MOSSIMO EARNINGS DROP IN 4TH QUARTER
NEW YORK — Battered by higher-than-planned product development costs and other problems, Mossimo Inc. fourth-quarter earnings fell to $548,000, or 4 cents a share, from $2.4 million, or 19 cents, a year earlier.
Year-ago figures were adjusted for the company’s February 1996 initial public offering. The sportswear firm said that in addition to the higher product development costs, earnings in the latest quarter were depressed by inefficiencies from changes in sourcing agents and factories and late product deliveries, resulting in allowances to retailers as well as higher-than-normal sales of out-of-season merchandise.
Sales for the three months ended Dec. 31 surged 47.3 percent to $26.7 million from $18.1 million as a result of increased consumer demand and greater brand recognition at retail, Mossimo said. Gross profit fell to 36.2 percent of sales from 42.7 percent a year ago.
Mossimo’s general and administrative expenses almost doubled to $2.8 million. Selling expenses jumped 65.4 percent to $2.3 million. Marketing costs more than doubled to $1.2 million and design costs almost tripled to $979,000.
“While we achieved strong financial performance in the first half of 1996, we readily acknowledge that the pace at which we were initially growing ultimately strained our operating systems and impeded our ability to efficiently keep up with demand and deliver product on schedule,” Mossimo Gianulli, chairman and chief executive officer, said in a statement.
“Looking ahead we remain focused on enhancing our strong relationships with retailers and expect to begin to realize the benefits of our relationships in infrastructure and other operational initiatives in the second half of 1997.”
He added that the success the company has experienced with the expansion of its in-store shop program underscores retailers’ continuing commitment to the Mossimo label. The company opened 89 in-store shops in 1996, bringing its total at yearend to 100. Mossimo plans to open an additional 125 shops in 1997.
For the year, adjusted income totaled $10.8 million, or 72 cents, compared with $11.5 million, or 89 cents.
Sales jumped 51 percent to $108.7 million from $71.9 million.
General and administrative expenses gained 63.6 percent to $6.3 million. Selling expenses jumped 61.6 percent to $9.3 million. Marketing expenses more than doubled to $4.2 million and design expenses also more than doubled to $2.4 million.
For a while last year, Mossimo was one of the hottest fashion IPOs going. When it went public a year ago, the offering price was $18 a share, and by June the stock was trading in the $50 range. However, last fall the stock had slumped to the $15 range as the company struggled with high costs and low earnings. On Monday, it closed on the New York Stock Exchange at 9 5/8, up 1/2.
In another development, Mossimo said it has named Ajit Patel as vice president and chief information officer, a new post created in part to develop the firm’s infrastructure and expand its information technology capabilities.
Patel will spearhead the development of an information technology strategy, as a precursor to a full-scale systems conversion. In addition, he will identify other more immediate opportunities to enhance the firm’s current systems.
Patel most recently served as vice president and chief information officer of Authentic Fitness Corp. in Commerce, Calif., where he has worked since 1992.