Mossimo to Fire 90% of Workers, Close Stores
Beleaguered apparel designer Mossimo Inc., undergoing a massive restructuring, said Monday it will lay off 90% of its employees, leaving the company with a skeleton crew, and will close its two stores by the end of the year.
The Irvine company also posted sharply higher first-quarter losses, although sales more than doubled.
The clothing designer, which recently struck a deal that will place its sportswear exclusively in Target discount stores beginning next year, plans to shut down its boutique at South Coast Plaza in Costa Mesa and an outlet store at the Ontario Mills shopping center in Ontario.
The South Coast Plaza store, which has a dozen employees, has begun selling all merchandise at half price. Employees said, however, that they have not been told when the store will close.
“We really don’t have a specific date,” store manager Tracey Gonzales said. “I do know that we’ll be open for a little while.”
Mossimo also will close its showrooms, which are in Irvine, Dallas and New York.
The company, which at the end of the year had about 100 employees, also said its line of credit will be virtually exhausted by next month. It said it is renegotiating the credit line and seeking additional financing to cover anticipated shortfalls.
Mossimo said it lost $9 million, or 59 cents a share, in the first quarter, compared with a loss of $1.6 million, or 10 cents a share, in the first quarter last year. The most recent loss included a $4.1-million restructuring charge.
The company also revealed that its cash on hand had dwindled to $316,000 at the end of the quarter from $473,000 at the end of 1999.
Sales jumped 118% for the quarter to $18.1 million from $8.3 million.
Company officials could not be reached for comment, but analyst Jeffrey Van Sinderen praised Mossimo’s spring apparel line, calling it “one of their best.”
“They really were out there trying to sell a decent product,” said Van Sinderen, with B. Riley & Co.
The company’s stock closed at $2.25, down 19 cents a share, on the New York Stock Exchange. The shares have lost 72% of their value so far this year.
Mossimo struggled for years after trying to shift quickly to fashion-oriented apparel from its beachwear roots. Before making the deal with Target, Mossimo made repeated stabs at righting itself, including in 1997 hiring turnaround expert John Brincko, who made a series of cost-cutting moves. The company then hired former Tommy Hilfiger Inc. Chief Executive Edwin Lewis to run Mossimo. He left when the Target deal was announced.
Under the Target deal, the Minneapolis-based discount chain will pay Mossimo a royalty based on a percentage of the net sales of Mossimo products, with a guaranteed minimum of about $27.8 million over the first three years of the agreement.
Initially, the Target products will include Mossimo-brand men’s and women’s apparel, but the line may be expanded to include such items as housewares, accessories and fragrances.
Mossimo is now trying to bridge the gap financially until the Target deal becomes effective in February.
A multimillion-dollar endorsement pact with golfer David Duval figures to add to the financial pressures. Mossimo must pay Duval at least $2.4 million this year and $850,000 a year for the next three years, according to a document filed Monday with the Securities and Exchange Commission.
Mossimo also disclosed that it agreed to pay $13 million to settle a series of 1997 lawsuits accusing the company of misleading investors. The settlement, approved in March by a federal judge, was covered by insurance, the document said.
