Troubled Mossimo Takes a Beating in Third Quarter, Plans to Regroup
Beset by dramatically lower sales and an inventory loss of $700,000, clothing maker Mossimo Inc. said Monday it expects to report a third-quarter loss of nearly $5 million next week.
Mossimo’s stock took a beating Monday, falling nearly 16% after the disappointing results were announced. The stock dropped $1.31 a share to $6, after hitting a 52-week low of $5.75 earlier in the session in heavy trading on the New York Stock Exchange. More than 362,000 shares changed hands, compared with the stock’s average daily volume of 74,500 the last three months.
The Irvine company said sales for the three months ended Sept. 30 plummeted 46% to $17.1 million from $31.9 million a year ago, partly as a result of weaker sales throughout the industry. The company said it will release final results Nov. 11.
In a move to bolster its management ranks, Mossimo also announced Monday that it will hire a president, a new position at the firm.
Industry analysts applauded the move, saying the company needs a strong executive to oversee its operations.
“They’re going to have to find somebody fast,” said Faye Landes of Smith Barney.
Landes said that Mossimo, which has dabbled in a variety of clothing styles--from beachwear to button-down shirts--needs to chart a clearer fashion path.
“They could use more focus,” she said. “There’s some very attractive clothes in there, but I think they need to settle on a clearly defined look.”
The company, which makes designer clothes for men and women, also said it will take reserves of about $2.2 million after taxes in the third quarter to reduce the value of some of its inventory and to discount the price of some clothing to retailers.
Founded in 1987, Mossimo sells in department and specialty chain stores nationwide. Shortly after going public in early 1996, the company’s stock soared to $50.125. Later, the stock slumped as the company posted a series of disappointing quarterly financial results.
Mossimo lost $500,000 in the first quarter this year, but turned a slight profit in the second quarter after cutting costs and restructuring operations.
But for the third quarter, the company expects to report a net loss of about $4.8 million, or 32 cents a share, compared to a net income of $2.3 million, or 15 cents a share, a year ago.
Mossimo said the $700,000 in inventory losses were a result of a flawed system it was using to track inventory, a problem it has since corrected.
“We view the inventory loss as a serious matter and have moved quickly to ensure even more frequent and rigorous inventory reviews,” founder and chief executive Mossimo Giannulli said Monday in a prepared statement.
Landes called Monday’s report “very negative” but said the company can rally.
“It’s a brand name with wide recognition and there’s a lot of talent in the company,” she said. “They know they have to pull things together a little bit, and I think they have a shot at it.”
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Mossimo at a Loss
Mossimo, the erstwhile hot fashion house, anticipates its largest quarterly loss since going public last year. Quarterly sales and net income in millions:
Sales
1997
3rd qtr.* 17.10
Net Income
1997
3rd qtr.* --4.80
* Estimate
Along the Way
Some signposts along the way to Mossimo’s recent financial woes:
1996
February: Share price rockets 39% to $25 a share during its New York Stock Exchange debut.
May: Reports solid gains in earnings and sales for its first quarter as a public company.
June: Share price reaches $50.13
July: Announces plans to enter women’s apparel market; share price falls to $38.63.
October: Shares fall to $23 on news third-quarter earnings will be below analyst expectations; unexpectedly high production costs blamed.
November: Shares drop to $16.50 after analysts downgrade firm’s ratings in the wake of disappointing third-quarter earnings.
1997
January: Announces that fourth-quarter profits will be less than half analysts expectations due to inventory shortages caused by late deliveries of holiday merchandise, unexpected production expenses and warehouse problems. Share price falls to $9.63; disgruntled shareholder files suit, alleging founder and chairman Mossimo Giannulli misled investors on value of his firm and overstated its ability to handle expansion into women’s apparel market.
April: Announces likely first-quarter loss of nearly $500,000; share price falls below $6.
May: Giannulli reassures shareholders at first meeting that revenue and profits will get back on track once production and distribution problems are resolved.
November: Reports likely third-quarter loss of $4.8 million; share price falls $1.31 to $6 a share.
Sources: Bloomberg News, Times reports; Researched by JANICE L. JONES / Los Angeles Times
