Despite lower royalties from its two biggest US licensees, Target and Mervyn's, Cherokee recorded sizeable gains in revenues and profits for the fourth quarter and full year due to a one-time payment for its work securing the Mossimo deal with Target.

During the three months ended 3 February, net income more than quadrupled to US$20.7m, or $2.33 a diluted share, from $4.4m, or $0.49, in the year-ago quarter.

While royalty revenues were down 7.1%, to $9.2m from $9.9m a year ago, total revenues increased more than fourfold to $42.2m from $9.9m.

The difference was the $33m payout paid to Cherokee by Iconix Brand Group to terminate Cherokee's finder's fee for setting up Mossimo's licensing deal with Target Corp.

Iconix acquired Mossimo for $67.5m in cash last November after Cherokee withdrew its bid for the firm based on the termination agreement.

Full-year results were also lifted by the Mossimo termination. Net income for the 12 months was $34.8m, or $3.93 a diluted share, nearly twice the $18.3m, or $2.07, registered in the prior year.

With the Mossimo buyout, revenues hit $76.6m versus $42.7m in the prior year. Excluding the buyout, revenues were still up 2.1% to $43.6m.

Worldwide sales for the Cherokee brand at retail surpassed $2.5bn, and global retail sales for all brands owned or represented by Cherokee during the year exceeded $4bn, the Van Nuys, California-based brand management firm said.

The company paid dividends of $0.75 and $2.55 a share in the quarter and year, respectively, versus $0.60 and $2.15 in the earlier-year periods.

"During fiscal year 2007, although our royalty revenues from domestic licensees Target and Mervyn's were down compared to last year, we were pleased to achieve royalty growth from many of our international licensees, while further strengthening our balance sheet as a result of the $33m received from the sale of the Mossimo finder's agreement," said Russell Riopelle, chief financial officer.

"We paid out $22.4m in dividends to our shareholders during 2007, and we remain committed to enhancing shareholder value through continued revenue growth and increased profitability."

He added that Cherokee continues to pursue acquisitions "to further enhance our operations."

Howard Siegel, president, noted that international revenues now account for more than 42% of Cherokee's "ongoing business. We believe that during this decade, a few elite brands will emerge with global dominance - World Brands.

"Our presence in North America, Europe and Eastern Europe provides a platform for the Cherokee brand's continue global growth and recognition. We will continue to explore new opportunities in other parts of Europe, South America and Asia as our primary objective is to establish Cherokee as the leading consumer lifestyle brand worldwide."

Cherokee's other brands include Sideout and Carole Little and, as had been the case with Mossimo, it represents a number of brands owned by others as well.

In addition to Target and Mervyn's, among its larger licensees worldwide are TJX Companies, Tesco, Hbc/Zellers, Pick 'n Pay, Comercial Mexicana, Falabella, Fawaz Al Hokair and Shanghai Bolderway.
By Arnold J Karr.