Vince Holding Corp. (NYSE:VNCE), a leading contemporary fashion
brand (“Vince” or the “Company”), today reported unaudited results
for the second quarter of fiscal 2016 ended July 30, 2016.
In this press release, the Company is presenting its financial
results in conformity with U.S. generally accepted accounting
principles ("GAAP") as well as on an "adjusted" basis. Adjusted
results presented in this press release are non-GAAP financial
measures. See "Non-GAAP Financial Measures" below for more
information about the Company's use of non-GAAP financial measures
and Exhibits 3 and 4 to this press release for a reconciliation of
GAAP results to such adjusted results.
For the second quarter ended July 30, 2016:
- Net sales decreased 24.1% to $60.7
million from $80.0 million in the second quarter of fiscal 2015.
Wholesale segment net sales decreased 32.1% to $39.6 million due to
the planned reduction in full-price orders related to the
transition of product under the new design team. Direct-to-consumer
segment net sales decreased 2.8% to $21.1 million compared to the
second quarter of fiscal 2015. Comparable sales decreased 18.7%,
including e-commerce sales, as a result of declines in the number
of transactions, which reflected the planned reduction in inventory
levels associated with the product transition.
- Gross profit was $27.4 million, or
45.1% of net sales. This compares to gross profit of $20.8 million,
or 26.0% of net sales, in the second quarter of fiscal 2015, which
includes a $14.4 million charge associated with the write-down of
excess inventory and aged product to expected net realizable value.
Excluding the inventory write-down, gross profit in the second
quarter of 2015 was $35.2 million, or 44.0% of net sales. Excluding
the write-down in the prior year quarter, the increase in gross
profit rate for the second quarter of 2016 reflected the favorable
impact from lower year-over-year adjustments to inventory reserves,
partially offset by an increase in the rate of sales allowances on
lower net sales.
- Selling, general, and administrative
expenses were $31.6 million, or 52.1% of sales. This compares to
$27.3 million, or 34.2% of sales, in the second quarter of fiscal
2015, which included $2.9 million of net management transition
costs related to executive severance and related costs. Excluding
these costs, selling, general and administrative costs in the
second quarter of 2015 were $24.5 million or 30.6% of net sales.
The increase in SG&A dollars for the second quarter of fiscal
2016 includes costs associated with 10 additional stores, incentive
compensation costs and continued strategic investments to support
the Company’s long term goals.
- Operating loss was $4.3 million,
compared to operating loss of $6.5 million for the second quarter
of fiscal 2015. Excluding the inventory write-down and net
management transition costs, operating income for the second
quarter of fiscal 2015 was $10.8 million.
- Net loss was $2.0 million, or $0.04 per
share, compared to net loss of $5.0 million, or $0.14 per share,
for the second quarter of fiscal 2015. Excluding the inventory
write-down and net management transition costs, net income for the
second quarter of fiscal 2015 was $5.2 million, or $0.14 per
share.
- The Company opened one new store,
ending the second quarter with 52 company-operated stores.
Brendan Hoffman, Chief Executive Officer, commented, “Our second
quarter results were largely in line with our expectations. As we
transitioned our product to Fall, we flowed fewer styles into the
wholesale channel as well as our own retail stores, which
contributed to the reduction in sales. Our Fall collection has just
recently been set on the selling floor and we are very pleased with
the presentation. As we have said in the past, we look forward to
the holiday season, at which time our new vision will be fully
reflected in our assortment. Overall, we believe that we are on
track to achieve our net sales and diluted EPS targets for fiscal
2016.”
Balance Sheet
The Company ended the second quarter with $21.3 million in cash
and cash equivalents and $55.0 million of borrowings under its debt
agreements.
Inventory at the end of the second quarter of fiscal 2016 was
$34.7 million compared to $45.6 million at the end of the second
quarter of fiscal 2015. The year-over-year inventory decline was
primarily due to better inventory management.
Capital expenditures for the second quarter of fiscal 2016
totaled $5.6 million, primarily attributable to new stores and IT
migration costs.
2016 Outlook
For fiscal 2016:
- Total net sales are still expected to
be between $290 million and $305 million, including revenues from
six new retail stores and comparable sales growth inclusive of
ecommerce sales in the flat to low-single digit range;
- Gross margin is now expected to be
approximately 46.2%, mainly due to additional strategic
investments, as well as the higher rate of sales allowances and
lower mix of full-price sales in the first half;
- SG&A is now expected to be between
$128 million and $133 million, contingent upon the level of annual
incentive compensation programs to be realized in fiscal 2016;
- Interest expense is still expected to
be approximately $4 million;
- Diluted EPS is still expected to be
$0.00 to $0.06. Note that the EPS guidance reflects a share count
of approximately 46.6 million, which includes the impact of 11.8
million shares issued in connection with the rights offering;
and
- Capital expenditures are now expected
to be between $12.5 million and $14.5 million, due to additional
branding initiatives, as well as an increase in the Company’s IT
migration investment.
Non-GAAP Financial
Measures
In addition to reporting financial results in accordance with
GAAP, the Company has provided, with respect to financial results
relating to the second quarter and first half of fiscal 2015,
adjusted cost of products sold, adjusted gross margin, adjusted
selling, general and administrative expenses, adjusted operating
income, adjusted income before taxes, adjusted income taxes,
adjusted net income and adjusted earnings per share and related
shares outstanding, which are non-GAAP financial measures, in order
to eliminate the effect on operating results of the inventory
write-down for excess and aged product and management transition
costs. The Company believes that the presentation of adjusted
results facilitates an understanding of the Company's continuing
operations without the non-recurring impact associated with the
inventory write-down and management transition costs. Non-GAAP
financial measures should not be considered in isolation from, or
as a substitute for, financial information prepared in accordance
with GAAP. A reconciliation of GAAP to non-GAAP results has been
provided in Exhibits 3 and 4 to this press release.
2016 Second Quarter Earnings Conference
Call
A conference call to discuss the second quarter results will be
held today, September 8, 2016, at 4:30 p.m. ET, hosted by Vince
Holding Corp. Chief Executive Officer, Brendan Hoffman, and Chief
Financial Officer, David Stefko. During the conference call, the
Company may answer questions concerning business and financial
developments, trends and other business or financial matters. The
Company's responses to these questions, as well as other matters
discussed during the conference call, may contain or constitute
information that has not been previously disclosed.
Those who wish to participate in the call may do so by dialing
(877) 201-0168, conference ID 63568042. Any interested party will
also have the opportunity to access the call via the Internet at
http://investors.vince.com/. To listen to the live call, please go
to the website at least 15 minutes early to register and download
any necessary audio software. For those who cannot listen to the
live broadcast, a recording will be available for 12 months after
the date of the event. Recordings may be accessed at
http://investors.vince.com/.
ABOUT VINCE
VINCE is a leading contemporary fashion brand best known for
modern effortless style and everyday luxury essentials. Established
in 2002, the brand now offers a wide range of women's and men's
apparel, women's and men's footwear, and handbags. Vince products
are sold in prestige distribution worldwide, including
approximately 2,400 distribution locations across approximately 40
countries. With corporate headquarters in New York and its design
studio in Los Angeles, as of September 8th, 2016, the Company has
40 company-operated full-price retail stores, 14 company-operated
outlet stores and its e-commerce site, VINCE.com. Please visit
www.VINCE.com for more information.
This document, and any statements incorporated by reference
herein, contains forward-looking statements under the Private
Securities Litigation Reform Act of 1995. Forward-looking
statements include the statements under “2016 Outlook” and
statements regarding, among other things, our current expectations
about the Company's future results and financial condition,
revenues, store openings and closings, margins, expenses and
earnings and are indicated by words or phrases such as "may,"
"will," "should," "believe," "expect," "seek," "anticipate,"
"intend," "estimate," "plan," "target," "project," "forecast,"
"envision" and other similar phrases. Although we believe the
assumptions and expectations reflected in these forward-looking
statements are reasonable, these assumptions and expectations may
not prove to be correct and we may not achieve the results or
benefits anticipated. These forward-looking statements are not
guarantees of actual results, and our actual results may differ
materially from those suggested in the forward-looking statements.
These forward-looking statements involve a number of risks and
uncertainties, some of which are beyond our control, including,
without limitation: our ability to maintain adequate cash flow from
operations or availability under our revolving credit facility to
meet our liquidity needs (including our obligations under the tax
receivable agreement); our ability to successfully complete the
migration of our systems and processes from Kellwood Company and to
successfully implement the new systems, processes and functions
following the migration; our ability to ensure the proper operation
of the distribution facility by a third party logistics provider
recently transitioned from Kellwood; our ability to remain
competitive in the areas of merchandise quality, price, breadth of
selection, and customer service; our ability to anticipate and/or
react to changes in customer demand and attract new customers,
including in connection with making inventory commitments; our
ability to control the level of sales in the off-price channels;
our ability to manage excess inventory in a way that will promote
the long-term health of the brand; changes in consumer confidence
and spending; our ability to maintain projected profit margins;
unusual, unpredictable and/or severe weather conditions; the
execution and management of our retail store growth plans,
including the availability and cost of acceptable real estate
locations for new store openings; the execution and management of
our international expansion, including our ability to promote our
brand and merchandise outside the U.S. and find suitable partners
in certain geographies; our ability to expand our product offerings
into new product categories, including the ability to find suitable
licensing partners; our ability to successfully implement our
marketing initiatives; our ability to protect our trademarks in the
U.S. and internationally; our ability to maintain the security of
electronic and other confidential information; serious disruptions
and catastrophic events; changes in global economies and credit and
financial markets; competition; the impact of recent turnover in
the senior management team; the fact that a number of members of
the management team have less than one year of tenure with the
Company, and the current senior management team has not had a long
period of time working together; our ability to attract and retain
key personnel; commodity, raw material and other cost increases;
compliance with domestic and international laws, regulations and
orders; changes in laws and regulations; outcomes of litigation and
proceedings and the availability of insurance, indemnification and
other third-party coverage of any losses suffered in connection
therewith; tax matters; and other factors as set forth from time to
time in our Securities and Exchange Commission filings, including
under the heading "Item 1A—Risk Factors" in our Annual Report on
Form 10-K and our Quarterly Reports on Form 10Q. We intend these
forward-looking statements to speak only as of the time of this
release and do not undertake to update or revise them as more
information becomes available.
This press release is also available on the Vince Holding Corp.
website (http://investors.vince.com/).
Exhibit (1)
Vince Holding Corp. and
Subsidiaries
Condensed Consolidated Statements of
Operations
(Unaudited, amounts in thousands
except
percentages, share and per share
data)
Three Months Ended Six Months
Ended July 30, August 1, July 30,
August 1, 2016 2015 2016
2015 Net sales $ 60,702 $ 79,993 $ 128,347 $ 139,835 Cost of
products sold 33,315 59,204 72,702
88,305 Gross profit 27,387 20,789 55,645 51,530 as a % of net sales
45.1 % 26.0 % 43.4 % 36.9 % Selling, general and administrative
expenses 31,642 27,331 63,448 52,971 as
a % of net sales 52.1 % 34.2 % 49.5 % 37.9 % Loss from operations
(4,255 ) (6,542 ) (7,803 ) (1,441 ) as a % of net sales (7.0 )%
(8.2 )% (6.1 )% (1.0 )% Interest expense, net 1,005 1,623 1,886
2,939 Other expense, net 28 350 188 491
Loss before income taxes (5,288 ) (8,515 ) (9,877 ) (4,871 )
Benefit for income taxes (3,321 ) (3,489 )
(5,986 ) (2,299 ) Net loss $ (1,967 ) $ (5,026 )
(3,891 ) (2,572 )
Loss per share: Basic loss per
share $ (0.04 ) $ (0.14 ) $ (0.09 ) $ (0.07 ) Diluted loss per
share $ (0.04 ) $ (0.14 ) $ (0.09 ) $ (0.07 )
Weighted average
shares outstanding: Basic 48,968,760 36,774,752 43,485,767
36,763,933 Diluted 48,968,760 36,774,752 43,485,767 36,763,933
Exhibit (2)
Vince Holding Corp. and
Subsidiaries
Condensed Consolidated Balance
Sheets
(Unaudited, amounts in
thousands)
July 30, January 30, 2016
2016
ASSETS
Current assets: Cash and cash equivalents $ 21,347 $ 6,230 Trade
receivables, net 21,040 9,400 Inventories, net 34,681 36,576
Prepaid expenses and other current assets 10,953
8,027 Total current assets 88,021 60,233 Property, plant and
equipment, net 43,865 37,769 Intangible assets, net 108,747 109,046
Goodwill 63,746 63,746 Deferred income taxes and other assets
97,946 92,774 Total assets $ 402,325 $ 363,568
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
Accounts payable $ 33,297 $ 28,719 Accrued salaries and employee
benefits 4,543 5,755 Other accrued expenses 12,543
37,174 Total current liabilities 50,383 71,648 Long-term debt
52,798 57,615 Deferred rent 16,667 14,965 Other liabilities 140,854
140,838 Stockholders' equity 141,623 78,502 Total
liabilities and stockholders' equity $ 402,325 $ 363,568
Exhibit (3)
Vince Holding Corp. and
Subsidiaries
Reconciliation of net income on a GAAP
basis to “Adjusted net income”
(Unaudited, amounts in thousands except
percentages, share and per share
data)
For the three months ended August 1, 2015
As Reported Adjustments As Adjusted
Net sales $ 79,993 $ 79,993 Cost of products sold
59,204 (14,447 ) (a) 44,757 Gross profit 20,789
14,447 35,236 as a % of sales 26.0 % 44.0 % Selling, general and
administrative expenses 27,331 (2,861 ) (b)
24,470 as a % of sales 34.2 % 30.6 % (Loss) Income from operations
(6,542 ) 17,308 10,766 as a % of sales (8.2 )% 13.5 % Interest
expense, net 1,623 1,623 Other expense, net 350
350 (Loss) Income before income taxes (8,515 ) 17,308
8,793 (Benefit) provision for Income taxes (3,489 )
7,079 (c) 3,590 Net (Loss) Income $ (5,026 ) $ 10,229 $
5,203
Earnings (loss) per share: Basic earnings
(loss) per share $ (0.14 ) $ 0.28 $ 0.14 Diluted earnings (loss)
per share $ (0.14 ) $ 0.28 $ 0.14
Weighted average shares
outstanding: Basic shares 36,774,752 36,774,752 Diluted shares
36,774,752 37,658,575 (a) To adjust cost of products sold to
remove the impact of inventory write downs of approximately $14.4
million primarily
related to excess out of season and
current inventory.
(b) To adjust selling, general and administrative expenses to
remove executive severance costs of $3.7 million, partially offset
by the favorable impact of $(0.8) million related to executive
stock option forfeitures. (c) Adjusted amount represents adjusted
pretax income multiplied by a normalized tax rate of 40.9%. The
normalized tax rate was derived by reference to statutory tax rates
in the jurisdictions in which the Company operates, without giving
effect to the Company’s valuation allowance or potential use of its
net operating loss carryforwards.
Exhibit (4)
Vince Holding Corp. and
Subsidiaries
Reconciliation of net income on a GAAP
basis to “Adjusted net income”
(Unaudited, amounts in thousands except
percentages, share and per share
data)
For the six months ended August 1, 2015 As
Reported Adjustments As Adjusted
Net sales $ 139,835 $ 139,835 Cost of products sold 88,305
(14,447 ) (a) 73,858 Gross profit 51,530 14,447
65,977 as a % of sales 36.9 % 47.2 % Selling, general and
administrative expenses 52,971 (2,861 ) (b)
50,110 as a % of sales 37.9 % 35.8 % (Loss) Income from operations
(1,441 ) 17,308 15,867 as a % of sales (1.0 )% 11.3 % Interest
expense, net 2,939 2,939 Other expense, net 491
491 (Loss) Income before income taxes (4,871 ) 17,308
12,437 (Benefit) provision for Income taxes (2,299 )
7,079 (c) 4,780 Net (Loss) Income $ (2,572 ) $ 10,229 $
7,657
(Loss) earnings per share: Basic (loss)
earnings per share $ (0.07 ) $ 0.28 $ 0.21 Diluted (loss) earnings
per share $ (0.07 ) $ 0.27 $ 0.20
Weighted average shares
outstanding: Basic shares 36,763,933 36,763,933 Diluted shares
36,763,933 37,855,607 (a) To adjust cost of products sold to
remove the impact of inventory write downs of approximately $14.4
million primarily related to excess out of season and current
inventory. (b) To adjust selling, general and administrative
expenses to remove executive severance costs of $3.7 million,
partially offset by the favorable impact of $(0.8) million related
to executive stock option forfeitures. (c) Adjusted amount
represents adjusted pretax income multiplied by a normalized tax
rate of 40.9%. The normalized tax rate was derived by reference to
statutory tax rates in the jurisdictions in which the Company
operates, without giving effect to the Company’s valuation
allowance or potential use of its net operating loss carryforwards.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160908006536/en/
Investor Relations:ICR, Inc.Jean Fontana,
646-277-1200Jean.fontana@icrinc.com
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