Vince Holding Corp reported disappointing third-quarter earnings, with earnings per share (EPS) falling short of expectations. The company posted an EPS of $0.15, missing the forecasted $0.35, and reported revenue of $80.2 million, below the expected $89.24 million. Following the announcement, Vince's stock fell 5.53% in pre-market trading, reflecting investor concerns over the earnings miss and revenue decline.
Key Takeaways
- Vince's Q3 EPS of $0.15 missed the forecast by $0.20.
- Revenue fell to $80.2 million, below expectations.
- Stock price declined by 5.53% after earnings release.
- Gross profit and margin improved despite sales decline.
- Strategic growth initiatives in men's apparel and new product categories.
Company Performance
Vince Holding Corp's overall performance in the third quarter showed mixed results. While the company managed to increase its gross profit and margin, net sales declined by 4.7% compared to the previous year. This decrease in sales came amid a broader shift in consumer demand from luxury to contemporary brands, which Vince is attempting to capitalize on with its strategic initiatives.
Financial Highlights
- Revenue: $80.2 million, down 4.7% year-over-year.
- Earnings per share: $0.15, compared to $0.08 in Q3 2023.
- Gross profit: $40.1 million, up from $37.2 million.
- Gross margin: Expanded by 580 basis points to 50%.
Earnings vs. Forecast
Vince's actual EPS of $0.15 was significantly below the forecasted $0.35, representing a 57% miss. The revenue of $80.2 million also fell short of the expected $89.24 million. This earnings miss marks a departure from the previous year's improvements in net income and gross profit.
Market Reaction
Following the earnings announcement, Vince's stock price dropped by 5.53%, reflecting investor disappointment with the missed earnings and revenue targets. The stock's performance is currently closer to its 52-week low of $1.15, indicating negative sentiment compared to broader market trends.
Company Outlook
Looking forward, Vince expects its Q4 fiscal 2024 net sales to range from a mid-single-digit decline to a low-single-digit increase. The company is cautiously optimistic about the holiday season and anticipates an operating margin increase of 25-50 basis points. Vince is also focusing on expanding its men's apparel line and new product launches in shoes, belts, and handbags.
Executive Commentary
Dave Stefko, Interim CEO, expressed confidence in Vince's future, stating, "We are highly confident in Vince's future." CFO John Cipenski highlighted the company's disciplined approach, saying, "Our disciplined approach to full price selling continues to strengthen our financial foundation."
Q&A
During the earnings call, analysts inquired about Vince's ABG VIN licensed product strategy and store expansion opportunities in the U.S. and UK. The company's focus on growing its men's business was also a key topic, with potential for further expansion.
Risks and Challenges
- Supply chain adjustments, including a 40% reduction in production in China, may pose operational risks.
- Continued decline in net sales could indicate market saturation or shifting consumer preferences.
- Macroeconomic pressures and competitive market dynamics may impact future performance.
- Execution risks associated with new product launches and market expansion strategies.
- Potential challenges in maintaining gross margin improvements amid fluctuating costs.
Full transcript - Vince Holding Corp (VNCE) Q3 2025:
Operator: Hello, everyone, and welcome to Vince Holding Corp. 3rd Quarter Fiscal 20 24 Results Call. My name is Lydia, and I'll be your operator today.
After the prepared remarks, there will be an opportunity to ask questions. I'll now hand you over to Akiko Okuma, Chief Administrative Officer and Head of Investor Relations to begin. Please go ahead.
Akiko Okuma, Chief Administrative Officer and Head of Investor Relations, Vince Holding Corp: Thank you, and good morning, everyone. Welcome to Vince Holding Corp's Q3 fiscal 2024 results conference call. Hosting the call today is Abe Stefko, Interim Chief Executive Officer and John Cipenski, Chief Financial Officer. Before we begin, let me remind you that certain statements made on this call may constitute forward looking statements, which are subject to risks and uncertainties that could cause actual results to differ from those that the company expects. Those risks and uncertainties are described in today's press release and in the company's SEC filings, which are available on the company's website.
Investors should not assume that statements made during the call will remain operative at a later time and the company undertakes no obligation to update any information discussed on the call. In addition, in today's discussion, the company is presenting its financial results in conformity with GAAP and on an adjusted basis. The adjusted results that the company presents today are non GAAP measures. Discussions of these non GAAP measures and information on reconciliations of them to their most comparable GAAP measures are included in today's press release and related schedules, which are available in the Investors section of the company's website at investors. Finst.com.
Now I'll turn the call over to Dave.
Dave Stefko, Interim Chief Executive Officer, Vince Holding Corp: Thank you, Akiko, and thank you everyone for joining us this morning. I will begin with a review of highlights from our Q3 performance before turning the call over to John to discuss our financial results and outlook in more detail. Our Q3 results reflect our ongoing focus on driving a stronger full price business while executing an increasingly more efficient operating model through our transformation efforts. Despite our top line performance falling slightly short of our expectations driven by lower than expected in season reorders in our international wholesale business as well as lower than expected sales in our outlet channel, we delivered profitability results in line with our prior guidance range driven entirely by gross margin expansion. Within our direct to consumer channel, we made the strategic decision to pull back promotional activity even more than originally planned in our outlet channel, which led to the lower than expected sales mentioned, but yielded a much healthier margin performance for the quarter.
With the ongoing work in focusing on a stronger full price business, we were pleased to see growth in our full price customer file accelerate to the high single digit range outpacing the trends we delivered in the first half of the year. This growth was spread fairly evenly between our stores and e commerce channels. With respect to our wholesale performance, as we mentioned on our last earnings call, we expected our Q3 sales to be lower than the prior quarter given the earlier timing of shipments. In addition, we saw lower than expected in season reorders with our international partners, particularly in Asia. We believe this was largely due to the impact the stronger U.
S. Dollar had on our partners purchasing decisions in season. Despite these top line dynamics, similar to our DTC channel, we saw strong full price performance across wholesale during the period. We are continuing to see customer demand shift from the higher end designer luxury assortments into contemporary brands like Vince. Our relationships with our key wholesale partners remain strong and we are again highlighted by Nordstrom (NYSE:JWN) as a leading brand supporting the mid teen sales growth they delivered in their women's apparel business in the Q3.
We were also excited to have Jill Norton, our President of North American Sales recently participate in the Nordy Pod hosted by Pete Nordstrom, where they discussed the long history we have with the iconic department store over the past 20 plus years. In women's and men's, our niche assortments outperformed as customers continue to demonstrate buy now, wear now behavior. While the first half of the quarter is typically a more transitional period from summer to fall in retail, we were pleased to successfully continue to sell through the summer assortment at full price as customers responded to the fabrications and color palette of our offering. While we did see a slower start to our sweaters and outerwear assortments given the unseasonably warm weather this fall, we entered the Q4 with a strong full price assortment that we believe will now resonate with the colder temperatures. In addition, we also continue to see opportunity in expanding our men's business, which currently exceeds 20% of our total sales.
During the quarter, we successfully launched our new men's pants program, which highlighted a broader range of fits with superior Italian fabrics at a competitive retail price. In conjunction with this launch, we introduced a pant guide to communicate fit names and measurements more clearly to the customer in order to increase customer satisfaction and decrease returns. We have been very pleased with the initial response to this offering and helps to further support our goal in expanding our men's business to 30% of total revenues. As we look to further progress our strategic growth initiatives with the strength we are seeing in our customer file, we're even more confident in the opportunity we have with the Vince brand and our ability to acquire a higher value customer. To support these efforts, we have continued to look for opportunity to further enhance our customer acquisition efforts through more personalized and targeted initiatives focused on increasing lifetime value across our customer base, especially amongst our top 10% of customers, our DICs, who represent nearly 40% of demand across the full price direct to consumer channel.
During the quarter and heading into the holidays, we have introduced early access events, encouraged traffic to stores through exclusive offerings and are exploring other engagement opportunities that we believe will resonate with this cohort. Our most recent direct mail campaign, which ran through November and ended on December 2, saw outsized performance from our DICs with a redemption rate 4 times that of our non DIC audience and a 50% higher average order value than our non BIC audience. As we have discussed before, another vehicle for customer acquisition is through new stores and we are actively working to identify white space opportunities for the brand. Our recent market analysis completed with Cushman and Wakefield evaluated our e commerce and wholesale sales data by zip code along with demographic information to identify the most promising markets for store expansion in the U. S.
Through this analysis, we identified Nashville as one of our top 5 untapped markets. We recently executed a lease for our 1st Nashville store, which will open in late fiscal 2025. We are hopeful to also open a store for an additional top 5 market in 2025. In addition, we are also expanding our presence in London with the opening of our 2nd location in the region. This new London store located on Marrowbone High Street, a famed destination known for its unique blend of history, culture and shopping will officially open in the spring of fiscal 2025.
We have temporarily opened it as a pop up location for the holiday shopping season and look forward to expanding our reach in this important metro market. As we look ahead, we will continue to explore other opportunities to expand our presence and enhance our omnichannel experience welcoming both new and existing customers to the brand. As we continue to position Vince for long term sustainable growth, we also remain committed to delivering on our transformation plan. At the end of the Q3, we are ahead of our plans to achieve our target for fiscal 2024. In addition to the improvements we are making within our cost of goods as part of the transformation plan, we have also been working on strategies to diversify our geographical exposure in light of the ongoing discussions regarding tariffs.
As we begin to take actions for 2025 product seasons, we believe we'll see a reduction of nearly 40% in our production of product in China. Further reduction strategies are being discussed. Looking ahead, we expect to continue to execute a healthy full price business across all channels and are very encouraged by the results we have driven thus far this quarter, including across the Black Friday, Cyber Monday period. While we are enthused by our results to date, we remain cautious with our outlook given the shortened holiday season and the ongoing uncertainty around the consumer. We do believe we are well positioned to deliver on our objectives for this year.
Before I turn the call over to John, I would like to acknowledge our teams for their continued efforts towards achieving our goals while prioritizing and enhancing our relationships with our customers, vendors and wholesale partners. We are highly confident in Vince's future and together remain dedicated to ensuring its long term success. I'll now turn it over to John to discuss our financial results and outlook in more detail. John?
John Cipenski, Chief Financial Officer, Vince Holding Corp: Thank you, Dave, and good morning, everyone. As Dave discussed, our disciplined approach to full price selling and execution of our transformation plans continue to strengthen our financial foundation this quarter. While total revenue declined compared to the prior year period, we achieved meaningful bottom line improvements highlighted by substantial gross margin expansion. Let me walk you through the key financial metrics and provide additional color on our performance for the quarter. Total (EPA:TTEF) company net sales for the Q3 decreased 4.7 percent to $80,200,000 compared to $84,100,000 in the Q3 of fiscal 2023.
The year over year decrease in total company net sales was driven by an 8.3% decrease in our direct to consumer segment and a 2.2% decrease in our wholesale segment. As Dave reviewed, these results were slightly below our expectations driven by lower than expected in season reorders in our international wholesale business as well as lower than expected revenues in our outlet channel. Combined, these factors negatively impacted sales growth in the quarter by 300 basis points. Excluding these factors, revenue trends would have been more in line to our expectations, which incorporated ongoing headwinds in our direct to consumer segment from store closures, which was a 163 basis point impact on the quarter as well as the pullback in promotional activity compared to the prior year. With respect to our wholesale business, we had expected a deceleration in the top line from the prior quarter given the earlier timing of shipments that we previously discussed on the last call.
Gross profit in the Q3 was $40,100,000 or 50 percent of net sales. This compares to $37,200,000 or 44.2 percent of net sales in the Q3 of last year. The increase in gross margin rate was driven by approximately 480 basis points related to lower product costing and freight costs and 80 basis points related to lower promotional activity in the direct to consumer segment and lower discounting. These factors were partially offset by approximately 50 basis points attributable to channel mix. Selling, general and administrative expenses in the quarter were $34,300,000 or 42.8 percent of net sales as compared to $34,400,000 or 40.9 percent of net sales for the Q3 of last year.
SG and A dollars were relatively flat compared to the prior year as a $500,000 decrease in marketing and advertising expenses, a $300,000 decrease in rent and occupancy costs and $200,000 of expense favorability compared to last year given the transaction related expenses with the authentic transaction was offset by $800,000 in increased compensation and benefits due primarily to higher severance and incentive compensation. Operating income for the Q3 was $5,800,000 compared to an operating income of $2,800,000 in the same period last year. Excluding the transaction related expenses incurred in the prior year period, adjusted operating income for the Q3 of fiscal 2023 was $3,100,000 Adjusted operating margin increased approximately 3.50 basis points compared to the prior year driven by the gross margin expansion which was partially offset by SG and A deleverage in the quarter given the decline in revenue. Net interest expense for the Q3 decreased $1,700,000 compared to $2,000,000 in the prior year. The decrease was primarily driven by expenses related to the refinancing transactions in the prior year as well as the year over year reduction in debt.
There was no provision for income taxes this quarter as given our year to date ordinary pre tax losses for the interim period and our expectation for annual ordinary pre tax income for the fiscal year. We determined that it is more likely than not that the tax benefit of the year to date loss will not be realized in the current or future years. And as such, tax provisions for the interim periods should not be recognized until we have year to date ordinary pre tax income. This compares to an income tax benefit of $500,000 in the same period last year. Net income for the Q3 was $4,300,000 or earnings per share of $0.34 compared to net income of $1,000,000 or earnings per share of $0.08 in the Q3 last year.
The prior year period includes one time items related to direct transaction expenses. Excluding these items, adjusted net income in the Q3 of fiscal 2023 was $1,800,000 or income per share of $0.15 Moving to the balance sheet. Net inventory was $63,800,000 at the end of the 3rd quarter as compared to $69,600,000 at
Dave Stefko, Interim Chief Executive Officer, Vince Holding Corp: the
John Cipenski, Chief Financial Officer, Vince Holding Corp: end of the Q3 last year. As we are continuing to take a disciplined approach to investing back into inventory to support the growth in both DTC and wholesale channels, we now expect inventory for fiscal 2024 to be up high single digits to fiscal 2023. Turning now to our outlook for the balance of the year. For Q4 fiscal 2024, we expect total net sales to be down mid single digits to up low single digits compared to $75,300,000 in the prior year quarter. With respect to operating margin, we expect Q4 fiscal 2024 operating margin to increase approximately 200 basis points to 300 basis points compared to last year's adjusted operating margin of negative 2.2%.
We expect improved full price penetration, disciplined promotions and the impact of our transformation initiatives to be the primary drivers of the operating margin increase, somewhat offset by SG and A deleverage from incentive compensation. With respect to our full year fiscal 2024 outlook, which as a reminder is a 52 week fiscal year, we continue to expect total net sales to decline in the low single digit range compared to $292,900,000 in fiscal 2023, which included a 53rd week, which represented approximately $2,200,000 in net sales. We also continue to expect adjusted operating margin to increase 25 basis points to 50 basis points compared to fiscal 2023 adjusted operating margin of 1.4%. This outlook includes a negative impact of approximately 140 basis points from non comparable royalty expenses through May 2024 that we expect to offset through ongoing gross margin expansion and disciplined expense management driven in part by our transformation efforts. As Dave reviewed, we are pleased with the progress we are making with our transformation plan and are ahead of our plan to achieve our annual target as we enter the Q4 of fiscal 2024.
As a reminder, about half of our total benefits from the transformation plan are expected to come from product cost efficiencies with no compromises to quality with the balance driven by targeted initiatives to improve pricing and promotions and reduce operating expenses. This concludes our remarks And I will now turn it over to the operator to open the call for questions.
Operator: Thank We have a question from Eric Beder with SCC Research. Please go ahead. Your line is open.
Eric Beder, Analyst, SCC Research: Good morning. Congratulations on the progress. Thank you. I want to talk a little bit about ABG VIN. I want to talk about ABG VIN.
I know that some of the products started to come in some of the licensed products have started to come into the stores again in Q3, Q4. Curious what the response has been to that? And then what should we be thinking about next year in terms of potential new product categories for the retail channel going forward?
Dave Stefko, Interim Chief Executive Officer, Vince Holding Corp: Thanks, Eric. So, at this time through fall season and now pre spring is we'll be starting to ship. It's really the licensed products that have been coming in. They've really been around shoes and cold weather goods, which are licenses that we've had for a few years. So as we indicated in our remarks, we're happy with our Black Friday, Cyber Monday and the license products continue to perform.
When you'll see new licenses that ABG Vince entered into since the transaction, there will be belts and leather goods that will launch with the spring season. And then handbags, license has been signed, but that's not expected to ship until fall, fall of 2025.
Eric Beder, Analyst, SCC Research: Okay. In terms of store potential, I'm excited that you're opening stores in both the UK and in the U. S. How should we be thinking about longer term the potential for expanding out the store base even a little bit more aggressively? And the potential in terms of returns, I saw there was in Q3 a significant increase in profitability on the operating line for the D2C?
Thank you.
Dave Stefko, Interim Chief Executive Officer, Vince Holding Corp: I'll address the stores and then John could talk about the results from Q3. So from a store perspective, when you look at the U. S, as we implied, we completed a study mid year with Cushman and Wakefield where we looked at the entire U. S. Market and with only 60 stores and a heavy concentration in New York and Los Angeles, we have a lot of white space in the U.
S. Where we can fill in stores. And as we said in our remarks, we've kind of allowed our e commerce sales and our wholesale sales, we kind of combined where those happen across the states along with markets. And in today's age of technology, you can define down to malls and shopping centers, where the demographics cross with who our consumer is. So we feel really good understanding what markets are good for us.
And you can imagine looking at a map, we have opportunities in the Midwest and the Pacific Northwest to name a few. So Nashville became one of the top markets. And so we're focused on looking at not just the top 5 markets, but the top markets and looking at opportunities. We'll still let economics drive us as to decision making. When you look outside the U.
S. And you look at the UK, we're much more opportunistic. We just thought Marlobone is a fabulous shopping location, similar to being on Madison Avenue here in New York City. It was an opportunity that we felt was important for the brand, especially looking at the results in our existing Dracot store that's been open for about 5 years now. So we thought it was the right time to make that investment.
As we talked last quarter, Eric, we also looked at a market like China and where we were testing stores, we pulled back in China because of the economic conditions and economic situations going on in China. So that's how we view the world and the U. S. From a new store opportunity.
John Cipenski, Chief Financial Officer, Vince Holding Corp: And Eric, just to add on that when we're talking about store performance.
Eric Beder, Analyst, SCC Research: Sorry, you wanted to ask a follow-up. No, go ahead. No, I was just going to
John Cipenski, Chief Financial Officer, Vince Holding Corp: mention in terms of the financial side of store performance, what we're seeing today, even though our top line, we see was impacted by the store closures that we had in the fleet as well as the pullback in promotional activity. What we're really seeing is a really positive bottom line impact from that full price selling strategy and all the efforts around transformation that is driving our overall margin results. And the other thing that we're seeing is being able to invest back in the right inventory in season is really helping us give a balanced offer to the customer. So all of those factors are really driving the performance in stores.
Eric Beder, Analyst, SCC Research: Okay. And one last question, men's. Congrats on getting over 20%. How did the expansion into all the Nordstrom stores go? And how should we be thinking about the opportunity for men's in your own stores going forward in terms of expanding that out?
Thank you.
Dave Stefko, Interim Chief Executive Officer, Vince Holding Corp: Yes. Thanks, Eric. So, from a Nordstrom perspective, it's early. I mean, the results we're very, very pleased with our Nordstrom results across the board that includes men's. So we certainly are seeing growth, but from our view it still is a little bit early.
In our own stores, again, men's is performing well. The pant program was a critical investment and launch that we've made this year. We're reacting to results that we're seeing and making adjustments where needed. But we certainly expect to see continued expansion, not just of men's in our stores, but as you know, Eric, we have one standalone men's store that we're evaluating also its performance and how that fits into the strategy going forward.
Eric Beder, Analyst, SCC Research: Great. Thanks.
Operator: Thank you. This concludes our Q and A session. So I'll now turn the call back over to Dave Stefko for any closing comments.
Dave Stefko, Interim Chief Executive Officer, Vince Holding Corp: Okay. Thank you for joining us today. We look forward to updating you on our 2024 fiscal year end results in our April year end call. Happy holidays, everyone.
Operator: Thank you. This concludes today's call. Thank you for joining. You may now disconnect your line.
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