LESS HIP, MORE WALLET CHEROKEE GROUP CONTINUES STRING OF PROFITABLE YEARS.

Byline: Brent Hopkins Staff Writer

VAN NUYS - Though its name hardly oozes hipness, the Cherokee Group still has something better - solid profits.

The licensor, brand manager for Mossimo, Side Out, Mrs. Fields and its own signature brand, announced its sixth consecutive year of profitability Wednesday, with strong results for both the fourth quarter and fiscal year 2002. The firm's secret, according to Chief Financial Officer Carol Gratzke, lies in its steady, dependable nature.

``It's always been positioned to connote quality for a traditional American lifestyle with wholesome values,'' she said. ``Because of that, our consumer knows what to expect when they buy it. It's not faddish, it's very tried and true.''

Though you won't see Cherokee billboards dotting Sunset Boulevard or find celebrities flocking to endorse its staid brands, a fixture of Target and Mervyn's stores, the company boasts solid financials. For fiscal 2002, retail sales of the firm's branded goods topped $2 billion. Royalty revenues for the year were $30 million, up from $28 million in 2001, and net income was up to $12 million, compared with $10.7 million the year before. Shareholders took home $1.47 on the year, up from $1.29 in 2001.

The fourth quarter also showed improvements, with royalty revenues up to $6.29 million, compared with $6 million in the same period a year ago. Net income was $2.34 million, up from $2.03 million, netting investors 29 cents per share, up from 25 cents per share.

The firm occupies an odd slot in the retail world, acting as the go-between for retailers and successful brand names. Profits come from licensing the brands, keeping them current and ensuring they continue to grow. Since it handles only the image, rather than manufacturing or inventories, the company can operate with 14 employees and very low overhead.

Its main customer is Target Corp., which accounts for 67 percent of Cherokee's licensing, according to the latter's 10-K filing. According to Douglas Kline, a spokesman for Target Stores, Cherokee and Mossimo brands are a key component of their apparel lineup.

``Cherokee and Mossimo both are important to us,'' Kline said. ``They're selling very well. This merchandise is exclusive to us, it's designed in collaboration with us, and it's trend-forward.''

The fashions have been key to Target's success as the chain has risen to become a major player on the discount scene. Its trendy, yet sensible, merchandise, largely sold under the Cherokee badge, consistently earns praise as crucial to the chain's hotly fought spot competing with Wal-Mart.

Aubie Goldenberg, a partner with Ernst & Young's Los Angeles office who analyzes the retail world, pointed to Cherokee's marriage of Mossimo and Target in 2001 as an illustration of how the licensor can improve a brand's stead. For brokering the deal, Cherokee gets a 15 percent royalty, amounting to a guaranteed $27.8 million over three years. Last year, this made for $2.2 million in income.

``Mossimo has a well-established, great brand name, but as an independent, they really struggled,'' he said. ``Target wanted a well-recognized brand name, but for them, building something to the point where Mossimo was would have taken a significant investment. With this, they got a well-known brand and the royalty was worth it.''

CAPTION(S):

2 photos

Photo:

(1 -- color) Barbara Bernhardt of Westlake Village picks out some Cherokee tops in the Mossimo area at the Woodland Hills Target.

(2 -- color) Cherokee brand tops exemplify the brand's mixture of bargain pricing and reliable style at a Target store Wednesday.

David Sprague/Staff Photographer