MOSSIMO: ANATOMY OF A TRANSFORMATION

Byline: Kristi Ellis / Cynthia Redecker, New York

LOS ANGELES — Mossimo Inc. has gone through many transformations, but this time, chairman and creative director Mossimo Giannulli thinks he has it right.
The company, which narrowed its losses in the second quarter, has shifted its focus away from denim, increased its sku’s, launched an aggressive marketing campaign and plans to introduce a new in-store concept, according to Giannulli. There are also a few more licensing possibilities on the horizon.
Would it be fair to characterize Mossimo’s performance as “a comeback”? That depends, said its chairman.
“A comeback is when someone is on the mat,” said Giannulli, just back from a 17-state personal appearance tour. “From a consumer standpoint, we never missed a step with women’s swimwear [produced by licensee Lunada Bay], so in that respect, it’s not fair to say it’s a comeback.
“But from a business aspect, I would suggest that it is an absolute comeback.”
Known as a highflier in the fashion industry, Giannulli started the company in 1987 with $15,000, making T-shirts and shorts out of his garage on Balboa Island in California. It took only eight years for him to turn the brand into a $110 million business.
In 1996, he took his company public and the stock price jumped to $50 a share. But rapid growth forced the company into a downward spiral in the next two years. Production costs escalated, shipments were delayed, inventory control disintegrated and the stock plummeted to $1 a share.
To stave off a complete financial collapse, the beleaguered company hired Brincko Associates Inc. in early 1998. Turnaround specialist John Brincko, former president and chief operating officer of Barneys New York, took the helm and implemented cost-cutting measures, inventory control and a quick-response system to halt the dramatic decline.
At the end of 1998, Brincko opted not to renew his contract and the company hired Edwin Lewis, a former Polo/Ralph Lauren executive vice president and Tommy Hilfiger vice chairman, as president and chief executive officer.
Lewis received an option to purchase 5.4 million shares of Mossimo common stock at $3 each. Giannulli, who owned 10.4 million shares, agreed to contribute to the company all shares issuable to Lewis.
In a further effort to boost the turnaround, Giannulli and Lewis — the two largest shareholders — both agreed to forgo a base salary and bonus this year.
Since taking over, Lewis who brought in his own team, has skewed the junior line to a slightly older customer, diversified product assortment and tweaked the Mossimo image. “He has a great merchandising mind,” Giannulli said. “He knows what we need to do to be successful at retail, from an sku count to a balance of line, to color stories, to the pieces of the line, to how it is going to sit on the floor, to how the deliveries are going, to designing a new in-store concept.”
With a revamped junior line, the company is going to be the next “great American brand,” according to Lewis.
As reported, Mossimo narrowed its second-quarter net loss to $5.5 million from $6.1 million on sales of $11.4 million. Excluding the onetime charge of $6.1 million related to insurance coverage to settle a class action lawsuit, Mossimo earned $625,000 for the quarter.
“If you take out that stupid lawsuit that we had to settle in the second quarter, we would have made money, and that is a big swing from where we were a year ago,” Giannulli said. “I think you can call it a comeback.”
The company, which changed from an activewear resource into a source for contemporary men’s and women’s denim-based sportswear, is undergoing yet another transformation, according to Giannulli.
He noted there was very little denim in the line.
“The denim market is saturated with people with very big budgets, and I don’t think that’s really what we stand for,” he said. “You really need to make a separate denim line for it to make any sense, and right now, that is not where our focus is.”
The focus is on synthetics, including, stretch fabrics, coated cottons and nylons. Unveiling the spring collection in the company’s new showroom here last month, Lewis pointed out the new colors, fabrics and silhouettes.
“We’ve added 50 percent more styles,” he said. “Our focus is to concentrate on key items, expand the classifications and build on color stories. We’re going after a mix of beach and uptown. We’ve increased the amount of silhouettes and introduced a lot of new fabrics that are more updated and sophisticated.”
Lewis cited organza cropped fitted jackets, three-quarter-sleeve patterned knit tops, photomesh print tops, cuffed ripstop nylon pants and microfiber vests. The Mossimo logos are also more streamlined.
Silhouettes include a mix of fashion-forward items as well as basics, such as Mossimo’s signature printed volleyball shorts, now available in a variety of novel fabrications like burnout velvet and microfiber.
Lewis added that the line now targets a slightly older customer and emphasized that the brand was oriented to a wider-ranging, junior and young contemporary market instead of specifically a junior one. The Mossimo line hangs in the junior departments of department stores.
Wholesale prices range from $14 to $38.
“We’re not surf and we’re not bubble-gum, so we can’t be pigeonholed into one category, which strengthens the brand,” said Lewis.
Lewis said he has also expanded distribution in major department stores and specialty stores around the country and expects to open more in-store shops in select department stores at the beginning of next year. Previously, the Mossimo line was targeted to specialty stores and surf shops. The company ended last year with 155 shops.
A key component of its turnaround is increasing the in-store shops and launching a new in-store shop concept.
Giannulli said the new concept, which will be rolled out next spring, is “very architectural and clean and a little lighter than the past.”
He is replacing the former iron fixtures and taupes and off-greens and browns with silver fixtures and a lot of white.
To reinvent the brand, Lewis enlisted the help of Mike Toth, executive creative director of Toth Brand Imaging.
Toth, who is responsible for building the ad campaigns of Nautica and Tommy Hilfiger, said he used cars and motorcycles from Giannulli’s personal collection as props for the shoot to acquaint the customer with the brand and the designer.
“We were trying to show where Mossimo’s head was at, and create a more universal brand,” said Toth. “But we also wanted to stay true to the California image and we’ve developed the idea of ‘California’ as freedom and liberation with an unlimited horizon.” The fall ad campaign appears in fashion magazines Elle, Vogue and GQ, as well as niche magazines like Spin, Nylon and Bikini. The ads depict young men and women lounging, against a backdrop of winding roads disappearing into a mountainous California horizon.
“I’ve tried to encompass the California lifestyle into a collection and not just through specific items,” said Giannulli. “With Edwin’s help, we’ve been able to merchandise the line so that it covers a broad assortment of product, but remains consistent. The goal was to create an interesting hybrid that’s not just denim, not just beach, and that’s active, casual and sophisticated at the same time.”
Retailers who have been on the rollercoaster ride with the Mossimo brand are optimistic.
“We feel very positive about the Mossimo line for spring 2000,” said Melissa Goff, fashion director at Burdines.
“They have a good handle on the casual sportswear collection that’s appropriate for our Florida market and customer.”
Bill Moll, a senior vice president and general merchandise manager for sportswear at Macy’s West, said the store had stuck with Mossimo “since the beginning.”
Moll said he was hopeful for the performance of the revamped line and expects double-digit increases for spring. He predicted the brand’s success would be based on the favorable partnership of Giannulli, a designer with a strong point of view, and the merchandising and marketing savvy of Lewis, an industry veteran.
“We’re confident about the relationship between Lewis and Mossimo and feel they are on track. The product is young and contemporary, not just restricted to California beachwear, the way it was. But it’s not all over the place. There is a real focus to the line,” explained Moll. “We think it’s going to stand out on the junior floor because there isn’t anything like it.”
Moll said the line was carried in approximately 60 doors.
Lewis, who declined to project a sales volume, said he was optimistic about the performance of the line and added that he was pacing the company’s overall growth cautiously.
“We’re being careful about the numbers that we’re giving and are going to let them speak for themselves,” said Lewis.
One industry source said, “Lewis is a man of action and not words. He’s being quiet because he’d rather see the results than predict them before the fact.”

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