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Anaheim Swimwear Maker Strokes Hard After Setback

Apparel: Lunada Bay CEO, called a skilled survivor, tries to recoup from Mossimo move.


It's a hectic time at swimwear maker Lunada Bay Corp. and Chief Executive Susan Crank's door is wide open.

One employee solicits Crank's opinion on a planned advertisement. The chief financial officer needs her signature on a revised budget. The production director reports that adding spangles to a bikini top will boost the cost of each garment by 80 cents.

No one is pausing these days at the Anaheim company. Led by Crank, a 15-year veteran of the apparel industry, Lunada Bay is scrambling to regain its financial footing after learning in March that Mossimo Inc., Lunada's best-selling brand, had struck a licensing deal for its sportswear with Target Stores.

The unexpected news was a gut punch because upscale retailers won't continue to stock Mossimo's apparel once the label lands on Target's less-pricey shelves. The Mossimo line had been generating 75% of Lunada's $40 million in annual sales.

Companies such as Lunada Bay typically toil in relative anonymity in the multibillion-dollar apparel-licensing industry. Success hinges on signing the right deals--and then delivering fashionable apparel that keeps pace with ever-changing consumer tastes.

But as Mossimo's fall from fashion grace illustrates, it's dangerous to become too dependent upon a single line. It also was a personal blow for Crank, 51, who considers designer Mossimo Giannulli a friend. "I was more than a little bit angry," Crank said.

This summer's selling season is over, but Crank maintains that Lunada Bay has a business plan that will put the company back on financial track for next summer.

Within weeks of Mossimo's unexpected announcement, Crank had struck a deal to produce Mossimo swimwear for Target. And rather than surrender the fatter profit margins offered by specialty and department stores that formerly carried the Mossimo line, Lunada Bay is launching its own upscale swimwear brands.

The company's new Becca label, a contemporary juniors line, features two-piece suits that will sell for $60 to $85, about the same price as the Mossimo swimsuits.

Lunada Bay is also introducing Rebecca V, a pricier brand that will include $140 to $300 swimsuits, as well as towels and sunglasses. A third new line, Becca Sport, will include bike shorts, crop tops and workout clothing.

The new brands are named after Lunada designer Rebecca Virtue, a 33-year-old Laguna Beach resident whose swimwear styles had propelled Mossimo to the top tier of the fickle junior swimwear market. One measure of her success: Mossimo swimsuits appeared on models in nine of Sports Illustrated's annual swimsuit editions--including one cover shot.

"Rebecca's one of those designers who can get inspired by a fence," Crank says.

The early signs have been promising. An initial order by Nordstrom's northwest division was the largest ever for a Lunada Bay product, including Mossimo swimwear, Crank said. And Absolutely Suitable, a ritzy Miami Beach store, is picking up Becca to replace Mossimo, one of its best-selling brands.

To promote the new brands, Lunada has beefed up its advertising budget. Over the next year, Becca ads will appear in half a dozen magazines, including Shape and In Style.

Still, the 88-employee company faces formidable odds in the $1.6-billion women's swimwear industry, with its Becca brands going up against such established big-name designers as Donna Karan and Tommy Hilfiger. Lunada Bay's deal to produce Mossimo swimwear for Target, while welcome, will generate substantially less business than before. Lunada had provided Mossimo swimwear for about 2,500 stores, while Target has 923 stores. Target's Mossimo items also will sell for substantially less than what upscale department stores charged.

"[Becca] will have a lot working against it," acknowledged Norman Seastedt, one of three men who founded Lunada Bay 20 years ago. "It takes a lot of luck and an awful lot of effort to be successful."

But those who know Crank predict she will succeed.

The Laguna Beach resident has a strong reputation among retailers, displaying a penchant for delivering products efficiently and a knack for spotting trends in the tough-to-chart swimwear industry. In addition to Mossimo, the company also produces the XOXO, GirlStar and Bebe brands under license.

Indeed, Southern California's cliquish, male-dominated surf-wear industry recently named her environmentalist of the year for her work with the Surf Industry Manufacturers Assn. on behalf of ocean preservation.

Industry experts also applaud Crank's ambitious effort to move Lunada Bay merchandise into virtually all levels of retail--discount chains, surf shops, trendy specialty stores and high-end department stores.

"Susan is the swimwear queen, period," Giannulli said. "She will have a diverse portfolio of companies and retailers. I think her company will be more successful two years from now than it's ever been."

It was Mossimo Giannulli's ascent in the apparel industry that provided the liftoff for Lunada Bay.

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