Q2 2025 Vince Holding Corp Earnings Call
Okay.
Okay.
Okay.
Okay.
Okay.
Okay.
Okay.
Okay.
Okay.
Okay.
Okay.
[music].
Okay.
Okay.
Okay.
Okay.
Okay.
Okay.
Okay.
[music].
Okay.
Thank you.
Okay.
Okay.
Okay.
Okay.
Yes.
Okay.
Okay.
Okay.
Okay.
Okay.
[music].
Okay.
Yeah.
Okay.
Okay.
Okay.
[music].
Unknown Attendee: Good afternoon. Thank you for attending the Vince 2nd quarter 2024 Earns Conference call.
Speaker Change: Good afternoon. Thank you for attending events second quarter 2024 earnings Conference call. My name is Victoria and I'll be your moderator today, all lines will be needed during the presentation portion of the call what's the opportunity for questions and answers at the end.
Victoria: My name is Victoria, and I'll be a moderator today. All lines will be muted during the presentation portion of the call, with the opportunity for questions and answers at the end.
Unknown Attendee: If you would like to ask a question, please press star followed by one on your toes and keep at.
Speaker Change: If you'd like to ask a question. Please press star followed by one on your telephone keypad I would now like to pass the conference over to your host Okie Dokie. Thank you you May proceed at Hugo.
Victoria: I would now like to pass the conference over to your host, Akiko Kuma. Thank you.
Akiko Kuma: You may proceed, Akiko. Thank you. And good afternoon, everyone. Welcome to Vince Holding Corp. 2nd Quarter Fiscal 2024 Results Conference Call.
Speaker Change: Thank you and good afternoon, everyone welcome to Vince holding Corp, second quarter fiscal 'twenty 'twenty four results conference call hosting the call today is Dave Stefko interim Chief Executive Officer, and Joseph Pesky, Chief Financial Officer before we begin let me remind you that certain.
Akiko Kuma: Most in the call today is Dave Stefko, Interim Chief Executive Officer and John Szczepanski, Chief Financial Officer. Before we begin, let me remind you that certain statements made on this call may constitute four looking statements, which are subject to risks and uncertainties that could cause actual results defer 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.
Speaker Change: Payments 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.
Speaker Change: 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.
Akiko Kuma: 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 that the company presents today are non-GAAP measures. Discussions of these non-GAAP measures and information on reconciliation systems to their most comparable GAAP measures are included in today's press release and related schedules, which are available in the investor section of the company's website at investors. Vince.com.
Speaker Change: And in today's discussion the company is presenting its financial results in conformity with GAAP and on an adjusted basis. The adjusted results that the company presents today are non-GAAP measures discussions of these non-GAAP measures and information and reconciliations of them.
Speaker Change: 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 web site at investors that Vince Dot com.
David Stefko: Now I'll turn the call over to Dave. Thank you, Akiko. And thank you, everyone, for joining us this afternoon. I will begin with a review of highlights from our second quarter performance before turning the call over to John to discuss our financial results in outlook in more detail. Overall, we are pleased with our second quarter results. We delivered sales growth of nearly 7 percent and adjusted operating margin of 1.5 percent, driven by 80 basis points of gross margin expansion and ongoing discipline expense management. These results exceeded our guidance as we benefited from the timing of wholesale orders, which shipped earlier than expected.
Now I'll turn the call over to Dave.
Speaker Change: Yeah.
Dave Stefko: Thank you Diego and thank you everyone for joining us this afternoon.
Dave Stefko: I will begin with a brief review of highlights from our second quarter performance before turning the call over to John to discuss our financial results and outlook in more detail.
Speaker Change: Overall, we're pleased with our second quarter results we.
Speaker Change: We delivered sales growth of nearly.
Speaker Change: 7%.
Speaker Change: And adjusted operating margin of one 5% driven by 80 basis points of gross margin expansion and ongoing disciplined expense management.
John: These results exceeded our guidance as we benefit benefited from the timing of wholesale orders, which shipped earlier than expected.
David Stefko: That said, excluding the benefit from these earlier shipments, our underlying wholesale business was solid and performed in line with our expectations as we have now normalized our off-priced business and are seeing strong demand across our key partners. The strength of our wholesale business helped to offset softer performance in our direct-to-consumer business, which continued to be impacted by our pullback and promotional activity across our store and e-commerce channels, as well as a lower mix of markdown units due to tight inventory management and fewer stores compared to the prior year. This was particularly felt in the latter part of the quarter, which is a typical sale period across retail, and customers are less inclined to pay full price for product, especially ahead of the fall season.
Speaker Change: That said, excluding the benefit from these earlier shipments are underlying wholesale business was solid and performed in line with our expectations as we have now normalized our off price business and we're seeing strong demand across our key partners.
Speaker Change: The strength of our wholesale business helped to offset softer performance in our direct to consumer business, which continued to be impacted by a pullback in promotional activity across our store and e-commerce channels as.
Speaker Change: As well as a lower mix of markdown units due to tight inventory management and fewer stores compared to the prior year.
Speaker Change: This was particularly felt in the latter part of the quarter, which is a typical sale period across retail and customers are less inclined to pay full price for product, especially ahead of the fall season.
David Stefko: Despite seeing healthier traffic trends in the quarter, our focus on maintaining a strong full-price assortment weighed on conversion during the period. However, taking into account these dynamics, we are pleased to continue to drive a year-over-year mid-single digit growth rate in our full-price customer file in the quarter. During the quarter, we saw strength across both our women's and men's business businesses. In women, customers gravitated toward our sweaters and our knit tops and bottoms. In addition, our men's customer continued to respond well to our linen program as well as our knit t-shirts, as he shops with a much more buy-now-wear-an-hour mindset.
Speaker Change: So despite seeing healthier traffic trends in the quarter, our focus on maintaining a strong full price assortment weighed on conversion during the period.
Speaker Change: However, taking into account. These dynamics, we are pleased to continue to drive a year over year mid single digit mid single digit growth rate in our full price customer file in the quarter.
Speaker Change: During the quarter, we saw strength across both our women's and men's business businesses.
Speaker Change: In womens customers gravitated toward our sweaters and knit tops and bottoms.
Speaker Change: In addition, our men's customer continued to respond well to our lithium program as well as our net T shirts as she shops with a much more buy now wear now mindset.
David Stefko: We are looking forward to continuing to expand our men's business, and in the fall season, we are excited for our newly launched enhanced bondage program, which highlights an elevated product offering, a broader range of fits with superior talent fabrics at a competitive retail price.
Speaker Change: We are looking forward to continuing to expand our men's business and in the fall season. We are excited for our newly launched enhanced bodies program, which highlights and elevated product offering a broader range of fits with with superior Italian fabrics, and a competitive retail price.
David Stefko: This was the first quarter for events where we had men's in all Nordstrom doors. We are excited by the good response to both our men's and women's products during the annual anniversary sale, which drove record results for us this year. Once again, Vince was once mentioned by Nordstrom's on its latest earnings call as one of its strong brands in women's apparel this past quarter. Nordstrom continues to be a strong partner, and together we're working closely on initiatives to enhance the Vince experience in their stores. Along with our relationship with Nordstrom, we are continuing to see solid demand across other key wholesale partners and are pleased to be in a healthier inventory position to better fulfill demand and capitalize on replenishment orders in season.
This was the first quarter for events, where we had none and all Nordstrom doors.
Speaker Change: We're excited by the good response to both our men's and women's products during the annual anniversary sale, which drove record results for us this year.
Speaker Change: Once again, Vince was mentioned by Nordstrom's on its latest earnings call as one of its strong brands in women's apparel this past quarter.
Speaker Change: North Northern continues to be a strong partner and together, we're working closely on initiatives to enhance the guest experience in their stores.
Speaker Change: Along with our relationship with Nordstrom, we are continuing to see solid demand across other key wholesale partners and are pleased to be in a healthier inventory position to better fulfill demand and capitalized on replenishment orders in season.
David Stefko: As we enter the fall season, we lean into key franchise categories for Vince that we have highlighted in our future heritage campaign, which was recently highlighted in Women's Wear Daily and Forum. The campaign features letters and catchmers as well as Swade, Tweed, and Cloud patterns. Through this campaign, we are continuing to invest into more top of final marking as we look to amplify our brand awareness. In addition to our brand marketing investments, as we head into the second half of the year, we are working to drive customer acquisition via new traffic driving and target audience campaigns.
Speaker Change: As we enter the fall season, we lean into key franchise categories for events that we have highlighted in our future Heritage campaign, which was recently highlighted in women's wear daily and Forbes.
The campaign features leathers in Kashmir, as well suede, Tweed and cloud patterns.
Speaker Change: Through this campaign, we are continuing to invest into more top of funnel marketing as we look to amplify our brand awareness.
Speaker Change: In addition to our brand marketing investments as we head into the second half of the year, we are working to drive customer acquisition, the new traffic driving and targeted audience campaigns.
David Stefko: We have plans to continue to enhance our customer acquisition efforts through initiatives focused on increasing lifetime value across our customer base, especially across our top 10% of customers who represent nearly 40% of demand across full-price directed consumers. The teams are finalizing the plans this month with respect to this initiative, so we're well positioned to launch ahead of the holiday quarter. As we have moved into fall, we're also seeing a greater engagement with our customer across creek key marketing channels. Our fall launch teaser was our top performing social media posts for August. Our email, highlighting our fall lookbook, outperformed last year's message, and our fall direct significantly outperformed last year's mailing as the fall collection is resonating with customers.
Speaker Change: We have plans to continue to enhance our customer acquisition efforts through initiatives focused on increasing lifetime value across our customer base, especially across our top 10% of customers, who represent nearly 40% of demand across full price direct to consumer.
Speaker Change: It seems we're finalizing the plans this month with respect to this initiative. So we are well positioned to launch ahead of the holiday quarter.
Speaker Change: As we have moved into fall, we're also seeing a greater engagement with our customer across Creek key marketing channels.
Speaker Change: Our fall launch Cheeser was our top performing social media posts for August.
Speaker Change: Our our email highlighting our fall look book outperformed last year's message and our fall direct mail significantly outperformed last year's mailing as the fall collection is resonating with customers.
David Stefko: As we look ahead, beyond this fall, we continue to see a long runway for growth for events through ongoing customer acquisition, growth of our men's business, new store openings, and international expansion. With respect to our international business, we're seeing solid sales growth from our first London store and we're evaluating potential opportunities to expand in that regional retirement. We continue to see opportunities within Europe to expand our presence, but we will be taking a more measured approach to the rest of the world as we're navigating a dynamic environment, particularly in China. We have recently made the decision, along with our operating partner, to pause our operations in China and focus on efforts in regions that have greater productivity and profitability opportunity at the moment.
Speaker Change: As we look ahead beyond this fall we continue to see a long runway for growth for Vince through ongoing customer acquisition growth through our men's business growth of our men's business, new store openings and international expansion.
Speaker Change: With respect to our international business, we're seeing solid sales growth from our first London store and are evaluating potential opportunities to expand in that region over time.
Speaker Change: We continue to see opportunities within Europe to expand our presence, but we will be taking a more measured approach to the rest of the world as we are navigating a dynamic environment, particularly in China.
Speaker Change: We have recently made the decision along with our operating partner to pause our operations in China and focus on efforts in regions that have greater productivity and profitability opportunity at the moment.
David Stefko: This decision does not have a material impact on our financial results or outlook, and we expect the two test stores will be closed before the end of the fiscal year. Our focus today is to position events for long term sustainable growth, and we believe through the actions and strategies we are executing, we are delivering on this objective. A key element of this progress is our transformation plan, and through our team's efforts at the end of the second quarter, we are ahead of our mid-year fiscal 2024 target. In addition to our work, we are also maintaining a strong relationship with Authentic through our strategic partnership in ABG events.
Speaker Change: This decision does not have a material impact on our financial results or outlook and we expect it to test stores will be closed before the end of the fiscal year.
Speaker Change: Our focus today is to position Vince for long term sustainable growth and we believe through the actions and strategies. We are executing we are delivering on this objective.
Speaker Change: A key element to this progress is our transformation plan and through our team's efforts at the end of the second quarter. We are ahead of our mid year fiscal 2024 target.
Speaker Change: In addition to our to our work we're also maintaining a strong relationship with authentic through our strategic partnership in APG events.
David Stefko: ABG Events recently launched its Peerless men's soothing collection under the Vince label and select wholesale partners and expects to launch its Centric brand collection of handbags, belts, and small leather goods under the Vince label beginning in 2025. In closing, we are pleased with our first half results and the progress we are making across our businesses.
APG, Vince recently launched its peerless mens suiting collection under the Vince label and select wholesale partners and expects to launch its centric brands collection of handbags belts and small leather goods under the Vince label beginning in 2025.
In closing.
Speaker Change: We are pleased with our first half results and the progress we're making across our businesses.
David Stefko: While we have seen some improvement in trends in our direct consumer channel into September, we believe it is prudent to update our guidance for the year to reflect a more cautious top-line outlook given the increasingly uncertain environment with respect to consumer spending and the potential impact from the shorter holiday shopping season, as well as the upcoming November election. That said, our wholesale business continue to remain on track with our expectations, and we are very pleased to raise our profitability outlook, despite the change in our overall top-line expectations. I want to thank all of our teams as they continue to execute and deliver on our objectives while maintaining a strong focus on strengthening our relationships with our customers and wholesale partners.
Speaker Change: While we have seen some improvement in trends in our direct consumer channel into September. We believe it is prudent to update our sales guidance for the year to reflect a more cautious top line outlook given the increasingly uncertain environment with respect to consumer spending and the potential impact from the shorter holiday shopping season as well.
Speaker Change: As the upcoming November election.
Speaker Change: That said our wholesale business continues to remain on track with our expectations and we are very pleased to raise our profitability outlook. Despite the change in our overall top line expectations.
Speaker Change: I want to thank all of our teams as they continue to execute and deliver on our objectives.
Speaker Change: While maintaining a strong focus on strengthening our relationships with our customers and wholesale partners.
David Stefko: We have strong confidence in the future for events and our commitment to continuing to position Vince for long-term success. Our board recently approved a stock repurchase program, and as John will review, we intend to continue to be disciplined stewards of capital with a strong focus on investing in our business, executing on our operating model, and delivering value to all our stakeholders.
Speaker Change: We have strong confidence in the future for events and are committed to continuing to position <unk> for long term success.
Speaker Change: Our board recently approved a stock repurchase program and as John will review, we intend to continue to be disciplined stewards of capital with a strong focus on investing in our business executing on our operating model and delivering value to all our stakeholders.
John Szczepanski: I will now turn it over to John to discuss our financial results and outlook in more detail. John?
I'll now turn it over to John to discuss our financial results and outlook in more detail.
Speaker Change: John.
John Szczepanski: Thank you, Dave, and good afternoon, everyone. As they have discussed, we are pleased with our overall second quarter results as we delivered sales and adjusted operating margins about our guidance expectations, driven by earlier than expected shipments in our wholesale channel, as well as ongoing execution of an improved full-priced business, disciplined expense management, and execution of our transformation plan objectives. Turning now to our results in more detail, total company net sales for the second quarter increased 6.8% to 74.2 million dollars compared to $69.4 million in the second quarter of fiscal 2023, which included an immaterial amount of sales from the Rebecca Taylor and Parker segment, which has been wound down.
John: Thank you, Dave and good afternoon, everyone.
Speaker Change: As Dave discussed we're pleased with our overall second quarter results as we delivered sales and adjusted operating margin above our guidance expectations driven by earlier than expected shipments in our wholesale channel as well as ongoing execution of an improved full price business disciplined expense management and execution of our <unk>.
John: Transformation plan objectives.
Speaker Change: Turning now to our results in more detail.
Speaker Change: Total company net sales for the second quarter increased six 8% to $74 $2 million compared to $69 $4 million in the second quarter of fiscal 2023.
Speaker Change: Which included an immaterial amount of sales from the Rebecca Taylor and Parker segment, which has been wound down.
John Szczepanski: The year-over-year increase in total company net sales was driven by a 29.6% increase in our wholesale segment as we capitalized on our inventory availability to meet demand, resulting in earlier than expected shipments at the end of the quarter. Excluding the benefit from these earlier shipments, our total sales results would have been more in line with the lower end of our guidance expectations, as our underlying wholesale channel performed in line with our expectations, as Dave reviewed. This performance was partially offset by an 18.1% decline in our direct-to-consumer segment, which was impacted by the closure of two full-priced stores and three outlet stores, as well as the temporary closure of one of our full-priced stores due to renovations.
Speaker Change: The year over year increase in total company net sales was driven by a 29, 6% increase in our wholesale segment as we capitalized on our inventory availability to meet demand, resulting in earlier than expected shipments at the end of the quarter.
Speaker Change: Excluding the benefit from these earlier shipments our total sales results would have been more in line with the lower end of our guidance expectations as our underlying wholesale channel performed in line with our expectations as Dave reviewed.
Speaker Change: This performance was partially offset by an 18, 1% decline in our direct to consumer segment, which was impacted by the closure of two full price stores and three outlet stores as well as the temporary closure of one of our full price stores due to renovations.
John Szczepanski: Store closures negatively impacted direct-to-consumer sales by 440 basis points in the period, and the remainder of the year-over-year decline was primarily attributed to lower markdown sales, given our ongoing efforts to pull back on promotions, despite being a typical sale period for the industry, particularly in the later part of the quarter.
Speaker Change: Store closures negatively impacted direct to consumer sales by 440 basis points in the period.
Speaker Change: And the remainder of the year over year decline was primarily attributed to lower markdown sales given our ongoing efforts to pull back on promotions, despite being a typical sale period for the industry, particularly in the later part of the quarter.
John Szczepanski: Schumer. Excluding the impact from store closures, we continued to see stores outperform e-commerce and attribute some of this to a greater impact from the pullback on promotions on the online business compared to stores. As they've noted, we're pleased with the full price business we are driving. Gross profit in the second quarter was $35.1 million, or 47.4% of net sales. This compares to $32.3 million or 46.6% of net sales in the second quarter of last year. The increase in gross margin of rate was driven by approximately 510 basis points related to lower promotional activity, lowered discounting, higher pricing, and lower freight costs, driven in part by actions related to our transformation plan.
Speaker Change: Excluding the impact from store closures, we continue to see stores outperform ecommerce and attribute some of this to a greater impact from the pullback on promotions on the online business compared to stores.
Speaker Change: As Dave noted, we're pleased with the full price business, we are driving.
Speaker Change: Gross profit in the second quarter was $35 1 million or <unk> 47, 4% of net sales.
This compares to $32 3 million or 46, 6% of net sales in the second quarter of last year.
Speaker Change: The increase in gross margin rate was driven by approximately 510 basis points related to lower promotional activity lower discounting higher pricing and lower freight costs driven in part by actions related to our transformation plan.
John Szczepanski: These factors were partially upset by 220 basis points unfavorable impact from Channel Next and royalty expenses of 180 basis points associated with the licensing agreement with Authentic Brands Group. Selling, general and administrative expenses in the quarter were $34 million, or 45.8% of net sales, as compared to $31.5 million, or 45.4% of net sales, for the second quarter of last year. The increase in SG&A dollars was primarily driven by a $2 million increase in rent and occupancy costs, mainly due to lease adjustments in the prior year. In addition, during the quarter, we incurred $1.8 million in severance and incentive compensation expenses that we did not incur in the prior year period.
Speaker Change: These factors were partially offset by 220 basis points unfavorable impact from channel mix.
Speaker Change: And royalty expenses of 180 basis points associated with the licensing agreement with authentic brands group.
Speaker Change: Selling general and administrative expenses in the quarter were $34 million or 45, 8% of net sales as compared to $31 5 million or 45, 4% of net sales for the second quarter of last year.
Speaker Change: The increase in SG&A dollars was primarily driven by a $2 million increase in rent and occupancy costs, mainly due to lease adjustments in the prior year.
In addition, during the quarter, we incurred $1 8 million in severance and incentive compensation expenses that we did not incur in the prior year period.
John Szczepanski: These costs were partially upset by $2 million of expense favorability compared to the prior year due to transaction-related expenses related to the ABG deal. Given the complex year-over-year dynamics with the timing of the ABG transaction, the wind down of the Rebecca Taylor business, the severance expenses incurred this year, and the reestablishment of our incentive compensation program. It is worth noting that, excluding these impacts, we leveraged our core operating course cost structure in Q2 due to our ongoing discipline expense management. Operating income for the second quarter was $1.1 million compared to an operating income of $32.9 million in the same period last year.
Speaker Change: These costs were partially offset by $2 million of expense favorability compared to the prior year due to transaction related expenses related to the AVG deal.
Speaker Change: Given the complex year over year dynamics with the timing of the AVG transaction, the wind down of the Rebecca Taylor business. The severance expenses incurred this year and the reestablishment of our incentive compensation program.
Speaker Change: It is worth noting that excluding these impacts we leveraged our core operating cost structure in Q2 due to our ongoing disciplined expense management.
Speaker Change: Operating income for the second quarter was $1 1 million compared to an operating income of $32 9 million in the same period last year.
John Szczepanski: Following the completion of the sale of 75% of the dense brand IP to Authentic Brands Group in the second quarter of fiscal 2023, the company realized the gain of $32 million and incurred transaction-related expenses of $2 million. Excluding these one-time items, adjusted operating income was $2.8 million. Adjusted operating margins declined approximately 260 basis points compared to the prior year, driven primarily by the favorability from lease adjustments in the prior year period of about 280 basis points, as well as a 240 basis point impact from severance expenses related to actions taken to streamline our leadership structure and increases in reestablishing our incentive compensation program.
Speaker Change: Following the completion of the sale of 75% of the Vince brand IP to authentic brands group in the second quarter of fiscal 2023, the company realized a gain of $32 million and incurred transaction related expenses of $2 million.
Speaker Change: Excluding these onetime items adjusted operating income was $2 $8 million.
Speaker Change: Adjusted operating margin declined approximately 260 basis points compared to the prior year driven primarily by the favorability from lease adjustments in the prior year period of about 280 basis points as well as a 240 basis point impact from severance expenses related to actions taken to streamline our leadership.
Speaker Change: <unk> and.
Speaker Change: An increase increases in reestablishing our incentive compensation program.
John Szczepanski: In addition, our adjusted operating margins benefited from gross margin expansion, despite incurring 170 basis points related to royalties.
Speaker Change: In addition, our adjusted operating margin benefited from gross margin expansion, despite incurring a 170 basis points related to royalty expenses.
John Szczepanski: the Expenses. This performance exceeded our expectations as we diligently managed expenses during the period. Net interest expense for the second quarter decreased to $1.7 million compared to $4.1 million per prior year. The decrease was primarily driven by expenses related to refinancing transactions in the prior year, as well as the year-over-year reduction in debt. Income tax benefits for the second quarter was $0.8 million, due to the reversal of the $0.8 million of ordinary tax expense recorded during the first quarter of fiscal 2024, as the company has year-to-date ordinary pre-tax losses for the interim period and is anticipating annual ordinary pre-tax income for the year.
Speaker Change: This performance exceeded our expectations as we diligently managed expenses during the period.
Speaker Change: Net interest expense for the second quarter decreased to $1 $7 million compared to $4 1 million the prior year.
Speaker Change: The decrease was primarily driven by expenses related to refinancing transactions in the prior year as well as the year over year reduction in debt.
Speaker Change: Income tax benefit for the second quarter was <unk> $8 million.
Speaker Change: Due to the reversal of the zero point $8 million of ordinary tax expense recorded during the first quarter of fiscal 2024 as the company has year to date ordinary pretax losses for the interim period and is anticipating annual ordinary pretax income for the year.
John Szczepanski: The company has determined that it is more likely than not that the tax benefit of the year-to-date loss will not be realized in the current or future years, and as such, the company should not recognize tax provisions for the interim periods until the company has year-to-date ordinary pre-tax income. The tax benefit in the second quarter of fiscal 2024 compares to an income tax benefit of $0.6 million in the same period last year. Net income for the second quarter was $0.6 million, or earnings per share of $0.5 million, compared to net income of $29.5 million, or earnings per share of $2.36 in the second quarter last year.
Speaker Change: The company has determined that it is more likely than not that the tax benefit of the year to date loss will not be realized in the current or future years and as such the company should not recognized tax provisions for the interim periods until the company has year to date ordinary pretax income.
Speaker Change: Tax benefit in the second quarter of fiscal 2024 compares to an income tax benefit of <unk> 6 million in the same period last year.
Speaker Change: Net income for the second quarter was zero point $6 million or.
Speaker Change: <unk> per share of <unk> <unk> compared to net income of $29 5 million or earnings per share of $2 36 in the second quarter last year.
John Szczepanski: The prior year period includes one-time items related to the Vince, IP sale gain, and transaction expenses. Excluding these items, adjusted net loss in the second quarter of fiscal 2023 was $0.5 million, or a loss per share of $0.04 million. Moving to the balance sheet, net inventory was $66.3 million at the end of the second quarter as compared to $85 million at the end of the second quarter last year. As we're continuing to take a disciplined approach to investing back into inventory to help support the growth we are seeing in our wholesale channel, we now expect inventory for fiscal 2024 to be up low single digits to fiscal 2023.
Speaker Change: The prior year period includes one time items related to the Vince IP sale gain and transaction expenses. Excluding these items adjusted net loss in the second quarter of fiscal 2023, with zero point $5 million or a loss per share of <unk>.
Speaker Change: Moving to the balance sheet.
Speaker Change: Net inventory was $66 $3 million at the end of the second quarter as compared to $85 million at the end of the second quarter last year.
Speaker Change: As we're continuing to take a disciplined approach to investing back into inventory to help support the growth we're seeing in our wholesale channel. We now expect inventory for fiscal 2024 to be up low single digits. The fiscal 2023, as we expect increased demand for our products for the spring 2025 selling season based on.
John Szczepanski: As we expect increased demand for our products for the spring 2025 selling season based on the success we have seen to date with our wholesale partners. With a healthier balance sheet in place, we are committed to continuing to execute our operating model while investing in our growth and delivering value to shareholders. The board has authorized the stock repurchase program for up to $1 million of common stock that is expected to be funded through existing cash and future free cash flow. The timing, manner, price, and amount of any repurchases are dependent on many factors and will be made in the best interest of the company, as detailed in our release.
Speaker Change: The success, we have seen to date with our wholesale partners.
Speaker Change: With a healthier balance sheet in place we are committed to continuing to execute our operating model, while investing in our growth and delivering value to shareholders.
Speaker Change: The board has authorized a stock repurchase program for up to $1 million of common stock that is expected to be funded through existing cash and future free cash flow.
Speaker Change: The timing manner price and amount of any repurchases are dependent on many factors and will be made in the best interest of the company as detailed in our release.
John Szczepanski: Turning now to our outlook for the balance of the year. As a reminder, starting with the third quarter of fiscal 2024, we will have anniversary periods of non-comparable growth expenses and non-comparable expense favorability due to the wind down of Rebecca Taylor, and therefore Q3 will be our first full quarter in which we are comparing them were like-for-like business model. In addition, we're in a much healthier position from a liquidity perspective this year, and we're able to invest into inventory in a much more balanced approach for the fall season.
Turning now to our outlook for the balance of the year.
Speaker Change: As a reminder, starting with the third quarter of fiscal 2024, we will have anniversaried periods of non comparable royalty expenses and non comparable expense favorability due to the wind down of Rebecca Taylor and therefore Q3 will be our first full quarter in which we are comparing a more like for like business model.
Speaker Change: In addition, we're in a much healthier position from a liquidity perspective, this year and we're able to invest into inventory in a much more balanced approach for the fall season. This year.
John Szczepanski: this year. For Q3 fiscal 2024, we expect total net sales to be flat to down low single digits relative to the prior year. This expectation takes into account the earlier than expected timing of wholesale shipments, which benefited Q2, as well as the expected ongoing impacts of more discipline, promotional activity in our DTC channel. As we have said, while these actions have near-term impacts on top line, we believe they better support the long-term health of our business. With respect to the operating margin, we expect Q3 fiscal 2024 operating margin to increase approximately 350 to 450 basis points compared to last year's adjusted operating margin of 3.7%.
Speaker Change: For Q3 fiscal 2024, we expect total net sales to be flat to down low single digits relative to the prior year.
Speaker Change: This expectation takes into account the earlier than expected timing of wholesale shipments, which benefited Q2.
Speaker Change: As well as the expected ongoing impact of more disciplined promotional activity in our DTC channel.
Speaker Change: As we have said while these actions have near term impacts on topline we believe they better support the long term health of our business.
Speaker Change: With respect to the operating margin, we expect Q3 fiscal 2024 operating margin to increase approximately 350 to 450 basis points compared to last year's adjusted operating margin of three 7%.
John Szczepanski: We expect improved full price penetration, disciplined promotions, and the impact of our transformation initiatives to be the primary drivers of the operating margin increase, somewhat offset by SG&AD leverage from incentive compensation. With respect to our full year fiscal 2024 outlook, which, as a reminder, is a 52-week fiscal year, we now expect total net sales to decline in the low single-digit range compared to the 53-week fiscal 2023. While our guidance for the wholesale channel has not changed, we have revised the embedded expectation for our DTC channel. While we have seen an improvement in trans heading into September, we believe improvement given the increase in certainty around the consumer environment heading into the second half to take a more conservative approach to our outlook as they reviewed.
Speaker Change: We expect improved full price penetration disciplined promotions and the impact of our transformation initiatives to be the primary drivers of the operating margin increase somewhat offset by SG&A deleverage from incentive compensation.
Speaker Change: With respect to our full year fiscal 2024 outlook, which as a reminder, is a 52 week fiscal year.
Speaker Change: We now expect total net sales to decline in the low single digit range compared to the 53 week fiscal 2023.
Speaker Change: While our guidance for our wholesale channel has not changed we have revised the embedded expectation for our DTC channel.
Speaker Change: While we have seen an improvement in trends heading into September. We believe are prudent given the increased uncertainty around the consumer environment heading into the second half to take a more conservative approach to our outlook as Dave reviewed.
John Szczepanski: Despite the revision in our sales outlook, we now expect adjusted operating margin to increase 25 to 50 basis points compared to fiscal 2023 adjusted operating margin. We expect the impact of royalty fees through May 2024, which were not incurred in the comparable fiscal 2023 period, to impact operating margin performance by approximately 140 basis points and expect to offset this headwind through ongoing gross margin expansion and disciplined expense management driven in part by transformation efforts. As Dave reviewed, we're pleased with the progress we're making with a transformation plan and are seeing better-than-expected results at the midpoint of the year, especially in the gross margin expansion we delivered to date.
Speaker Change: Despite the revive revision in our sales outlook. We now expect adjusted operating margin to increase 25 to 50 basis points compared to fiscal 2023 adjusted operating margin.
Speaker Change: We expect the impact of royalty fees through May 2024, which were not incurred in the comparable fiscal 2023 period.
Speaker Change: The impact operating margin performance by approximately 140 basis points and expect to offset this headwind through on growing ongoing gross margin expansion and disciplined expense management driven in part by our transformation efforts.
Speaker Change: As Dave reviewed.
Speaker Change: Pleased with the progress, we're making with our transformation plan and are seeing better than expected results at the midpoint of the year, especially in the gross margin expansion, we delivered to date.
John Szczepanski: As a reminder, about half of our total savings from the transformation plan are expected to come from product cost efficiencies with no compromises to quality, with the balance driven by targeted initiatives to improve pricing. Improve the cadence and discipline of promotion and reduce operating expenses. As we look beyond this year, we continue to believe in the opportunity we see in front of us and are confident in our plans to deliver long-term profitable growth.
Speaker Change: As a reminder, about half of our total savings from the transformation plan are expected to come from product cost efficiencies with no compromises to quality with the balance driven by targeted initiatives to improve pricing in.
Speaker Change: Improve the cadence and discipline on promotions and reduce operating expenses.
As we look beyond this year, we continue to believe in the opportunity we see in front of US and are confident in our plans to deliver long term profitable growth.
Unknown Attendee: This concludes our remarks, and I will now turn it over to the operators to open the call for questions.
Speaker Change: This concludes our remarks and I will now turn it over to the operator to open the call for questions.
Unknown Attendee: Of course, we will now begin the question-answer session. If you'd like to ask a question, please press star followed by one on your telephone key pack. If for any reason you'd like to remove that question, please press star followed by two. Again, to ask a question, press star one.
Speaker Change: Of course, we will now begin the question and answer session. If you'd like to ask a question. Please press star followed by Glenn on your telephone keypad.
Any reason you would like to remind you that question. Please press star followed by Pierre again to ask a question press Star one.
Eric Bitter: As a reminder, if you are using a speaker phone, please remember to take up your hands right before asking a question. We will pause you briefly as questions are registered. Our first question comes from line of Eric Bitter with SEC Research. Your line is now open.
Speaker Change: As a reminder, if you are using a speaker phone. Please remain good pickup your handset before asking a question, we'll pause here to briefly ask questions registered.
Speaker Change: Our first question comes from the line of Eric better with SEC Research. Your line is now open.
Unknown Attendee: Good afternoon. Congratulations on the progress. Thanks, Eric. Thank you.
Speaker Change: Good afternoon, and congratulations on the progress.
Thanks, Eric.
Speaker Change: Thank you.
Eric Bitter: We'll talk a little bit about something embedded, some of the pieces embedded in your guidance. So on the wholesale, you had basically things you believe were shipped to Q3, shipped to Q2.
Speaker Change: Talk a little bit about something embedded in some of the pieces embedded in your guidance.
So on the wholesale you had basically.
Speaker Change: Things you believe were shifted to Q3 shifts into Q2.
David Stefko: What are you thinking in terms of potential reorders or other pieces here that can kind of help with the cute with the wholesale business, and are you with the image where you have able to fulfill increased demand from wholesale if it does come through and the private was shifting Q2. Please send to want to be more aggressive, potentially and getting shipments in earlier this year. Very good question. So first, we think it's always an advantage to have product on the floor. It does drive our reorder business, and there's that is a core component to our operating model.
Speaker Change: What are you thinking in terms of potential reorders or other pieces here that can kind of help with the cute with the wholesale business and are you with the inventories you have able to fulfill increased demand from wholesale if it does come through and the product that was shipped in Q2, we said we wanted to be more aggressive.
Speaker Change: Is it potentially getting shipments in earlier this year.
Speaker Change: Very good question. So first we think it's always an advantage to have product on the floor.
Speaker Change: Drive our reorder business in there is that is a core component to our operating model. We think we have the right balance of inventory now that we've we've been able to reinvest given our liquidity position.
David Stefko: So we think we have the right balance of inventory. Now that we've been able to reinvest given our liquidity position. We think we have the right balance of inventory for not just our wholesale channel, but also our DTC channel to be effective in the second half of the year.
Speaker Change: We think we have the right balance of inventory for not just our wholesale channel, but also our DTC channel.
Speaker Change: To be effective in the second half of the year.
David Stefko: Okay, and what should we be thinking about in terms of any mentioned you're closing the stores in Asia with your partner, and there's the potential down the road to increase London or the Europe in general. What are we thinking about in terms of the domestic business, as you mentioned, you were net five stores down in Q2. You know, why should we thinking about the opportunities here, and I guess if there are opportunities, what you would think in terms of when you might be potentially able to expand the own store network here in the US. Yeah, Eric, we are; I mean, we are looking at opportunities in the US as we speak.
Speaker Change: Okay.
Speaker Change: Should we be thinking about in terms I know you mentioned you are closing.
Speaker Change: The stores in Asia with your partner and there are some potential down the road to increase London, where we are.
Speaker Change: Europe in general what should we be thinking about in terms of the domestic business. As you mentioned you were net five stores down in Q2.
Speaker Change: What should we be thinking about the opportunities here and I guess, if there are opportunities. What you would think in terms of when you would might be.
Speaker Change: <unk> been able to expand the store network here in the U S.
Speaker Change: Yes, Eric we are I mean, we are looking at opportunities in the U S. As we speak there is as you know we.
David Stefko: You know, there are, as you know, you know, we have pretty much a fair amount of white space in the US, we're heavily concentrated in cities like New York. You know, Los Angeles, Miami, but not very concentrated in cities like Chicago and Denver and Houston and Dallas and markets, you know, great growth markets like Nashville, you know, where we don't have any stores at all. So, so we are actively looking at opportunities, and as we find opportunities that fit our model and ROI, you know, we will be making future investments.
Speaker Change: We have pretty much a fair amount of white space in the U S.
We're heavily concentrated in cities like.
In New York.
Speaker Change: Los Angeles, Miami, but not not very concentrated in cities like Chicago, and Denver, and Houston and Dallas.
And markets.
Speaker Change: Great growth markets like Nashville, where we don't have any stores at all so we are actively looking at opportunities and as we find opportunities.
Speaker Change: That fit our model and ROI, we will be we will be making future investments.
David Stefko: Okay, last question. You mentioned that I've seen at the stores the expansion of men's with the pants business, and one of the things we've seen is that the amount of colors has continued to increase, and I'm assuming that's part of the ability to respond to inventory. I know you've talked previously about the goal of getting to about 30% of men's in, I believe, it's three years. Is that goal still there and kind of what will be seen kind of in the back here in terms of men's expansion? Thank you. Thanks, Eric. So yes, we have seen expansion in our minds business, you know, where we sit, you know, today, you know, through the first six months versus the prior year. You know, the men's pan program, obviously, is a new opportunity for us.
Speaker Change: Okay and last question, you mentioned that I've seen at the stores the expanse.
Speaker Change: The expansion of men's with the pants business.
Speaker Change: One of the things we've seen is that the amount of colors have continued to increase.
Speaker Change: And I'm, assuming that's part of the ability to respond to inventory I know you've talked previously about the goal of getting to about 30% of men's in I believe its three years is that goal still there and kind of what we'll be seeing kind of in the back half here in terms of men's expansion. Thank you.
Speaker Change: Thanks, Eric.
Speaker Change: So yes, we have seen expansion in our managed business and where we sit today.
Speaker Change: Today through the first six months.
Speaker Change: Versus the prior year the men's Pant program obviously.
Speaker Change: Is a is a new opportunity for us.
Unknown Attendee: Thank you for recognizing, you know, the breath of the product, you know, that we've put out. We've just had our first quarter. With more streams being in all men's stores, we do speak with other wholesale partners about growth opportunities. You know, we are making further investments as we see the results of the men's bottoms program and what opportunities that may lead to the next. So yes, we're on, we are, you feel we're on track for that three-year goal of 30%. Great. Congratulations. And again, good luck in the holiday period. Yeah, thank you.
Thank you for recognizing the breadth of the product that we've put out.
Speaker Change: We've just had our first quarter with Nordstrom is being in all men's stores, we do speak with other wholesale partners about growth opportunities and we are making.
Speaker Change: Further investments as we see the results of the mens bottoms program and what opportunities that may lead to next so yes. We are doing so we are on track for that three year goal of 30%.
Speaker Change: Great.
Gratulation and again good luck in the holiday period.
Speaker Change: Yes, Thank you Eric.
Unknown Attendee: Thank you for your question.
Speaker Change: Thank you for your question.
Michael: Our next question comes from line of Michael couldn't ski with no capital market. You know, I know then.
Speaker Change: Our next question comes from the line of Michael.
Speaker Change: <unk> with loop capital markets.
Speaker Change: Your line is now open.
Michael: Thank you very much for taking my questions and, you know, good quarter. There are a couple of things. Can you quantify the amount of sales that were pushed into Q2? Was that over five million?
Speaker Change: Thank you very much for taking my questions and good.
Speaker Change: Good quarter.
Speaker Change: A couple of things can you quantify the amount of sales that were pushed into Q2 was that over $5 million.
John Szczepanski: Hi, Mike. So, yeah, we definitely saw the benefit from having inventory available early in the quarter, earlier than expected in Q2 versus Q3. We did essentially the beat that we had to our guide represented the majority of that acceleration. So, so that's what sort of drove our cadence in terms of Q2 and what we expected in Q2 versus Q3.
Speaker Change: Hi, Mike.
Speaker Change: Yes, we definitely saw the benefit from having inventory available.
Speaker Change: Early in the quarter.
Speaker Change: Earlier than expected.
Speaker Change: In Q2 versus Q3.
Speaker Change: We did essentially the beat that we had to our guide represented the majority of that acceleration.
Speaker Change: So thats what sort of drove our.
Speaker Change: Cadence in terms of Q2.
Speaker Change: And what we expected in Q2 versus Q3.
Michael: Okay.
Speaker Change: Okay.
Michael: I'm sorry. I'm sorry, that value. 440 basis point, right, John of the. Did you hear me, John, or no? That that was not 4 to 40 basis points. Okay.
Speaker Change: Mentioned about I'm sorry.
I would say aggressive sorry value right 440 basis point right John.
Speaker Change: Could you hear me John or no.
Speaker Change: That.
Speaker Change: That was it.
Speaker Change: <unk> not 440 basis points.
Speaker Change: Okay.
Speaker Change: Alright.
Michael: And then I'm talking in terms of the expansion of the men's line; they're just kind of want to clarify. When will we, when I guess I'm just kind of under trying to understand in terms of, you know that you expanded colors and things like that. But I'm wondering, in terms of additional products from here, I mean, were you anticipating adding more men's product lines from here. I'm just trying to understand the cadence of the product development things that are going likely to go into North. Yeah, we really haven't talked about anything, but with the, you know, the launch of the men's bodies program, you know, it's not just, you know, more colors.
Speaker Change: And then in terms of the expansion of the mens line, there just kind of want to clarify.
Speaker Change: Yeah.
Speaker Change: When will we.
Speaker Change: I guess I'm, just kind of under trying to understand in terms of.
Speaker Change: I know that you expanded colors and things like that but I'm wondering in terms of additional products from here I mean, where are you anticipating.
Speaker Change: Adding more men's product lines from here I'm, just trying to understand the cadence of the product development things that are going to likely to go into nordstroms.
Speaker Change: And the timing, yes, we really kind of.
Speaker Change: Talked about anything but.
Speaker Change: The launch of men's bottoms program.
It's not just me.
Speaker Change: More colors.
David Stefko: It's a, it's a new fit. It's a, it's a better fabric. You know, so we're trying to see the results of that. You know, Michael, we also are looking at, you know, with our new license partner. You know, in the men's shooting area is, you know, ways that we could, you know, take advantage of that as we look forward. So yes, there are other categories that we are looking at, but nothing. You know, nothing other than potentially something with our license partner that we may launch, you know, in the near term. Gotcha.
Speaker Change: A new set of its a better fabric.
Speaker Change: So we're trying to see the results of that.
Speaker Change: Michael We also are looking at with our new licensed partner.
Speaker Change: Mens suiting area is ways that we could take advantage of that as we look forward. So yes. There are other categories that we are looking at but nothing.
Speaker Change: Nothing.
Speaker Change: Other than potentially something with our licensed partner that we may launch.
Speaker Change: Near term.
Speaker Change: Gotcha, and then in terms of the consumer that many companies have identified a bifurcated consumer with a higher income consumers continuing to spend and lower end to come kind of struggling a little bit and I'm. Just I know that you had previous promotions that may have skewed.
Michael: And in terms of the consumer, you know, the many companies are identified a bifurcated consumer with the higher income consumers continue to spend and lower income kind of struggling a little bit. And I'm just, I know that you had previous promotions that they have skewed your, you know, your customer base down to the lower income or lower income category.
Speaker Change: Your customer base down to the lower income.
Speaker Change: Income category and I'm, just wondering in terms of going.
Michael: And I'm just wondering, in terms of going upstream and position, is there a chance that you would have to increase not promotional spend, but more marketing spend in terms of, you know, kind of attracting that higher income to consumer.
Speaker Change: Upstream and positioning is there.
They're typically you would have to increase not promotional spend but more marketing spend in terms of.
Speaker Change: Attracting that higher income consumer and I was just wondering if maybe you could just give us your thoughts in terms of the.
David Stefko: I was just wondering if maybe you could just give us your thoughts in terms of the current market environment and like where your products are placed and how you see that market developing developing. Yeah, okay. So yes, we might we are seeing like as we look as we enter the third quarter, you know what the trends we see, you know, in our business. So the last six weeks, you know, since, you know, since the beginning of our Q3 and the consumer, you know, two things, one is being, you know, less that July kind of focused on its sale period, it's marked down period.
Speaker Change: Current market environment, and like where your products are placed and how you see that market develop developing.
Speaker Change: Yeah. Okay. So yes, Mike we are seeing I guess, we look as we enter the third quarter.
Speaker Change: The trends we see on.
Speaker Change: In our business over the last six weeks since since the beginning of our Q3 and the consumer.
Speaker Change: Two things one is being.
Speaker Change: Less at July kind of focused on its sale period its markdown period.
David Stefko: You know, and people kids are back to school and consumer refills excited about being able to shop fall, you know, and we do hear that, you know, just the ability that it's fall buying season. We certainly are seeing our product resonate with the consumer and, you know, we continue to drive what we see as the full price, the full priced customer file. And you're right, we are seeing a decline in our customer file from the discount perspective because we are less promotional and less marked down units to sell.
Speaker Change: And people are kids are back to school and in consumer we feel as excited about being able to shop.
Speaker Change: Paul.
Speaker Change: We do hear that.
Speaker Change: Just the ability that its fall.
Speaker Change: The buying season.
Speaker Change: Certainly our seeing our product resonate.
Speaker Change: With the consumer.
Speaker Change: And we continue to drive.
What we see as a full price full price customer.
Speaker Change: Customer file.
Speaker Change: And Youre right, we are seeing a decline in our customer file from a discount perspective, because we are less promotional and having less markdown units to sell.
David Stefko: As we look into 2025, you know, as we've talked about, we certainly see the need that we need to do make investments, marketing investments in top of final marketing, greater investments there, but more importantly in brand awareness. And we're very encouraged, you know, by our performance in Nordstrom anniversary to have record results there. You know, and with that consumer, Nordstrom is driving that traffic and it has that everyday customer that knows the Vince brand. You know, that performance that we see is really encouraging to us. And so we certainly, certainly, as I said, a plan making investments in marketing drives that hire income consumer as we look into 2025.
Speaker Change: As we look into 2025.
Speaker Change: As we've talked about we certainly see the need that we need to do make investments marketing investments in top of funnel marketing greater investments there, but more importantly in brand brand awareness and we're very encouraged.
Our performance in Nordstrom anniversary to have record results there.
Speaker Change #100: And where that consumer Nordstrom is driving that traffic again, it has that everyday customer that knows the Vince brand.
Speaker Change #100: That performance that we see.
Speaker Change #100: Is really encouraging to us and so we certainly certainly as I said plan on making investments in marketing to drive.
Speaker Change #100: The higher income consumer as we look into 2025.
Michael: Terrific, well, good job, and good luck on your coming season. Thanks, Michael. Thank you, Mike.
Speaker Change #100: Terrific well good job.
Speaker Change #100: Good luck on your upcoming season.
Speaker Change #101: Thanks, Michael.
Speaker Change #101: Thank you Mike. Thank you for you.
Unknown Attendee: Thank you for your question. There are no questions registered at this time.
Speaker Change #102: Thank you for your questions.
Speaker Change #104: There are no questions registered at this time I would now like to pass the call back to base desktop.
David Stefko: I would now like to pass the call back to Dave's death. Go with for closing remarks. Thank you all for joining us today. We'll speak to you again in early December on our third quarter results.
Speaker Change #104: For closing remarks.
Speaker Change #104: Okay.
Thank you all for joining us today.
Speaker Change #106: We'll speak to you again in early December on our third quarter results.
Unknown Attendee: Have a great rest of your day. Thank you.
Speaker Change #107: Great rest of your day. Thank you.
Unknown Attendee: That concludes today's call. Thank you for your participation, and enjoy the rest of your day.
Speaker Change #107: That concludes today's call. Thank you for your participation and enjoy the rest of your day.
Speaker Change #107: Okay.