Cherokee, Inc. (NASDAQ:CHKE)

CAPS Rating: 3 out of 5

The Company markets and licenses the Cherokee, Sideout and Carole Little brands and related trademarks and it represents other brands for apparel, footwear and accessories.

Recs

5
Player Avatar FoolishN8 (21.04) Submitted: 8/2/2007 10:20:52 PM : Underperform Start Price: $28.67 CHKE Score: -4.47

Fundamentals look great, but this is all due to the big $33 million payout from Target to buy the Mossimo brand. Excluding that and the company had even earnings growth over last year. Take out the effects and fundamentals haven't improved. Also there is too much risk. 42% of revenue comes from Target, 28% from Taseko in Britain. Target has a termination option every year and Cherokee sales were down 20% last year. If at any time they terminate the agreement this stock tanks. Sure dividends are great, 100% of 2005 and 2006 earnings and 70% of 2007 (100% if you exclude Mossimo sale), but if any licencing agreement is terminated, bye-bye dividend. The company has also explicitly stated they can cancel the dividend to pursue acquisitions, which is quite likely given they're paying out 100%!!!
Just cause the ratios look good doesn't mean its being run well. This sucker's down for a reason and should stay down.

Report this Post 6 Replies
Member Avatar rmenschel (78.50) Submitted: 8/17/2007 2:29:55 AM
Recs: 0

Your argument is good, but you finish with: > This sucker's down for a reason and should stay down.It's gained significantly against the S&P500 since then. Why would that be?

Member Avatar FoolishN8 (21.04) Submitted: 10/19/2007 1:20:17 AM
Recs: 0

I think Cherokee has become a fan favorite due to the seemingly high dividend, however it can't maintain its current ratios and performance. I still think my call is right, I'm just a little off on the timing. Unless they replace Mossimo, it will be tough to replicate last year's performance.

Member Avatar euroedmus (< 20) Submitted: 11/13/2007 5:42:42 PM
Recs: 0

Taseko in Britain...??? did you mean Tesco?: if you dont know the correct name of the biggest retailer in Europe i doubt you know enough about Cherokee. Sales in Europe and other countries outside the risky US is the biggest plus for this company. i bought it yesterday at its lowest price this year and will most probably enjoy a money maker for years ahead. time will show.

Member Avatar bowser1954 (< 20) Submitted: 3/11/2008 10:33:42 PM
Recs: 0

Mossimo has ben replaced several times over by recent deals.

Member Avatar FoolishN8 (21.04) Submitted: 4/23/2008 3:27:43 PM
Recs: 0

Holy crap I can't believe I was so spot on with this. Drop in revenue due to one-time gain from Mossimo sale. Wow. Would love to hear some other's reaction.

Member Avatar ViolentCapital (97.54) Submitted: 8/14/2008 11:42:31 AM
Recs: 0

what the hell? of course revenue will drop when you sell a subsidiary! thats why your supposed to put the after-tax sale gain as cash, and net out revenues from that division (ignore discontinued ops)

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