Dive Brief:
- Vince Holding Corp. on Tuesday reported that total Q4 net sales fell 17.5% to $75.3 million, due largely to the wind-down of the Rebecca Taylor business, and to a lesser extent a 6.3% decrease at the Vince brand. Wholesale fell 9.7% to $30.9 million and direct-to-consumer fell 3.7% to $44.4 million.
- Gross margin expanded to 45.4% of net sales from 39.6% of net sales, with about 790 basis points from lower promotional activity and 190 related to the wind-down of lower-gross margin Rebecca Taylor. Net loss narrowed by 57.4% to $4.7 million.
- For the year, total net sales fell 18% to $292.9 million, with wholesale down 11.7% and DTC down 4.5%. The company swung into the black, reaching $25.5 million in net income, from last year’s $38.3 million net loss.
Dive Insight:
As Vince continues to work on its turnaround, the brand is without a permanent CEO. David Stefko, who last year had announced his retirement as the company’s chief financial officer, has stepped into the top job in the interim.
During a call with analysts Tuesday, Stefko said the company has made good progress, maintaining “a very disciplined approach to inventory management,” refinancing its credit facilities, pulling back on both promotional activity and off-price wholesale, and expanding margins and profitability.
Those milestones were achieved despite a new headwind in the form of royalty fees that must be paid to Authentic Brands Group, which last year snapped up the Vince brand’s intellectual property. Vince Holding Corp. received $76.5 million in cash and a 25% ownership stake in a new Authentic subsidiary, dubbed ABG Vince.
But for at least the next decade (with eight ten-year renewal options), the Vince brand now must pay fees associated with that licensing agreement. In Q4, those fees dragged gross margin down by about 430 basis points, and are expected to siphon about 400 basis points from operating margins this year.
The fees are a factor in the turnaround, too, as the company is aiming for more than “$30 million in cost savings over the next three years to help mitigate royalty fees now incurred in our go-forward operating model,” Stefko said on the call.
