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Vince Holding Corp. Reports Fourth Quarter and Fiscal Year 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 fourth quarter and fiscal year 2018 ended February 2,
2019.

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 fourth quarter ended February 2, 2019:

  • Net sales increased 4.2% to $77.8 million as compared to $74.6 million
    in the same period last year. The fourth quarter of fiscal 2017
    included $1.6 million of incremental net sales in our
    Direct-to-consumer segment from the 14th week.
  • Direct-to-Consumer comparable sales grew 3.1% on a 13-week basis.
  • Gross margin rate increased 160 basis points to 47.1%.
  • Operating income was $2.0 million compared to an operating loss of
    $6.6 million in the same period last year. Adjusted operating income
    was $3.6 million compared to an adjusted operating loss of $1.5
    million in the same period last year.
  • Net income was $0.7 million or $0.06 per diluted share. Adjusted
    earnings per diluted share was $0.20 compared to an adjusted loss of
    $0.20 per share in the same period last year.

Brendan Hoffman, Chief Executive Officer, commented, "We were pleased to
have delivered on our guidance for 2018, which was a pivotal year for
our Company. We streamlined our wholesale business to focus on key
partners where we achieved strong retail door sell through, we
successfully opened 6 new stores and drove double digit eCommerce
growth, we launched a subscription rental program and received accolades
on our women's collections throughout the year.

We have worked diligently to rejuvenate and stabilize the Vince brand,
and build a strong foundation to support long term profitable growth.
Looking ahead, for 2019, we are focused on growing our
direct-to-consumer business, increasing our international presence,
exploring product extensions into new categories and elevating our
marketing efforts. We are excited about the future growth potential for
the Vince brand and remain committed to driving long term shareholder
value."

For the fourth quarter ended February 2, 2019:

  • Net sales increased 4.2% to $77.8 million from $74.6 million in the
    fourth quarter of fiscal 2017, which included $1.6 million in sales in
    our Direct-to-consumer segment from the 14th week.
    Wholesale segment sales increased 4.8% to $40.3 million, due to lower
    sales allowances as compared to the same period last year partially
    offset by a decline in shipments related to the exit of certain
    wholesale partners as well as lower off-price channel sales.
    Direct-to-consumer segment sales increased 3.6% to $37.5 million
    compared to the fourth quarter of fiscal 2017, which included $1.6
    million in net sales from the 14th week. Comparable sales
    increased 3.1% on a 13-week basis, 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 7.9% to $36.7 million, or 47.1% of net sales,
    compared to gross profit of $34.0 million, or 45.5% of net sales, in
    the fourth quarter of fiscal 2017. The 160 basis point increase in
    gross margin rate in the fourth quarter of fiscal 2018 was due to a
    favorable impact from year-over-year adjustments to inventory reserves
    partially offset by higher upfront discounts in the off-price
    wholesale channel.
  • Selling, general, and administrative expenses were $34.7 million, or
    44.6% of sales compared to $40.5 million, or 54.3% of sales, in the
    fourth quarter of fiscal 2017. This includes non-cash asset impairment
    charges related to property and equipment of certain retail stores of
    $1.7 million in fiscal 2018 and $5.1 million in fiscal 2017. The
    decline in SG&A dollars, excluding the aforementioned non-cash asset
    impairment charges, was primarily the result of decreased compensation
    and benefit costs.
  • Operating income was $2.0 million, or 2.5% of net sales, which
    included $1.7 million related to the aforementioned non-cash asset
    impairment charges. Operating loss was $6.6 million for the fourth
    quarter of fiscal 2017, which included $5.1 million related to the
    aforementioned non-cash asset impairment charges. Excluding the
    aforementioned charges, adjusted operating income was $3.6 million in
    the fourth quarter of fiscal 2018 as compared to adjusted operating
    loss of $1.5 million in the fourth quarter of fiscal 2017.
  • Other income in the fourth quarter of fiscal 2017 included a Tax
    Receivable Agreement ("TRA") adjustment of $82.0 million.
  • Net income was $0.7 million, or $0.06 per diluted share compared to
    $74.5 million, or $6.41 per diluted share for the fourth quarter of
    fiscal 2017. The net income for the fourth quarter of fiscal 2017
    includes the aforementioned TRA adjustment and the aforementioned
    non-cash asset impairment charge.
  • Adjusted net income, excluding the aforementioned charges, was $2.4
    million, or $0.20 per diluted share, as compared to adjusted net loss
    of $2.4 million, or a $0.20 loss per share, in the same period last
    year. Please refer to Exhibit 3 for a reconciliation.
  • The Company ended the quarter with 59 company-operated stores
    reflecting six openings and two closings since the fourth quarter of
    last year.

For the fiscal year ended February 2, 2019:

  • Net sales increased 2.3% to $279.0 million from $272.6 million during
    fiscal year 2017, including $1.6 million in our Direct-to-consumer
    segment from the 53rd week. Wholesale segment net sales
    decreased 3.9% to $159.6 million and direct-to-consumer segment net
    sales increased 12.1% to $119.3 million compared to fiscal year 2017,
    which included $1.6 million of incremental net sales from the 53rd
    week. Comparable store sales on a 52-week basis increased 10.7%,
    including e-commerce sales.
  • Operating income was $4.1 million, or 1.5% of net sales, compared to
    an operating loss of $18.3 million in fiscal 2017. Excluding the
    aforementioned non-cash asset impairment charges, adjusted operating
    income was $5.8 million in fiscal 2018 as compared to adjusted
    operating loss of $13.2 million in the same period last year.
  • Net loss was $2.0 million, or $0.17 per share, which includes the
    aforementioned non-cash asset impairment charge of $1.7 million. This
    compares to net income of $58.6 million, or $7.70 per diluted share,
    in fiscal 2017, which includes the aforementioned TRA adjustment and
    the aforementioned non-cash asset impairment charge.
  • Adjusted net loss was $0.3 million, or $0.03 per share, excluding the
    aforementioned charges, as compared to adjusted net loss of $18.3
    million, or $2.41 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 2018 with $46.5 million
of borrowings under its debt agreements. The Company decreased overall
borrowings under its debt agreements since the same period last year by
$3.4 million, primarily due to $5.5 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 fourth quarter of fiscal 2018 was $53.3
million compared to $48.9 million at the end of the fourth quarter of
fiscal 2017. The increase in inventory was primarily due to the growth
of the replenishment program and the earlier timing of Spring receipts.

Capital expenditures for the fourth quarter of fiscal 2018 totaled $0.8
million.

2019 Outlook

For fiscal 2019 the Company expects:

  • Net sales to be between $290 million and $300 million. This compares
    to net sales of $279.0 million in fiscal 2018.
  • Operating income to be between $7 million and $9 million, including an
    estimated $1.5 million associated with strategic consulting fees. This
    compares to reported operating income of $4.1 million in fiscal 2018,
    which included a $1.7 million non-cash asset impairment charge related
    to property and equipment of certain retail stores.
  • Capital expenditures to be between $4.0 million and $4.5 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-two week period of fiscal 2018, 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. In
addition, 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. 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 Exhibit 3 to this press
release.

2018 Fourth Quarter Earnings Conference Call

A conference call to discuss the fourth quarter results will be held
today, April 10, 2019, 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 3682989. 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, fragrance, and home for a global
lifestyle. Vince products are sold in prestige locations worldwide. As
of April 10, 2019, 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 2019
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 realize the benefits of our strategic initiatives; our
ability to maintain our larger wholesale partners; the execution and
management of our retail store growth plans; our ability to make lease
payments when due; our ability to expand our product offerings into new
product categories, including the ability to find suitable licensing
partners; our ability to comply with the obligations under our credit
facilities; our ability to continue having the liquidity necessary to
service our debt, meet contractual payment obligations, and fund our
operations; our ability to remediate the identified material weaknesses
in our internal control over financial reporting; our ability to
optimize our systems, processes and functions; our ability to mitigate
system security risk issues 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; changes in global economies
and credit and financial markets; 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 Twelve Months Ended
February 2,   February 3, February 2,   February 3,
2019 2018 2019 2018
Net sales $ 77,783 $ 74,648 $ 278,951 $ 272,582
Cost of products sold   41,130   40,673   148,226   150,793
Gross profit 36,653 33,975 130,725 121,789
as a % of net sales 47.1 % 45.5 % 46.9 % 44.7 %
Selling, general and administrative expenses   34,693   40,548   126,586   140,106
as a % of net sales 44.6 % 54.3 % 45.4 % 51.4 %
Income (loss) from operations 1,960 (6,573 ) 4,139 (18,317 )
as a % of net sales 2.5 % (8.8 )% 1.5 % (6.7 )%
Interest expense, net 1,142 1,527 5,882 5,540
Other expense (income), net   138   (81,998 )   225   (81,882 )
Income (loss) before income taxes 680 73,898 (1,968 ) 58,025
Provision (benefit) for income taxes   8   (614 )   54   (572 )
Net income (loss) $ 672 $ 74,512 $ (2,022 ) $ 58,597
Earnings (Loss) per share:
Basic earnings (loss) per share $ 0.06 $ 6.41 $ (0.17 ) $ 7.70
Diluted earnings (loss) per share $ 0.06 $ 6.41 $ (0.17 ) $ 7.70
Weighted average shares outstanding:
Basic 11,622,134 11,616,144 11,619,828 7,605,822
Diluted 11,746,654 11,617,464 11,619,828 7,608,427
 

Vince Holding Corp. and Subsidiaries

     

 

 

Exhibit (2)

Condensed Consolidated Balance Sheets

(Unaudited, amounts in thousands)

 
February 2, February 3,
2019 2018
ASSETS
Current assets:
Cash and cash equivalents $ 118 $ 5,372
Trade receivables, net 28,896 20,760
Inventories, net 53,271 48,921
Prepaid expenses and other current assets   6,317   6,521
Total current assets 88,602 81,574
Property and equipment, net 25,156 31,608
Intangible assets, net 76,501 77,099
Goodwill 41,435 41,435
Deferred income taxes and other assets   3,237   2,818
Total assets $ 234,931 $ 234,534
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 28,787 $ 22,556
Accrued salaries and employee benefits 5,510 6,715
Other accrued expenses 8,535 7,906
Current portion of long-term debt   2,750   8,000
Total current liabilities 45,582 45,177
Long-term debt 42,340 40,682
Deferred rent 14,636 15,633
Other liabilities 58,273 58,273
Stockholders' equity   74,100   74,769
Total liabilities and stockholders' equity $ 234,931 $ 234,534
 

Vince Holding Corp. and Subsidiaries

 

 

 

 

Exhibit (3)

Reconciliation of GAAP to Non-GAAP measures

(Unaudited, amounts in thousands)

For the three months ended February 2, 2019
As Reported (GAAP)   Retail Store Impairment Charge   TRA Adjustment     As Adjusted (Non-GAAP)
 
Income from operations $ 1,960 $ (1,684 ) $ $ 3,644
Income (loss) before income taxes 680 (1,684 ) 2,364
Provision for income taxes   8   -     8
Net income (loss) $ 672 $ (1,684 ) $ $ 2,356
Earnings (loss) per share $ 0.06 $ (0.14 ) $ $ 0.20

(1)

 
 
 
For the three months ended February 3, 2018
As Reported (GAAP) Retail Store Impairment Charge TRA Adjustment As Adjusted (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 for income taxes $ (614 )       (614 )
Net income (loss) $ 74,512 $ (5,111 ) $ 82,002 $ (2,379 )
Earnings (loss) per share $ 6.41 $ (0.44 ) $ 7.06 $ (0.20 ) (2)
 
 

 

  For the twelve months ended February 2, 2019
As Reported (GAAP)   Retail Store Impairment Charge   TRA Adjustment     As Adjusted (Non-GAAP)
 
Income from operations $ 4,139 $ (1,684 ) $ $ 5,823
Loss before income taxes (1,968 ) (1,684 ) (284 )
Provision for income taxes   54       54
Net loss $ (2,022 ) $ (1,684 ) $ $ (338 )
Loss per share $ (0.17 ) $ (0.14 ) $ $ (0.03 ) (1)
 
 
 
For the twelve months ended February 3, 2018
As Reported (GAAP) Retail Store Impairment Charge TRA Adjustment As Adjusted (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 for income taxes

$ (572 )       (572 )
Net income (loss) $ 58,597 $ (5,111 ) $ 82,002 $ (18,294 )
Earnings (loss) per share $ 7.70 $ (0.67 ) $ 10.78 $ (2.41 ) (2)
 
 

(1) Based on a weighted-average shares outstanding of
11,746,654 and 11,619,828 for the three and twelve months ended February
2, 2019 respectively.

(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.

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