Q4 2021 Vince Holding Corp Earnings Call
Yeah.
Hello, and welcome to today's <unk> Q4, 2021 earnings Conference call. My name is Elliot and I'll be coordinating your call thing.
If you would like to register a question during the presentation you may do so by pressing star followed by one on your telephone Keith.
Now I'd like to hand over to Amy Levy Vice President of Investor Relations. Please go ahead, when you're ready.
Thank you and good morning, everyone welcome to Vince holding Corp, 's fourth quarter fiscal 2021 result conference call hosting the call today, Jack Swagel, Chief Executive Officer, and Dave Stefko, Chief Financial Officer before we begin let me remind you that certain statements made on this call may constitute forward.
<unk> 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.
After the prepared remarks management will be available to take your questions for as long as time permit now I'll turn the call over to Jack.
Thank you Amy and thank you everyone for joining us this morning for a discussion on our fourth quarter and our fiscal year performance. We remain encouraged by the trends in our business in spite of the current macro headwinds impacting our industry.
Looking back at 2021 and through the first quarter of 2022, we're very pleased with the ongoing momentum in the Vince business, we continue to gain traction.
The direct to consumer.
And wholesale partner channels.
As we further refine our offerings and enhance the customer experience in terms of Rebecca Taylor and the team has made progress in developing a personal collection with floral prints and silhouettes, while maintaining the romantic aesthetic of the brand.
I would like to begin with review of the performance of the Vince brand.
In the fourth quarter direct to consumer sales recovered slightly above fiscal 2019 results. While we saw continued sales pressure in the challenging wholesale channel.
Our gross margin improved significantly to last year, despite higher freight costs.
The strength of the brand combined with our high quality product provides us with pricing power to offset cost headwinds, we remain extremely well positioned in the contemporary luxury category as we continue to evolve the assortment to meet the needs of our customers.
Looking back at her holiday season, we were very pleased with our performance as we rolled out promotions beginning in early November earlier in the quarter than usual.
Customers responded positively to our gifting assortments, particularly in this with sweaters as well as the Dressier styles ahead of the season and based on the success, we expect to repeat this cadence in 2022.
In addition to address your items of business in the fourth quarter was fueled by styles that prepared customers are returning to work and social activities outside the home.
We saw a very strong response to casually in leather and we'll build on these strengths.
Trend is supplementing her wardrobe has continued into the first quarter. Our spring collections introduced an array of fashion colors, which have been well received in the first quarter as we shift away from most of the neutrals.
Look I head.
Towards call ours have shown enthusiasm in our.
And Kevin Assortments as well as our new line of cold weather accessories for men and women by Anna Kal, our new licensing partners.
In addition, based on the success I mentioned earlier, we see a very big opportunity with sweaters outerwear, particularly leather in the back half of this year.
In men's we are extremely pleased with the continued momentum both in the wholesale channel and in our own stores and website.
While we are seeing excellent growth across these four categories Knits Morgans.
And in addition to sweaters, particularly performed well during the fourth quarter.
Thus far in the first quarter, we have seen a great response to Linden and paths, including geography, as we evidently has capitalized on the hybrid work from home environment.
Based on the impressive performance, we are seeing quarter. After quarter. We are confident that the men's category remains a significant growth opportunity and is a key strategic focus for the Vince brand.
In particular <unk>.
So distribution will remain a meaningful part of this growth strategy as we work to drive market share gains by broadening our customer reach.
Looking at store performance by region urban locations continue to outpace the store base.
That said during the quarter store productivity remained under pressure as a result of pharma crime related buying behavior.
We began to see this trend improve in March, especially in some of our resort vacation locations like Honolulu in Las Vegas.
E Commerce continues to show momentum, even as the mix shifts towards stores. We plan to continue to lean into E. Commerce is the consumer utilizes both channels.
We reopened our fifth Avenue store. This past week, we are excited to be reopening the stores given its high traffic location and the fact that it's the first of in store to offer extended sizes.
For the first half of the year, we plan to open a new store in the Boston Seaport.
And wholesale supply chain disruptions and delays remain a challenge, but our teams are working closely with our partners to get product into stores in a timely manner.
Like others. We believe these headwinds will continue at least through the first half of this year.
Overall, we remain pleased with the sell through at retail.
Which continues to demonstrate the demand for Vince as we remain the leading contemporary brand for our partners.
The reception of our branded Bloomingdales continues to be very strong, particularly driven by younger customers in urban markets, such as New York City and Los Angeles.
As mentioned on last quarter's call, we see an opportunity to grow this relationship and we will look to do so in a way that complements our existing wholesale footprint.
We are also excited to share that during the quarter. We reached an agreement in Saks Fifth Avenue, the launch of our collections on <unk> Dot com as well as select locations. This year.
SaaS represents another great partnership opportunity for events and we look forward to growing this relationship over time.
From a brand perspective, we have installed a disciplined approach to marketing throughout the funnel at both Vince and Rebecca Taylor.
We have been focusing on combining top of funnel marketing with performance marketing on in coding the message for each brand.
During the holiday shopping period, we launched clear holiday campaigns on social media for both Vincent Rebecca Taylor.
While these campaigns.
Mainly rooted in social we also used E mail and SMS and a very tactical manner to drive customer spoke to the website and into stores, while simultaneously increasing our brand awareness.
As a result of these marketing strategies, we have seen double the traffic and conversion from the fourth quarter of the previous year.
Another enhancement.
Hence initiative for events was our direct mail campaign, where we operate our most valuable customers.
With a gift with a gift card to drive them into stores and onto the web site.
We will use direct marketing more in the future.
During the spring season, we strategically positioned the Vince brand.
Using messaging focused on living life. Your way for example, we introduced a series called crafted with Vince This past spring.
Which takes artist and build stories around each of their lives and how they fit Vince close into these stores.
The <unk> event is and always has been quiet contemporary luxury.
Type of measure that because the June daily life.
Our customers are highly affluent and as such they truly appreciate the quality of the Vince brand.
In order to expand our customer base, a key focus for us has been to grow brand awareness and loyalty across generations, particularly to the younger customer.
We introduced the introduction of a considered social campaign.
The use of our Influencer strategy will continue to be critical to both Vince and Rebecca Taylor as we aim to increase awareness and drive conversion.
As mentioned last quarter, we completed the base implementation of our point of sale system for the Vince brand further enhancing our omni channel capabilities, our ship from store capability, which makes more efficient use of our omnichannel inventories has been a huge success and it's become an instrumental piece a R E.
Commerce business.
During the fourth quarter ship from store accounted for 14% of total ecommerce demand quarter to date and more than 25% of our online sales are being crypto through stores, allowing us to ship a much larger percentage of demand and we were a year ago.
In addition to our ship from store capability buy online pick up in store, which we launched at the end of the fourth quarter has started to show encouraging results as it allows for more speed to market in terms of where product is coming from.
We expect both ship from store and focus.
To be even more refined in the second half of this year and additionally, as seeing strengthened our E mail marketing strategy, which is driving conversion in stores.
Looking forward, we will continue to focus on strengthening our omni channel capabilities to drive Vince holding corp's digital transformation.
We will be re platforming the front end platforms of both Vince and Rebecca Taylor starting in the second half of 2022.
We have selected Salesforce, our current partner for these new platforms.
Have them in place by the end of the year.
Subsequent to that we will install a true customer data platform CDP.
Which will further enhance our targeted marketing and personalization capabilities.
Turning to our international business I'd like to start by acknowledging the deeply troubling situation that is happening in the Ukraine.
All of US had been Stanton standard support with the people of Ukraine and to show the support we have made a $50000 donation to Ukrainian relief efforts.
In addition, we have created a selection of accessories with our partner <unk> <unk>.
Reining in refugee support to further raise funds for this cost.
All of that said our business in eastern Europe , It's extremely small and we have now stopped that business.
We are confident we can make up this exposure in eastern Europe between our Spanish.
Australia and Chinese businesses in China, we are excited to announce that we had in hone.
Wholesale relationship, which will allow us to open our first store in Shanghai and launch on on web and the back half of this year.
Alongside that we are still in conversations with our joint venture partner to fully launch the Vince brand in China, We look forward to providing you with an update on future calls as these conversations progress.
Okay.
We're all we are very pleased with the performance of the Vince brand over the past year and remain extremely confident in its future.
Our teams will continue to work hard to take advantage of all of the opportunities ahead.
As we drive market share gains and the contemporary luxury category.
Turning to Rebecca Taylor, we are making progress and heading in the right direction.
As we grow the brand a key focus for the team has been establishing healthy.
Margin healthy strategies through full price selling.
Similar to the Vince brand Rebecca has been met with no resistance to price increases we are encouraged by the reception of our spring assortment, which extends the spring 2021 relaunch.
And our recent fall and winter Assortments.
Continuing to address.
More of her lifestyle needs with a particular focus on building out occasion based items that can be dressed up or down to adjust to a changing needs.
During the first quarter, we have seen a great response delays crochet and prints thus far.
Okay.
In wholesale we.
<unk> seen success by leveraging relationships with existing partners. We believe there is a growing white space in this category that we can take advantage of to drive market share gains.
Looking ahead, we re launching a test of six select Dillard stores this coming fall.
We are encouraged by the performance of our west coast stores, including our new store.
Springs, as well as our outlets in Carlsbad in Livermore, California.
During the fourth quarter, we opened three full price stores and one outlet for Rebecca Taylor.
As a reminder, we currently have 18, Rebecca Taylor stores 10 of which are full price in it of which our outlet stores.
As we continue to increase our marketing efforts, we are seeing the results start to meet our expectations.
Our social engagement fourth quarters sequentially increased approximately 42% for.
For spring, we are taking the foundation of the Rebecca brand and embedding it into the concept of travel around the world.
Similar events, our messaging focuses on demonstrating how the brand is appropriate wherever you go as the world starts to regain the need for occasion based items.
Based on the successful partnership <unk> had with American Express for several years, we made it a focus for Rebecca Taylor and the first quarter and are very pleased with the results.
Overall, we will continue to lean into a similar strategy strategic plan.
Two what drove success advance as we redefined our merchandising assortment and enhance our brand messaging.
In conclusion, our performance reflects the strength of our distinct fashion brands.
Despite experiencing extraordinary headwinds since I joined Vince holding a year ago, we continue to impressively manage through these challenges, while making progress on our three year plan that we announced in January .
As they watched the hard work the good hard work of our teams put in quarter after quarter.
I continue to be more excited about the future in.
In 2022, we will continue to use a disciplined approach while executing on key strategies to drive future growth for our shareholders.
With that I will turn it over to Deb.
Okay.
Okay.
Thanks Jack.
I would like to reiterate how pleased we are with the trends in our business in spite of the macro headwinds as we remain focused on driving our key strategies.
Looking back on 2021, we have made impressive progress on both refining and executing our key strategy strategic initiatives.
Simultaneously navigating through unprecedented challenges in the overall environment.
We have worked we have worked very closely with our wholesale channel partners landlords and vendors all of whom have been great partners during such an uncertain China.
Looking ahead into 2022, we see meaningful opportunities to grow both of our distinct fashion brands as we capitalized on the strong foundation, we have continued to build over the past few difficult years.
Total company net sales for the fourth quarter increased 32% to $99 million compared to $75 million in the fourth quarter of fiscal 2020.
Florida, Vince brand fourth quarter consolidated net sales increased 26% to $87 million compared to $70 million in the same prior year period.
Our Vince direct to consumer segment sales increased 45% to $44 million in the fourth quarter and exceeded 2019 levels driven by our E Commerce business, which benefited from the ship from store capabilities provided by our new Pos system.
In stores, we saw improved traffic trends versus 2020, particularly in locations in our urban markets, which outpaced the store base in the quarter.
In our wholesale segment net sales increased 10%.
We approached <unk> 2019 sales levels and continued to outperform peers within the contemporary luxury category.
On the heels of this strong performance, we are thoughtfully expanding our distribution with the addition of targeted Saks locations.
Rebecca Taylor and Parker combined net sales increased 121% to $11 7 million as compared to the same period last year.
This was primarily driven by sales growth of Rebecca Taylor and wholesale channel as well as nine new store openings for the brand since the end of last year.
Gross profit in the fourth quarter was $43 6 million or <unk>, 44% of net sales.
This compares to $27 6 million or 36, 9% of net sales in the fourth quarter of last year.
The 710 basis point increase in gross margin rate compared to the fourth quarter of fiscal 2020 was primary primarily due to lower year over year adjustments to inventory reserves and lower promotional activity and a direct consumer channel.
Partially offset by transportation costs related to supply chain challenges.
Selling general and administrative expenses in the quarter were $41 8 million or 42, 2% of net sales as compared to $31 5 million or 42, 1% of net sales for the fourth quarter of last year.
The increase in SG&A dollars as a result of higher payroll and compensation expense increased investments in marketing and higher occupied occupancy costs due to landlord rent concessions we received in the prior year.
Operating operating income for the fourth quarter was $1 8 million compared to a loss of $3 9 million in the same period last year.
Income tax expense for the fourth quarter was $2 8 million as a result of noncash deferred tax expense created by the current period amortization.
Have indefinite lives goodwill and intangible assets for tax, but not for book purposes.
This noncash book versus tax impact on income taxes will continue in 2022 as well.
Net loss for the fourth quarter was $2 7 million or <unk> 23 loss per share compared to a net loss of $7 4 million or a <unk> 62 loss per share in the fourth quarter last year.
Moving now to the balance sheet.
Borrowings under our debt agreements totaled $92 7 million.
We ended the quarter with availability of $40 6 million under our under our revolving credit facility.
Moving to inventory net inventory was $78 6 million at the end of the fourth quarter as compared to $68 2 million at the end of the fourth quarter last year.
In January of 2022, we received a more normal flow of spring 2022 shipments while last year, we were working through excess inventory from prior seasons and received the majority of our new spring shipments in the first quarter of 2021.
Due to shipping delays associated with the global supply chain issues.
Now I would like to provide guidance for the first first quarter of fiscal 2022 as well as provide some additional context regarding our outlook for the remainder of the year.
For the first quarter, we expect total company net net sales to approximate $77 million exceeding pre COVID-19 revenue levels.
Operating loss is expected to be between $6 million and $8 million, reflecting a decline in gross margin year over year, partially offset by SG&A expense leverage.
The increased gross margin pressure as a result of higher markdowns in our duty, our DTC channel as well as product and transportation cost inflation experienced during the first quarter.
Looking beyond our first quarter guidance, we increased orders of pre salt and fall assortment sourced assortments, which we believe will support the relaunch of da Vinci E Commerce platform.
And associated marketing strategies expected elevated demand.
In addition, we increased replenishment inventory following a shortfall last year.
These higher inventory levels should help to mitigate the impact of extended shipping times related to factory shutdowns and a temporary port closure in Shanghai.
As a result of these actions, we expect to see higher inventory levels at the end of the second quarter.
In addition to this we have also moved spring 2022 seasonal assortments into the off price channel earlier than we have historically done to ensure we will maintain a balanced composition of the inventory.
We anticipate that these actions will enable us.
To be comparatively less dilutive with markdowns in the second half of the year than in the first half.
This combined with further price increases that will begin to take effect at the end of the second quarter and more fully in the back half of the year should help to mitigate the impact of continued product and transportation cost inflation.
For fiscal 2022, we expect capital expenditures net of tenant allowance to be below 2021, and more similar to 2020 with a focus on digital investments as we can continue to drive our digital transformation.
Looking ahead, we will continue to focus on executing our key strategies to drive growth in our business.
This concludes my comments regarding our fourth quarter, we will now take your questions.
Great.
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Our first question today comes from Dana Telsey from Telsey Advisory Group. Your line is open.
Good morning, Jack David Amy Nice to see the progress.
Couple of things on the first on the supply chain discussions.
How have you diversified whether it's sourcing bringing in goods how law any sense of timing in terms of how long you expect things to be at these levels on any improvement in the second half of the year.
Correct any of the China Lockdowns are they impacting you and then just on the guidance for the first quarter. Dave that you had mentioned can you just expand a little bit on the.
Inventory levels in terms of markdowns for price.
You are seeing in terms of the fashion product and the basic product and how you are sorting it. Thank you.
Dana I'll start Hey, Dana this is Jack I will start it off.
In terms of how we're diversifying.
We're leaning in a little harder to some of our vendors.
Categories that are outside of China, we're doing more and more business in Peru, and we are doing more business domestically as well. In addition to that we are testing and sampling and looking to do more product.
In Europe , and Turkey in Portugal.
That's all in gestation that hasnt really come to fruition, but clearly our receipts coming out of South America and domestically are starting to grow.
We are finding we continue to find new ways to move product out of China like many others, we're being as creative as we can be.
It's somewhat of a game of whack, a mole as things move around.
Have gone from.
In many cases from air to now looking at fast boats.
I think that there is some relief there but.
It's morphing it changes day to day and.
The environment is very difficult to predict beyond this week.
So in terms of guidance I would be remiss to give.
To give you anything further out because it continues to change we are aware that over 3 million people that have been tested in Beijing. Just this week and are waiting to see what that's going to mean.
In terms of product and product that hasn't affected us yet, but we're also kind of holding our breath on that.
Dave I would add to that game.
Yes, I would add to that that.
We have not we have not seen the supply chain challenges.
<unk>.
Slow us down to this point, we have we have spent money to air items.
When you look at that was going on in Shanghai.
We have moved items.
Via boat from Shanghai to other.
Other ports or air or air strips too.
Because of the difficulty to truck items across the border and so we've been responsive and investing.
When you talk about second quarter and some of the things we've done from an inventory perspective.
That's why we've taken something like replenishment and increased order.
The quantities.
No it make sure that we have product as we get into the back half of the year.
In case, the supply chain challenges could continue.
Got it.
And price increases what's the magnitude of price increases that you've taken what are you expecting to take go forward and is it on the whole assortment in both Vince and Rebecca Taylor or is it more one versus the other.
It's pretty much across both brands and it's pretty pervasive across the entire collections.
I think we were.
We were hopeful and fall as we were pricing the spring that we had taken enough and I think we've been a little bit more aggressive as we look towards fall. We are seeing significant cost of goods increases as we as we build product for the fall and beyond.
And.
Are looking for looking for the light at the end of the tunnel here, where it starts to slow down, but but candidly, we will see them across the board in talking to our.
Through our wholesale partners.
They're seeing the same thing from other resources as well.
Got it.
And it also sounds like wholesale is increasing how many more bloomingdales stores. How many sacks are you looking to go into and do you manage the pricing there did they manage it in terms of promotions, how do you expect that to work.
With bloomingdale's were hitting a few doors at just a handful.
But candidly the.
The productivity per door is the thing that we think we can we can really grow the most.
See it too in terms of their ownership the depth of product.
And we're very very pleased with just how proactive this relationship has been.
Yes.
Likewise with <unk>, we're going to go in there with a handful of stores and ecommerce.
And really work with them as a partner in terms of having us having.
Having this having a lot of say in terms of of how we are positioned from a pricing standpoint.
Got it and it sounds like Jack you alluded to the fact that it seems like spring merchandise.
It's Dave reopening and social occasion dressing youre seeing the benefit and any just weighed frame or talk about how spring has been received.
Yes.
Vince it's been a lot about color and it has been incredibly well received in all channels.
Whether it's wholesale retail or e-commerce .
Same in Rebecca Taylor special really matters, and Rebecca Taylor, which is why I emphasized things like crochet.
And the more hand than it looks.
That clearly is risk resonates. So we include the Rebecca Taylor customer is and we're just trying to find more ways to throw out like that.
Thank you.
Sure.
We have no further questions I'll now hand back to Jack Russell for closing remarks.
Great. Thank you. This concludes our fiscal 2021 results call. Thank you for your time and your attention to this we will be updating you. All on final Q1 2022 results in June .
You for your time and have a great day.
Today's call is now concluded. Thank you for your participation you may now disconnect your lines.
Yeah.
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