Release Date: September 16, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Vince Holding Corp (VNCE, Financial) delivered a sales growth of nearly 7% and an adjusted operating margin of 1.5%, exceeding guidance expectations.
- The company's wholesale business performed solidly, benefiting from earlier-than-expected shipments and strong demand across key partners.
- Vince Holding Corp (VNCE) saw strength in both women's and men's businesses, with notable performance in sweaters, knit tops, and bottoms for women, and linen programs and knit T-shirts for men.
- The company is expanding its men's business, including a new enhanced bottoms program and increased presence in Nordstrom stores.
- Vince Holding Corp (VNCE) is making strategic investments in brand marketing and customer acquisition, aiming to enhance brand awareness and increase lifetime value across its customer base.
Negative Points
- The direct-to-consumer business experienced softer performance due to a pullback in promotional activity and fewer stores compared to the prior year.
- Store closures negatively impacted direct-to-consumer sales by 440 basis points, contributing to an 18.1% decline in this segment.
- The company has paused operations in China due to a dynamic environment, which may limit international growth opportunities in the short term.
- Despite overall sales growth, the adjusted operating margin declined by approximately 260 basis points compared to the prior year, driven by various factors including severance expenses and royalty fees.
- Vince Holding Corp (VNCE) has revised its full-year sales outlook to reflect a more cautious top-line outlook due to increased uncertainty around consumer spending and the potential impact of the upcoming November election.
Q & A Highlights
Q: What are you thinking in terms of potential reorders or other pieces here that can help with the wholesale business? And are you able to fulfill increased demand from wholesale if it does come through?
A: We think it's always an advantage to have product on the floor as it drives our reorder business, which is a core component of our operating model. We believe we have the right balance of inventory for both our wholesale and direct-to-consumer channels to be effective in the second half of the year. - John Szczepanski, CFO
Q: What should we be thinking about in terms of the domestic business and potential store expansions?
A: We are actively looking at opportunities in the US, particularly in cities where we currently have no stores, such as Chicago, Denver, Houston, Dallas, and Nashville. As we find opportunities that fit our model and ROI, we will be making future investments. - David Stefko, Interim CEO
Q: Is the goal of getting to about 30% of men's business in three years still there? What will we see in terms of men's expansion in the back half of the year?
A: Yes, we are on track for that three-year goal of 30%. We have seen expansion in our men's business, and the men's pant program is a new opportunity for us. We are making further investments as we see the results of the men's bottoms program. - David Stefko, Interim CEO
Q: Can you quantify the amount of sales that were pushed into Q2? Was that over $5 million?
A: The beat we had to our guidance represented the majority of the acceleration, which drove our cadence in terms of Q2 versus Q3. - John Szczepanski, CFO
Q: Are you anticipating adding more men's product lines from here?
A: With the launch of the men's bottoms program, we are seeing results and are looking at other categories, potentially with our licensed partner in the men's suiting area. - David Stefko, Interim CEO
Q: How do you see the current market environment and where your products are placed?
A: We are seeing our product resonate with the consumer and continue to drive full-price customer file. We plan on making investments in top-of-funnel marketing and brand awareness, especially given our strong performance in Nordstrom anniversary sales. - David Stefko, Interim CEO
Q: What are your thoughts on the bifurcated consumer market and your promotional strategy?
A: We are seeing a decline in our customer file from a discount perspective due to less promotional activity. We plan to make greater investments in top-of-funnel marketing and brand awareness to attract higher-income consumers. - David Stefko, Interim CEO
Q: What is the impact of the earlier-than-expected wholesale shipments on Q3?
A: The earlier-than-expected timing of wholesale shipments benefited Q2, and we expect total net sales for Q3 to be flat to down low single digits relative to the prior year. - John Szczepanski, CFO
Q: What is your outlook for the full-year fiscal 2024?
A: We now expect total net sales to decline in the low-single-digit range compared to fiscal 2023, but we expect adjusted operating margin to increase 25 to 50 basis points. - John Szczepanski, CFO
Q: How are you managing your inventory and liquidity?
A: We are taking a disciplined approach to investing back into inventory to support growth in our wholesale channel. We expect inventory for fiscal 2024 to be up low single digits compared to fiscal 2023. - John Szczepanski, CFO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
