Lower royalty revenue hits Cherokee brand

09 Apr '09

4 min read

Cherokee Inc, a leading licensor and global brand management company, reported financial results for the fourth quarter and fiscal year ended January 31, 2009 (Fiscal 2009). Fiscal Year 2009 Highlights:

• Royalties from international territories totaled $19.2 million, or 53% of the Company's total Fiscal 2009 royalties, as compared to $21.7 million and 52% for the prior year
• Worldwide annual retail sales of Cherokee-branded products exceeded $2.0 billion
• Operating expenses declined $2.1 million, from $15.4 million last year to $13.3 million in Fiscal 2009
• Zero debt
• Ended the year with cash and cash equivalents of $13.7 million and receivables of $5.5 million
• Paid $2.50 per share, or a total of $22.2 million, in dividends to shareholders during Fiscal 2009. In March 2009, the Company paid a dividend of $0.50 per share to shareholders.

For the year ended January 31, 2009, net revenues totaled $36.2 million, as compared to $41.6 million in the same period last year. Selling, general and administrative expenses totaled $13.3 million in fiscal 2009 as compared to $15.4 million in the same period last year. Net earnings totaled $14.3 million, or $1.61 per diluted share, as compared to fiscal 2008 net earnings of $16.4 million, or $1.84 per diluted share.

Net revenues for the fourth quarter of Fiscal 2009 totaled $6.1 million, as compared to the $8.7 million reported in the fourth quarter of fiscal 2008. Selling, general and administrative expenses totaled $2.3 million in the fourth quarter of Fiscal 2009, as compared to $3.5 million in the same period last year. Net earnings were $2.4 million or $0.27 per diluted share, as compared to $2.8 million, or $.31 per diluted share in the same period last year.

Howard Siegel, President of Cherokee, stated, "This year we have grown in 13 of the 16 countries that are actively selling Cherokee product. Results have been especially strong throughout Central Europe and Mexico, and we are optimistic about our recent launches in Chile, Peru, Brazil, Israel and India.

This growth helped to offset some of the declines we experienced. While our retail sales at Target in the U.S. declined by 23% due to a reduction in the adult categories, our revenues only declined by 12% as a result of our continued growth in the children's categories and the tiered rate structure we have in place, which provides for higher royalty rates on the front end of our sales.

In addition, in the U.K., Tesco's retail sales declined by 24%, primarily as a result of a slowdown in their economy and also due to the strengthening of the U.S. dollar. However, sales with Tesco throughout Central Europe grew by 25%, helping mitigate some of the decrease in the U.K. Overall, our total international revenues now represent 53% of our total royalties. We are confident we will continue to see positive results from the expansion of our international presence throughour Cherokee 'World Brand' Strategy.

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