Cherokee Announces Record Second Quarter Sales and Earnings.

VAN NUYS, Calif. -- Cherokee Inc. (NASDAQ:CHKE):

--Net income up over 18% to $4.3 million

--EPS up over 16% to $0.50 per share

--Revenue up 3% to $10.2 million

Cherokee Inc. (NASDAQ:CHKE), a leading global licensor and brand management company, today reported record revenue and earnings for the second quarter ended July 31, 2004.

Net revenues for the three months ended July 31, 2004 increased by $294,000 to $10.2 million, compared to net revenues of $9.9 million in the comparable period last year.

Net income for the three months ended July 31, 2004 increased to $4.3 million, or $0.50 per diluted share, compared to $3.7 million, or $0.43 per diluted share, in the year-ago period.

Selling, general and administrative expenses for the period decreased $304,000 from the second quarter of the prior year to $3.3 million, primarily due to lower legal and marketing expenses.

Income from interest and other income increased by $330,000 to $453,000 as compared to $123,000 in the second quarter of last year, primarily due to the receipt of an additional $375,000 from Mossimo pursuant to the reimbursement of our legal fees incurred in connection with our lawsuit with Mossimo, which was settled in favor of Cherokee in the second quarter.

The Company ended the quarter with cash and equivalents of $8.3 million and no debt. Net cash provided by operations during the six months ended July 31, 2004 totaled $13.1 million.

Howard Siegel, President of Cherokee, stated: "We continue to diligently execute our highly successful retail direct licensing strategy pioneered by Cherokee nearly ten years ago. We are pleased to report that our second quarter royalty revenues increased by almost $300,000. Our established and diversified portfolio of brands allows our royalty revenue to increase even when sales of Cherokee goods at some of our retail partners decline in a particular quarter. It should be noted that these second quarter results did not include any royalty revenue from sales of Cherokee goods in Mexico or Asia or from royalties attributed to sales of the House Beautiful brand at May Company stores -- all of which we expect will contribute to our revenues during our next fiscal year."

Russell J. Riopelle, Chief Financial Officer, added: "We are pleased to report record operating results and strong cash flow during the quarter. In addition, on July 27th we declared a $0.42 per share dividend, payable in September, which represents our fourth consecutive quarterly dividend. Furthermore, we continue to focus on managing our expenses as evidenced by a year-over-year decrease of over 8% in our SG&A expenses."

Robert Margolis, Chairman and CEO, said: "We have completed another record quarter from both an operational and financial standpoint and stand poised to meet the challenges ahead. We continue to focus on expanding our business with our existing accounts as well as pursuing additional growth opportunities to further enhance shareholder value."

Cherokee Inc., based in Van Nuys, is a marketer, licensor and manager of a variety of brands it owns and represents. Currently, Cherokee has licensing agreements in a number of categories, including family apparel, fashion accessories and footwear, as well as home furnishings and recreational products. Some of Cherokee's premier clients around the world include Target Stores, Mervyn's, TJX Companies, Hearst Publications and Solara Capital (U.S.), Zellers (Canada), Carrefour (selected countries in Europe and South America), Tesco (U.K., Ireland and certain other European and Asian countries) and Shanghai Bolderway (China).

Statements included within this news release that are not historical in nature constitute forward-looking statements for the purposes of the safe harbor provided by the Private Securities Litigation Reform Act of 1995. When used, the words "anticipates," "believes," "estimates," "objective," "expects," "may," "likely," "should," "could," "possible," "plans," "goals" and similar expressions are intended to identify such forward-looking statements. In particular, the forward-looking statements in this news release include statements concerning the potential future issuance of dividends, which would be declared at the sole discretion of the Company's Board of Directors and may be declared only out of funds legally available therefore in any amount or not at all; the Company's pursuit of continued international growth; and the potential retirement of additional debt. Forward-looking statements involve known and unknown risks and uncertainties that may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such risks and uncertainties include, but are not limited to, the effect of national and regional economic conditions, the financial condition of the apparel industry and the retail industry, the overall level of consumer spending, the effect of intense competition in the industry in which the Company operates, adverse changes in licensee or consumer acceptance of products bearing the Company's brands as a result of fashion trends or otherwise, the ability and/or commitment of the Company's licensees to design, manufacture and market Cherokee and Sideout branded products, the Company's dependence on a single licensee for most of the Company's revenues, the Company's dependence on its key management personnel, and adverse determinations of claims, liabilities or litigations, including our dispute with Mossimo, and the effect of a breach or termination by the Company of the management agreement with the Company's CEO. A further list and description of these risks, uncertainties and other matters can be found in the Company's Annual Report on Form 10-K for the year ended February 1, 2003, and in its periodic reports on Forms 10-Q and 8-K. Undue reliance should not be placed on the forward-looking statements contained herein because some or all of them may turn out to be wrong. The Company disclaims any intent or obligation to update any of the forward-looking statements contained herein to reflect future events and developments.

CONSOLIDATED STATEMENTS OF OPERATIONS
                               Unaudited

                       Three months ended        Six months ended
                    ------------------------ -------------------------
                     July 31,    August 2,    July 31,     August 2,
                        2004        2003         2004         2003

Royalty revenues    $10,206,000  $9,912,000  $22,437,000  $21,969,000
Selling, general
 and administrative
 expenses             3,282,000   3,586,000    6,250,000    6,479,000
                    ------------ ----------- ------------ ------------

Operating income      6,924,000   6,326,000   16,187,000   15,490,000

Other income
 (expenses):
Interest expense         (6,000)   (187,000)     (10,000)    (429,000)
Investment and
 interest income        453,000     123,000      631,000      216,000
                    ------------ ----------- ------------ ------------

Total other income
 (expenses), net        447,000     (64,000)     621,000     (213,000)

Income before
 income taxes         7,371,000   6,262,000   16,808,000   15,277,000
Income tax
 provision            3,035,000   2,600,000    6,929,000    6,319,000
                    ------------ ----------- ------------ ------------

Net income           $4,336,000  $3,662,000   $9,879,000   $8,958,000
                    ------------ ----------- ------------ ------------

Basic earnings per
 share                    $0.50       $0.44        $1.14        $1.09
                    ------------ ----------- ------------ ------------

Diluted earnings
 per share                $0.50       $0.43        $1.13        $1.06
                    ------------ ----------- ------------ ------------

Weighted average
 shares outstanding
    Basic             8,662,044   8,251,776    8,632,990    8,242,020
                    ------------ ----------- ------------ ------------

    Diluted           8,727,255   8,477,759    8,705,613    8,443,582
                    ------------ ----------- ------------ ------------


                      CONSOLIDATED BALANCE SHEETS

                                              July 31,    January 31,
                                                 2004         2004
                                             (unaudited)
Assets
Current assets:
    Cash and cash equivalents                 $8,274,000   $5,850,000
    Restricted cash                                   --    2,627,000
    Receivables, net                           9,552,000   12,992,000
    Prepaid expenses and other current
     assets                                      146,000      747,000
    Deferred tax asset                           954,000      954,000
                                             ------------ ------------

Total current assets                          18,926,000   23,170,000

Deferred tax asset                             1,589,000    1,589,000
Property and equipment, net of accumulated
 depreciation of $368,000 and $342,000,
 respectively                                    124,000      108,000
Trademarks, net of accumulated amortization
 of $3,601,000 and $3,091,000, respectively    9,425,000    9,726,000
Other assets                                      40,000       34,000
                                             ------------ ------------

         Total assets                        $30,104,000  $34,627,000
                                             ------------ ------------

Liabilities and Stockholders' Equity
Current liabilities:
    Accounts payable                             $85,000     $529,000
    Other accrued liabilities                  3,057,000    4,315,000
    Income taxes payable                          56,000           --
    Dividends payable                          3,638,000           --
    Notes payable                                     --    2,625,000
                                             ------------ ------------

Total current liabilities                      6,836,000    7,469,000


Commitments and Contingencies

Stockholders' Equity:
Common stock, $.02 par value, 20,000,000
 shares authorized, 8,662,824 and 8,595,916
 shares issued and outstanding at July 31,
 2004 and at January 31, 2004, respectively      173,000      171,000
Additional paid-in capital                     7,266,000    6,207,000
Retained earnings                             15,829,000   20,780,000
                                             ------------ ------------

Stockholders' equity                          23,268,000   27,158,000
                                             ------------ ------------

Total liabilities and stockholders' equity   $30,104,000  $34,627,000
                                             ------------ ------------

Further financial information and explanatory footnotes may be found
in Cherokee's Form 10-Q, which the company expects to file with the
SEC on Sept. 8, 2004.