California Apparel News

Mossimo Giannulli is getting back to his Orange County roots.

The designer, whose name is splashed across nearly every clothing rack in Target Corp.’s vast chain of discount stores, has acquired fledgling activewear label Modern Amusement, the Costa Mesa, Calif.–based company designer Jeff Yokoyama launched in 1995.

Rumors of the acquisition have been circulating throughout the industry for some time and were recently confirmed by several industry sources. Both companies declined to discuss details of the purchase.

Under the ownership of Mossimo Inc., Modern Amusement will run its small, four-person company from its Orange County headquarters. But plans are in the works to relocate the company’s headquarters to a new location in Santa Monica, Calif., according to Modern Amusement officials.

Giannulli launched his company as a surf label in the late 1980s in Irvine, Calif., and almost declared bankruptcy before moving to Santa Monica to design apparel for Target.

Industry sources said the acquisition could help him gain new ground in the activewear market, particularly in the better men’s market.

Modern Amusement is in line with better boutique collections such as Howe, Ever and Stuuml;ssy.

“I don’t think Mossimo is doing this deal to reclaim his once perfect reputation,” said Ryan Heuser, president and co-founder of Paul Frank Industries Inc. Heuser once worked as the head of men’s public relations for Mossimo. “I just think he sees an underexposed brand with a ton of upside potential and a built-in coolness factor.”

Jason Bleick, creative director of Los Angeles–based better casual men’s apparel line Ever, said Giannulli’s investment is a wise move because there’s a need for better casual brands in the young men’s category.

Specialty retailers that carry the Modern Amusement label agree.

“Yokoyama’s attention to detail and the added nuisances to Modern Amusement’s designs are what separate the company from its competitors,” said retailer Billy Stade, owner of The Closet, a better boutique chain in Orange County.

At American Rag, men’s and denim buyer Stephanie Seeley believes this is a win-win situation because there’s a niche in the market for active sportswear lines with an urban attitude. She said Modern Amusement’s deal with Mossimo allows the company to expand its offerings and enhance its production capabilities.

“It’s a fantastic connection because Modern Amusement has great product and a strong following,” she said, noting that Modern Amusement’s logo sweat shirts, T-shirts and long-sleeved striped knit shirts did exceptionally well at American Rag stores in Los Angeles and San Francisco. “It’s been their dream to expand the brand.hellip; That dream will now be realized having that financial backing.”

Name game

Modern Amusement quickly made a name for itself as an urban brand in the better menswear market, quickly growing to an $8 million company at its peak in the late 1990s, company executives said.

Modern Amusement’s better casual clothing, for men and women between the ages of 17 and 38, is sold at specialty retailers nationwide. In recent years, the company rolled out retail stores in Los Angeles, Hawaii and Japan.

Yokoyama, who previously founded Maui & Sons and Pirate Surf and who also designed for Stuuml;ssy, launched his latest line using a black crow logo. “Black Crow” was Yokoyama’s childhood nickname in Glendale, Calif.

Mossimo connection

For Yokoyama’s business associates, Kurt Schroeder and Allan Burdine, who both spent several years working in production and sales at Mossimo in the early 1990s, the acquisition will be a homecoming.

The partners’ top priority for Modern Amusement has been brand development and international expansion, which could accelerate under the Mossimo corporate name. “It’s time to elevate the brand and get exposed to different channels of distribution,” Schroeder said.

Currently, Yokoyama and Schroeder are busy revamping Modern Amusement’s Spring/Summer 2004 collection, which will bow in late spring. The company also brought in a new sales manager, Brian Awitan, formerly of Diesel.

Skirting bankruptcy

Mossimo has made a major turnaround in recent years. In 2000, the designer, who used to sell his line to specialty stores, was close to declaring bankruptcy. Then he inked a direct-to-retail licensing agreement with Target, which now owns the exclusive U.S. rights to manufacture and sell apparel and accessories with the Mossimo label. Mossimo’s better casual designs for Target include T-shirts, knits tops and bottoms, dresses, jeans, outerwear and activewear.

The licensing deal, which runs through Jan. 31, 2006, has been lucrative for Mossimo, which posted a net income in 2002 of $13.7 million. Giannulli owns two-thirds of the public company, which is traded on the NASDAQ.

In other related Mossimo news, a California appellate court denied the company’s appeal of a June 17, 2003, arbitration award, making the company responsible for finder’s fees, interest and attorneys costs owed to Van Nuys, Calif.–based Cherokee Inc., which brokered the licensing agreement between Target and Mossimo in 2000. Cherokee, in its filings with the U.S. Securities and Exchange Commission, said Mossimo owes the company $5.8 million in royalties.