Mossimo’s Earnings Held Down by Strained Systems

Mossimo Inc. on Monday reported dramatically higher revenue but decidedly disappointing earnings for the fourth quarter and year ended Dec. 31.

Fourth-quarter net income totaled $548,000, or 4 cents per share, down from net income of $2.5 million, or 19 cents per share, a year earlier. Net income for the year fell to $12 million from $19.2 million.

Quarterly revenue rose 47% to $26.8 million from $18.2 million, while yearly sales rose to $108.7 million, up from $72 million.

Founder and Chairman Mossimo Giannulli blamed the company’s lower-than-anticipated earnings on dramatic growth that “ultimately strained our operating systems and impeded our ability to efficiently keep up with demand and deliver product on schedule.”

Mossimo, which is expanding its product line to improve upscale women’s apparel and include a broader line of menswear, has been hurt during recent quarters by unexpectedly high product development costs, late deliveries to retailers and higher-than-normal returns of out-of-season merchandise.

Mossimo cautioned Wall Street in recent months that its year-end results would fall noticeably short of analysts’ expectations. Previously bullish apparel industry analysts responded by lowering their recommendations to neutral and are waiting to see if the company can better control its costs.

The company believes that its dramatic expansion ultimately will drive earnings to more respectable levels. The company opened 89 department store boutiques in 1996, boosting its total to 100. Mossimo plans to open 125 more in-store shops in 1997.

Mossimo closed up 50 cents at $9.625 in New York Stock Exchange trading. Mossimo climbed to $50.125 last year prior to word of the production and distribution problems.