Q1 2021 Vince Holding Corp Earnings Call
Okay.
Yes.
Okay.
[music].
Yes.
[music].
Uh huh.
[music] on it.
Okay.
[music].
Good day and thank you for standing by today's conference is scheduled to begin momentarily until that time. Your line is when they can be placed on hold thank you for your patience.
[music].
No.
[music].
Yeah.
[music].
Good day and thank you for standing by welcome to the Vince Q1, 'twenty 'twenty 1 earnings conference call.
At this time all.
All participants are in a listen only mode.
Third as speaker presentation, there will be a question and answer session.
To ask a question during the session you will need to press star 1 on your telephone is free.
You acquired any further assistance please press star zero.
I would now like to hand, the conference over to.
Amy Levy. Please go ahead.
Thank you and good afternoon, everyone welcome to Vince holding Corp, 's first quarter fiscal 'twenty 'twenty, 1 results conference call hosting the call today is Jack's wasteful, Chief Executive Officer, and Dave Stefko Chief financial.
Officer for.
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 expect 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 todays discussion the company is presenting its financial results in conformity with GAAP and on an adjust.
Billings basis the for.
Fiscal 2020 adjusted results that 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.
Adjusted investors that Vince Dot com after.
After the prepared remarks management will be available to take your questions for as long as time permits.
Now I'll turn the call over to Jack.
Great. Thank you Amy and thank you everyone for joining us. This afternoon. We are pleased with the pace of recovery on our business led by the Vince brand.
I Didnt revenue on the first quarter grew 47.5% and loss from operations was $7.1 million on more than $15 million improvement over the adjusted loss from the first quarter of fiscal 2020, we are highly encouraged by this performance as we emerge from the crisis with 2 distinct global fashion brands that they believe have tremendous long.
Long term growth potential.
Starting with Vince revenue in each of the direct to consumer and wholesale segments are showing a strong recovery wholesale revenue is nearing fiscal first quarter 2019 results, while retail store sales are just modestly lower as traffic recovers.
They were operating in Q1 at 23% fewer hours as compared to pre COVID-19 deaths.
While still impacted by a lack of international travel, particularly on our tourist markets customers are enthusiastic about shopping us in store.
At the same time, we continue to gain market share.
And within the luxury contemporary category within our wholesale partner doors.
The momentum of the Vince brand is firmly in place as the sophisticated effortless style of the brand continues to resonate with consumers.
As consumers begin to vacation.
Vacation again, we have launched a new swimmer collaboration with <unk>.
Sure.
That will be available in select wholesale partner doors, and Vince Dot com.
We believe the swim is another category through which we can increase our share for closet and we look forward to this partnership.
In men's we are particularly excited to see the strong performance at wholesale as we've become a clear leader within the men's contemporary luxury.
Swim, we continue to see men's as a meaningful growth opportunity for Vince and we are highly encouraged by the momentum in this business.
As you see the rising consumer demand for the burdens from Covid, we are ramping up our investments in marketing to attract new consumers to the brand while remaining highly engaged with our existing customers.
As the vaccines continue to rollout we see the anticipation of returning to a lifestyle that includes activities away from the home in terms of both work and leisure.
In response to this we have shifted away from communicating to customers with Vince at home and lounge and luxury messaging towards the new wear to work and promise of travel.
As a glimmer on the horizon.
In addition, we are transitioning our emphasis away from sales and promotions to full price messaging.
With the recovery from the pandemic beginning to accelerate around the world. We believe that we are hitting a pivotal point in our business as we prepare to fully resume our growth strategies for Vince.
We plan to continue to ramp our marketing investments throughout the remainder of the year.
We were also on track to implement our point of sales systems by fall of this year.
We view this as another step towards increasing our targeted marketing and personalization capabilities.
As this is foundational to launching our CRM systems.
In addition, the implementation of point of sale will enable us to expand our omnichannel capabilities, such as ship from store and buy online and pick up in store, which we expect to complete prior to our fiscal year end.
As part of our go forward plan to increase marketing investments, we have created the new role.
Role of Chief marketing and digital officer.
For the priorities for this role will be to develop and execute brand and performance marketing strategies as well as to accelerate our omnichannel business across the Vince from Rebecca Taylor brands.
Look forward to sharing more detail on disposition once the candidate has officially joined the organization.
Turning to our Vince retail strategy, we believe that stores continue to play an important role in building brand awareness and driving customer engagement prior.
Prior to Covid, we saw success on opening new stores with flexible lease options and favorable economics.
In the first quarter, we opened 1 new store in East Hampton, New York just.
In time for the summer season.
We opened 1 additional store in the second quarter and plan to open an additional 5 stores throughout the remainder of the year.
These stores are in highly favorable locations all with short term renewable leases in.
In addition to full price stores, we plan to open 3 outlet locations in the second quarter as we.
Expand our omnichannel capabilities, we believe that stores will further fuel profitable growth for our businesses.
In the international business, we are excited to see the strong acceptance of the Vince brand in Australia.
Our new shop in shop locations are performing above expectations, and we see opportunity to expand our presence in.
On this market.
We will also begin to revisit our plans to expand into China with a growing demand for luxury resuming.
In Europe, we are seeing a slower recovery in our London business as well as the impact of Covid continues to weigh on that this region.
However, we remain confident in the potential for this market and look forward.
Celebrating our growth strategies once we begin to see a recovery.
On the last topic prior to shifting to Rebecca Taylor I am pleased to announce the introduction of borrow for events scheduled for launch at the end of this month.
Based on the success of Vince unfold, we are launching this rental option in both women's.
Men's and men's through.
True castle, our partner to enable more customers to discover and where new styles.
We believe that borrow creates another opportunity for us to organically grow our member base as users potentially transition to unfold.
Overall, I'm very pleased with the direction.
We are taking with the Vince brand and as we continue to leverage the positive momentum in our business to advance our growth strategies. We continue to see a lot of runway for global expansion as we further leverage the distinct positioning of this luxury brand.
Turning to Rebecca Taylor I remain excited about the potential for.
And longer term as we employ similar strategies that led to the successful turnaround of the Vince brand.
While revenue declined in the quarter as we reset the brand we are seeing momentum build each month and operating results in this business have improved meaningfully which Dave will speak to shortly.
We remain confident in.
On the creative direction that Rebecca Taylor as we returned to the brand's heritage and a modernized way to serve today's woman.
We saw strong response to the relaunch in spring 2021 collection Romanticism redefine in both our direct to consumer channel and net wholesale partner doors.
The strong sell through combined with interest.
For this for those who don't currently carry Rebecca Taylor is giving us even greater confidence that we're moving the brand in the right direction.
The collection has expanded from dresses on occasion wear to include sweaters trousers, knitwear and outerwear categories.
With a complete lifestyle offering we are well positioned to serve our customer as she.
Transitions back to her pre COVID-19 way of living.
Creative director Stephen Catherine.
Posted an interactive online event at Bloomingdale's as part of the relaunch, which resulted in sales on the brand tripling at that partner in the ensuing days.
Based on the strong reception, we plan to similar events in the future.
From a bloomingdale's and other wholesale partners. We are highly encouraged by the enthusiastic response, we are seeing in the early stage.
In conjunction with New collection, we also relaunched the brand's new digital first strategy, including a completely redesigned website for launch of an SMS program and greater focus on segmentation.
<unk> personalization.
Cash tag Rebecca with friends launched on Instagram as a campaign of women, who embody the new spirit of Rebecca Taylor Rebecca's community.
This name will carry forward in social media and in other channels, we saw growth in followers triple in just 2 weeks in total followers, reaching over 2 million people.
<unk>, we will continue to invest in paid social and paid search to drive traffic and revenue growth.
In mid July we plan to relaunch R&D day, Rebecca Taylor's version of Vince unfold as well as borrow on Rebecca Taylor Dot com.
Similar to Vince we see this as an opportunity to gain access to new customers.
People spanned the optionality of our offerings.
As part of the brand relaunch, we plan to open full price and outlet locations that offer the same attractive economics, we achieved for the Vince brand.
We opened 2 new outlet locations, so far in the second quarter and plan to open an additional 3 outlets and the remainder of 2021.
We also plan to open for full price locations this year.
While the turnaround progress for Rebecca Taylor was temporary hampered from the Covid pandemic, we are no less confident in the long term potential for this business.
In conclusion, we are extremely pleased to see the strong recovery in consumer demand in.
To place and believe we are well positioned to benefit for both our Vince and Rebecca Taylor brands.
We are seeing strong momentum at the Vince brand as we resume our growth strategies.
At the same time, we are excited by the progress we are seeing and Rebecca Taylor.
With our recent relaunch of the brand.
Our focus will remain.
On driving our initiatives forward, while maintaining discipline in how we operate the business for the long term profitable growth.
With that I will turn it over to debt.
Thanks, Jack we're on.
Encouraged to see the accelerated pace of recovery in our business on the first quarter.
On top.
Top line trends continue to increase sequentially, giving us confidence to continue to advance on near term strategies.
Total company net sales for the first quarter increased 47, 5% to $57.5 million compared to $39 million on the first quarter of fiscal 2020.
For the Vince brand first quarter consolidated net sales increased 76, 3% for $50.7 million compared to $28.8 million in the same prior year period.
Our Vince direct to consumer segment sales increased 32, 3% to $23.9.
$9 million in the first quarter.
This increase reflects improved traffic trends in our retail business still led on non tourist areas, including retail stores in the Midwest, Florida, and Texas, while urban areas continue their recovery at a slower pace.
Gross on our e-commerce business.
Less pronounced as consumers return to in person shopping our stores we open.
As a reminder, our e-commerce business in the first quarter of fiscal 2020 grew significantly due to the temporary store closures, resulting from mandated COVID-19 lockdowns.
In our wholesale segment net sales increased.
156%.
As Jack said, we remain confident in our market share position within this segment as Vince continues to outperform peers within a contemporary luxury category.
Rebecca Taylor and Parker combined net sales decreased 33, 6% to $6.8 million.
As compared to the same period last year.
As we have shared in the past with the Covid crisis, we have paused the development of new products for our Parker business to focus resources on the operations of our advanced and Rebecca Taylor brands.
This contributed to about 2 thirds of the sales decline in the quarter.
For Rebecca Taylor the decline was largely due to decreased e-commerce traffic as a result of a pullback in marketing as well as reduced assortment and average unit retails as part of our reset of the brand.
Nevertheless, we remain very pleased with response to our new product offering both within our direct to consumer.
<unk> and wholesale segments.
Total company gross profit on our first quarter was $25.5 million or 44, 3% of net sales.
This compares to $16 million or 41% net sales for the first quarter of last year.
The 330 basis point increase in gross.
<unk> can rate was primarily due to a lower year over year adjustments to inventory reserves due to the impact of Covid last year.
This increase was partially offset by channel mix due to the higher mix of E Commerce last year.
Both company and wholesale partner stores were temporarily closed.
<unk> selling general and administrative expenses in the quarter was $32.6 million or 56, 6% on net sales as compared to $38.5 million for 98, 8% of net sales for the first quarter of last year.
As a result of the actions taken to reduce cost at the onset of the Covid pandemic.
SG&A dollars decreased by $6 million in the first quarter, which was primarily the result of lower consulting and other third party costs as well as decreased bad debt expense payroll and compensation expense and marketing expense.
Operating loss for the first quarter was $7.1 million compared to.
To a loss of $49.4 million in the same period last year, which included approximately $26.9 million in noncash asset impairment charges.
Looking at results for Vince as compared to the first quarter of 2019 sales were $50.7 million in the first quarter of 2020.
1 as compared to $55.1 million in the first quarter of 2019, while operating income excluding corporate unallocated expenses was $7.2 million in the first quarter of 2021 compared to $8.8 million in the first quarter of 2019.
Income tax expense for the first quarter.
<unk> was $2.6 million as a result of a noncash deferred tax expense created by the current period amortization of indefinite live goodwill intangible assets for cash, but not for book purposes.
We expect there will be another tax expense in the second quarter and to see a tax benefit.
<unk> in the second half of the year.
The tax expense per tax benefit recognized for each quarter will also be noncash.
Therefore for the full year, we expect this noncash deferred tax liability to be approximately $2.8 million.
Net loss for the first quarter was $11.6 million.
For a loss of 98 per share compared to a net loss of $48.2 million for a $4.12 loss per share in the first quarter last year.
Excluding a TRA income adjustment of $2.3 million and noncash asset impairment charges adjusted net loss for the first quarter of fiscal.
2020 was $23.6 million or $2 <unk> loss per share.
Moving on now to the balance sheet.
Borrowings under our debt agreements totaled $87.3 million.
We ended the quarter with availability of $27.4 million under our revolving credit facility.
We continue to take steps to manage our liquidity and maintain financial flexibility and we believe we have adequate funds to effectively operate our business.
We will continue to make targeted long term investments to continue to support long term strategies.
Moving now to inventory net inventory was $71.7.
At the end of the first quarter as compared to $67.3 million at the end of the first quarter last year.
We continue to work through Covid impacted excess inventory from fall 2020 in prior seasons.
As we anticipated we are seeing open to buy dollars in the off price channel being released.
<unk> with the recovery of retail shopping by the consumer.
Looking ahead, we anticipate the balance of newness versus prior season inventory to continue to improve.
Due to the uncertainty related to the impact of COVID-19 will not be providing formal guidance at this time.
That said as a reminder for fiscal 2021, we are planning capital expenditures net of tenant allowances to be below that of 2020.
And as Jack detailed in his remarks, our Capex plans include a total of 19 new stores in fiscal 2021, 10 for Vince and 9 for Rebecca Taylor.
As well as it investments specifically related to our efforts to become fully omnichannel.
With the uncertainties related to retail and the recovery from Covid over the last year, we opportunistically, but aggressively pursued new stores and brand appropriate centers.
Like our pre Covid strategy, we were.
Secure short term low investment low cost leases.
Overall, we are extremely encouraged by recent trends as the economy and industry continue to recover from Covid.
The strong positive momentum in our business combined with the recent increase in consumer demand makes us even more confident in the long.
Term potential for both Vince and Rebecca Taylor.
Like many industries, we are facing macro headwinds such as increased labor and shipping costs that we're managing through.
Regardless, we will continue to manage aspects of the business conservatively given that Theyre still remains limited certainty at this time.
This concludes my comments regarding our first quarter, we will now take your questions.
Later.
As a reminder to ask a question you will need to press star 1 on your telephone to withdraw your question basketball on tea.
I have a question from Dana Telsey.
Telsey Advisory group your line is now open.
Good afternoon, and glad to hear about the recovery that you're beginning to see as you think about the recovery and Vince for the 76 per cent increase and frankly, you know back to nearly Tuesday, and wholesale back to nearly 2019 levels. How is the on line.
Line business performing as stores reopen what are you seeing there and as you just as you went through the quarter was there any difference in cadence.
And sat.
And region in terms of regional performance and then a couple of follow up.
Well those are great questions, Hi, Dan as Jarrod Hi.
Couple of thoughts on that.
So the web we're continuing to see.
Growth in the web.
I'd like to see a lot more to be quite honest with you.
I look to I look for later this quarter third and fourth quarter to really see that accelerate.
On bringing in.
Digital person to really help with that and I think that.
That's just the beginning and that's just the first step.
As far as cadence.
We're building momentum I think we started slow at the beginning of the fiscal year. There were some shipping issues. We had late product the port issues in China and in California, clearly affected us as we as.
As we stock products is where we've started to see the momentum.
No we've looked down the supply chain and taking measures to ensure that that doesn't happen again.
And it won't happen again.
So I do think as we gotten better inventory positions, we really saw the acceleration, we're starting to in our own DTC.
<unk> on our own stores, we're beginning to expand store hours, where it makes sense, where the traffic is starting to really come back we saw.
I think like a lot of retailers like a lot of brands, we saw a lot of growth for a quickly from vacation destinations.
And we really watch that now go across the country.
And very very pleased with the progress we've seen with it.
Thank you and then as you think about the wholesale operating income.
Wholesale operating income where did where did that strength come from is it lower markdowns. How are you doing with the Neiman Marcus Nordstrom doors anything new to note and other partner.
And it's on the platform side with online in terms of wholesale.
I'm working on a lot of different things with platforms.
Good question I think in the coming calls I'll be able to share some I hate to talk about things before they happen.
Yeah.
As far as wholesale goes.
<unk>.
Our ship was pretty specific on the last call about we were a little frustrated for a while at the open to buy from some of our wholesale partners was a it was a bit tight as they were trying to ratchet down their inventories were starting to see some remedy of that.
And I think opportunistically, the better inventory positions will be in.
Gives us a competitive advantage over some of our competitors that arent in our net inventory position.
Got it and then you mentioned marketing investments ramping up how do you think about the marketing budget. This year, maybe compared to 2019 on what should we look for on the back half for the year on marketing.
Most of it will.
Digital.
Which I don't think it was a surprise in 2021.
Beginning to start that.
To put our toe on the water in terms of investment spend how do we look at look at channels that are working whether it's.
Pinterest for Rebecca R. R.
Following me ads for events as we start to start to see some progress I think.
We are willing and able to to be able to react to it and move much quicker.
Got it and then on the port congestion and supply chain inventories up 6.5% to $71.7 million.
How are you thinking about inventories go forward and then on the on taxes, what's your expectation there for the balance of the year. Thank you.
From an inventory perspective Dana.
I would expect us to.
<unk> seen the inventories.
Slightly up.
2.2.
Last year we.
We were from.
From a tax perspective.
Like we said, it's it's all non cash we should be we're projecting $2.8 million of noncash cash tax expense for the year.
Fluctuate.
Through the quarters, depending on whether we are positive from the operating income on a negative on the operating operating income perspective.
Got it and then promotional environment.
Yes.
On your AUR is I mean, we're seeing lean promotions, what are you seeing and how you're thinking about AUR.
<unk> going forward.
Look I think this year.
<unk> provides a reset.
And then the ability to be less promotional.
Then we probably have been historically.
And definitely dialogue about that.
With our partners about.
Where can we do with not just because it's an anniversary sale.
Does it have to be what it was is that have to be as deep as it was and I think everyone is cognizant because of some inventory issues.
That are out there that there isn't a necessity so much to have to be highly promotional upfront.
So.
Very encouraged for what the landscape looks like with them.
And 1 last thing Jack Rebecca Taylor any initial reads, there and what Youre seeing in your expectations go forward.
Look I think.
We're still in an evolving period with that end.
Excited very excited about about what the reception.
<unk> has been.
As we get more eyeballs on it and I think that will.
Momentum is building and we will continue to build all through this year.
Terrific. Thank you very much.
This concludes the Q&A session I will now turn the call back to Jack Stifel.
Thank you just wanted to thank everyone for being on the call today appreciate it and look forward to talking to you again at the end of the second quarter.
Have a great day.
This concludes today's conference. Thank you for joining you may now disconnect.
[music].
Sure.
[music].
Okay.
Okay.
[music].
Yes.
For the businesses.
[music].
Okay.
[music].
Okay.