Vince Holding Corp. (NYSE:VNCE) Q2 2023 Earnings Call Transcript

Vince Holding Corp. (NYSE:VNCE) Q2 2023 Earnings Call Transcript September 12, 2023

Operator: Hello, and welcome to today’s Vince Q2 2023 Earnings Conference Call. I’m now going to hand over to Caitlin Churchill, Investor Relations, to begin. Catlin, please go ahead.

Caitlin Churchill : Thank you, and good morning, everyone. Welcome to Vince Holding Corp, second quarter fiscal 2023 results conference call. Hosting the call today are Jack Schwefel, Chief Executive Officer; and Michael Hand, Interim Chief Financial Officer. Before we begin, let me remind you that certain statements made on this call may constitute forward-looking statements, which are subject to risks and uncertainties that could cause actual results to differ from those that the company expects. Those risks and uncertainties are described in today’s press release and in the company’s SEC filings, which are available on the company’s website. Investors should not assume that statements made during the call will remain operative at a later time, and the company undertakes no obligation to update any information discussed on the call.

In addition, in today’s discussion, the company is presenting its financial results in conformity with GAAP and on an adjusted basis. The adjusted results the company presents today are non-GAAP measures. Discussions of these non-GAAP measures and information on reconciliations of them to their most comparable GAAP measures are included in today’s press release and related schedules, which are available in the Investors section of the company’s website at investors.vince.com. Finally, the company has filed a notification of late filing on Form 12b-25 with the Securities and Exchange Commission with respect to its quarterly report on Form 10-Q for the fiscal quarter ended July 29, 2023. The company expects to file the quarterly report within the extension period of five calendar days provided under rule 12b-25 of the Securities Exchange Act of 1934 as amended.

Following today’s remarks, there will be no Q&A session. Now I will turn the call over to Jack. Jack?

Jack Schwefel : Thank you, Caitlin, and thank you, everyone, for joining us this morning. The second quarter marks the beginning of a new chapter for Vince following the close of our transaction with Authentic Brands Group in late May. The transaction strengthened our liquidity position, allowing us to spend more time focusing on the product and the business. Since that time, we have continued to strengthen our balance sheet with the refinancing of our ABL facility in late June and enhanced our focus on improving our margin performance and executing our strategic growth initiatives. Before I provide an update on this progress, let me review highlights from our second quarter performance. As expected, we continued to navigate a challenging macro environment during the second quarter, which impacted both our direct-to-consumer and wholesale channels.

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Q&A Session

That said, we are pleased with the delivered sequential improvement in our direct-to-consumer channel compared to the first quarter, while our wholesale channel was more pressured due to the strategic decision to pull back the penetration of off-price and enhance our focus on the more profitable full-price business. While this decision impacts our top-line performance in the near term, we believe it’s the right approach, especially as our inventories have normalized. Across both channels, we are pleased with the customer reception to our assortment. For both men’s and women’s, we also saw nice results from our pre-fall product assortment, which we believe bodes very well as we move into the key fall selling season for Vince. With respect to profitability, we are pleased with the year-over-year improvement, we delivered in adjusted operating income, driven primarily by gross margin expansion due to lower freight costs.

In addition, we also remain focused on maintaining a disciplined approach to inventory management and operating a more streamlined organization, which we believe will continue to benefit us as we move forward. Turning to the progress against our strategic growth initiatives, including growing our customer base through leveraging our enhanced e-commerce capabilities and CDP platform, expanding our international presence and growing our Men’s business. First, with respect to leveraging our enhanced e-commerce capabilities in CDP platform, while we have continued to see relative outperformance of our store fleet compared to our e-commerce site, we experienced notable improvements in our e-commerce performance later in the quarter as we were able to better leverage our platform and CDP capabilities while also benefiting from increased marketing spend that drove traffic and conversion to the site.

We are particularly pleased with the results we saw from investments in social through partnerships with key influencers such as Arielle Charnas, who shared her Vince Trion with over with her over 1 million followers on Instagram and help drive significant traffic and demand to our e-commerce site. In addition, we continue to leverage our CDP platform, to better engage with our top customers and deliver more targeted communication across our customer base, which we believe will position us well to continue to drive increased loyalty and improve customer acquisition as we move forward. Turning next to our focus on international expansion. We are excited to announce our plans to open two new stores in China in the coming months in Nanjing this fall and in Beijing in early spring ’24.

We have continued to be pleased with our first store in Shanghai, which opened in September of last year, and look forward to expanding our presence in the country. Let me now discuss the progress in our men’s business. We continue to be encouraged by the momentum we are seeing in our men’s business, including the initial performance from our recently opened Roosevelt Field store. We believe we can grow this business to approximately 30% of our top-line performance in the next four years and are well on track to achieving this goal. In Q2, we saw strength in our high summer products Boucle Cabana Stripe Short as well as Linen shirts and polos, and see further opportunity in these areas for the future. In addition to the progress against our strategic initiatives, we are also pleased with our partnership with Authentic who recently announced a long-term agreement with Peerless, the largest producer of men’s and boy’s tailored clothing in North America to design, manufacture, and distribute it.

Vince men’s tailored clothing, dress shirts, neckwear, and neckwear accessories across the United States and Canada. We believe this partnership is a great addition for the Vince brand, and we look forward to showcasing this product in our stores and online in fall ’24. As we look ahead to the remainder of the year, while we are remaining prudent with respect to our outlook, particularly for the wholesale business, we are encouraged by the improvements in a trend we saw later in the second quarter continuing as we enter the third quarter. We recently launched our Vince Heroes campaign, highlighting our most loved and versatile pieces as we lean into fall selling season. We will also be launching our Gray Matters campaign in the upcoming days, which will showcase timeless silhouettes in this season’s color focus, which will be shown in the mix of varying tones and textures.