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Deal May Cost Mossimo Much of Its Cachet

TIMES STAFF WRITER

Mossimo Giannulli stands to benefit richly from his licensing deal with Target Stores. But a regulatory filing Thursday also shows how much the Irvine fashion designer will give up to reap a financial reward.

Giannulli will earn at least $8.5 million in the first year of the deal, which Mossimo Inc. signed this week in a bid to keep the financially troubled company afloat. As part of the deal that surprised longtime Giannulli associates, the 36-year-old Southern Californian signed over the rights to his name, signature, voice and even personality, in effect becoming the retailer’s paid pitchman.

Giannulli, who had hoped to groom Mossimo as a bona fide alternative to such fashionable names as Tommy Hilfiger, Donna Karan and Ralph Lauren, is betting that the new relationship with the huge Minneapolis-based retailer will help turn Mossimo into a household word among label-conscious Americans.

But it will be more middle-of-the-road than Rodeo Drive. Mossimo’s label will now adorn everything from baby clothes and women’s lingerie to suitcases and rugs. Target is expecting to sell more than $300 million a year in Mossimo merchandise, according to estimates in a Securities and Exchange Commission filing.

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SEC Filing Offers Insight

The filing by Mossimo provides an intimate look at how a powerful retail chain plans to take an elite brand and turn it into a mass-marketing vehicle. The venture is not unlike Martha Stewart’s deal to provide stylish goods at low prices for Kmart shoppers and designer Michael Graves’ marketing arrangement with Target.

The documents reveal what Giannulli will have to do to earn his keep, but only time will tell if Target can mainstream what’s arguably one of Southern California’s fashion pillars. Changes, however, are likely to be swift and noticeable.

Mossimo, which has been advertising in such high-fashion beacons as Vanity Fair and GQ, and boasts when its daring swimwear appears in Sports Illustrated’s annual swimsuit issue, now will be mass-marketed on television and billboards, through direct mail and on shopping bags promoting the Target, Dayton’s, Mervyn’s and Marshall Field’s retail chains.

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The Target alliance also signals an apparent downward shift in a pricing strategy that has included $300 eyeglass frames and $500 men’s suits. Mossimo now will labor on designs for a Target line.

The deal “gives Target a young, trendy handle,” said Ilse Metchek, executive director of the California Fashion Assn., a trade group in Los Angeles. “But by the same token, [Target’s] reach is so far and so wide, they won’t afford fashion risks.”

“Mossimo can’t be cutting-edge anymore,” she said.

Mossimo began as a beachwear company in the early ‘80s, with Giannulli selling volleyball shorts out of the back of his car. But as Mossimo tried to make the difficult leap into high fashion, the company stumbled, running into financial and management problems. The company said this week that it expects to lay off many of its remaining 100 employees.

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By signing with Target, Giannulli figures to earn more than $9 million annually after the first year, according to the filing. Much of what he will do to earn his paycheck is pro forma--attending a dozen planning meetings annually, including six in Minneapolis. He also agreed to head a Los Angeles-based staff that will provide Target with proprietary designs.

But Target clearly intends to capitalize on Giannulli’s name, personality and image as it strives to woo consumers who insist that good value and good design not be mutually exclusive.

Target has a long list of demands that it expects to be fulfilled.

The SEC filing cautions that “at no time . . . will [Mossimo] or Giannulli disparage their association with [Target Stores].” Another section requires Giannulli to maintain a design standard “at least as high as the top line of similar products now being sold.”

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A morals clause advises that the deal will destruct “if Giannulli is convicted of or admits to the commission of any felony, convicted of any offense involving substance abuse, or publicly admits that he is addicted to any controlled substance.”

The filing also provides insight into Target’s plan to leverage Giannulli’s carefully cultivated image as an arbiter of fashion. Giannulli has signed over the rights to his “name, signature, photograph, voice [and] other sound effects, likeness, personality, endorsement, biography and statements” for use in Target’s advertising and marketing.

Giannulli, the SEC filing states, has agreed to “attend and participate in all rehearsals, filming, taping, recordings and photography sessions reasonably required.”

Mossimo, which once counted Macy’s West and other high-end department stores among its most important outlets, also agreed to withhold its designs from such competitors as Wal-Mart, Kmart, Costco and Pic ‘N’ Save.

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