Shares of brand-management company Cherokee (NASDAQ:CHKE) rose more than 3% yesterday following the announcement that it signed an exclusive deal to represent Roots, a Canadian apparel and accessories brand that also runs retail stores, mostly north of the border, though its wares are well-known in the United States, too.
It's good news for Cherokee, which is the kind of company LloydDobler might have enjoyed working for: It doesn't sell anything bought or processed, buy anything sold or processed, process anything sold, bought, or processed, or repair anything sold, bought, or processed. Instead, as Matt Logan learned from its CFO in an August interview, it licenses its brands to retailers who develop and sell products that bear those names.
The company's brands include its namesake, plus Sideout, Carole Little, and others. Customers include Target (NYSE:TGT), European megaretailers Tesco and Carrefour, and others. To build its business, Cherokee is constantly looking for partners in markets around the world -- in addition to Roots, it's signed on Arcila-Duque Interiors, Essence Communications, and Hot Kiss in 2005 alone.
Cherokee has to keep announcing deals like those to remain interesting to the retailers that peddle its branded wares. Target appears pleased: The massive retailer agreed earlier this month to extend its agreement with Cherokee through January 2007. Investors approve of management's doings as well: The company's shares have come in well ahead of the S&P 500 over the past 12 months.
And who wouldn't be interested in a growing, financially healthy business that turns out nice cash flows? Someone may be interested enough to buy the whole thing. In January, the company brought in an investment bank to help it consider "strategic alternatives."
That can mean a lot of things, but it's not difficult to imagine a company -- perhaps a major retailer who'd like Cherokee's brands for its own -- to consider Cherokee an appealing morsel. The increased ownership of respected brands by retailers is a trend that doesn't look like it will be slowing in the near future.
Fool contributor Dave Marino-Nachison doesn't own any of the companies mentioned.
