Market Overview

Vince Holding Corp. Reports Third Quarter 2018 Results

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Vince Holding Corp. (NYSE:VNCE), a leading global luxury apparel and
accessories brand ("Vince" or the "Company"), today reported unaudited
results for the third quarter of fiscal 2018 ended November 3, 2018.

Highlights for the third quarter ended November 3, 2018:

  • Net sales increased 5.6% to $83.5 million
  • Direct-to-Consumer sales increased 17.1%; comparable sales grew 14.1%
  • Gross margin rate increased 250 basis points to 48.9%
  • Operating income increased 68.9% to $9.0 million
  • Net income was $6.8 million or $0.57 per diluted share compared to net
    income $3.5 million or $0.41 per diluted share

Brendan Hoffman, Chief Executive Officer, commented, "Our third quarter
results reflect continued strength across several areas of our business.
Operating income for the quarter increased by $3.7 million and for the
year-to-date period, operating results improved by $13.9 million. For
the third quarter, our retail segment delivered a 14.1% comp with
continued momentum in our eCommerce business while in our wholesale
segment, we saw continued strength in our department store doors with
higher sell-through rates and further market share gains. During the
third quarter, we opened two stores in premier locations and we recently
signed a lease for a store in midtown Manhattan across from Rockefeller
Center. Overall, with another quarter of great results under our belt,
combined with our performance through the Black Friday weekend, we are
raising the low end of our full year guidance and are more optimistic
than ever about our ability to deliver profitable growth over the long
term."

For the third quarter ended November 3, 2018:

  • Net sales increased 5.6% to $83.5 million from $79.1 million in the
    third quarter of fiscal 2017. Wholesale segment sales were flat at
    $53.0 million, as shipment declines related to the exit of certain
    wholesale partners were offset by lower sales allowances than in the
    same prior year period. Direct-to-consumer segment sales increased
    17.1% to $30.5 million compared to the third quarter of fiscal 2017.
    Comparable sales increased 14.1%, including e-commerce sales, due
    primarily to an increase in transactions partially offset by a lower
    average unit retail related to product mix.
  • Gross profit increased 11.3% to $40.8 million, or 48.9% of net sales,
    compared to gross profit of $36.7 million, or 46.4% of net sales, in
    the third quarter of fiscal 2017. The 250 basis point increase in
    gross margin rate in the third quarter of fiscal 2018 was due to a
    decrease in the rate of sales allowances in the wholesale segment,
    non-recurring costs incurred in the third quarter of fiscal 2017
    related to the exit of certain wholesale partners and lower product
    and supply chain costs. This was partially offset by an unfavorable
    impact from year-over-year adjustments to inventory reserves.
  • Selling, general, and administrative expenses were $31.9 million, or
    38.2% of sales compared to $31.4 million, or 39.7% of sales, in the
    third quarter of fiscal 2017.
  • Operating income increased by 68.9% to $9.0 million, or 10.7% of net
    sales compared to operating income of $5.3 million, or 6.7% of net
    sales for the third quarter of fiscal 2017.
  • Net income was $6.8 million, or $0.57 per diluted share compared to
    $3.5 million, or $0.41 per diluted share for the third quarter of
    fiscal 2017.
  • The Company ended the quarter with 59 company-operated stores
    representing a net increase of four stores since the third quarter of
    last year.

Balance Sheet

The Company ended the third quarter of fiscal 2018 with $1.0 million in
cash and cash equivalents and $63.0 million of borrowings under its debt
agreements. On August 21, 2018, the Company refinanced the 2013
Revolving Credit Facility and the 2013 Term Loan Facility by entering
into the 2018 Revolving Credit Facility and 2018 Term Loan Facility. All
outstanding amounts under the previous credit facilities totaling $69.8
million including interest were repaid in full.

The Company decreased overall borrowings under its debt agreements since
the same period last year by $5.1 million, primarily due to $8.5 million
of net repayments to the term loan facilities, partially offset by an
increase in net borrowings under the revolving credit facilities to fund
working capital needs.

Net inventory at the end of the third quarter of fiscal 2018 was $61.5
million compared to $51.4 million at the end of the third quarter of
fiscal 2017. The increase in inventory was primarily due to the planned
product returns in the first half of the fiscal year from exited
wholesale partners and the growth of the replenishment program.

Capital expenditures for the third quarter of fiscal 2018 totaled $1.3
million.

Fiscal 2018 Outlook

For fiscal 2018 the Company now expects:

  • Net sales to be between $277 million and $280 million. This compares
    to net sales of $272.6 million in fiscal 2017.
  • Operating income to be between $5 million and $7 million, excluding
    any potential non-cash asset impairment charges. This compares to
    reported operating loss of $18.3 million in fiscal 2017, which
    included a $5.1 million non-cash asset impairment charge related to
    property and equipment of certain retail stores.

2018 Third Quarter Earnings Conference Call

A conference call to discuss the third quarter results will be held
today, December 13, 2018, at 8:30 a.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 3394516. 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 and footwear as well as
capsule collections of handbags and home for a global lifestyle. Vince
products are sold in prestige locations worldwide. As of December 13,
2018, the Company operated 45 full-price retail stores, 14 outlet stores
and its e-commerce site, vince.com. The Company is headquartered in New
York and operates a design studio in Los Angeles. 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 include the statements under "Fiscal 2018
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 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 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 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; 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 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.

         

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 Nine Months Ended
November 3,     October 28, November 3,     October 28,
2018 2017 2018 2017
Net sales $ 83,526 $ 79,067 $ 201,168 $ 197,934
Cost of products sold   42,709   42,400   107,096   110,120
Gross profit 40,817 36,667 94,072 87,814
as a % of net sales 48.9 % 46.4 % 46.8 % 44.4 %
Selling, general and administrative expenses   31,850   31,358   91,893   99,558
as a % of net sales 38.2 % 39.7 % 45.7 % 50.3 %
Income (loss) from operations 8,967 5,309 2,179 (11,744 )
as a % of net sales 10.7 % 6.7 % 1.1 % (5.9 )%
Interest expense, net 2,154 1,693 4,740 4,013
Other expense, net   78   113   87   116
Income (loss) before income taxes 6,735 3,503 (2,648 ) (15,873 )
Provision (benefit) for income taxes   (30 )   (6 )   46   42
Net income (loss) $ 6,765 $ 3,509 $ (2,694 ) $ (15,915 )
Earnings (Loss) per share:
Basic earnings (loss) per share $ 0.58 $ 0.41 $ (0.23 ) $ (2.58 )
Diluted earnings (loss) per share $ 0.57 $ 0.41 $ (0.23 ) $ (2.58 )
Weighted average shares outstanding:
Basic 11,621,012 8,610,869 11,619,059 6,166,219
Diluted 11,847,606 8,611,308 11,619,059 6,166,219
 
             

Exhibit (2)

Vince Holding Corp. and Subsidiaries

 

Condensed Consolidated Balance Sheets

 

(Unaudited, amounts in thousands)

 
November 3, February 3, October 28,
2018 2018 2017
ASSETS
Current assets:
Cash and cash equivalents $ 1,050 $ 5,372 $ 5,723
Trade receivables, net 32,323 20,760 31,278
Inventories, net 61,515 48,921 51,378
Prepaid expenses and other current assets   6,369   6,521   4,045
Total current assets 101,257 81,574 92,424
Property and equipment, net 28,158 31,608 38,799
Intangible assets, net 76,650 77,099 77,249
Goodwill 41,435 41,435 41,435
Deferred income taxes and other assets   3,422   2,818   2,816
Total assets $ 250,922 $ 234,534 $ 252,723
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 27,053 $ 22,556 $ 15,717
Accrued salaries and employee benefits 6,514 6,715 5,045
Other accrued expenses 9,473 7,906 11,522
Current portion of long-term debt   2,750   8,000   9,000
Total current liabilities 45,790 45,177 41,284
Long-term debt 58,730 40,682 57,621
Deferred rent 15,111 15,633 15,927
Other liabilities 58,273 58,273 137,830
Stockholders' equity   73,018   74,769   61
Total liabilities and stockholders' equity $ 250,922 $ 234,534 $ 252,723
 

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