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Cherokee Inc. Q3 FY’14 revenues remain consistent

December 13, 2013 (United States Of America)

Cherokee Inc., a global marketer of style-focused lifestyle brands, reported financial results for the third quarter ended November 2, 2013.

Net revenues for the third quarter were $6.7 million, consistent with the prior-year period. Revenues associated with Liz Lange and the Cherokee School Uniform brands offset a significant decrease of approximately $525,000 in Cherokee royalty revenues at Zellers Canada.

Retail sales of Cherokee branded merchandise at Target U.S., excluding Cherokee School Uniforms, increased despite the tougher retail environment; however, royalty revenue from Target, as expected, declined $400,000 due to the deescalating royalty rate reached earlier this fiscal year as compared to Fiscal 2013.

Additionally during the third quarter, the devaluation of several foreign currencies negatively impacted revenue by approximately $122,000. Despite these currency devaluations, Cherokee’s international business continued to see growth during the quarter. Retail sales at Tesco increased 187% on a year-over-year basis.

Selling, general and administrative expenses for the third quarter were $4.1 million, or 61% of net revenues, compared with $3.4 million, or 51% of net revenues, in the prior-year period. This increase is related to personnel and development costs required to further maximize the 360-degree licensing model.

During the quarter, the Company added to its infrastructure in anticipation of further growth in Fiscal 2015 including the launch of Cherokee-branded adult products on Target dotcom and the expansion of the Company’s brand portfolio into new territories.

Net income for the third quarter was $1.6 million, or $0.19 per diluted share, compared with $2.1 million, or $0.25 per diluted share, in the prior-year period.

“The Cherokee Group has seen solid progress year-to-date,” said Cherokee Chief Executive Officer Henry Stupp. “Despite a tough domestic retail environment, continued challenges facing the European economy and the closing of Zellers Canada, revenues for first nine months of Fiscal 2014 increased roughly 8.2% year-over-year.

Clearly, the positive impact attributable to the refinement of our operating model combined with the acquisitions of the Liz Lange and Cherokee School Uniform businesses have strengthened the Company and positioned us for future growth and development.

“We are particularly excited about our recent expansion of Liz Lange Maternity in India with Mahindra’s Mom & Me Stores, and are happy to announce a new brand license agreement for the Cherokee brand with specialty and freestanding stores in Thailand, Singapore, Malaysia, Vietnam and Myanmar with Apostrophy Inc., a subsidiary of Connectin Asia. In addition, our current progress with our namesake Cherokee brand in South America has contributed to our overall success.

“With just over a month and a half remaining in the fiscal year, we remain confident that our brand initiatives, marketing efforts, and increased support and collaboration with our key partners positions the Cherokee Group well for the future. Going forward, we will continue to evaluate ways to expand and enhance our current roster of brands as well as acquire additional brands to generate value for both our shareholders and retail partners,” Mr. Stupp concluded.

At November 2, 2013, the Company had cash and cash equivalents of $3.5 million, compared to $2.4 million at February 2, 2013.


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