Mossimo Warns Profit Will Drop in Quarter

Mossimo Inc. said Wednesday that its fourth-quarter profit will be less than half what analysts had expected, sparking yet another round of stock bashing by disgruntled shareholders.

The apparel company linked the expected earnings drop to late deliveries of holiday merchandise, unexpected expenses associated with new lines and apparent warehouse problems that created an inventory shortage. The disappointing report came even as Mossimo continued to enjoy strong sales.

Mossimo’s stock dropped to a new low of $9.125 on Wednesday in New York Stock Exchange trading before rising slightly to close at $9.625, down $1.125. The stock drop was the latest in a growing string of declines for Mossimo, which hit a high of $50.125 in June.

Mossimo said it expects to report fourth-quarter earnings of 3 cents to 8 cents per share, far below analysts’ estimates of 18 cents a share. Mossimo earned 19 cents a share for the fourth quarter a year ago.

It’s the second quarter in a row in which the company has failed to meet analysts’ expectations.

Earnings for the full year are likely to fall between 72 cents and 77 cents per share, down from the 89 cents registered last year and below the 88 cents expected by analysts.

Mossimo executives said the probable earnings drop was driven in large part by “price concessions” the company was forced to pay to retailers when apparel and accessory shipments fell behind during the holiday shopping season. Mossimo also blamed an unexplained “inventory shortage” for the disappointing earnings.

Some apparel industry analysts linked Mossimo’s operational problems in recent quarters to a staggering growth rate at the company, which expects fourth-quarter sales to rise by 50% to about $27 million and projected a similar growth rate for the entire year. “These are serious growing pains,” said Fay Landes, a New York-based analyst with Smith Barney.

Mossimo acknowledged that sales should grow just 15% in 1997, far below last year’s rate..