Vince Holding Corp. (NYSE:VNCE), a leading global contemporary
group (“Vince” or the “Company”), today reported its financial
results for the third quarter of fiscal year 2020 ended October 31,
2020.
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 Exhibit 3 to this press release for a reconciliation of GAAP
measures to such non-GAAP measures.
Highlights for the third quarter ended October 31, 2020:
- Net sales decreased 34.0% to $69.0 million as compared to
$104.5 million in the same period last year.
- Gross margin rate was 45.9% compared to 48.8% in the same
period last year.
- Income from operations was $6.3 million compared to $7.6
million in the same period last year. Excluding costs associated
with the acquisition of Rebecca Taylor and Parker, income from
operations in the third quarter of fiscal 2019 was $8.3
million.
- Occupancy expense for the third quarter was positively affected
by rent abatements, rent deferrals and rent reductions, totaling
$4.2 million, resulting from negotiations with landlords.
- Net income was $5.0 million or $0.42 per diluted share compared
to a net income of $6.0 million or $0.50 per diluted share in the
same period last year. Net income for the third quarter of fiscal
2020 reflects the $4.2 million, or $0.36 per share benefit of the
aforementioned rent concessions. Excluding costs associated with
the acquisition of Rebecca Taylor and Parker, net income in the
third quarter of fiscal 2019 was $6.7 million or $0.56 per diluted
share.
- Subsequent to the end of the third quarter the Company closed
the Third Lien Credit Facility resulting in excess availability of
$42.3 million as of December 11, 2020.
David Stefko, Interim Chief Executive Officer and Chief
Financial Officer, commented, “We saw sequential improvement in our
sales trends and delivered an operating profit, even excluding the
benefit of rent concessions, through prudent cost management in the
third quarter. This sequential improvement in direct-to-consumer
sales and gross margin continued into the fourth quarter as we
entered the holiday season. While the current environment remains
difficult, Vince remains a top performing brand in the contemporary
luxury segment within our existing wholesale partners with strong
customer demand for comfort casual luxury. We are also pleased to
see the positive reaction to the brand refresh and merchandising
initiatives taking place at Rebecca Taylor. Our proven ability to
re-establish the brand leadership position for Vince, combined with
the advancements we are making to restore the DNA of Rebecca
Taylor, are generating excitement among our wholesale
partners.”
Mr. Stefko continued, “Looking ahead, we believe that we have
the liquidity in place to continue to navigate through the
challenges presented by the COVID pandemic. For Vince, we are
well-positioned to gain further market share and advance our
strategic initiatives as we emerge from the pandemic. For Rebecca
Taylor, we remain enthusiastic about the long term growth
opportunity given the brand’s strong recognition within the
contemporary luxury apparel space.”
For the third quarter ended October 31, 2020:
- Total Company net sales decreased 34.0% to $69.0 million
compared to $104.5 million in the third quarter of fiscal
2019.
- Gross profit was $31.7 million, or 45.9% of net sales, compared
to gross profit of $51.0 million, or 48.8% of net sales, in the
third quarter of fiscal 2019. The decrease in the gross margin rate
was primarily due to increased promotional activity and channel mix
partially offset by lower sales allowances.
- Selling, general, and administrative expenses, were $25.4
million, or 36.8% of sales, compared to $43.4 million, or 41.6% of
sales, in the third quarter of fiscal 2019. The decrease in
SG&A dollars was primarily the result of lower payroll and
compensation expense, landlord rent concessions, reduced marketing
spend and prudent expense management.
- Income from operations was $6.3 million compared to income from
operations of $7.6 million in the same period last year. Excluding
costs associated with the acquisition of Rebecca Taylor and Parker,
income from operations in the third quarter of fiscal 2019 was $8.3
million.
- Net income was $5.0 million or $0.42 per diluted share compared
to a net income of $6.0 million or $0.50 per diluted share in the
same period last year. Net income in fiscal 2020 reflects the $4.2
million, or $0.36 per share benefit of the aforementioned rent
concessions. Excluding costs associated with the acquisition of
Rebecca Taylor and Parker, net income in the third quarter of
fiscal 2019 was $6.7 million or $0.56 per diluted share.
- The Company ended the quarter with 70 company-operated Vince
and Rebecca Taylor stores, a net increase of 1 store since the
third quarter of fiscal 2019.
Vince
- Net sales decreased 28.7% to $61.6 million as compared to the
third quarter of fiscal 2019.
- Wholesale segment sales decreased 24.2% to $38.7 million
compared to the third quarter of fiscal 2019.
- Direct-to-consumer segment sales decreased 35.4% to $22.8
million compared to the third quarter of fiscal 2019.
- Income from operations excluding unallocated corporate expenses
was $15.9 million compared to $22.6 million in the same period last
year.
Rebecca Taylor and Parker
- Net sales decreased 58.9% to $7.5 million as compared to the
third quarter of fiscal 2019.
- Loss from operations was $1.9 million compared to a loss of
$1.5 million in the same period last year.
Net Sales and Operating Results by Segment:
Three Months Ended
October 31,
November 2,
(in thousands)
2020
2019**
Net Sales:
Vince Wholesale
$
38,746
$
51,102
Vince Direct-to-consumer
22,822
35,302
Rebecca Taylor and Parker
7,454
18,135
Total net sales
$
69,022
$
104,539
Income (loss) from operations:
Vince Wholesale
$
16,027
$
18,497
Vince Direct-to-consumer
(141
)
4,133
Rebecca Taylor and Parker
(1,907
)
(1,506
)
Subtotal
13,979
21,124
Unallocated corporate*
(7,715
)
(13,574
)
Total income from operations
$
6,264
$
7,550
* Unallocated corporate expenses are related to the Vince brand
and are comprised of selling, general and administrative expenses
attributable to corporate and administrative activities (such as
marketing, design, finance, information technology, legal and human
resource departments), and other charges that are not directly
attributable to the Company’s Vince Wholesale and Vince
Direct-to-consumer reportable segments.
**Fiscal 2019 amounts reflect the retrospective combination of
the entities.
Financing Activities
As disclosed in the December 14, 2020 press release, the Company
entered into a $20 million Third Lien Credit Facility with SK
Financial Services, LLC (“SK Financial”) on December 11, 2020.
Interest and fees under the Third Lien Credit Facility are payable
in kind. Proceeds from this facility were used to pay down
borrowings under the Company’s existing Revolving Credit Facility.
SK Financial is an affiliate of Sun Capital Partners, Inc. (“Sun
Capital”), whose affiliates own approximately 72% of the Company’s
common stock. The Third Lien Credit Facility was reviewed and
approved by the Special Committee of the Company’s Board of
Directors, consisting solely of directors not affiliated with Sun
Capital, which was represented by independent legal advisors.
In addition, on December 11, 2020, the Company entered into
amendments to its existing Revolving Credit Facility and to its
existing Term Loan Credit Facility. The amendments, among others,
extended the period during which the testing under a financial
covenant is suspended, lowered the fixed charge coverage ratio to
be maintained thereafter, extended the applicability of certain
revised eligibility criteria for trade receivables and waived
certain term loan amortization payments. For more information about
the Third Lien Credit Facility as well as the amendments to the
Term Loan Facility and the Revolving Credit Facility, please refer
to the Company’s current report on Form 8-K filed with the
Securities and Exchange Commission on December 14, 2020.
After giving effect to the closing of the Third Lien Credit
Facility on December 11, 2020, the Company had excess availability
of $42.3 million under its Revolving Credit Facility.
Inventory
Net inventory at the end of the third quarter of fiscal 2020 was
$88.6 million compared to $71.6 million at the end of the third
quarter of fiscal 2019. The Company continued to work through
seasonal inventory through promotions and will continue to move
product through a combination of promotional activity, its outlet
stores and the off-price channel.
Outlook
Due to the uncertainty related to the impact of the COVID-19
pandemic, the Company is not providing an outlook for fiscal 2020,
as previously announced.
The COVID-19 pandemic remains volatile and continues to evolve
on a daily basis, which could negatively affect the outcome of the
measures intended to address its impact and/or our current
expectations of the Company’s future business performance.
2020 Third Quarter Earnings Conference
Call
A conference call to discuss the third quarter results will be
held today, December 21, 2020, at 4:30 p.m. ET, hosted by Vince
Holding Corp. Interim Chief Executive Officer and Chief Financial
Officer, David Stefko. During the conference call, the Company may
make comments concerning business and financial developments,
trends and other business or financial matters. The Company's
comments, 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
(833) 392-0629, conference ID 6757388. 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.
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 nine months ended October 31, 2020, adjusted operating
income (loss), adjusted income (loss) before income taxes, adjusted
income taxes, adjusted net income (loss) and adjusted earnings
(loss) per share, which are non-GAAP measures, in order to
eliminate the effect of non-cash asset impairment charges and the
TRA adjustment. In addition, with respect to financial results
relating to the third quarter and nine months ended November 2,
2019, adjusted operating income (loss), adjusted income (loss)
before income taxes, adjusted income taxes, adjusted net income
(loss) and adjusted earnings (loss) per share, which are non-GAAP
measures, in order to eliminate the effect on operating results of
cash asset impairment charges and costs associated with the
acquisition of Rebecca Taylor and Parker. The Company believes that
the presentation of these non-GAAP measures facilitates an
understanding of the Company's continuing operations without the
impact associated with the aforementioned items. While these types
of events can and do recur periodically, they are excluded from the
indicated financial information due to their impact on the
comparability of earnings across periods. 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 Exhibit 3 to this press release.
ABOUT VINCE HOLDING CORP.
Vince Holding Corp. is a global contemporary group, consisting
of three brands: Vince, Rebecca Taylor and Parker. Vince,
established in 2002, is a leading global luxury apparel and
accessories brand best known for creating elevated yet understated
pieces for every day effortless style. Known for its range of
luxury products, Vince offers women’s and men’s ready-to-wear,
footwear and accessories through 48 full-price retail stores, 15
outlet stores, and its e-commerce site, vince.com and through its
subscription service Vince Unfold, www.vinceunfold.com, as well as
through premium wholesale channels globally. Rebecca Taylor,
founded in 1996 in New York City, is a high-end women’s
contemporary lifestyle brand inspired by beauty in the everyday.
The Rebecca Taylor collection is available at 10 retail stores,
through our e-commerce site at rebeccataylor.com and through its
subscription service Rebecca Taylor RNTD,
www.rebeccataylorrntd.com, as well as through high-end department
and specialty stores in select international markets. Parker,
founded in 2008 in New York City, is a contemporary women’s fashion
brand that is trend focused. The Parker collection is available at
high-end department and specialty stores in select international
markets. Please visit www.vince.com for more information.
Forward-Looking Statements: 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 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: the impact of
the novel coronavirus (COVID-19) pandemic on our business, results
of operations and liquidity; our ability to continue having the
liquidity necessary to service our debt, meet contractual payment
obligations, and fund our operations; changes in global economics
and credit and financial markets; the expected effects of the
acquisition of the Acquired Businesses on the Company; our ability
to integrate the Acquired Businesses with the Company, including
our ability to retain customers, suppliers and key employees; our
ability to realize the benefits of our strategic initiatives; our
ability to maintain our larger wholesale partners; the loss of
certain of our wholesale partners; our ability to make lease
payments when due; the execution and management of our retail store
growth plans; our ability to expand our product offerings into new
product categories, including the ability to find suitable
licensing partners; our ability to remediate the identified
material weakness in our internal control over financial reporting;
our ability to optimize our systems, processes and functions; our
ability to mitigate system security risk issues, such as cyber or
malware attacks, as well as other major system failures; our
ability to comply with privacy-related obligations; our ability to
comply with domestic and international laws, regulations and
orders; changes in laws and regulations; our ability to ensure the
proper operation of the distribution facilities by third-party
logistics providers; 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 remain
competitive in the areas of merchandise quality, price, breadth of
selection and customer service; our ability to keep a strong brand
image; our ability to attract and retain key personnel; our ability
to protect our trademarks in the U.S. and internationally; 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 current and
future licensing arrangements; the extent of our foreign sourcing;
fluctuations in the price, availability and quality of raw
materials; commodity, raw material and other cost increases; our
reliance on independent manufacturers; seasonal and quarterly
variations in our revenue and income; further impairment of our
goodwill and indefinite-lived intangible assets; competition; other
tax matters; and other factors as set forth from time to time in
our Securities and Exchange Commission filings, including those
described under “Item 1A—Risk Factors” in our Annual Report on Form
10-K and Quarterly Reports on Form 10-Q. 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, except as required by law.
Vince Holding Corp. and Subsidiaries
Exhibit (1)
Condensed Consolidated Statements of
Operations
(Unaudited, amounts in thousands except
percentages, share and per share data)
Three Months Ended
Nine Months Ended
October 31,
November 2,
October 31,
November 2,
2020
2019*
2020
2019*
Net sales
$
69,022
$
104,539
$
145,062
$
270,779
Cost of products sold
37,368
53,542
84,068
138,536
Gross profit
31,654
50,997
60,994
132,243
as a % of net sales
45.9
%
48.8
%
42.0
%
48.8
%
Impairment of goodwill and intangible
assets
—
—
13,848
19,491
Impairment of long-lived assets
—
—
13,026
641
Selling, general and administrative
expenses
25,390
43,447
91,282
129,200
as a % of net sales
36.8
%
41.6
%
62.9
%
47.7
%
Income (loss) from operations
6,264
7,550
(57,162
)
(17,089
)
as a % of net sales
9.1
%
7.2
%
(39.4
)%
(6.3
)%
Interest expense, net
1,259
1,326
3,306
3,906
Other (income) expense, net
(1
)
7
(2,304
)
126
Earnings (loss) before income taxes
5,006
6,217
(58,164
)
(21,121
)
Provision for income taxes
43
216
113
167
Net earnings (loss)
$
4,963
$
6,001
$
(58,277
)
$
(21,288
)
Earnings (loss) per share:
Basic earnings (loss) per share
$
0.42
$
0.51
$
(4.96
)
$
(1.83
)
Diluted earnings (loss) per share
$
0.42
$
0.50
$
(4.96
)
$
(1.83
)
Weighted average shares
outstanding:
Basic
11,796,860
11,679,380
11,758,327
11,660,710
Diluted
11,807,498
11,967,757
11,758,327
11,660,710
* November 2, 2019 amounts reflect the retrospective combination
of the entities.
Vince Holding Corp. and Subsidiaries
Exhibit (2)
Condensed Consolidated Balance
Sheets
(Unaudited, amounts in
thousands)
October 31,
February 1,
November 2,
2020
2020
2019*
ASSETS
Current assets:
Cash and cash equivalents
$
704
$
466
$
838
Trade receivables, net
32,862
40,660
38,825
Inventories, net
88,552
66,393
71,611
Prepaid expenses and other current
assets
4,407
6,725
10,845
Total current assets
126,525
114,244
122,119
Property and equipment, net
18,228
25,274
26,118
Operating lease right-of-use assets
96,187
94,632
93,642
Intangible assets, net
76,655
81,533
81,697
Goodwill
31,973
41,435
41,435
Deferred income taxes and other assets
4,886
5,184
4,195
Total assets
$
354,454
$
362,302
$
369,206
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable
$
43,497
$
43,075
$
35,083
Accrued salaries and employee benefits
7,200
9,620
7,449
Other accrued expenses
14,794
14,194
14,256
Short-term lease liabilities
20,386
20,638
20,275
Short-term borrowings
—
—
19,099
Current portion of long-term debt
—
2,750
2,750
Total current liabilities
85,877
90,277
98,912
Long-term debt
92,823
48,680
43,469
Long-term lease liabilities
101,744
90,211
89,825
Other liabilities
864
2,354
58,444
Stockholders' equity
73,146
130,780
78,556
Total liabilities and stockholders'
equity
$
354,454
$
362,302
$
369,206
* November 2, 2019 amounts reflect the retrospective combination
of the entities.
Vince Holding Corp. and Subsidiaries
Exhibit (3)
Reconciliation of GAAP to Non-GAAP
measures
(Unaudited, amounts in
thousands)
For the three months ended
October 31, 2020
As Reported (GAAP)
Long-lived Assets Impairment
Charge
Goodwill and Intangibles
Impairment Charge
TRA Adjustment
Cost Associated with
Acquisition
As Adjusted (Non-GAAP)
Earnings from operations
$
6,264
$
—
$
—
$
—
$
—
$
6,264
Interest expense, net
1,259
—
—
—
—
1,259
Other (income) expense, net
(1
)
—
—
—
—
(1
)
Earnings before income taxes
5,006
—
—
—
—
5,006
Provision for income taxes
43
—
—
—
—
43
Net earnings
$
4,963
$
—
$
—
$
—
$
—
$
4,963
Earnings per share
$
0.42
$
—
$
—
$
—
$
—
$
0.42
(1)
For the three months ended
November 2, 2019*
As Reported (GAAP)
Long-lived Assets Impairment
Charge
Goodwill and Intangibles
Impairment Charge
TRA Adjustment
Cost Associated with
Acquisition
As Adjusted (Non-GAAP)
Earnings from operations
$
7,550
$
—
$
—
$
—
$
(718
)
$
8,268
Interest expense, net
1,326
—
—
—
—
1,326
Other (income) expense, net
7
—
—
—
—
7
Earnings before income taxes
6,217
—
—
—
(718
)
6,935
Provision for income taxes
216
—
—
—
—
216
Net earnings
$
6,001
$
—
$
—
$
—
$
(718
)
$
6,719
Earnings per share
$
0.50
$
—
$
—
$
—
$
(0.06
)
$
0.56
(2)
(1) Based on weighted-average shares outstanding of 11,807,498
for the three months ended October 31, 2020
(2) Based on weighted-average shares outstanding of 11,967,757
for the three months ended November 2, 2019.
* November 2, 2019 amounts reflect the retrospective combination
of the entities.
For the nine months ended
October 31, 2020
As Reported (GAAP)
Long-lived Assets Impairment
Charge
Goodwill and Intangibles
Impairment Charge
TRA Adjustment
Cost Associated with
Acquisition
As Adjusted (Non-GAAP)
Loss from operations
$
(57,162
)
$
(13,026
)
$
(13,848
)
$
—
$
—
$
(30,288
)
Interest expense, net
3,306
—
—
—
—
3,306
Other (income) expense, net
(2,304
)
—
—
(2,320
)
—
16
(Loss) income before income taxes
(58,164
)
(13,026
)
(13,848
)
2,320
—
(33,610
)
Provision for income taxes
113
—
—
—
—
113
Net (loss) earnings
$
(58,277
)
$
(13,026
)
$
(13,848
)
$
2,320
$
—
$
(33,723
)
(Loss) earnings per share
$
(4.96
)
$
(1.11
)
$
(1.18
)
$
0.20
$
—
$
(2.87
)
(3)
For the nine months ended
November 2, 2019*
As Reported (GAAP)
Long-lived Assets Impairment
Charge
Goodwill and Intangibles
Impairment Charge
TRA Adjustment
Cost Associated with
Acquisition
As Adjusted (Non-GAAP)
Loss from operations
$
(17,089
)
$
(641
)
$
(19,491
)
$
—
$
(718
)
$
3,761
Interest expense, net
3,906
—
—
—
—
3,906
Other (income) expense, net
126
—
—
—
—
126
Loss before income taxes
(21,121
)
(641
)
(19,491
)
—
(718
)
(271
)
Provision for income taxes
167
—
—
—
—
167
Net loss
$
(21,288
)
$
(641
)
$
(19,491
)
$
—
$
(718
)
$
(438
)
Loss per share
$
(1.83
)
$
(0.05
)
$
(1.67
)
$
—
$
(0.06
)
$
(0.04
)
(4)
(3) Based on weighted-average shares outstanding of 11,758,327
for the six months ended October 31, 2020, which excludes the
effect of dilutive equity securities.
(4) Based on weighted-average shares outstanding of 11,660,710
for the six months ended November 2, 2019, which excludes the
effect of dilutive equity securities.
* November 2, 2019 amounts reflect the retrospective combination
of the entities.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201221005617/en/
Investor Relations: ICR, Inc. Jean Fontana, 646-277-1214
Jean.fontana@icrinc.com
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