Mossimo Stock Down 50% on Word of Licensing Deal


Mossimo Inc.'s stock lost half its value Wednesday, a day after the struggling apparel company announced that it will license its clothing to Target Stores, that its chief executive has resigned and that it needs more financing to continue operating.

The stock closed Wednesday at $3.25, down $3.25 a share on the New York Stock Exchange, making it the biggest percentage loser in U.S. markets. More than 1.5 million shares changed hands, 25 times the daily average for the last three months.

As the stock plunged, Target formally announced its licensing deal with the apparel designer, saying it plans to launch a full line of Mossimo clothing in its stores next year. It is the first designer-apparel licensing agreement for Minneapolis-based Target.

The line may eventually be expanded to include a variety of products, such as housewares, accessories and fragrances.

Founder Mossimo Giannulli, whose stylish designs at one point were making inroads in the world of high fashion, will help design the apparel for Target, which will handle virtually all other aspects of the business. Mossimo will be paid royalties based on sales. The deal guarantees $1 billion in sales over three years, beginning in February 2001.


Ongoing operations at Mossimo’s Irvine headquarters will be largely scaled back to “design and finance functions,” Mossimo said.

Meanwhile, Mossimo licensees are trying to assess what the restructuring will mean to their businesses.

Industry experts have questioned whether licensees will be able to continue to sell the Mossimo brand through department stores such as Nordstrom and Bloomingdale’s when it is also on racks at Target. Selling a brand at discount stores can smudge its prestige.

Lunada Bay Corp. in Anaheim, the licensee for Mossimo’s women’s swimwear and bodywear, said that nearly 80% of its sales are tied to the brand, which could yield sales of $33 million this year. The company sold to carefully selected retailers, from specialty stores, including surf shops, to department stores such as Macy’s and Nordstrom.

“It’s very disappointing for our business to be jeopardized in this way,” Chief Executive Susan Crank said.

Target said it will include men’s swimwear in its new line next year. It is also exploring the possibility of buying products from current licensees of the Mossimo brand.

It was still unclear Wednesday what will happen with the Mossimo boutique at South Coast Plaza in Costa Mesa or the Mossimo surplus outlet at Ontario Mills shopping center in Ontario, but workers at both stores said they expect the businesses to remain open.

Mossimo executives could not be reached for comment.