Apparel Firm Mossimo Sued by Investor

SANTA ANA — A disgruntled shareholder has filed suit against Mossimo Inc., alleging that founder and Chairman Mossimo Giannulli misled investors on the value of the Irvine-based apparel company and overstated its ability to handle a recent expansion into women’s apparel markets.

The fast-growing company, which has been hurt by production snafus in recent months, joins a growing number of Southern California firms that have been sued by shareholders in the wake of declining stock prices.

Executives at Mossimo declined to comment on the suit, saying that they’d yet to see the document.

The suit, filed Thursday by shareholder Chaile B. Steinberg in Superior Court in Santa Ana, alleges that Mossimo’s executives fraudulently misled investors on the company’s ability to expand beyond its core business, men’s sportswear. The suit alleges that the company didn’t acknowledge its production and distribution limitations until after profit had stalled.

During recent months, the company’s stock price plummeted to $8.88 a share from as high as $50 shortly after its initial public stock offering early in 1996. The stock price tumbled as word of production snarls cut into profit during the holiday retail season.

The suit alleges that Giannulli and other executives “completely lost control of the company’s operations and finances” in recent months, and didn’t report shortcomings to investors on a timely basis.

On Jan. 15, Mossimo said its fourth-quarter profit would be between 3 cents to 8 cents per share, far below the 18 cents anticipated by Wall Street analysts.

The suit seeks unspecified damages for Steinberg and other, as-yet-unnamed shareholders who bought Mossimo stock between Feb. 22, 1996, and Jan. 14. Mossimo’s stock closed Friday at $10.125, up 25 cents, in New York Stock Exchange trading.

In recent weeks, Irvine-based Oakley Inc. has been hit with lawsuits filed by three shareholders who contend that they were misled by executives at the upscale sunglasses manufacturer. Oakley’s stock rocketed to a 52-week high of $27.125 in May before tumbling dramatically upon word that sales of sunglasses during the holiday season would be slower than expected.

Oakley issued more bad earnings news Friday, saying its fourth-quarter earnings will fall below analysts’ reduced estimates because of slow sales in the U.S. during the Christmas season.