What the Hell Happened?
If you and your dirtbag friends could have scraped together a couple of hundred bucks last week, you could have owned Mossimo Inc. Well, not owned, perhaps, but at 50 cents per share—15 cents less than an Almond Joy at your local AM/PM minimart—you could have bought yourself a sizable chunk of the company. What a sizable chunk of the company means is unclear these days since these days, the name "Mossimo" sounds less like "Hilfiger" and more like "Pearl Harbor," as the company slides ever faster from its 1996 high. Those were the days when company founder and leader Mossimo Giannulli was mentioned breathlessly in the same first-name way reserved for Ralph, Calvin, Donna and Tommy.
Your couple of hundred bucks could not have bought you Giannulli, of course. That would be wrong—people can't buy people. Corporations do that. Target Stores closed a deal for Giannulli in March when it guaranteed Mossimo Inc. $27.8 million—and Giannulli himself $8.5 million—in royalties in the first year of a three-year agreement. In exchange, Target has the exclusive rights to sell Mossimo's sportswear, as well as the right to put the Mossimo name on baby clothes, suitcases, rugs, sacks of grass seed—whatever it likes. The deal also bought the assurance that Giannulli will "at no time . . . disparage the association with Target Stores" and that Target now owned the rights to Giannulli's "name, signature, photograph, voice and other sound effects, likeness, personality, endorsement, biography and statements"—all the stuff teachers told you was outlawed by the Emancipation Proclamation.
And the worst of it for Mossimo Inc. and Giannulli was that that wasn't the worst of it. Target, at least, had promised them a lot of money. The worst of it was in July 1999, when the company settled for $13 million lawsuits brought by investors who said the company had misled them with falsely optimistic financial statements. Or perhaps the worst of it came in April, when the company laid off 90 percent of its work force. Or two weeks ago, when three creditors sued to get their money now because they said Mossimo Inc. would not be around when the Target deal goes into effect in February 2001.
We get confused. But at least one thing is crystal-clear: man, we love this shit. This is what makes America—and VH1—so great. Guy goes up; guy goes down. Guy goes up; guy goes down. One day you're making T-shirts out of your garage; the next you're only the third fashion designer ever to make the Forbes 400 (with a personal fortune of $490 million) and are quoted saying, "Clothing is pretty basic. We're not talking rocket science here"; and the next year, the magazine announces you've fallen off the list under the headline "Minimo Mossimo."
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And so it is that most of the stories chronicling Mossimo's bad news have made references to the fact that Mossimo was "cocky" and "brash," that he had a big ego and it was this big ego that caused him to shoot high, and that ultimately, spectacularly, "Ha, ha, fuck you"erly, it had been his undoing.
I've got to be honest: I have no idea what Mossimo Giannulli's personality has to do with any of this. I've never talked to the guy. I called his office several times, got his extension and left messages in which I said I wanted to talk to him for this story. But he never called back. I've talked to people who said he seemed like a nice guy. I've talked to people who said he was indeed a nice guy who "got turned around" and eventually sold out the people who believed in him. I've talked to people who said he's a great guy who will eventually not only find his way out of this mess but also find his way back to the front of the fashion pack.
Like I said, I've never met the man. It's pretty much agreed that his problems spring from aiming too high, too soon, trying to make his company something it wasn't, or at least something it wasn't ready or equipped to be at the time. But to pin that on being too ambitious or having a big ego is ridiculous: accusing a fashion designer of being egotistical is like accusing an NBA player of being tall.
No. What may have killed or perhaps only wounded Mossimo was impatience, inexperience, popularity and the standup bass Giannulli owns but never plays because he can't. That much is clear. What isn't clear is whether the company will be around next February to start collecting on that Target deal. Some people I talked to said yes; others said no. Either way, one thing is for certain: man, we just love this shit.
okay, now: it's important for you to know that this stuff happens all the time in fashion, an industry steeped in steep declines—Anybody hear from Isaac Mizrahi lately? Granted, Mossimo's flameout has been spectacular (the stock once traded at $50), so spectacular that Wall Street Journal reporter Teri Agins referred to it as "fashion's theater of the absurd" in her book The End of Fashion.
But anyone in or around the industry will tell you that a fashion house getting its lunch handed to it is absolutely, simply, almost invariably the way things go. Success is unusual. As one fashion analyst said, "The only thing that distinguishes the Mossimo story is that he's from the West Coast and that he's heterosexual."
Those who think that Giannulli was a "pygmy"—as Fashion Network Report called him—fancying himself in the same company as Calvin Klein and Donna Karan, conveniently forget that Klein's company would probably have gone out of business in the early '90s if David Geffen hadn't given him $62 million to pay off his debts. Donna Karan? On the day Mossimo's stock hit 50 cents, Karan's stock—once trading at $30—was at $7.
These things happen in fashion. All the time. Like every day.
"Moss has been in business 13, 14 years—that's a century in this business," said Tom Knapp, founder and owner of Club Sportswear, who met and became friends with Giannulli while they were attending USC in the mid-1980s. "The first ASR [Action Sports Retailer] show I ever had a booth at was 1985. I was looking back at the material from that show the other day, and I realized that of all the companies there, only 10 are still around. They come and they go; it happens all the time."
Here's what happened to Mossimo:
He grows up in Newport Beach, a popular but kind of strange kid because he cares a lot—a lot—about how he looks, about how everything around him looks. His mother, Nancy, later told People magazine that she would take him to friends' homes and he would study and remember how the house was decorated "down to the doorknobs."
He attends USC but drops out in 1987 to start his own business, which he runs out of his Balboa Island apartment: garage, patio and living room converted into shipping and staging areas; upstairs bedrooms overflowing with fabric. In his first year, Mossimo clocks sales exceeding $1 million.
Ostensibly working in the surfwear industry, he becomes famous first for volleyball shorts with his "M" stamped on the butt. His clothes are never really adopted by hardcore surf and skate kids. Instead, he distinguishes his brand and reaches a much broader audience with clothes that fuse Southern California beach with Las Vegas Rat Pack cool. One pair of volleyball shorts looks very much like it was made from tuxedo pants.
By 1992, Mossimo oversees 52 employees and $32 million in sales despite a grueling regional recession. By 1996, there are 300 employees, and Giannulli is a star, even appearing in a Janet Jackson video. The company has a name and a back story that people love: beach bum made good. Never mind that it's not true. Giannulli was no bum—upper-middle-class family, Corona del Mar High School, ambition. He was fastidious and visual, even as a kid: he tailored his Little League uniform so it looked and fit better. He customized his bike and skateboard so they stood out, and when he got older, he did the same thing with his car. He didn't just like looking good; he needed it. He was famous for how particular he was about the arrangement of things on his desk and how pictures and memos were hung in his company's Irvine headquarters. He hired people based not on their fashion experience—many of them had none—but on their personal sense of style.
This is how he hired Ryan Heuser, who was Mossimo's head of public relations: "I was working in the warehouse, and every morning a coffee truck would come, and Moss would go out with everybody else and get coffee and a bagel and just sit and talk with everyone," said Heuser, who eventually left the company to start Paul Frank Industries. "I would talk to him at times, and I guess he saw the way I dressed and started to ask me what kind of clothes I liked, and one day he just said, 'We got to get this guy inside [company headquarters].'"
Heuser would rise to prominence in the company's marketing department while becoming part of Giannulli's inner circle, which some called "Moss' Posse."
"It was wonderful," Heuser said. "There was probably a total of eight guys, and we would roll in his Suburban limo and go to magazine parties—very high-profile parties—or take a Lear jet to New York for fashion week. Those are things I remember; those were the best times. You didn't talk about them when you got back in the office because you didn't want people to feel left-out, but I'm sure there was some resentment. But while I was there, things were still going well. I'm sure there was probably more resentment when things weren't going so well."
Giannulli hung out with beautiful people like John Stamos and one of the Baldwin brothers—the good-looking one, I believe—as well as actress Lori Loughlin, whom he married. His house was stocked with the standup bass he didn't play but looked good, the cigars he didn't smoke but looked good. When In Style magazine noted religious objects such as church pews, novena candles and a baptismal font in the house, Giannulli told its reporter, "Don't dig too deep; I just like the stuff."
And so the people who didn't and still don't understand why Giannulli didn't stay the surfwear course to such great success as Quiksilver and Hurley didn't and don't understand what drove Giannulli.
"Moss needed fashion, needed the fashion world," Knapp said. "In surfwear, we're much more about function. Moss was never a function guy. He was always more about fashion. Quiksilver, Hurley—this is California lifestyle; it's about play. New York is fashion. Moss needed New York."
New York beckoned him with the company of beautiful designers. So in 1996, when he thought the company was ready (it wasn't), Giannulli took it public to raise money for the company's expansion: he would upgrade its men's line into things like $500 suits as well as create a women's line.
this is where some people get confused. Some people think the company's expansion into high-end fashion alienated its core surf customers while it was never embraced by its new target audience. That's not true: Mossimo was never a hit with skate grommets; his new line was a hit with retailers; orders rolled in.
It wasn't indifference that battered Mossimo. It was popularity.
Mossimo committed the fatal—and common—error of expanding too quickly. Inexperienced and overwhelmed, Mossimo Inc. couldn't accomplish the most basic industrial tasks.
"Our merchandiser book is how we promote our latest line to stores, but by the time the line came out, half the stuff that was in that book wasn't even produced," said Lori Mitsch, who worked for five years at Mossimo, first in the South Coast Plaza store as a manager and then in the company headquarters as merchandise coordinator. "The stuff just never got made. Stores were really getting fed up."
The stuff that did get made was arriving late in the store—a cardinal sin in the business. "If you miss your shipping dates, let's say by a couple of weeks, that's two weeks less you're on the floor," said Heuser, who remains one of Giannulli's biggest fans. "The retailer is mad because his floor doesn't look fresh. Your window for sales is cut by a couple of weeks because when that season is over, it's over, and your stuff is gone.
"It kills you in terms of reorder because now the store has a lot of your stuff left over, goods they have to discount. And, you know, when something is discounted, there's a tendency for people to think something's wrong with it. It's like a house that stays on the market too long.
"So now the store is feeling burned, and they don't trust you. They'll say to themselves, 'I gave them orders for 8,000, and they only shipped 4,000. This time, I'll order 4,000 and see how they do.' Not shipping on time absolutely kills you. You can paint your image, do all the right marketing, get in all the right stores, but the bottom line is if you're not hitting your shipping dates, the stores don't care. They'll take you out."
Problem two: the stuff that did arrive in the stores was of an inconsistent quality.
"Quality control had completely broken down," Mitsch said. "When I went back to work in the [South Coast Plaza] store, the amount of returned items was just unbelievable. And this wasn't because someone didn't like the color. It was for basic things like shrinkage or cheap material, things that were just unacceptable to customers."
Stuff like this gets around, especially if your company is on the New York Stock Exchange. By mid-1997, less than a year after going public, the value of Mossimo's 11 million shares had fallen from $550 million to $88 million. The stock that had traded as high as $50 was now at $8.
And that was pretty much that. In the fashion biz, that's all it takes to kill you.
"The one big lesson from what's happening at Mossimo is that you're never safe," Heuser said. "What happened there could happen to any one of us. Have one bad season, you're dead. Don't ship on time, you're dead. Your quality control is off, you're dead. Grow your line too quickly, have consumers think you're overdistributed, you're dead. It's a brutal, brutal business."
CEOs were brought into this brutal, brutal business to save things, streamline operations, get things running smoothly again. John Brincko, who had turned around Barney's New York, was brought in and failed. Edwin Lewis, who had been CEO at Tommy Hilfiger, came in and didn't accomplish much—unless what he had set out to accomplish was pissing people off.
"That is the rudest man I've ever met," Mitsch said. "When he came in, we were all like, 'Oooohh, this guy turned around Tommy Hilfiger; he's going to turn us around.' But he just never had a good thing to say to anyone. Everyone was terrified of the guy; all he did was demoralize the staff, and I think pretty soon people were too scared to do their jobs.
"I remember right before we went public—and even after, when things weren't going so well—there was still a lot of energy in the company. We were like a family. We believed in Moss, and we believed we could turn it around. But by the time Edwin got there, you couldn't find Moss anymore. He just wasn't around. And Edwin was just riding everyone. He was the buzz kill for everyone. It ruined the energy, ruined the moment. That's when I knew it was over."
but when is "over" over? is it over when you sell your name? When you lay off 90 percent of your workers? Mossimo Inc., such as it is, still exists. The question, of course, is will it exist in February to collect that Target dough?
A lot of people don't think so. They figure the name has been so sullied by association with failure and bankruptcy and 50-cent stocks that it will never be a draw again. Of course, Target doesn't think that, and they seem to know what people want.
"Absolutely, he'll come through this," said Amy Smitts of Volcom. Smitts was Giannulli's personal assistant for seven years, starting out at the company as a receptionist. "Everybody's piling on right now, especially people who have always been really envious of him and would now just love to see him fail. I've talked to him, and he's got a good attitude; this isn't getting him down. Trust me—he'll do fine."
But just as certain are the dissenters, best represented by the industry analyst who matter-of-factly said, "Oh, he's done. You don't come through something like that and still have a name to sell what he wants it to sell. He can make a comeback, but it will have to be as something other than Mossimo. That's over. That's done."
Do you care?
"Moss could be leapfrogging everyone with this Target deal, and we don't even know it," Knapp said. "I wouldn't bet against the guy. But, either way, the consumer doesn't care, which is how it should be. Being an entrepreneur is not for the weak of heart. You put your neck on the line, and a bunch of people who don't have the guts to do that are just waiting to say, 'I told you so.' That's just the way things are. They love you when you're on top, and a year later, when you're like Leif Garrett on Behind the Music, they love to sit in their easy chairs and say, 'Ha, ha! Look at them. Pass the peanuts.'"
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