Mossimo’s Woes Continue With $6.1-Millon Loss, Plunge in Sales

The bad news continued at Mossimo Inc. on Friday as the clothing company reported a second-quarter net loss of $6.1 million, or 41 cents a share, while sales dropped 35%.

Mossimo attributed the bleak numbers to a one-time restructuring cost of $3.8 million and its decision to sell fewer clothes through specialty retail shops. The Irvine-based company earned $45,000 during the same period in 1997.

The restructuring cost included write-offs for improvements to property that Mossimo will no longer need as part of its corporate downsizing, and the cost of closing both the company’s screen printing business and its retail store in Pasadena.

The screen printing operation and the Pasadena store lost about $315,000 in the first half of 1998.

The restructuring costs were anticipated, Chief Executive John Brincko said, and the numbers reported Friday were better than the company had expected.

“They’re not a surprise to us,” he said. “And they’re not a surprise to Wall Street.”

Indeed, Mossimo’s stock held steady Friday, closing at $2.75, up 6 cents, in New York Stock Exchange trading.

Mossimo has been doing some painful belt-cinching to recover from difficulties that have arisen since it attempted to move quickly from its original beachwear and casual wear business to more upscale fashions.

The company now is putting its emphasis on “a denim-based sportswear collection with fashion elements,” Brincko said.

Brincko, who signed on earlier this year to right the faltering company, said he believes Mossimo will recover, once its costs are under control.

“The steps we reported today are absolutely essential elements of the turnaround,” he said.

Sales for the quarter fell to $11.4 million from $17.6 million a year ago. Sales of men’s clothing--once the company’s strong suit--plummeted 64% in the second quarter to $4.3 million from $11.9 million in the same 1997 period.

Sales of women’s clothing rose 7.75% to $4.2 million during the period.

Not everybody is as optimistic as Brincko about Mossimo’s strategy of concentrating on denims along with other items, such as twill pants and knit shirts, a market cluttered with competitors.

“They’re in the same channels as Nautica, which is a much more established company,” said Jennifer Black, a retail apparel analyst with Black & Co. in Portland. “And you’ve got Tommy [Hilfiger] and Ralph Lauren” in addition to up-and-coming companies such as Seattle-based Cutter & Buck Inc., which recorded annual sales increases of 70% over the last three years.

“It doesn’t surprise me at all that [Mossimo is] struggling,” Black said. “They could potentially be a takeover candidate or they could potentially go out of business or they could just struggle for a long time.”

But Brincko insists that Mossimo is making steady headway.

Mossimo started the year with high inventory levels for the spring, summer and fall, which hurt profits, Brincko said. But controls are now in place to prevent the accumulation of excess inventory, he said.

And Mossimo is meeting its shipping deadlines, he said, something it hasn’t always done.

The company is increasingly relying on department store sales.

In the first six months of 1998, 45% of Mossimo’s total sales came from department stores, Brincko said, compared with 39% a year ago.

For the first six months, Mossimo lost $7.7 million, or 52 cents a share, compared with a loss of $453,000, or 3 cents a share, for the comparable period last year. Sales declined 38% to $25.9 million from $41.6 million.

Brincko predicted that Mossimo’s overall loss this year will be “significantly lower” than in 1997, when the company lost $18.7 million.