In its bleakest days in the mid-1990s, Cherokee Inc. realized it had overlooked a key asset — its name.
The Cherokee brand, which began as a shoe line in 1973, evolved into a Van Nuys clothing manufacturing company focused on women and juniors sizes. It moved its headquarters two years ago to Sherman Oaks.
By the early 1990s, as discount retailers such as Target Corp., Wal-Mart Stores Inc. and Kmart started elbowing out more expensive department stores, Cherokee found itself struggling to maintain sales.
It filed a Chapter 11 bankruptcy petition in 1993 and again in 1994. Under that chapter of the bankruptcy code, the company was able to remain in control and operate. But it soon was on the verge of liquidating under Chapter 7 when a survey it conducted offered a surprising road map to success.
Consumers placed Cherokee in the top 10 of the most recognizable apparel sportswear brand names. Executives decided to stop manufacturing and start selling the brand name.
Today, the company is a global marketer of fashion and lifestyle brands for apparel, accessories, luggage, cosmetics and footwear.
In addition to the Cherokee brand, the company also owns or licenses Sideout, Liz Lange, Sideout Sport, Carole Little, Saint Tropez-West, Chorus Line, All That Jazz and other brands.
Cherokee plans to add to its family of brands licensed in more than 40 countries and more than 4,000 locations around the globe. Among the new territories it is entering is Asia.
The company recently signed a retail license agreement with Mahindra Retail Pvt Ltd. in India to sell its Liz Lange Maternity branded clothes at Mahindra's Mom & Me outlets throughout India as well as online.
"We are very excited to partner with the Mahindra Group and to have the opportunity to bring the Liz Lange brand to a broader customer base," said Cherokee Chief Executive Henry Stupp, 50, who joined the company in 2010.
"Just as Liz Lange prides itself on being one of the most recognized and respected maternity brands, Mom & Me stores strive to be the preferred destination of every expectant mother looking for world-class products and services," he said.
Last month, Cherokee reported fiscal third-quarter profit of $1.6 million, down 25% from a year earlier, even though revenue fell only 0.7% to $6.7 million.
Stupp said Cherokee has seen "solid growth" over the last year.
In Britain and central Europe, Cherokee has entered into a partnership with Tesco, Britain's biggest retailer.
Cherokee also has an exclusive arrangement with 179 Comercial Mexicana stores and is the clothing brand representative for international supermodel Alessandra Ambrosio, a deal it announced in February.
During the first six months of its 2013-14 fiscal year, which ends Feb. 1, Cherokee's retail sales climbed 14% at Target, one of its most important retail outlets.
Stupp said the company's biggest challenge domestically is consumer confidence, which he believes was damaged by the partial government shutdown in October and other political impasses.
"Internationally, challenges will come from declining currencies in several key markets in which Cherokee does business as well as the macro-economy in Europe," he said.
Chief Financial Officer Jason Boling said the company also will be challenged by "significant revenue declines" at Zellers in Canada, which sells the Cherokee brand but has been closing stores, and at Target, where royalty rates were moved to a lower tier.
Only one analyst, James Fronda of Sidoti & Co., regularly covers Cherokee. He recommends buying the stock.
Fronda gives Cherokee high marks for cash flow yield, corporate governance and its growth in price-to-earnings ratio.
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