Monday, January 31, 2011


Ever tried gorgonzola cheese? I did... once. It was really stinky. Not unlike what unfolding this morning at CHKE.

Bad Headlines

This was the first headline I saw this morning on CHKE (CHEROKEE INC Files SEC form 8-K, Entry into a Material Definitive Agreement, Creation of a Direct Financial Obligatio). I did not like it as this mentioned that CHKE and their Executive Chairman were going different ways. What I really didn't like was the golden parchute, where he got a lump sum payment of $2.2m and his 400,000 shares of CHKE bought at Friday's closing price of $18.15. Those two items add up to about $10m, which is a huge chunk of change for an efficient company like CHKE with a $161m market cap.

The 2nd headline I saw later made me mad as opposed to unhappy (Cherokee Inc. Announces New Chairman and Quarterly Dividend). They cut their dividend from 38 cents to 20 cents. Now this was not a "surprise" to me, as I had always felt their dividend was at risk for a cut given their income levels. But I was mad because it triggered (not surprisingly) a sell-off of about 10%. My question is that if they knew about the resignation and the lowering of the dividend, why should the chairman get paid at $18.15???? He should be taking the same $2 haircut we stockholders are taking, which would hit him by about $800,000!

1 comment:

MagicDiligence said...

Margolis always had some ridiculous terms in his employment contract. The proxy said he had ultimate say in additions/subtractions from the Board, his base pay could never be cut, and that the company must compensate him for any "inconveniences". I'm not surprised he yanked the company's teat one last time on the way out. Hopefully governance improves now, because I do like CHKE as a business.