Vince Holding (VNCE) was once a pariah in the investment world. On a split-adjusted basis, the stock fell from $350 in late 2014 to $50 by late 2015 and it was trading below $4 in November 2017. It has now rallied back to above $19. So it has been a wild ride. Of note, in October 2017, Vince did a 1-for-10 reverse stock split.
Since you're probably not too familiar with VNCE, some background would help. Vince is a luxury apparel brand founded in 2002. It started with a collection of stylish women's knits and cashmere sweaters but it has since expanded into a wide range of women's, men's and children's apparel, women's and men's footwear, and handbags.
Its collections are inspired by the brand's California origins and embody a feeling of warm and effortless style. Vince designs uncomplicated yet refined pieces that approach dressing with a sense of ease. Known for its range of luxury products, Vince offers women's and men's ready-to-wear, shoes, handbags, and home.
The majority of its sales are via the wholesale channel where its clothing is displayed at prestige, high-end department stores, including over 2,400 distribution locations across 40 countries. A minority of sales come through its direct-to-consumer (Vince stores and online). Vince currently operates 44 full-price retail stores, 14 outlet stores and its e-commerce site, vince.com. The company is headquartered in New York and operates a design studio in Los Angeles.
So what has been going on? We mentioned before that this stock has been a roller coaster over the past few years. The company reported several bad quarters and there were a series of guide-downs. At one point, VNCE elected to write down a significant chunk of inventory and it made the decision to just dispose of the vast majority of its prior year product. That's how difficult it was.
A new CEO was hired in October 2015: Brendan Hoffman. He had served as CEO of The Bon-Ton Stores (BONT) from February 2012 to August 2014. Previously he was CEO of Lord & Taylor for more than three years where he was credited with revamping the brand. Prior to this, he served six years as CEO of Neiman Marcus Direct, a subsidiary of Neiman Marcus, where he oversaw the growth of neimanmarcus.com and the launch and growth of bergdorfgoodman.com. A new CFO was hired in December 2015. The new CEO's first priority was fixing the product. VNCE believes it has made significant headway in recapturing the Vince DNA with the return of its founders and its enhanced design team.
The stock has been making a strong move since reporting Q1 (Apr) results in mid-June. VNCE reported a $(0.49) loss which was quite large but much better than the $(1.88) loss in the prior year period. Revenue fell 6.1% YoY to $54.5 mln. Wholesale segment sales fell 19.5% YoY to $28.5 mln, in line with internal expectations. The wholesale segment decline was primarily due to the planned reduction in full-price wholesale partners. Direct-to-consumer segment sales increased 14.9% to $26.0 mln. Same store comps were +12.3%, including e-commerce sales, primarily due to an increase in transactions.
VNCE was pleased with the strong response to its women's and men's product assortments in AprQ which drove a double digit comp increase in its full price stores, and more than 25% growth in its eCommerce business. In addition, the company is highly encouraged by its three recent store openings, all of which are exceeding sales expectations.
In the wholesale channel, VNCE saw better than expected performance at both Nordstrom and Neiman Marcus as well as strong sell-through across all accounts, indicating a favorable response to its product offering. Sales in its wholesale segment declined, as expected, primarily as the result of planned reduction in partners in this channel. Another positive is that, given its increased confidence and visibility in the business, VNCE has reinstituted annual guidance (they had stopped providing guidance during the downturn). VNCE expects full year revenue of $273-280 mln and operating income of $3-6 mln vs a non-GAAP operating loss of $(13.2) mln in FY17.
In sum, VNCE has been making a strong move, especially in the past six weeks or so. The stock has doubled since late May. It's still very early, but the company seems to be making a nice turnaround.