Vince, the understated, coastal California-inspired brand, is showing signs that its transformation plan is working.
On Tuesday, Vince reported that net income for the third quarter ended Nov. 2 rose to $4.3 million, or 34 cents per diluted share, compared with net income of $1 million, or 8 cents, a year earlier.
Income from operations totaled $5.8 million and compared with income from operations of $2.8 million in the same period last year.
Net sales decreased 4.7 percent to $80.2 million from $84.1 million. The year-over-year decrease was driven by an 8.3 percent drop in Vince brand direct-to-consumer sales and a 2.2 percent decline in Vince brand wholesale sales, the company indicated.
Gross profit came in at $40.1 million, or 50 percent of net sales, compared to gross profit of $37.2 million, or 44.2 percent of net sales, an increase primarily driven by an approximately 480 basis-point gain related to lower product and freight costs and 80 basis points related to lower promotional activity in the direct-to-consumer segment and lower discounting. These factors were partially offset by an approximately 50 basis-point decline attributable to channel mix, the company said.
“Our ongoing focus on driving a healthier, full-price business and executing on our transformation plan continues to yield strong results, as evidenced by the significant gross margin expansion and improved profitability we delivered in the third quarter compared to the prior year,” said David Stefko, interim chief executive officer of Vince, in a statement. “While revenue fell slightly short of our expectations, primarily due to lower in-season reorders in our international wholesale business and lower than expected outlet channel sales, the underlying strength of the Vince brand continues to resonate with customers.
“As we look ahead, we expect to continue to execute a healthy full price business across all channels, and are very encouraged by the results we have driven thus far in the fourth quarter,” Stefko added. “While we remain prudent with our outlook given the shortened holiday selling season and the ongoing uncertainty around the consumer, we believe we are well positioned to deliver on our objectives for this year.”
Vince’s transformation strategy has included the wind-down of the Rebecca Taylor brand and the sale of the Vince intellectual property in return for $76.5 million in cash and a 25 percent membership interest in ABG Vince.
Vince still designs, produces, ships and sells all of the Vince apparel products. ABG can assign a license for a noncore category. Vince pays ABG Vince royalty payments since Vince gets use of the IP to sell and manufacture the core Vince categories. ABG Vince, which owns 75 percent of the Vince IP, pays Vince a cash distribution equal to 25 percent of ABG Vince’s net cash received from other licensed categories.
The transformation program, announced in October 2023, also aims to reduce costs by $30 million over a three-year period including streamlining manufacturing and production operations.
The license agreement contains an initial 10-year term and eight 10-year renewal options allowing the company to renew the agreement.
In other third-quarter results released by Vince, wholesale sales decreased 2.2 percent to $48.8 million compared to the third quarter of fiscal 2023, and direct-to-consumer segment sales decreased 8.3 percent to $31.4 million.
For the fourth quarter of fiscal 2024, Vince expects total company net sales to be down midsingle digits to up low-single digits compared with sales of $75.3 million in the fourth quarter of fiscal 2023. The company expects fourth-quarter fiscal 2024 total company operating margin to increase 200 basis points to 300 basis points compared with total company operating margin of minus 2.2 percent in the fourth quarter of fiscal 2023.
For all of 2024, Vince continues to expect total company net sales to decrease in the low-single-digit range compared to $292.9 million in fiscal 2023. The decline in sales and the outlook for further declines in the fourth quarter apparently pushed Vince’s stock price down about 18 percent, or 38 cents, to $1.52 at midday Tuesday.
