Revenue Declines Hurt Cherokee’s First Quarter

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Shares of Cherokee Inc. lost more than 6 percent Friday, a day after the company reported higher first quarter profit due to a favorable tax ruling, but said revenue was down.

The Van Nuys apparel and home decor company late Thursday reported net income of $3.3 million (38 cents per share) compared with $2.9 million (33 cents) a year earlier.

Cherokee, whose lines include Cherokee, Sideout and Carole Little, received a $2.2 million refund from the California Franchise Tax Board after a favorable ruling. That reduced the company’s tax expense by about $1.2 million for the quarter.

The company, which licenses out its brands but does little to no in-house design, saw revenue fall nearly 16 percent to $6.9 million.

Chief Executive Henry Stupp said during a conference call that royalty revenue from European retail chain Tesco fell 16 percent, but the two companies were discussing new products to boost sales. Cherokee sales at Target stores in the United States have stabilized and even improved during the spring, though no details were provided.

“Now more than ever, we are actively engaged in laying a strong foundation that will stabilize and ultimately grow our business with our existing and future partners,” Stupp said. “We are confident in our strategic direction and based upon the positive reactions from our partners, we believe in our ability to execute on these plans.”

Shares closed down $1.24, or 6.7 percent, to $17.21 on the Nasdaq.

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