Apparel retailer Cherokee Global Brands (NASDAQ:CHKE) said Target (NYSE:TGT) elected not to renew the license of the Cherokee brand in the United States, sending the company's shares tumbling 33 percent in extended trading.
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The current license will expire on Jan. 31, 2017, Cherokee said in a statement on Thursday. Target has been licensing the Cherokee brand for almost two decades.
Cherokee earned $15.0 million in royalty revenue from Target for the Cherokee brand, excluding Canada sales and school uniforms category sales, in fiscal 2015, according to Cherokee's annual filing.
The royalty revenue accounted for 43 percent of Cherokee's total revenue for the period, according to the filing.
"The termination of our license agreement with Target for Cherokee branded products would have a material adverse effect on our business," Cherokee had said in the filing.
The company also reported a 3.2 percent decline in second-quarter sales, hurt by weak demand for Cherokee-branded products in the UK and Canada.
Cherokee's shares plunged more than 33 percent to $16.03 in extended trading on Thursday. Up to Thursday's close, they had risen about 25 percent this year.
(Reporting by Yashaswini Swamynathan in Bengaluru; Editing by Savio D'Souza)