Lower Royalty Revenue Hits Cherokee

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Cherokee Inc. on Wednesday said a decrease in royalty revenues on its licensed clothing brands led to a 15 percent drop in fourth quarter profits, reflecting slower sales at its customers’ retail stores, which include Target and Wal-Mart.

The Van Nuys licensing and brand management company, which owns the Cherokee, Sideout and Carole Little labels, reported net income of $2.38 million (27 cents per share) for the quarter ended January 31, compared with $2.81 million (31 cents) a year ago. Royalty revenue fell 30 percent to $6.12 million.

For the full fiscal year, Cherokee said net earnings fell 13 percent to $14.3 million ($1.61), as revenues dropped 13 percent to $36.2 million.

Looking ahead, President Howard Siegel said he remained confident that the company would continue to see positive results from its Cherokee ‘World Brand’ expansion strategy. The company’s brands are in 30 countries, with plans to launch in Spain and the Middle East in the next six to 12 months.

“The combination of our low-cost business model, coupled with the stability, consistency and geographic diversification of our revenue streams, gives us confidence about our business prospects in the future,” Chief Executive Robert Margolis said in a statement.

Cherokee shares were up 10 cents, or less than 1 percent, to $16.51 in midday trading on the Nasdaq.