Vince Holding Corp. (NYSE:VNCE), a leading global luxury apparel
and accessories brand (“Vince” or the “Company”), today reported
unaudited results for the fourth quarter and fiscal year 2017 ended
February 3, 2018.
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.
For the 14 weeks ended February 3, 2018:
- Sales increased 16.9% including $1.6
million from the 14th week
- Direct-to-Consumer comparable sales
grew 16.1% on a 13-week basis
- Operating loss was $6.6 million
compared to $62.9 million. Adjusted operating loss was $1.5 million
compared to an adjusted operating loss of $7.8 million in the same
period last year
- Diluted earnings per share was $6.41
compared to a loss per share of $32.81. Adjusted net loss per share
was $0.20 compared to a loss of $1.55 per share in the same period
last year
Brendan Hoffman, Chief Executive Officer, commented, “We were
pleased with our fourth quarter results, which reflect the
significant progress we’ve made toward regaining market share. Our
strong comparable sales results illustrate that our product is
resonating with consumers and that the demand for the Vince brand
remains strong. Our largest comp increase came from locations in
proximity to department stores that we have exited, demonstrating
that our efforts to capture these customers in our own stores are
working. As we place greater emphasis on our Direct-to-Consumer
growth strategy, we plan to opportunistically open stores in key
street and mall locations that are appropriate for the Vince brand.
In our wholesale business, our partnerships with Nordstrom and
Neiman Marcus are progressing very well and we are beginning to see
our collaborative efforts yield benefits.”
Mr. Hoffman continued, “We are pleased with the continued
momentum in our direct to consumer channel and sell thru at the
department store thus far in the first quarter. There is great
enthusiasm surrounding the Vince product, which is highly
encouraging as we look ahead. We will continue to execute our
strategic initiatives and believe that we are on the right track to
deliver sustainable profitable growth over the long term.”
For the fourth quarter ended February 3, 2018:
- Net sales increased 16.9% to $74.6
million, including $1.6 million in sales from the 14th week,
compared to $63.9 million in the fourth quarter of fiscal 2016.
Wholesale segment sales increased 11.7% to $38.5 million as
compared to the same period last year. The 14th week had an
immaterial impact on the wholesale segment. Direct-to-consumer
segment sales increased 22.9% to $36.2 million compared to the
fourth quarter of fiscal 2016, including $1.6 million in sales from
the 14th week. Comparable sales increased 16.1% on a 13-week basis,
including e-commerce sales, primarily due to an increase in average
unit retail.
- Gross profit was $34.0 million, or
45.5% of net sales, compared to gross profit of $29.2 million, or
45.7% of net sales, in the fourth quarter of fiscal 2016. The
decrease in gross margin rate was largely due to a mix shift in the
wholesale channel and an unfavorable adjustment to inventory
reserves, partially offset by lower supply chain costs and a
favorable adjustment to reserves related to the cost of executing
the Company’s wholesale distribution strategy.
- Selling, general, and administrative
expenses were $40.5 million, or 54.3% of sales, compared to $39.1
million, or 61.1% of sales, in the fourth quarter of fiscal 2016.
This includes non-cash asset impairment charges related to property
and equipment of certain retail stores of $5.1 million in fiscal
2017 and $2.1 million in fiscal 2016. The decline in SG&A
dollars, excluding the aforementioned non-cash asset impairment
charges, was primarily the result of the non-recurrence of
investments related to the transition of IT systems made last year,
as well as lower product development costs and savings related to
ending the Company’s consulting arrangement with its founders. This
was partially offset by increased incentive compensation costs and
investments related to the remediation and optimization of IT
systems.
- Operating loss was $6.6 million, which
included $5.1 million related to the aforementioned non-cash asset
impairment charges. Operating loss was $62.9 million for the fourth
quarter of fiscal 2016, which included impairment charges of $22.3
million related to goodwill associated with the Company’s
direct-to-consumer business, $30.8 related to the tradename
intangible asset, and $2.1 million as a result of the
aforementioned non-cash charge for retail stores. Excluding the
aforementioned charges, adjusted operating loss was $1.5 million in
the fourth quarter of fiscal 2017 as compared to adjusted operating
loss of $7.8 million in the fourth quarter of fiscal 2016.
- Other income reflects a Tax Receivable
Agreement (“TRA”) adjustment of $82.0 million related to lower
federal tax rates due to the new Tax Cuts and Jobs Act, as well as
for the Company’s updated five-year projections.
- Net income was $74.5 million, or $6.41
per diluted share, compared to a net loss of $162.1 million, or
$32.81 per share, for the fourth quarter of fiscal 2016. The net
income for the fourth quarter of fiscal 2017 includes the
aforementioned TRA adjustment, a negligible benefit from income
taxes due to the offsetting impact of the tax valuation allowance,
and the aforementioned non-cash asset impairment charge. The net
loss for the fourth quarter of fiscal 2016 included a negative
impact related to the aforementioned non-cash asset impairment
charges as well as the valuation allowance recorded against the
Company’s deferred tax assets. Excluding the aforementioned
charges, adjusted net loss was $2.4 million, or $0.20 per share, as
compared to adjusted net loss of $7.7 million, or $1.55 per share,
in the same period last year. Please refer to Exhibit 3 for a
reconciliation.
- The Company ended the quarter with 55
company-operated stores, an increase of one store since the fourth
quarter of fiscal 2016.
For the fiscal year ended February 3, 2018:
- Net sales increased 1.6% to $272.6
million from $268.2 million during fiscal year 2016, including $1.6
million from the 53rd week. Wholesale segment net sales decreased
2.3% to $166.1 million and direct-to-consumer segment net sales
increased 8.5% to $106.5 million compared to fiscal year 2016,
including $1.6 million from the 53rd week. Comparable store
sales on a 52-week basis increased 4.5% compared to the prior year
period, including e-commerce sales.
- Net income was $58.6 million, or $7.70
per diluted share, which includes the aforementioned TRA
adjustment, a negligible benefit from income taxes due to the
offsetting impact of the tax valuation allowance, and the
aforementioned non-cash asset impairment charge. This compares to
net loss of $162.7 million, or $35.04 per share, in fiscal 2016,
which includes a negative impact related to the non-cash asset
impairment charges as well as the valuation allowance recorded
against the Company’s deferred tax assets. Excluding the
aforementioned charges, adjusted net loss was $18.3 million, or
$2.41 per share, as compared to adjusted net loss of $8.2 million,
or $1.76 per share, in the same period last year. Please refer to
Exhibit 3 for a reconciliation.
Balance Sheet
The Company ended the fourth quarter of fiscal 2017 with $5.4
million in cash and cash equivalents and $49.9 million of
borrowings under its debt agreements. The $0.3 million decrease in
borrowings under its debt agreements over the prior year period is
due to $12.0 million of payments to the term loan facility, offset
by net higher borrowings under the revolving credit facility.
Net inventory at the end of the fourth quarter of fiscal 2017
was $48.9 million compared to $38.5 million at the end of the
fourth quarter of fiscal 2016.
Capital expenditures for the fourth quarter of fiscal 2017
totaled $0.4 million.
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 fourth quarter and the fifty-three week period of
fiscal 2017, 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 non-cash asset impairment charges, the TRA adjustment,
and the offsetting impact of the valuation allowance recorded
against the Company’s deferred tax assets. In addition, with
respect to the fourth quarter and fifty-two week period of fiscal
2016, the Company has provided adjusted operating loss, adjusted
loss before income taxes, adjusted income taxes, adjusted net loss
and adjusted loss per share, which are non-GAAP financial measures,
in order to eliminate the effect on operating results of non-cash
asset impairment charges and the valuation allowance recorded
against the Company’s deferred tax assets. 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 inherent volatility
and 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 Exhibits 3 to this press release.
2017 Fourth Quarter Earnings Conference
Call
A conference call to discuss the fourth quarter results will be
held today, April 12, 2018, at 4:30 p.m. ET, hosted by Vince
Holding Corp. Chief Executive Officer, Brendan Hoffman, and
Executive Vice President 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) 235-5655, conference ID 6181319. 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
Established in 2002, Vince is a leading global luxury apparel
and accessories brand best known for creating elevated yet
understated pieces for every day. The collections are inspired by
the brand’s California origins and embody a feeling of warm and
effortless style. Vince designs uncomplicated yet refined
pieces that approach dressing with a sense of ease. Known for
its range of luxury products, Vince offers women’s and men’s
ready-to-wear, shoes, handbags, and home for a global lifestyle. As
of February 3, 2018, Vince products were sold in prestige
distribution worldwide, including approximately 2,000 distribution
locations across more than 40 countries. With its design studio in
Los Angeles and corporate headquarters in New York, the Company
operated 41 full-price retail stores, 14 outlet stores and its
e-commerce site, vince.com. Please visit www.vince.com for more
information. This press release is also available on the Vince
Holding Corp. website (http://investors.vince.com/).
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 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 continue having the
liquidity necessary to service our debt, meet contractual payment
obligations, and fund our operations; our ability to comply with
the covenants under our credit facilities; our ability to
successfully operate the newly implemented systems, processes and
functions recently transitioned from Kellwood Company; our ability
to remediate the identified material weaknesses in our internal
control over financial reporting; further impairment of our
goodwill and indefinite-lived intangible assets; our ability to
realize the benefits of our recently announced strategic
initiatives; the execution and management of our retail store
growth plans; our ability to make lease payments when due; our
ability to ensure the proper operation of the distribution facility
by a third-party logistics provider; 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 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; 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;
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; our
ability to maintain compliance with the continued listing standards
of the New York Stock Exchange; effect of the U.S. federal income
tax law reform; other tax matters; and other factors as set forth
from time to time in our Securities and Exchange Commission
filings, including those described in this Annual Report on Form
10-K under “Item 1A—Risk Factors.” 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
Fiscal Year February 3, January
28, February 3, January 28, 2018
2017 2018 2017 Net sales $ 74,648 $ 63,879 $
272,582 $ 268,199 Cost of products sold 40,673 34,663
150,793 145,380 Gross profit 33,975 29,216 121,789
122,819 as a % of net sales 45.5 % 45.7 % 44.7 % 45.8 % Impairment
of indefinite-lived intangible asset — 53,061 — 53,061 Selling,
general and administrative expenses 40,548 39,087
140,106 134,430 as a % of net sales 54.3 % 61.1 %
51.4 % 50.1 % Income (loss) from operations (6,573 ) (62,932 )
(18,317 ) (64,672 ) as a % of net sales (8.8 )% (98.5 )% (6.7 )%
(24.1 )% Interest expense, net 1,527 1,023 5,540 3,932 Other
expense (income), net (81,998 ) (50 ) (81,882
) 329 Income (loss) before income taxes 73,898 (63,905 )
58,025 (68,933 ) (Benefit) provision for income taxes (614 )
98,243 (572 ) 93,726 Net income (loss) $
74,512 $ (162,148 ) $ 58,597 $ (162,659 )
Earnings (loss) per
share: Basic earnings (loss) per share $ 6.41 $ (32.81 ) $ 7.70
$ (35.04 ) Diluted earnings (loss) per share $ 6.41 $ (32.81 ) $
7.70 $ (35.04 )
Weighted average shares outstanding: Basic
11,616,144 4,942,314 7,605,822 4,642,053 Diluted 11,617,464
4,942,314 7,608,427 4,642,053
Vince Holding Corp. and
Subsidiaries Exhibit (2) Condensed
Consolidated Balance Sheets (Unaudited, amounts in
thousands) February 3, January 28,
2018 2017 ASSETS Current assets: Cash and cash
equivalents $ 5,372 $ 20,978 Trade receivables, net 20,760 10,336
Inventories, net 48,921 38,529 Prepaid expenses and other current
assets 6,521 4,768 Total current assets 81,574 74,611
Property and equipment, net 31,608 42,945 Intangible assets, net
77,099 77,698 Goodwill 41,435 41,435 Deferred income taxes and
other assets 2,818 2,791 Total assets $ 234,534 $
239,480
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT) Current liabilities: Accounts payable $ 22,556 $
37,022 Accrued salaries and employee benefits 6,715 3,427 Other
accrued expenses 7,906 9,992 Current portion of long-term debt
8,000 — Total current liabilities 45,177 50,441
Long-term debt 40,682 48,298 Deferred rent 15,633 16,892 Other
liabilities 58,273 137,830 Stockholders' equity (deficit)
74,769 (13,981 ) Total liabilities and stockholders' equity
(deficit) $ 234,534 $ 239,480
Vince Holding Corp. and
Subsidiaries Exhibit (3) Reconciliation of
GAAP to Non-GAAP measures (Unaudited, amounts in thousands
except per share data) For the three months
ended February 3, 2018
As
Retail Store
As
Reported
Impairment
TRA
Valuation
Adjusted
GAAP)
Charge
Adjustment
Allowance
(Non-GAAP)
Loss from operations $ (6,573 ) $ (5,111 ) $ — $ —
$
(1,462
)
Income (loss) before income taxes 73,898 (5,111 ) 82,002 —
(2,993
)
(Benefit) provision for income taxes (614 ) (1,887 )
(1)
— 1,887
(614
)
Net income (loss) $ 74,512 $ (3,224 ) $ 82,002
$
(1,887
)
$
(2,379
)
Earnings (loss) per share $ 6.41 $ (0.28 ) $ 7.06
$
(0.16
)
$
(0.20
)
(2)
For the three months ended January 28, 2017
Goodwill &
As
Retail Store
Intangible
As
Reported
Impairment
Asset
Valuation
Adjusted
(GAAP)
Charge
Impairment
Allowance
(Non-GAAP)
Loss from operations $ (62,932 ) $ (2,082 )
$
(53,061
)
(3)
$ —
$
(7,789
)
Loss before income taxes (63,905 ) (2,082 )
(53,061
)
—
(8,762
)
(Benefit) provision for income taxes 98,243 (849 )
(4)
(21,638
)
(4)
121,836
(1,106
)
Net loss $ (162,148 ) $ (1,233 )
$
(31,423
)
$
(121,836
)
$
(7,656
)
Loss per share $ (32.81 ) $ (0.25 )
$
(6.36
)
$
(24.65
)
$
(1.55
)
(5)
For the twelve months ended February 3, 2018
As
Retail Store
As
Reported
Impairment
TRA
Valuation
Adjusted
(GAAP)
Charge
Adjustment
Allowance
(Non-GAAP)
Loss from operations
$
(18,317
)
$
(5,111
)
$ — $ —
$
(13,206
)
Income (loss) before income taxes 58,025
(5,111
)
82,002 — (18,866 ) (Benefit) provision for income taxes
(572
)
(2,056
)
(1)
— 2,056 (572 ) Net income (loss) $ 58,597
$
(3,055
)
$ 82,002 $ (2,056 ) $ (18,294 ) Earnings (loss) per share $ 7.70
$
(0.40
)
$ 10.78 $ (0.27 ) $ (2.41 )
(2)
For the twelve months ended January 28, 2017
Goodwill &
As
Retail Store
Intangible
As
Reported
Impairment
Asset
Valuation
Adjusted
(GAAP)
Charge
Impairment
Allowance
(Non-GAAP)
Loss from operations
$
(64,672
)
$
(2,082
)
$ (53,061 )
(3)
$ — $ (9,529 ) Loss before income taxes
(68,933
)
(2,082
)
(53,061 ) — (13,790 ) (Benefit) provision for income taxes
93,726
(849
)
(4)
(21,638 )
(4)
121,836 (5,623 ) Net loss
$
(162,659
)
$
(1,233
)
$ (31,423 ) $ (121,836 ) $ (8,167 ) Loss per share
$
(35.04
)
$
(0.27
)
$ (6.77 ) $ (26.25 ) $ (1.76 )
(5)
(1)
Based on a normalized tax rate of 36.92% and 40.23% for the
three and twelve months ended February 3, 2018 respectively,
derived by reference to statutory rates in the jurisdictions in
which the Company operates, without giving effect to the Company’s
valuation allowance.
(2)
Based on a weighted-average shares outstanding of 11,616,144 and
7,605,822 for the three and twelve months ended February 3, 2018
respectively, which excludes the effect of dilutive equity
securities.
(3)
Includes $22,311 and $30,750 of impairment charges associated with
goodwill and our tradename intangible, respectively.
(4)
Based on a normalized tax rate of 40.8% for the three and twelve
months ended January 28, 2017, derived by reference to statutory
rates in the jurisdictions in which the Company operates, without
giving effect to the Company’s valuation allowance.
(5)
Based on a weighted-average shares outstanding of 4,942,314 and
4,642,053 for the three and twelve months ended January 28, 2017
respectively.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180412006204/en/
Investor Relations:ICR, Inc.Jean Fontana,
646-277-1200Jean.fontana@icrinc.com
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