Sherman Oaks, CA—Cherokee Inc. reported Thursday afternoon a decline in its third quarter profit while sales were flat. But the marketer of lifestyle brands, such as Cherokee and Liz Lange, was optimistic about the future as more international deals are signed.
For the quarter ended Nov. 2, Cherokee posted a net profit of $1.6 million or 19 cents a share, compared with $2.1 million, or 25 cents a share, a year earlier. That narrowly missed analysts’ average estimate expecting 21 cents a share.
Net revenue was flat at $6.7 million. The company noted that 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.
New Licenses in Asia
Retail sales of Cherokee branded merchandise at Target U.S. 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.”
Despite foreign 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.
During the quarter, the company added to its infrastructure in anticipation of further growth including the launch of Cherokee-branded adult products on Target.com and the expansion of the company’s brand portfolio into new territories.
“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,” said Henry Stupp, chief executive.
Stupp added that the company was pleased with its expansion of Liz Lange Maternity in India with Mahindra’s Mom & Me Stores, and its 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.
“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, Stupp added.