Mossimo’s Woes Continue as Stock Falls Nearly 25%

Mossimo Inc.’s stock continued its free fall on Friday, plunging nearly 25% in New York Stock Exchange trading after several industry analysts downgraded their ratings for the apparel company in the wake of disappointing third-quarter earnings.

The stock fell $5.375 Friday to close at $16.50, after slumping to a record low of $15.875 earlier in the day. In the past month the stock has lost half of its market value, and has fallen from an all-time high of $51.125 in June.

“The market is pretty unforgiving at this point in time,” said Faye Landes, an analyst with Smith Barney in New York who downgraded Mossimo to neutral from accumulate. “We’re looking for stories with absolutely no hitches . . . and in this case, unfortunately, there are a couple of hitches.”

While Mossimo is “taking several steps” to control higher-than-anticipated expenses, Landes advised investors to “stay on the sidelines” until company managers trim back production costs that skyrocketed during the third-quarter introduction of new men’s and women’s sportswear lines.

Friday’s fall was the latest in a string of tumbles for the apparel company since mid-October, when founder and Chairman Mossimo Giannulli cautioned that third quarter earnings would fall below analysts’ expectations.

Friday’s drop was set in motion by an announcement after Thursday’s market close that quarterly earnings had fallen to $2.3 million, or 15 cents a share, from $2.7 million, or 21 cents a share a year ago. Revenue grew by 70% to $31.9 million, up from $18.8 million.

After third-quarter per-share earnings fell a penny short of what analysts had predicted, some analysts, including Merrill Lynch & Co.’s Brenda Gall, downgraded the stock to neutral from accumulate.

Trading was heavy Friday. About 1.7 million shares changed hands, nine times the three-month daily average of 178,000 shares.

Mossimo shares are now trading below the $18 per share that the company received when it went public last February. The stock surged $7 per share in its first day of trading.

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Stock Plunge

Mossimo Inc’s stock has lost about two-thirds of its value since June. Weekly closing stock prices:

Nov. 8, 1996: $16.50

* Source Bloomberg Business News.

* Researched by JANET L. JONES / Los Angeles Times