Q4 2024 Vince Holding Corp Earnings Call

Operator: Good morning all, good afternoon all, and welcome to the Vince Q4 2024 Earnings Conference Call. My name is Adam and I'll be your operator today. If you'd like to ask a question in the Q&A portion of today's call, you may do so by pressing star followed by 1 on your telephone keypad.

Good morning, or good afternoon, welcome to <unk> Q4, 2020 call earnings Conference call. My name is that nobody ever printed stay if you'd like to ask a question in the Q&A portion of today's call. You meant you said by pressing star Philip I'd want to telephone keypad.

Akiko Okuma: I will now hand the floor to Chief Administrative Officer Akiko Okuma to begin, so please go ahead when you are ready. Thank you and good morning, everyone.

Speaker Change: Now hand, the floor to chief administrative officer can you commit to begin to please go ahead when you're ready.

Speaker Change: Thank you and good morning, everyone welcome to Vince holding Corp, fourth quarter and full year fiscal 2024 results conference call.

Akiko Okuma: Welcome to Vince Holding Corp's fourth quarter and fourth year fiscal 2024 results conference call.

Akiko Okuma: Hosting the call today is Brendan Hoffman, Chief Executive Officer and Yuji Okumura, Chief Financial Officer. Before we begin, let me remind you that certain statements made on this call may constitute overlooking statements, which are subject to risks and uncertainties that could cause actual results to differ from those that the company expects. Those risks and uncertainties are described in today's press release and in the company's SEC filings, which are available on the company's website.

Speaker Change: During the call today is Brendan Hoffman, Chief Executive Officer, and use your Okamura Chief Financial Officer before we begin let me remind you that certain statements made on this call may constitute forward looking statements, which are subject to risks and uncertainties that could cause actual results to differ from those that the company expects.

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 later time and the company undertakes no obligation to update any information discussed on the call.

Akiko Okuma: Investors should not assume that statements made during the call will remain operative at a later time, and the company undertakes no obligation to update any information discussed on the call. In addition, in today's discussion, the company is presenting its financial results in conformity with GAAP and on an adjusted basis. The adjusted results that the company presents today are non-GAAP measures. Discussions of those non-GAAP measures and information on reconciliation systems to their most comparable GAAP measures are included in today's press release.

Speaker Change: In addition in todays discussion the company 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 those non-GAAP measures and information on reconciliation to their most comparable GAAP measures are in.

Speaker Change: In today's press release and related schedules, which are available in the investors section of the company's website at investors <unk> com.

Akiko Okuma: and related schedules, which are available in the investor section of the company's website at investors.vince.com.

Brendan Hoffman: Now I'll turn the call over to Brendan. Thank you, Akiko. And thank you everyone for joining us today.

Brett: Now I'll turn the call over to Brett.

Brett: Thank you Jacob and thank you everyone for joining US today. This marks my first earnings call since returning as CEO earlier this year, because I cannot overstate, how proud I am to be back with the <unk> team.

Brendan Hoffman: This marks my first earnings call since returning as CEO earlier this year. And I cannot overstate how proud I am to be back with the Vince Having observed the business's evolution from a distance these past few years, I recognize not only the progress that has been made in strengthening the foundation of the organization, especially over the past year, but also the strength of the leadership team in place and the consistency in the product delivered season after season. With core DNA of Vince remains intact, our product continues to resonate with consumers seeking effortless sophistication, and we've made significant strides in operation.

Brett: Having observed the business evolution from a distance. These past few years I recognize not only the progress that's been made in strengthening the foundation of the organization, especially over the past year, but also the strength of the leadership team in place and the consistency in the product delivered season after season.

Brett: Core DNA of Vince remains intact, our product continues to resonate with consumers seeking paperless sophistication and we've made significant strides in operational efficiency.

Brendan Hoffman: While we are currently operating in MISPA's highly dynamic and evolving landscape, the work the team has done over the past year with its transformation plan and focusing on improving product costs and overall operating efficiencies better positions us to navigate today's environment.

Brett: While we are currently operating and missed the highly dynamic and evolving landscape.

Brett: Work the team has done over the past year with its transformation plan, focusing on improving product cost and overall operating efficiencies better positions us to navigate today's environment.

Brendan Hoffman: Before I provide more color on the current environment and how it's impacting Vince, let me review a few highlights from the business's fourth quarter. The period came in better than expected, driven by our wholesale segment, which helped to offset the softness in our retail stores, despite ongoing positive momentum with our full-price customer file, which drove growth in our e-commerce market. During the quarter, we continue to engage the full price customer with double digit growth in full price customers in Q4 across our DTC. Additionally, retention efforts focused on our most valuable and highest spending customer tier proved effective, with plus 9% growth in our highest customer spending tier for Kup.

Brett: Before I provide more color on the current environment, how it's impacting this let me review a few highlights on the business as fourth quarter performance.

Brett: The theory it came in better than expected driven by our wholesale segment, which helped to offset the softness in our retail stores. Despite ongoing positive momentum with our full price customer file which drove growth in our ecommerce channel.

Brett: During the quarter, we continued to engage with full price customer with double digit growth in full price customers in Q4 across our DTC channels.

Brett: Additionally, retention efforts focused on our most valuable and highest spending customer tier proved effective plus 9% growth in our highest customer spending to your Q4.

Brendan Hoffman: Across both men's and women's, we saw strength in our sweaters and bottoms assortments. Our funnel neck sweater continues to be a key product for our women's sweater assortment and drove nice growth in the quarter. We also saw strength in our women's pant business as customers gravitated towards new fabrications and seasonal colors and our core bias. In men's, cashmere was also a top-performing fabrication within sweaters, and we continue to be pleased with the success of our pant program. As we did with our Bias Pants for Women, we introduced new suede fabrication for our Dillon pant in men's and continue to see nice reception to the newness we are delivering with Key Silhouette.

Brett: Across both men's and women's we saw strength in our sweaters and bottoms assortment. Our funnel next weather continues to be a key product for our women's sweater assortment drove nice growth in the quarter we.

Brett: We also saw strength in our women's pants business as customers gravitate towards new fabrications and seasonal colors and our core biased pants.

Brett: In mens Kashmir was also a top performing fabrication within sweaters and we continue to be pleased with the success of our Pant program as we did with our bias pants for women, we introduced new suede fabrication for our Dillon pants and men's and continue to see nice reception to the newness, we are delivering with key silhouette.

Brendan Hoffman: Within wholesale, we continue to see strong momentum. Our relationships with key wholesale partners have never been stronger. And I am amazed by the growth we're now delivering in this channel that just a few years ago appeared to a plateau. And partners like Nordstrom's and Bloomingdale's, we have prime floor space to showcase our compelling assortments and provide opportunities for growth, including the expansion of our men's. As the team has talked about in prior quarters, men's is an opportunity for the brand. What was once a key item business has now grown into a full collection today and we are proud to be a dual gender brand represented in all Nordstrom doors.

Brett: Within wholesale we continue to see strong momentum our relationships with key wholesale partners have never been stronger.

Brett: Amazed by the growth we are now delivering in this channel, but just a few years ago appeared to have plateaued.

Brett: And partners like Nordstrom, and Bloomingdale's, we a prime floor space to showcase our compelling assortment and provide opportunities for growth, including the expansion of our men's business.

Brett: As the team has talked about in prior quarters men's is an opportunity for the brand.

Brett: What was once a T. I M business has now grown into a full collection today and we are proud to be a dual gender brand represented at all Nordstrom doors.

Brendan Hoffman: While I hope to be sharing more in the growth opportunities we see ahead for the brand, our number one priority at the moment is navigating and managing through the evolving tariff policies and dynamic consumer landscape. Environments such as these, the strength of our relationships with our wholesale partners is critical. I'm working closely with Jill Norton, our Chief Commercial Officer, and we are talking with our partners regularly on how to best handle the current situation with tariffs and the uncertainty we are all grappling with around the potential impact they may have on consumer behavior. in our own direct to consumer channel while ecommerce has remained positive store sales performance has been However, we are pleased with the improved product margin performance across all our direct We are closely monitoring potential changes in consumer behavior given the uncertainty with the current macro environment.

Brett: Well I would hope to be sharing more on the growth opportunities. We see ahead for the brand.

Brett: Number one priority at the moment is navigating and managing through the evolving tariff policies dynamic consumer landscape.

Brett: In environments, such as these the strength of our relationships with our wholesale partners is critical.

Brett: I am working closely with Jill Norton, our Chief commercial officer, and we are talking with our partners regularly on how to best handle the current situation with Paris and the uncertainty we are all grappling with around the potential impact they may have on consumer behavior.

Brett: And our own direct to consumer channel while E. Commerce has remained positive store sales performance has been inconsistent. However.

Brett: However, we are pleased with the improved product margin performance across all of our direct to consumer channels.

Brett: We are closely monitoring potential changes in consumer behavior, given the uncertainty with the current macro environment.

Brendan Hoffman: As it relates to tariffs, as Yuji will discuss, while we have reduced our exposure to China over the past few years. As of the end of fiscal 2024, over 60% of our cost of goods sold was sourced We are actively working on mitigation strategies. We are in the process of moving about one third of our exposure for fall product outside of China. We are planning for further geographic diversification of our sources. We are also evaluating strategic price increases and working closely with partners across our network to help to absorb the increased costs. In addition, we are taking a very measured approach on all expenditure across the organization in light of the current environment.

As it relates to tariffs as <unk> will discuss well we've reduced our exposure to China over the past few years as at the end of fiscal 2024 over 60% of our cost of goods sold was sourced from China.

Brett: We are actively working on mitigation strategies, we were in the process of moving about one third of our exposure for fall product outside of China.

Brett: We are planning for further geographic diversification of our sourcing base. We are also evaluating strategic price increases and working closely with partners across our network to help to absorb the increased costs.

Brett: In addition, we are taking a very measured approach in all expenditures across the organization in light of the current environment.

Brendan Hoffman: Given the increased uncertainty and limited visibility to what the full impact of current policy and consumer behavior, we will not be providing full year value. As I mentioned at the start of my remarks, the organization is on a much stronger footing heading into this type of environment, given the actions and changes that have been put in place over the past year. The transformation plan delivered over $10 million in savings in fiscal 2024, and the efforts from this plan will now shift to help manage tariff mitigation. To be clear, our entire organization continues to be focused on execution and delivering the product and experience our partners and customers expect.

Brett: Given the increased uncertainty and limited visibility to what the full impact of current policy and consumer behavior.

Brett: We'll not be providing full year guidance.

Brett: As I mentioned at the start of my remarks, the organization is on a much stronger footing heading into this type of environment, given the actions and changes that are put in place over the past year.

Brett: The transformation plan delivered over $10 million in savings in fiscal 2024, and the efforts from this plan, we're now shifts to help manage tariff mitigation.

Brett: To be clear our entire organization continues to be focused on execution and delivering the product and experience our partners and customers expect from us.

Brendan Hoffman: The transformation plan is to foster a culture in which everyone looks to do their part to affect change and deliver results, and will be a key driver of the real-time changes we need to make to manage through the current situation.

Brett: The transformation plan has fostered a culture in which everyone looks to do their part to effect change and deliver results and will be a key driver of the real time changes, we need to make to manage through the current situation.

Brendan Hoffman: Before I wrap up, I'd like to acknowledge our team for their continued efforts in prioritizing and enhancing our relationships with our customers, vendors, and wholesale partners. I also want to take a moment to express my appreciation for the depth of talent we have within our organization.

Before I wrap up I'd like to acknowledge our team for their continued efforts and prioritizing enhancing our relationships with our customers vendors and wholesale partners.

Brett: I also wanted to take a moment to express my appreciation to the depth of talent, we have within our organization.

Brendan Hoffman: I'm particularly pleased that Yuji has stepped into the role of CFO. Having been with the company since 2018, and most recently serving as our controller, he brings tremendous institutional knowledge and financial acumen to the team. I have every confidence in his ability to navigate our current dynamic environment and to help drive our financial strategy.

Brett: Particularly pleased that UGI stepped into the role of CFO.

Brett: Having been with the company since 2018, and most recently serving as our controller he brings tremendous institutional knowledge and financial acumen to this decision.

Brett: I have every confidence in his ability to navigate our current in a dynamic environment.

Brett: Help drive our financial strategy.

Brendan Hoffman: The seamless transition is a testament to the strong bench of leadership at PITS. The continuity and depth of the team is manifested in the high-quality product we deliver season after season. With our team solidified and with a more efficient operating model in place, while our strategic priorities are shifting to manage through the current situation, I have the utmost confidence that we will successfully navigate these near-term hits. I've always believed in the strength and potential for Vince. It's why I led the company previously, and it's what brought me back. I'm committed to leveraging my experience and passion for Vince to not only successfully navigate today's environment, but to drive sustainable long-term growth.

Brett: The seamless transition is a testament to the strong bench of leadership at beds, a continuity and depth of the team is manifested in the high quality product we deliver season after season.

Brett: With our team solidified and with a more efficient operating model in place.

Brett: Our strategic priorities are shifting to manage through the current situation.

Brett: Most confident that we will successfully navigate these near term headwinds.

Speaker Change: I've always believed in the strength and potential for Vince It's why I led the company previously and that's what brought me back I'm committed to leveraging my experience and passion for Vince not only successfully navigate today's environment, but to drive sustainable long term growth.

Yuji Okumura: I'll now turn it over to Yuji to discuss our financial results and outlook in more Thank you, Brendan, and good morning, everyone. Fiscal 2024 was an important year for the company as we focused on executing a healthier full price business, enabling us to strengthen our financial foundation reflected in the 100 basis point improvement. in the adjusted operating margin on relatively flat sales performance compared to the prior year. As Brendan noted, while we are currently operating in a very dynamic environment, we believe through the work we have put in place and the actions we have taken with respect to our cost structure and product margin improvements better position us to navigate today's challenge.

Speaker Change: I'll now turn it over to EOG to discuss our financial results and outlook in more detail.

Speaker Change: Thank you Brendan and good morning, everyone.

Speaker Change: Fiscal 2024 was an important year for our company as we focused on executing a healthier full priced business, enabling us to strengthen our financial foundation reflected in the 100 basis point improvement.

Speaker Change: And the adjusted operating margin on relatively flat sales performance compared to the prior year.

Speaker Change: As Brendan noted while we are currently operating in a very dynamic environment. We believe that the work we have put in place and the actions we have taken with respect to our cost structure and product margin improvements better position us to navigate today's challenges.

Yuji Okumura: Before I discuss our views for fiscal 2025, let me review our fourth quarter results in more detail. As a reminder, the fourth quarter of fiscal 2023 included a 14th week, representing the 53rd week in the prior year, which resulted in approximately $2.2 million in net sales and $0.4 million in loss from operations. The company net sales for the fourth quarter increased 6.2% to $80 million compared to $75.3 million in the fourth quarter of fiscal 2023. Excluding the impact from the extra week, total company net sales for the fourth quarter increased approximately 9% compared to the prior year.

Speaker Change: Before I discuss our views for fiscal 2025, let me review our fourth quarter results in more detail as a reminder, the fourth quarter of fiscal 2023 included a 14th week, representing the 50 <unk> week in the prior year, which resulted in approximately $2 2 million in net sales.

Speaker Change: And <unk> 4 million and loss from operation.

Speaker Change: The company net sales for the fourth quarter increased six 2% to $80 million compared to $75 3 million in the fourth quarter of fiscal 2023.

Speaker Change: Excluding the impact from the extra week total company net sales for the fourth quarter increased approximately 9% compared to the prior year.

Yuji Okumura: With respect to channel performance, we delivered a 26.7% increase in our wholesale segment, which more than offset an 8.1% decrease in our direct-to-consumer segment. Our wholesale performance overall exceeded our expectations for the period driven in part by earlier shipments of our spring product to our wholesale partners. Our direct-to-consumer business performed relatively in line to our expectations, as our store channel continued to be impacted by planned store activity, including closures, remodels, and relocations, along with softer trends and traffic. Gross profit in the fourth quarter was $40.1 million or 50.1% of net sales. This compares to 34.2 million or 45.4% of net sales in the fourth quarter of last year.

Speaker Change: With respect to channel performance, we delivered a 26, 7% increase in our wholesale segment, which more than offset an eight 1% decrease in our direct to consumer segment.

Speaker Change: Our wholesale performance overall exceeded our expectations for the period driven in part by earlier shipment of our spring product to our wholesale partners.

Speaker Change: Our direct to consumer business performed relatively in line to our expectations as our store channel continued to be impacted by plant tour activity, including closures Remodels and relocations, along with softer trends in traffic.

Speaker Change: Gross profit in the fourth quarter was $40 1 million or 51% of net sales.

Speaker Change: This compares to $34 2 million or 45, 4% of net sales in the fourth quarter of last year.

Yuji Okumura: The increase in gross margin rate was driven by approximately 320 basis points related to lower promotional activity in our direct-to-consumer segment and our lower discounting, as well as approximately 210 basis points related to lower product costing and freight costs. These factors were partially offset by approximately 120 basis points attributable to channel. Selling and general administrative expenses in the quarter were $37.8 million or 47.2% of net sales as compared to $35.8 million or 47.6% of net sales for the fourth quarter of last year. The slight increase in SG&A dollars compared to the prior year period was largely driven by increased salaries and benefits and increased rent expense attributable to lease modifications made in prior comparative quarters.

Speaker Change: The increase in gross margin rate was driven by approximately 320 basis points related to lower promotional activity in our direct to consumer segment.

Speaker Change: Our lower discounting as well as approximately 210 basis points related to lower product costing and freight costs.

Speaker Change: These factors were partially offset by approximately 120 basis points attributable to channel mix.

Speaker Change: Selling and general administrative expenses in the quarter were $37 8 million or 47, 2% of net sales as compared to $35 8 million or 47, 6% of net sales for the fourth quarter of last year.

Speaker Change: The slight increase in SG&A dollars compared to the prior year period, largely driven by increased salaries and benefits and increased rent expense attributable to these modifications made in prior comparative quarter.

Yuji Okumura: These factors are partially offset by decreases in consulting and information technology costs.

Speaker Change: These factors were partially offset by decreases in consulting and information technology costs.

Yuji Okumura: During the quarter, we recorded a $32 million non-cash goodwill impairment charge. The impairment charge was driven by the change in control of ownership through P180's acquisition of the majority of our common equity shares from some capital in January. including the impact of this chart, operating loss for the fourth quarter was 29.7 million compared to the operating loss of 1.7 million in the same period last year. excluding the non-cash goodwill impairment charge and the transaction expenses associated with the P180 transaction, the adjusted operating income was $2.5 million. The improvement in adjusted operating income compared to the prior year was primarily driven by the gross margin expansion.

Speaker Change: During the quarter, we recorded a $32 million noncash goodwill impairment charge.

Speaker Change: The impairment charge was driven by the change in control of ownership through <unk> acquisition of the majority of our common equity shares from some capital in January.

Speaker Change: Including the impact of this chart.

Speaker Change: Operating loss for the fourth quarter was $29 7 million compared to operating loss of $1 7 million in the same period last year.

Speaker Change: Excluding the noncash goodwill impairment charge and the transaction expenses associated with the <unk> transaction.

Speaker Change: <unk> operating income was $2 5 million.

Speaker Change: The improvement in adjusted operating income compared to the prior year was primarily driven by the gross margin expansion.

Yuji Okumura: Net interest expense for the quarter decreased to $1.6 million compared to $1.7 million in the prior year. The decrease was primarily driven by the paydown of the third lien facility, which occurred in conjunction with the P180 transaction. Benefit for the income taxes this quarter was $2 million, which was driven by a $3 million reversal of deferred tax liability previously created by the amortization of indefinite liabilities recognized for tax but not for book purposes. As the goodwill was fully impaired, the deferred tax liability created by the asset was also reversed. This was authored by the current federal and state tax.

Speaker Change: Net interest expense for the quarter decreased to $1 6 million compared to $1 7 million in the prior year.

Speaker Change: The decrease was primarily driven by the pay down of the thirdly facility, which occurred in conjunction with the <unk> 180 transaction.

Speaker Change: Benefit for income taxes. This quarter, it was $2 million, which was driven by $3 million reversal of deferred tax liability.

Speaker Change: <unk> created by the amortization of indefinite live.

Speaker Change: <unk> recognized for tax, but not for book purposes.

Speaker Change: As the goodwill was fully impaired the deferred tax liability created by the asset was also reversed.

Speaker Change: It was offset by the current federal and state tax expenses.

Yuji Okumura: The tax benefit in the fourth quarter of fiscal 2024 compares to an income tax expense of $1.9 million in the same period last year. Net loss for the fourth quarter was $28.3 million or loss per share of $2.24 compared to the net loss of $4.7 million or loss per share of $0.37 in the fourth quarter last year. The current period includes the previously mentioned goodwill impairment. Excluding the impairment charge and its associated tax impact and the P180 transaction expenses, we had net income for the quarter of $0.8 million or earnings per share of $0.06. Moving to the balance sheet, net inventory was $59.1 million at the end of fourth quarter as compared to $58.8 million at the end of fourth quarter last year.

Speaker Change: The tax benefit in the fourth quarter of fiscal 2024 compares to an income tax expense of $1 9 million in the same period last year.

Speaker Change: Net loss for the fourth quarter was $28 3 million or loss per share of $2 24, compared with a net loss of $4 7 million or loss per share of 37 in the fourth quarter last year.

Speaker Change: The current period includes the previously mentioned goodwill impairment.

Speaker Change: Excluding the impairment charge and its associated tax impact and the <unk> transaction expenses, we had net income for the quarter.

Speaker Change: $8 million or earnings per share of <unk>.

Speaker Change: Moving to the balance sheet net inventory was $59 1 million at the end of fourth quarter as compared to $58 8 million at the end of fourth quarter last year.

Yuji Okumura: Before I review our outlook for the fourth quarter, I wanted to follow up on Brendan's discussion regarding tariffs. As of the end of fiscal 2024, China represented 66% of our cost of goods sold and therefore our current policies with respect to tariffs have significant impact on our business. We are actively reviewing all mitigation strategies, including diversifying our geographic exposure, working with our vendors for concessions, reviewing our pricing strategies, and capturing other efficient As Brendan noted, we have already begun to dramatically reduce our exposure to China beginning with our full product. Given the timing of the increased tariff, we do not expect a material impact to our first quarter performance.

Speaker Change: Before I review our outlook for the fourth quarter I wanted to follow up on Brandon's discussion regarding tariffs.

Speaker Change: As of the end of fiscal 2020 for China represented 66% of our cost of goods sold and therefore, our current policies with respect to tariffs had a significant impact on our business.

Speaker Change: We're actively reviewing all mitigation strategies, including diversifying our geographic exposure.

Speaker Change: Without vendors for concessions reviewing our pricing strategies and capturing other efficiencies.

Speaker Change: As Brendan noted, we have already begun to dramatically reduce our exposure to China, beginning with our fall product.

Speaker Change: Given the timing of the increased tariffs, we do not expect a material impact to our first quarter performance. However, as noted in our press release, given the uncertainty related to the potential impact and duration of the current tariff policies, we will not be providing full year guidance. At this time. However, let me provide some color on I expect.

Yuji Okumura: However, as noted in our press release, given the uncertainty related to the potential impact and duration of the current tariff policies, we will not be providing full-year guidance at this time. However, let me provide some color on our expectations for Q1. As a reminder, the first quarter is typically our smallest quarter of the year from a sales and profitability perspective, and historically delivers an operating loss for the period. For the first quarter of fiscal 2025, we expect sales to decline approximately 5% compared to prior year, driven by the impact of timing of shifts of our wholesale shipment as well as impact from planned store activity in our retail channel, including multiple closures, remodels, and relocations, as well as pullback in promotional activity.

Speaker Change: Patients for Q1.

Speaker Change: As a reminder, the first quarter is typically our smallest quarter of the year.

Speaker Change: Sales and profitability perspective, and historically delivers an operating loss for the period.

Speaker Change: For the first quarter of fiscal 2025, we expect sales to decline approximately 5% compared to prior year driven by the impact of timing a shift of our wholesale shipment as well as the impact from planned store activity in our retail channel, including multiple soldiers remodels and relocations as well as pullback.

Speaker Change: And promotional activity.

Yuji Okumura: With respect to profitability, we continue to be pleased with the traction we have seen in product margin performance and have continued to reduce our promotional activity through the first few months of the fiscal year. That said, we expect adjusted operating margin to decline approximately 500 basis points compared to the prior year period, largely driven by lower sales, increased marketing spend earlier in the quarter, and other expenses primarily related to the timing of the store relocations and remodel. As discussed, given the increased uncertainty in our current landscape, we are being very disciplined with expenses going forward, and believe the strategic initiatives and discipline we implemented throughout 2024 have positioned us well to execute effectively to respond to the current macro challenge.

Speaker Change: With respect to profitability, we continue to be pleased with the traction we have seen in product margin performance I have continued to reduce our promotional activity through the first few months of the fiscal year.

Speaker Change: That said, we expect adjusted operating margin to decline approximately 500 basis points when compared to the prior year period, largely driven by lower sales increased marketing spend early in the quarter and other expenses primarily related to the timing of the store relocations and Remodels.

Speaker Change: As discussed given the increased uncertainty in our current landscape, we are being very disciplined with expenses going forward.

Speaker Change: And believe the strategic initiatives and disciplined we implemented throughout 2024 have positioned us well to execute effectively to respond to the current macro challenges.

Yuji Okumura: We're collaborating closely with our wholesale partners, assessing all available mitigation levers, and leveraging our exceptional team to navigate this landscape. Our primary focus remains on delivering the quality products and experiences that have drawn customers to Vince. We will continue to operate with strategic agility, maintaining the flexibility to adapt quickly as market conditions evolve.

Speaker Change: We're collaborating closely with our wholesale partners assessing all available mitigation levers and leveraging our exceptional team to navigate this landscape.

Speaker Change: Our primary focus remains on delivering the quality product and experiences that have drawn customers Vince.

Speaker Change: We will continue to operate with strategic agility, maintaining the flexibility to adapt quickly as market conditions evolve.

Operator: This concludes our remarks and I will now turn it over to the operator to open the poll for questions. Thank you. As a reminder, if you'd like to ask a question on today's call, please press star followed by one on your telephone keypad now. Please remember to be unmuted locally when preparing to ask a question.

Speaker Change: This concludes our remarks and I will now turn it over to the operator to open the call for questions.

Thank you as a reminder, if you'd like to ask a question on todays call. Please press star followed by one on your telephone keypad now please remember to be mutually Cleveland Pan to ask two questions.

Eric Beder: And the first question today comes from Eric Beder from SCC Research. Eric, please go ahead. Your line is open. Good morning. Congratulations on coming back, Brenda. Thank you, Eric.

Speaker Change: First question today comes from Aric Beta from FCC Research. Please go ahead. Your line is open.

Speaker Change: Good morning.

Speaker Change: Congratulations on coming back to Brendan.

Speaker Change: Thank you Eric.

Eric Beder: When you look Great, when you look at kind of, let's just take tariffs out of it and look at the business for just a little bit. In terms of new products, new expansions, new categories, is that, what process changed? I know that you've expanded the accessories portion a little bit. Are we going to see more of that going forward? How should we think about the store count and the opportunity there? Unknown Attendee, Eric Beder, Unknown Attendee, David Stefko, John Szczepanski, Akiko Okuma, Vince Holding You broke up a little bit. Were you saying taking tariffs out of it?

Speaker Change: When you look.

Speaker Change: Great when you look at.

Speaker Change: Let's just take tariffs out of it and look at the business for just a little bit in terms of new products new expansions new.

Speaker Change: Okay.

Speaker Change: Is that what process changed I know that you've expanded the accessories portion a little bit are we going to see more of that going forward, how should we think about.

Speaker Change: The store count and the opportunity there.

Speaker Change: You broke up a little bit where you, saying taking tariffs out of it.

Speaker Change: So.

Brendan Hoffman: We've talked enough about tariffs when we look at business this year in terms of the potential to expand some of the categories further that's been talked about by your predecessors. Is that still the case in terms of accessories and in terms of some of the other businesses and how should we be thinking about longer term the potential for store expansion both in the U.S. and internationally?

Speaker Change: We've talked enough about tariffs when we look at.

Speaker Change: The business this year in terms of the potential to expand some of the categories. Further that's been talked about or your predecessors or is that still the case in terms of accessories and in terms of some of the other businesses and how should we be thinking about longer term the potential for store expansion both in the U S.

Speaker Change: Nationally.

Brendan Hoffman: Yeah, so I'm very excited about the evolution of the categories. You know, a lot of that credit goes to Authentic Brands Group, because they, they're the ones pushing that. But I think, you know, they push the envelope there a little bit to everyone's advantage. So I think it's created more diversity in terms of our offering, and that's only going to only going to continue. So I think, you know, we tried to do that when I was here the first time through some third party product. And I think now being able to do it through the license label, whether we do it directly or through ABG and some licenses has, has really enhanced the brand.

Speaker Change: Yes so.

Speaker Change: I'm very excited about the evolution of the category as you know a lot of that credit goes to authentic brands group because they.

Speaker Change: They're the ones pushing that but I think.

Speaker Change: They push the envelope there a little bit to everyone's advantage. So I think it's created more diversity in terms of our offering and that's only going to.

Speaker Change: Only going to continue so I think.

Speaker Change: We tried to do that when I was here. The first time through some third party product and I think now being able to do it through the Vince label, whether we do it directly or through AVG and some licenses has.

Speaker Change: Really enhance the brand in terms of stores store openings I mean again.

Brendan Hoffman: In terms of stores, store openings, I mean, again, you know, we'll have to see what happens with tariffs. But momentarily taking that out of it, we were enthusiastic about the opportunity to expand. in some new locations and markets here in the US. You know, including we have one store plan for Sacramento and another one planned for Nashville. We have a second store opening up in London next month or later this month, I guess now so. So yeah, so you know, we'll have to see some of the decisions we now need to make around tariffs and see where that plays out.

Speaker Change: We will have to see what happens with tariffs but.

Speaker Change: Momentarily taking that out of it we were enthusiastic about the opportunity to expand.

Speaker Change: And some new locations and markets here in the U S.

Speaker Change: Including we have one store planned for Sacramento and another one planned for Nashville.

Speaker Change: We have a second store opening up in London next month or later this month I guess now so.

Speaker Change: So yes so.

Speaker Change: We'll have to see some of the decisions, we now need to make around tariffs.

Speaker Change: And see where that plays out but.

Brendan Hoffman: But you know, very enthusiastic for what I've seen coming back five years later with the evolution of the And just to kind of follow up a little bit on that, I know you've been changing the systems around to be able to focus more on some of the core customers. You mentioned some of those metrics for Q4, what is the opportunity there to better market to kind of that customer who can afford maybe a price increase or other pieces driven by tariffs going forward? Thank you. Yeah, I think the team had really been focused last year on full price, getting back to full price and our full price customers.

Speaker Change: Yeah.

Speaker Change: Very enthusiastic for what I've seen coming back five years later with the evolution of the brand.

Speaker Change: And just to kind of follow up a little bit on that I know you've been changing our systems around to be able to.

Speaker Change: Focus more on some of the core customers you mentioned some of those metrics for Q4, what is the opportunity there to better market to kind of that customer who.

Speaker Change: Sure Ken affords, maybe a price increase or other pieces driven by tariffs.

Speaker Change: Going forward. Thank you.

Speaker Change: Yes, I think the team has.

Speaker Change: <unk> really been focused last year on a full price getting back to full price in our full price customer.

Brendan Hoffman: which is going to benefit us, as I think you just suggested, given what is likely to happen with some strategic price increases. So, very fortunate that that work has already started, and we'll just continue to support that.

Speaker Change: Which is going to benefit us as I think you've just suggested given what is likely to happen with some strategic price increases so.

Speaker Change: Very fortunate that that works has already started and we will just continue to.

Steve: Support that and Steve.

Steve: <unk> make investments to go after that full price customer as you said.

Unknown Attendee: Akiko Okuma, Unknown Attendee, David Stefko, John Szczepanski, Akiko Okuma, Unknown Attendee, Unknown Attendee, David Stefko, John Szczepanski, Akiko Okuma, Unknown Attendee, David Stefko, Okay, thank you. Good luck the rest of the year.

Steve: Hopefully can absorb any of the price increases that come down the road, but for US. This is true five years ago. It's true now Vince has always been about great value and so.

Steve: We need to make sure that where we sit amongst our peers, we're still providing great value to our consumer base.

Steve: Okay. Thank you good luck the rest of the year.

Speaker Change: Thank you Sir.

Steve: Yeah.

Michael Kupinski: The next question comes from Michael Kupinski from Noble Financial.

Speaker Change: Next question comes from Michal Krupinski from Noble financial Michael Your line is open. Please go ahead.

Michael Kupinski: Michael, your line is open, please go ahead. Thank you. Thanks for taking my questions. Appreciate that. Just a quick couple of quick questions. Can you quantify how much of the revenue shift in wholesale there was into the fourth quarter? Yeah, sure.

Michal Krupinski: Thank you. Thanks for taking my questions I appreciate that just a quick couple of quick questions can you quantify how much of the revenue shift in wholesale there wasn't to the fourth quarter.

Yuji Okumura: This is Eugene, I can take that. Um, the, the fourth quarter, um, in, in relation to the fourth quarter, the shift wasn't material because fourth quarter wasn't material enough in the grand scheme of things, just given that the fourth quarter is just a bigger size business compared to the Q1. So when you look at it, in comparison, The impact that has the Q125, it obviously has. and more.

Speaker Change: Yes sure. This is huge I can take that.

Speaker Change: The fourth quarter.

Speaker Change: In relation to the fourth quarter.

Speaker Change: It wasn't a material business fourth quarter wasn't material enough in the Grand scheme of things just given that.

Speaker Change: Fourth quarter is just the bigger size business compared to the Q1. So when you look at it in comparison to Q the impact it had for Q1 'twenty five it obviously has a significant meaning.

Speaker Change: With the timing of this shift.

Yuji Okumura: Okay, going back to the tariffs, has the tariff issue changed any of your plans for product introductions or even current products that you may now decide to discontinue? Just trying to get a sense of do you anticipate that there will be fewer SKUs in this year? Or do you you still plan you're moving forward with your your your current plans? Well, it's definitely a work in progress. The team is on the ground in Asia now.

Speaker Change: Okay, well going back to the tariffs has the tariff issue changed any of your plans for product introductions or even current products that you may now decide to discontinue just trying to get a sense of do you anticipate that there will be fewer skus this year or do you.

Speaker Change: Do you still plan.

Speaker Change: Moving forward with your <unk>.

Speaker Change: Current plans.

Speaker Change: Well, it's definitely a work in progress.

Speaker Change: The team is on the ground.

Speaker Change: Asia now.

Speaker Change: Uh huh.

Yuji Okumura: working closely with our partners, our suppliers to move production where we can, where we think it doesn't sacrifice quality into other parts of Asia to try to avoid the Unknown Attendee, David Stefko, John Szczepanski, Akiko Okuma, Vince Holding Unknown Attendee, David Stefko, John Szczepanski, Akiko Okuma, Vince Holding Thank you.

Speaker Change: Working closely with our partners our suppliers to move.

Speaker Change: Production, where we can where we think it doesn't sacrifice quality into other parts of Asia to try to avoid the.

Speaker Change: The China tariffs.

Speaker Change: Definitely be a little bit of SKU reduction.

Speaker Change: There are just some things that won't make sense to bring in at these levels for fall as we move to pre spring, which is our holiday we feel more confident that we can.

Speaker Change: Changed around the sourcing and protect the key items, but it's definitely a work in progress and obviously will.

Speaker Change: Hi.

Speaker Change: Change, depending on where the tariffs ultimately land.

Speaker Change: Thank you and my last question one of your strategies was to decrease cost to ship.

Yuji Okumura: And my last question, one of your strategies was to decrease cost was to shift from like air freight to ship freight. And I was just wondering, in terms of the tariffs and possibly maybe even supply issues, I guess, if you're looking at it that way, may change. Has that strategy changed in any way? I'm sorry, we're specific to whether we air or vote. Is that what the question was? Yes, correct. Yeah, that's right. Yeah, I mean, right now we're starting to put stuff back on the water, you know, through boat. to meet our ship windows, but also give ourselves a little bit more flexibility to see where the where the towers land over the next three or four weeks.

Speaker Change: From like Air freight to ship freight and I was just wondering in terms of the tariffs and possibly maybe even supply issues I guess that youre looking at it that way may changed has that strategy changed in any way.

Speaker Change: I'm sorry.

Speaker Change: Specific to whether we are a boat.

Speaker Change: The question was yes, correct, yes, that's correct.

Speaker Change: Yeah, I mean, right now we're starting to put stuff back on the water.

Speaker Change: Through through boat.

Speaker Change: To meet our ship Windows, but also give us a little bit more flexibility to see where the where the terrorist's land over the next three or four weeks, we do have a bonded warehouse here in the U S that gives us a little bit more flexibility, if we don't like where things are.

Yuji Okumura: We do have bonded warehouse here in the US that gives us a little bit more flexibility if we don't like where things are. But to your point, we've also talked about maybe, maybe it will make sense to air some stuff just to have a little bit more precision in terms of where the when the goods land. I think it's important for us.

Speaker Change: But to your point, we've also talked about maybe maybe it will make sense to air some stuff just to have a little bit more precision in terms of.

Speaker Change: Where the when the goods land I think it's important for us.

Michael Kupinski: Unknown Attendee, David Stefko, John Szczepanski, Akiko Okuma, Vince Holding Gotcha. That's all I have. Thank you.

Speaker Change: To be able to have goods land to be able to turn them right around so that we can convert it rather than sit in our warehouse for a few weeks. So I would say that mostly it's going to be both.

Speaker Change: But we'll continue to assess that.

Speaker Change: As the situation continues to evolve.

Speaker Change: Got you that's all I have thank you.

Speaker Change: Thank you.

Brendan Hoffman: Not showing any further questions on my side, so with that I'll hand the call back to Brendan Hoffman for some closing comments. Okay, well, we thank everyone for joining us today, and we look forward to updating you on our Q1 final results in June. Thanks very much.

Speaker Change: I'm not showing any further questions of muscle.

Brendan Hoffman: Go back to Brendan Hoffman for some closing comments.

Brendan Hoffman: Okay, well, we thank everyone for joining us today, and we look forward to updating you on our Q1 final results in June.

Brendan Hoffman: Very much.

Operator: This concludes today's call. Thank you very much for your attendance.

Brendan Hoffman: This concludes today's call. Thank you very much for your attendance you may now disconnect your lines.

Operator: You may now disconnect your line.

Brendan Hoffman: [music].