The garment company that’s become rich by reviving and managing brand names has put a new label on its own operation: For Sale...Maybe.
Representatives of publicly-traded Cherokee Inc. recently said the company will look into ways to give a boost to the value of its stock, a review that will include prospects for a sale. The company has hired New York-based Goldman Sachs Group Inc. to assist in the efforts.
Cherokee is based in the Van Nuys district of the San Fernando Valley. Robert Margolis, the company’s chief executive officer and a longtime veteran of the Downtown garment trade, oversees a lean operation that has consistently found profits in sprucing up established brands and finding them new retail outlets while contracting for most of the production processes involved in making the goods.
Margolis did just that with the Cherokee brand on which the company was founded, and performed similar revivals with the Sideout label. Margolis is largely credited with engineering a deal that took the once-high flying Mossimo label from bankruptcy to big sales at Target Stores Inc.’s namesake discount chain—a step down for the brand in terms of image, but a leap upward in terms of revenue and profits. That deal earns royalties for Cherokee on the sale of Mossimo merchandise, a model that has been reflected in other agreements.
Cherokee has long had strong ties to Target for its namesake label, Mossimo and several others, and has lined up deals for clothing labels and home furnishings line with other retailers. Longtime Los Angeles-based womenswear label Carole Little, for example, is now in the Cherokee portfolio and found on shelves at TJX Cos. stores, including its T.J. Maxx locations.
Cherokee’s stock has periodically hit rough patches in the past because of investors’ fears that the company had been over-reliant on Target for sales. That has changed lately, though, as Margolis has diversified the company’s retail relationships with deals such as the agreement with TJX Cos.
Cherokee has also moved aggressively overseas, and the United Kingdom-based Tesco retail chain has now supplanted Target as Cherokee’s top outlet in terms of revenue.
Those efforts have led to strong growth in revenue and enviable profits for Cherokee. Those factors—along with the diversification in terms of retail relationships—have apparently prompted the search for ways to reconsider its options for increasing the company’s value. Cherokee on December 18 reported profits of $3.7 million—or 41 cents a share—on revenue of $8.9 million for the third quarter of 2007. The strong results pushed Cherokee’s stock up by $2.10 a share that day, to $34.52, and the price remained near that level, as of presstime.
Cherokee executives could not be reached for comment on news of a possible sale, as of presstime.
