up 66.7 percent from the year-ago quarter when it posted net income of $1.2 million, or 14 cents. The prior-year quarter included a one-time charge of $1.9 million stemming from the forgiveness of a note receivable from a company executive.
Net revenue, all in the form of licensing and royalties, grew 5.3 percent to $6 million from $5.7 million in the 2000 quarter.
For fiscal year 2001, Cherokee reported net income of $10.8 million, or $1.29 a diluted share. That figure is 33.6 percent higher than net income from 2000 which, including the $1.9 million charge, was $8.1 million, or 94 cents. Net revenue grew 14.4 percent to $28.3 million, from $24.7 million.
Worldwide retail sales of Cherokee-licensed brands approached $2 billion for the year. Pretax margins grew to 63.6 percent from 52.3 percent in fiscal 2000. Due in part to the $1.9 million charge in the year-ago period, selling, general, and administrative expenses declined 10.9 percent to $8.3 million.
The company expects continued earnings and revenue growth in fiscal 2002 from existing licensees, as well as its newly inked agreement with Mossimo Inc. As reported, Cherokee advised Mossimo last year in a licensing agreement with Target Stores, and will share a portion of the royalties. Significant revenue from its recent licensing arrangement with Paris-based retailer Carrefour isn’t expected until fiscal 2003.
These licensing ventures reflect what chief executive Robert Margolis, in a statement, termed a business model “at the forefront of an industry shift wherein retailers are using their economies of scale to enjoy higher profit margins while delivering recognizable brands to consumers.”
Cherokee licenses its Cherokee and Sideout brands directly to retailers.