Retailer Target helps Cherokee Q2 FY'14 sales climb 19%

Net revenues for the second quarter were $7.5 million, an increase of approximately 19% from $6.3 million in the prior-year period.

The increase in revenues was primarily the result of higher revenues from the retail sales of Cherokee-branded products at Target and the addition of the Liz Lange brand to our portfolio. In addition, the Company experienced solid increases with its international licensees partially offset by a year-over-year decrease of Cherokee royalty revenues at Zellers Canada of approximately $0.7 million due to the retailer’s closing during Cherokee’s first quarter of Fiscal 2014.

The Company’s international business also continued to see growth during the quarter, marked by further global expansion into the Middle East and Indonesia, the recent six-year extension of the Company’s partnership in South America with Tottus, and a 47% revenue increase with Tesco on a year-over-year basis.

Cherokee saw similarly strong progress in North America, including a 32% increase in Cherokee brand royalty revenue with its exclusive U.S. retail partner Target and early success with the launch of the Cherokee brand with Target Canada.

Additionally, during the second quarter, the devaluation of several foreign currencies, including the Japanese Yen, Indian Rupee, and South African Rand, resulted in an approximately $131,000 unfavorable impact to revenues.

Selling, general and administrative expenses for the second quarter were $4.2 million, or 57% of sales, compared with $3.6 million, or 58% of sales, in the prior-year period. This increase is related to personnel costs that are provided to enhance the Company’s 360° approach with its partners including Tesco and increased amortization costs related to the acquisition of the Liz Lange and Cherokee Uniform brands.

Net income for the second quarter was $1.9 million, or $0.23 per diluted share, an increase of 19% compared with $1.6 million, or $0.19 per diluted share, in the prior-year period

“The first-half of Fiscal 2014 has been very productive for the Cherokee Group,” said Cherokee Chief Executive Officer, Henry Stupp. “Revenues for the quarter increased nearly 19% despite the early closing of Zellers Canada and foreign currency devaluations.”

Mr. Stupp continued, “Our successes over the past six months have positioned the Cherokee Group for continued growth throughout the remainder of Fiscal 2014 and into the future. We are pleased with our ongoing refinement of our operating model, and going forward we will continue to execute against our long-term strategic growth plan as well as evaluate new acquisition opportunities to generate value for both our shareholders and retail partners.”

At August 3, 2013, the Company had cash and cash equivalents of $2.8 million, compared to $2.4 million at February 2, 2013.

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Cherokee Inc