Mossimo’s Troubles Continue
Beleaguered apparel designer Mossimo Inc., undergoing a massive restructuring, said Monday that it will lay off 90% of its employees 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.
Mossimo also will close its showrooms, which are in Irvine, New York and Dallas.
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.
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. Sales jumped 118% to $18.1 million from $8.3 million.
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.
Mossimo has struggled for years after trying to shift too 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 implemented a series of cost-cutting steps.
The company then hired former Tommy Hilfiger Inc. Chief Executive Edwin Lewis to run Mossimo. Lewis left when the Target deal was announced.
According to that agreement, the Minneapolis-based 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 deal.
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 now is trying to bridge the gap financially until the Target deal becomes effective in February.
The company could not be reached for comment.
The 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.
