Vince Holding Corp. (NYSE: VNCE) ("VNCE" or the "Company"), a
global contemporary retailer, today reported its financial results
for the second quarter 2023 ended July 29, 2023.
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 second quarter ended July 29, 2023:
- Net sales were $69.4 million compared to $89.2 million in the
same period last year reflecting a 14.3% decrease in Vince brand
sales and a 98.7% decrease in Rebecca Taylor and Parker segment
sales, combined, driven by the previously announced wind down of
the Rebecca Taylor business.
- Income from operations was $32.9 million compared to loss from
operations of $5.2 million in the same period last year. Adjusted
income from operations* in the second quarter of fiscal 2023, which
excludes the $32.0 million Vince IP Sale Gain as well as $2.0
million of Transaction Expenses (each as defined below) was $2.8
million.
- Net income was $29.5 million or $2.36 per diluted share
compared to a net loss of $15.0 million or $(1.23) per share in the
same period last year. Excluding the Vince IP Sale Gain and the
Transaction Expenses, adjusted net loss* for the second quarter of
fiscal 2023 was $0.5 million or $(0.04) per share.
Jack Schwefel, Chief Executive Officer of VNCE said, "The second
quarter marked an important chapter for Vince. We successfully
closed the previously announced transaction with Authentic Brands
Group and swiftly took actions to strengthen our balance sheet
while enhancing our focus on our strategic growth initiatives and
maintaining a disciplined approach to inventory management and
expenses. Our second quarter sales performance was impacted by the
ongoing macro-related headwinds as well as our strategic decision
to pull back on the off-price wholesale business as our inventory
balance has normalized compared to last year. We are encouraged by
the improvement in trend we delivered in our direct-to-consumer
channel during the period and have maintained this momentum as we
have entered the start of the third quarter. We continue to believe
we are well positioned to execute our initiatives and deliver on
our objectives."
For the second quarter ended July 29, 2023:
- Total Company net sales decreased 22.1% to $69.4 million
compared to $89.2 million in the second quarter of fiscal 2022. The
year-over-year decline was primarily driven by the previously
announced wind down of the Rebecca Taylor business, and to a lesser
extent a decline in Vince brand sales.
- Gross profit was $32.3 million, or 46.6% of net sales, compared
to gross profit of $36.4 million, or 40.8% of net sales, in the
second quarter of fiscal 2022. The increase in gross margin rate
was driven by lower freight costs, favorable year-over-year
adjustments to inventory reserves, as well as approximately 120
basis points related to the wind down of the Rebecca Taylor
business, which historically operated at a lower overall gross
margin, and partially offset by approximately 320 basis points of
royalty expenses associated with the Licensing Agreement (as
defined below).
- Selling, general, and administrative expenses were $31.5
million, or 45.4% of sales, compared to $39.0 million, or 43.7% of
sales, in the second quarter of fiscal 2022. The decrease in
SG&A dollars was primarily driven by the wind down of the
Rebecca Taylor business resulting in a $6.6 million net expense
favorability in the second quarter of fiscal 2023. In addition, the
Company also had lower consulting and other third-party costs as
well as lower expenses related to compensation and benefits and
product development. These lower costs were partially offset by
$2.0 million in transaction related expenses (the "Transaction
Expenses") relating to the Authentic Transaction (as defined
below).
- Income from operations was $32.9 million compared to a loss
from operations of $5.2 million in the same period last year.
Adjusted income from operations* in the second quarter of fiscal
2023, which excludes the gain on sale of intangible assets relating
to the Vince IP Sale (the "Vince IP Sale Gain") as well as
Transaction Expenses was $2.8 million.
- Income tax benefit was $0.6 million as a result of applying the
Company's estimated effective tax rate for the fiscal year to the
three months Income (loss) before income taxes and equity in net
income of equity method investment excluding discrete items.
Discrete items for the second quarter included the $32.0 million
Vince IP Sale Gain and $2.0 million in Transaction Expenses. There
was no tax expense associated with these discrete items as the
Company has substantial net operating losses, both at the federal
and state levels, which are currently held in reserve with a
valuation allowance. The tax benefit in the second quarter of
fiscal 2023 compares to an income tax expense of $7.9 million in
the same period last year.
- Net income was $29.5 million or $2.36 per diluted share
compared to a net loss of $15.0 million or $(1.23) per share in the
same period last year. Excluding the Vince IP Sale Gain and the
Transaction Expenses, adjusted net loss* for the second quarter of
fiscal 2023 was $0.5 million or $(0.04) per share.
- The Company ended the quarter with 66 company-operated Vince
stores, a net decrease of 1 store since the second quarter of
fiscal 2022.
Vince Second Quarter Highlights
- Net sales decreased 14.3% to $69.3 million as compared to the
second quarter of fiscal 2022.
- Wholesale segment sales decreased 22.0% to $36.4 million
compared to the second quarter of fiscal 2022.
- Direct-to-consumer segment sales decreased 3.7% to $32.9
million compared to the second quarter of fiscal 2022.
- Income from operations excluding unallocated corporate expenses
was $12.5 million compared to income from operations of $12.2
million in the same period last year.
Rebecca Taylor and Parker Segment Second Quarter
Highlights
- On September 12, 2022, the Company announced the strategic
decision to wind down its Rebecca Taylor business to focus its
resources on the Vince brand. The wind down of the Rebecca Taylor
business is now substantially completed.
- Net sales decreased 98.7% to $0.1 million as compared to the
second quarter of fiscal 2022.
- Income from operations was $1.3 million compared to a loss from
operations of $5.5 million in the same period last year. Income
from operations in the second quarter of fiscal 2023 included a net
benefit of $1.1 million primarily associated with the release of
Rebecca Taylor operating lease liabilities as a result of lease
terminations.
Net Sales and Operating Results by Segment:
Three Months Ended
July 29,
July 30,
(in thousands)
2023
2022
Net Sales:
Vince Wholesale
$
36,407
$
46,692
Vince Direct-to-consumer
32,930
34,200
Rebecca Taylor and Parker
110
8,302
Total net sales
$
69,447
$
89,194
Income (loss) from operations:
Vince Wholesale
$
11,360
$
12,797
Vince Direct-to-consumer
1,098
(617
)
Rebecca Taylor and Parker
1,257
(5,485
)
Subtotal
13,715
6,695
Unallocated corporate (1)
19,135
(11,899
)
Total income (loss) from operations
$
32,850
$
(5,204
)
(1) 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.
In addition, unallocated corporate expenses includes the $32.0
million from the Vince IP Sale Gain as well as $2.0 million in
Transaction Expenses.
Balance Sheet
On June 26, 2023, the Company announced that it entered into a
new five-year credit agreement for an $85 million senior secured
asset-based revolving credit facility (“ABL Credit Facility”)
expected to mature in June 2028. The new ABL Credit Facility was
entered into with Bank of America, N.A acting as administrative
agent and replaces the Company's previous senior secured
asset-based revolving credit facility set to mature in June 2024,
which was repaid in full and terminated.
At the end of the second quarter of fiscal 2023, total
borrowings under the Company's debt agreements totaled $67.5
million and the Company had $34.7 million of excess availability
under its revolving credit facility.
Net inventory at the end of the second quarter of fiscal 2023
was $85.1 million compared to $129.5 million at the end of the
second quarter of fiscal 2022. The year-over-year decrease in
inventory was driven by the wind down of the Rebecca Taylor
business as well as a decline in Vince as the Company sold through
higher levels of inventory from the prior year and rebalanced its
inventory purchases for the current season.
During the quarter ended July 29, 2023, the Company did not
issue shares of common stock under the ATM program. The Company
continues to have shares available under the program to exercise
with proceeds to be used as sources, along with cash from
operations, to fund future growth.
Strategic Partnership with Authentic
Brands Group
On May 25, 2023, the Company announced that it completed the
previously announced transaction with Authentic Brands Group
("Authentic"). As part of the transaction ("Authentic
Transaction"), VNCE and Authentic entered into a strategic
arrangement whereby VNCE contributed its intellectual property to a
newly formed Authentic subsidiary ("ABG Vince") for total
consideration to VNCE of $76.5 million in cash from Authentic and
25% membership interest in ABG Vince. Authentic owns the majority
stake of 75% membership interest in ABG Vince.
With the proceeds from this transaction, VNCE repaid in full the
outstanding balance of $27.7 million under its Term Loan Credit
Facility as well as a portion of the outstanding borrowings under
its Revolving Credit Facility.
In connection with the Authentic Transaction, VNCE entered into
an exclusive, long-term license agreement (the "License Agreement")
with Authentic for usage of the contributed intellectual property
for VNCE's existing business in a manner consistent with the
Company's current wholesale, retail and e-commerce operations. The
License Agreement contains an initial ten-year term and eight
ten-year renewal options allowing VNCE to renew the agreement.
*Non-GAAP Financial
Measures
In addition to reporting financial results in accordance with
GAAP, the Company has provided, with respect to the financial
results relating to three and six months ended July 29, 2023,
adjusted income (loss) from operations, adjusted income (loss)
before income taxes and equity in net income of equity method
investment, adjusted (benefit) provision for income taxes, adjusted
income (loss) before equity in net income of equity method
investment, adjusted net income (loss), and adjusted earnings
(loss) per share, which are non-GAAP measures, in order to
eliminate the effect of the Vince IP Sale Gain, Transaction
Expenses, the Parker IP Sale Gain and the Discrete Tax Benefit. 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.
Conference Call
A conference call to discuss the second quarter results will be
held today, September 12, 2023, at 8:30 a.m. ET, hosted by Vince
Holding Corp. Chief Executive Officer, Jack Schwefel, and Interim
Chief Financial Officer, Michael Hand. 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) 470-1428, conference ID 294165. 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 HOLDING CORP.
Vince Holding Corp. is a global retail company that operates the
Vince brand women's and men's ready to wear business. 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. Vince Holding Corp. operates
49 full-price retail stores, 17 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. Please visit www.vince.com for more information.
Forward-Looking Statements: This document, and any statements
incorporated by reference herein contain 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 possible or assumed
future results of operations of the Company 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 the license agreement with ABG Vince; ABG Vince's
expansion of the Vince brand into other categories and territories;
ABG Vince's approval rights and other actions; our ability to
maintain adequate cash flow from operations or availability under
our revolving credit facility to meet our liquidity needs; our
ability to realize the benefits of our strategic initiatives;
general economic conditions; further impairment of our goodwill;
the execution and management of our direct-to-consumer business
growth plans; our ability to make lease payments when due; our
ability to maintain our larger wholesale partners; our ability to
remediate the identified material weakness in our internal control
over financial reporting; our ability to comply with domestic and
international laws, regulations and orders; 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 attract and retain key personnel; seasonal
and quarterly variations in our revenue and income; our ability to
mitigate system security risk issues, such as cyber or malware
attacks, as well as other major system failures; our ability to
optimize our systems, processes and functions; our ability to
comply with privacy-related obligations; our ability to ensure the
proper operation of the distribution facilities by third-party
logistics providers; fluctuations in the price, availability and
quality of raw materials; commodity, raw material and other cost
increases; the extent of our foreign sourcing; our reliance on
independent manufacturers; 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
Six Months Ended
July 29,
July 30,
July 29,
July 30,
2023
2022
2023
2022
Net sales
$
69,447
$
89,194
$
133,503
$
167,570
Cost of products sold
37,099
52,822
71,563
95,563
Gross profit
32,348
36,372
61,940
72,007
as a % of net sales
46.6
%
40.8
%
46.4
%
43.0
%
Impairment of intangible assets
—
1,700
—
1,700
Impairment of long-lived assets
—
866
—
866
Gain on sale of intangible assets
(32,043
)
—
(32,808
)
—
Selling, general and administrative
expenses
31,541
39,010
64,274
79,930
as a % of net sales
45.4
%
43.7
%
48.1
%
47.7
%
Income (loss) from operations
32,850
(5,204
)
30,474
(10,489
)
as a % of net sales
47.3
%
(5.8
)%
22.8
%
(6.3
)%
Interest expense, net
4,137
1,882
7,427
3,766
Income (loss) before income taxes and
equity in net income of equity method investment
28,713
(7,086
)
23,047
(14,255
)
(Benefit) provision for income taxes
(592
)
7,903
(5,877
)
7,903
Income (loss) before equity in net income
of equity method investment
29,305
(14,989
)
28,924
(22,158
)
Equity in net income of equity method
investment
207
—
207
—
Net income (loss)
$
29,512
$
(14,989
)
$
29,131
$
(22,158
)
Earnings (loss) per share:
Basic earnings (loss) per share
$
2.37
$
(1.23
)
$
2.35
$
(1.83
)
Diluted earnings (loss) per share
$
2.36
$
(1.23
)
$
2.34
$
(1.83
)
Weighted average shares
outstanding:
Basic
12,428,339
12,220,693
12,385,347
12,125,759
Diluted
12,479,667
12,220,693
12,470,085
12,125,759
Vince Holding Corp. and
Subsidiaries
Exhibit (2)
Condensed Consolidated Balance
Sheets
(Unaudited, amounts in
thousands)
July 29,
January 28,
July 30,
2023
2023
2022
ASSETS
Current assets:
Cash and cash equivalents
$
869
$
1,079
$
1,073
Trade receivables, net
20,859
20,733
27,469
Inventories, net
85,079
90,008
129,472
Prepaid expenses and other current
assets
11,148
3,515
4,179
Total current assets
117,955
115,335
162,193
Property and equipment, net
8,345
10,479
15,590
Operating lease right-of-use assets
75,286
72,616
82,437
Intangible assets, net
—
70,106
73,807
Goodwill
31,973
31,973
31,973
Assets held for sale
—
260
—
Equity method investment
26,232
—
—
Other assets
2,595
2,576
3,218
Total assets
$
262,386
$
303,345
$
369,218
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable
$
39,170
$
49,396
$
80,309
Accrued salaries and employee benefits
2,764
4,301
6,259
Other accrued expenses
9,022
15,020
12,148
Short-term lease liabilities
18,250
20,892
22,860
Current portion of long-term debt
—
3,500
2,625
Total current liabilities
69,206
93,109
124,201
Long-term debt
67,204
108,078
111,992
Long-term lease liabilities
72,901
72,098
83,109
Deferred income tax liability and other
liabilities
2,976
9,803
14,469
Stockholders' equity
50,099
20,257
35,447
Total liabilities and stockholders'
equity
$
262,386
$
303,345
$
369,218
Vince Holding Corp. and
Subsidiaries
Exhibit (3)
Reconciliation of GAAP to Non-GAAP
measures
(Unaudited, amounts in thousands except
share and per share amounts)
For the three months ended
July 29, 2023
As Reported (GAAP)
Gain on Sale of Vince Intangible
Assets
Transaction Related Expenses
Associated with the Authentic Transaction
Gain on Sale of Parker Intangible
Assets
Transaction Related Expenses
Associated with the sale of Parker Intangible Assets
Discrete Tax Benefit Associated
with Classification Change
As Adjusted (Non-GAAP)
Income (loss) from operations
$
32,850
$
32,043
$
(2,041
)
$
—
$
—
$
—
$
2,848
Interest expense, net
4,137
—
—
—
—
—
4,137
Income (loss) before income taxes and
equity in net income of equity method investment
28,713
32,043
(2,041
)
—
—
—
(1,289
)
(Benefit) provision for income taxes
(592
)
—
—
—
—
—
(592
)
Income (loss) before equity in net income
of equity method investment
29,305
32,043
(2,041
)
—
—
—
(697
)
Equity in net income of equity method
investment
207
—
—
—
—
—
207
Net income (loss)
$
29,512
$
32,043
$
(2,041
)
$
—
$
—
$
—
$
(490
)
Earnings (loss) per share (1)
$
2.36
$
2.57
$
(0.16
)
$
—
$
—
$
—
$
(0.04
)
For the six months ended July
29, 2023
As Reported (GAAP)
Gain on Sale of Vince Intangible
Assets
Transaction Related Expenses
Associated with the Authentic Transaction
Gain on Sale of Parker Intangible
Assets
Transaction Related Expenses
Associated with the sale of Parker Intangible Assets
Discrete Tax Benefit Associated
with Classification Change
As Adjusted (Non-GAAP)
Income (loss) from operations
$
30,474
$
32,043
$
(4,782
)
$
765
$
(150
)
$
—
$
2,598
Interest expense, net
7,427
—
—
—
—
—
7,427
Income (loss) before income taxes and
equity in net income of equity method investment
23,047
32,043
(4,782
)
765
(150
)
—
(4,829
)
(Benefit) provision for income taxes
(5,877
)
—
—
—
—
(6,127
)
250
Income (loss) before equity in net income
of equity method investment
28,924
32,043
(4,782
)
765
(150
)
6,127
(5,079
)
Equity in net income of equity method
investment
207
—
—
—
—
—
207
Net income (loss)
$
29,131
$
32,043
$
(4,782
)
$
765
$
(150
)
$
6,127
$
(4,872
)
Earnings (loss) per share (2)
$
2.34
$
2.57
$
(0.38
)
$
0.06
$
(0.01
)
$
0.49
$
(0.39
)
(1) As reported is based on diluted
weighted-average shares outstanding of 12,479,667 and as adjusted
is based on basic weighted average shares outstanding of 12,428,339
for the three months ended July 29, 2023.
(2) As reported is based on diluted
weighted-average shares outstanding of 12,470,085 and as adjusted
is based on basic weighted average shares outstanding of 12,385,347
for the six months ended July 29, 2023.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230912271210/en/
Investor Relations: ICR, Inc. Caitlin Churchill,
646-277-1274 Caitlin.Churchill@icrinc.com
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