Cherokee Inc., the global licensor and brand management company, said total royalty revenues for the first quarter ended May 2, 2009 totaled $8.9 million, as compared to $11.5 million in the comparable period last year. This result is partly due to the stronger U.S. dollar, which resulted in lower U.S. dollar based royalties from the company's international licensees.


Operating expenses for the first quarter totaled $3.1 million, as compared to $3.7 million in the comparable period last year, representing a reduction of expenses of $0.6 million due to continued expense management policies. Cherokee’s net income for the first quarter decreased by a total of $847,000 to $3.8 million or 43 cents per diluted share, as compared to $4.7 million, or 52 cents per diluted share in the year ago period. The year ago period included $0.5 million of audit royalties, or an estimated 3 cents per diluted share, which represented several years of past royalties due.


The company estimates that first quarter diluted EPS would have totaled approximately 50 cents per share, or 7 cents higher, had exchange rates remained constant in the first quarter as compared to the prior year. However, first quarter earnings also benefited by approximately 4 cents per diluted share from amended tax returns filed in the first quarter. Normalizing for all of these adjustments to both periods, the company estimates that first quarter diluted EPS would have been 46 cents as compared to 49 cents per share last year.


Howard Siegel, President of Cherokee, stated, “Our domestic royalty revenues for the First Quarter decreased by $0.9 million from the prior year. This was primarily attributable to the reduction of Cherokee adult business at Target and the closure of Mervyn’s. These declines were partially offset by our growth in the Cherokee children’s business at Target and the Carole Little brand at TJX. We continue to discuss with Target expansion opportunities with the adult business for 2010. Internationally, we experienced retail sales growth in local currencies ranging from 11% to 28% in Hungary, Poland, the Czech Republic and Slovakia with Tesco. However, in the U.K. retail sales in local currency declined by 12.7%, and as a result of the stronger dollar the exchange rate difference totaled -27.6%. Although we expect that retail revenues may continue to be soft through the rest of this year, we believe we will benefit from our growing revenue streams from our Cherokee brand in Brazil, Chile, Peru and India, coupled with the continued growth of Norma Kamali at Wal Mart. In addition, we are excited about the upcoming launch of our Cherokee brand in Spain with Eroski, which is expected to occur in the second half of 2009, and believe this could grow to be a significant contributor to our future royalty revenues.”


Robert Margolis, Chairman and CEO, added, “We believe that our business model and debt-free balance sheet serve us well given the current challenges in the retail environment worldwide. Although we are not pleased with our First Quarter revenue results, we are pleased with our prudent expense management and are very certain that our sales teams are focused on some exciting growth opportunities we hope to announce over the next 6 months.” Russell J. Riopelle, Chief Financial Officer, commented, “We finished the quarter in another strong cash position, with cash and cash equivalents of $9.6 million, trade receivables of $8.5 million, and no debt. As we previously announced, we will pay a dividend of $0.50 per share on June 18th. Unless we see a prudent and compelling acquisition opportunity or some other growth opportunity, we expect to continue a dividend policy commensurate with our earnings and excess cash availability, while we continue to monitor any proposed tax law changes which could accelerate our dividend policy. We will continue to implement and execute strategies designed to maximize value for our shareholders.”





              May 2,           January 31,
2009 2009
Current assets:
Cash and cash equivalents $ 9,582,000 $ 13,652,000
Receivables 8,535,000 5,475,000
Income taxes receivable 1,177,000 1,609,000
Prepaid expenses and other current assets 74,000 75,000
Deferred tax asset   582,000   795,000
Total current assets 19,950,000 21,606,000
Deferred tax asset 987,000 894,000

Property and equipment, net of accumulated depreciation of $744,000 and $725,000, respectively

194,000 210,000
Trademarks, net 8,718,000 9,013,000
Other assets   14,000   14,000
Total assets $ 29,863,000 $ 31,737,000
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 727,000 $ 954,000
Accrued compensation payable 512,000 2,902,000
Income taxes payable 1,877,000 734,000
Accrued dividends payable   4,407,000   4,407,000
Total current liabilities 7,523,000 8,997,000
Stockholders' Equity:
Preferred stock, $.02 par value, 1,000,000 shares authorized

None issued and outstanding

Common stock, $.02 par value, 20,000,000 shares authorized, 8,814,187, and 8,814,187 shares issued and outstanding at May 2, 2009 and at January 31, 2009, respectively

176,000 176,000
Additional paid-in capital 15,055,000 14,875,000
Retained earnings   7,109,000   7,689,000
Stockholders' equity

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