Significant Contracts and Concentrations of Risk

12 Months Ended

Feb. 03, 2018

Significant Contracts and Concentrations of Risk

Significant Contracts and Concentrations of Risk

10.          Significant Contracts and Concentrations of Risk

The Company has historically earned a significant portion of its royalties under a license agreement with Target Corporation (“Target”), which granted Target the exclusive right in the United States to use the Cherokee brand and trademarks in various merchandise categories.  In September 2015, Target informed the Company that such agreement would not be renewed, and accordingly, a portion of the agreement terminated on January 31, 2017, and the remaining portion of the agreement related to Cherokee branded products in the school uniforms category expired on January 31, 2018.  The license agreement provided for minimum annual royalties of $0.8 million in the school uniforms category and $10.5 million in all other categories.

The Company also had a license agreement with Target to sell Liz Lange branded products, which provided for a fixed royalty rate based on Target’s net sales of Liz Lange branded products.  The license expired on January 31, 2018.  

The Company had a license agreement with Kohl’s Illinois, Inc. (“Kohl’s”), which granted Kohl’s the rights to sell Tony Hawk and Hawk Signature branded apparel and related products in the United States.  The Company earned royalties based on a fixed rate of sales of these products in the United States, subject to a minimum annual royalty payment of $4.8 million through January 31, 2017 and $4.6 million through January 31, 2018, the end of the license term.

Concentrations of credit risk within the Company’s accounts receivable are minimal due to the limited amount of uncollected receivables and the nature of the Company’s licensing business.  Generally, the Company does not require collateral or other security to support licensee receivables.  Target accounted for approximately 9% and13% of accounts receivable at February 3, 2018 and January 28, 2017, respectively, and approximately 6%,  39% and 53% of revenues during Fiscal 2018, Fiscal 2017 and Fiscal 2016, respectively.  Kohl’s accounted for approximately 12% and 5% of accounts receivable at February 3, 2018 and January 28, 2017, respectively, and approximately 16%,  14% and 14% of revenues during Fiscal 2018, Fiscal 2017 and Fiscal 2016, respectively.