Next Wave for Mossimo is Deal With Canadian Retailer

Retail by Deborah Belgum

Mossimo Inc., the Santa Monica-based company that licenses its apparel designs to discount retailer Target Corp., is expanding its product line and going international.

The fashion company recently signed a three-year licensing deal with Hudson's Bay Co., Canada's largest and oldest department store chain.

Starting in spring 2003, Mossimo apparel will be sold in more than 320 Zellers stores, a division of Hudson's Bay that is modeled after Target stores.

"It will be an apparel line that is similar to what is found in the U.S.," said Manny Marrero, chief financial officer for Mossimo, the label started by California designer Mossimo Giannulli in 1987. "They will get the services of our design team, which are nine full-time people in Santa Monica, and then they will be responsible for sourcing, manufacturing and distribution of the product."

The clothing will carry the Mossimo label and include men's women's, boy's, girl's and infant apparel. It also includes watches, sunglasses, underwear and swimwear.

The company would not reveal financial details of the deal, which will be a test of Mossimo's international appeal and could lead to licensing deals in Europe and other overseas locations.

Licensing apparel has been a very profitable business plan for Giannulli, who got out of manufacturing a full-service casual beachwear collection after being on the verge of bankruptcy in 2000.

New Shoes

Vans Inc., whose stock has been trading at a 52-week low, is trying to beef up its selection of women's athletic shoes as part of an attempt to jump-start its retail line.

Unable to replicate the immense popularity of its Upland shoe, a style that became a hot seller soon after it was introduced a year and a half ago, the Santa Fe Springs-based company has gone to New York and Paris designers for fresh concepts.

The women's athletic shoe business has become increasingly competitive as Skechers Inc. and Nike Inc. heat up their lines.

Meanwhile, Vans, which operates nearly 150 stores in the U.S. and Europe, is revamping its lineup of retail executives. After seven years, Neal Lyons resigned as president of retail effective June 15. The company has hired Kevin Bailey as vice president of retail store operations.

He and Howard Kreitzman, who joined the company three months ago as vice president and general merchandise manager for retail, will be running the retail division. The company is looking to improve sales and its stock price, which was trading at around $8.75 last week after reaching a high of $24.89 a year ago.

Shares dipped drastically after the company warned of wider-than-expected losses for the 4th quarter ending May 31 and that it would be closing its skate park in Bakersfield.

The company expects to see a fourth-quarter loss of 20 cents a share, excluding charges, on sales in the range of $60 million to $61 million. A year ago, sales during the like period came in at $85.2 million.



Staff reporter Deborah Belgum can be reached at (323) 549-5225 ext. 228, or at dbelgum@labusinessjournal.com.


Big 5 IPO Aiming to Raise $100 Million to Retire Debt

By DEBORAH BELGUM

Staff Reporter

Big 5 Sporting Goods Corp. is set to go public this week, raising as much as $97.6 million to retire or buy back more than $100 million in debt and preferred stock.

The company also plans to draw on as much as $19.9 million of its credit facility to complete the transactions.

The El Segundo-based sporting good retailer will offer 6.1 million shares of stock tentatively priced between $14 and $16 a share.

According to the prospectus filed with the Securities and Exchange Commission, as much as $60.3 million of the proceeds will be used to buy back the 78 percent stake in Big 5's preferred stock held by leveraged buyout firm Leonard Green & Partners LP.

"It is basically a recapitalization and deleveraging event," said John Danhakl, a partner in Leonard Green & Partners. "They believe that with less debt and less preferred stock, they have a healthier balance sheet going forward."

Big 5, which has 261 stores in 10 states, reported net income of $15 million for the year ended Dec. 31, compared to $11.1 million a year earlier. It posted revenues of $622.5 million in 2001 vs. $571.4 million in 2000.

The prospectus shows that Big 5 had realized 25 consecutive quarterly increases in same-store sales and that all but one of its stores has generated operating profits in each of the last five years.

"They are highly leveraged, there's no doubt about that," said Wedbush Morgan Securities analyst Joan Bogucki-Storms. "But I think they have to open new stores because 60 percent of their stores are centered in the West, which leaves them subject to risk factors from a regional angle."

Big 5 officials were not available for comment.

Big 5 was founded in 1955 as United Merchandising Corp., selling surplus World War II merchandise. In 1963, the company changed its name and started selling sporting goods in five locations in Southern California.

It was purchased by Thrifty Corp. in 1971, and in 1992, backed by Leonard Green & Partners, management completed a leverage buyout of the firm from Pacific Enterprises, which had acquired Thrifty.

After the offering, Green Equity Investors LP, an affiliate of Leonard Green & Partners, will hold a 27.5 percent stake. Big 5 co-founder and Chairman Emeritus Robert W. Miller will be selling more than 900,000 shares under his control, reducing his stake to 5.3 percent of the company.

Miller's 50-year-old son, Steven G. Miller, the company's chairman, president and chief executive, will sell nearly 300,000 shares, reducing his stake to 6.2 percent after the offering.

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