In the face of dwindling sales and a bleak bottom line, Vince chief executive officer Brendan Hoffman is betting that more stores and better product will turn things around for the brand.
Vince’s delayed fourth-quarter figures showed net sales fell 21.9 percent to $63.9 million while losses totaled $162.1 million, compared with year-ago earnings of $1.8 million. The report included more warnings about the company’s ability to continue operating as a going concern over the coming year.
That put investors on edge and sent the stock reeling. Shares of the company fell 25.9 percent to $1 on Friday, leaving it with a market capitalization of $49.4 million.
Hoffman tried to calm some nerves on a call with Wall Street analysts, noting store openings and expansions are on the horizon.
The ceo said Vince’s spring collection, which shipped during the first quarter, sold “more in line with our expectations,” compared to pre-spring product, which saw order cancellations and returns, particularly in the off-price channel.
Hoffman also pointed to a reduction in promotional activity so far this year, saying it marks a more permanent realignment from 2016, in which Vince became “far too reliant on up-and-down promotions.”
“While this impacted both our top and bottom line in 2016, it’s now behind us,” Hoffman said. “This clean-up was a necessary decision for the brand, but we also realize in the current environment, we need to be relatively competitive to our peers. Going forward will further refine our strategy to ensure that we balance our promotions and messaging with protecting brand integrity.”
Nevertheless, fourth-quarter wholesale sales were “significantly below plan” while retail sales were “slightly below” expectations, according to executive vice president and chief financial officer David Stefko.
In an effort to improve sales, Vince has brought back a pre-fall delivery that was nixed last year due to timing issues. It’s set to hit stores in May.
“This delivery will feature lots of lighter-weight fabrics and transitional colors and we believe will mark the start of a more relevant wear-now collection from Vince,” Hoffman said.
Beyond changing up assortments and deliveries, Hoffman said Vince will be “methodically” adding new stores, while expanding existing locations and working to “better utilize space” across the store base.
Vince is set to open a store in Honolulu and is discussing other “new store opportunities,” according Hoffman. He also said the New York flagship on Madison Avenue will soon see the addition of men’s and other store expansions are being negotiated.
E-commerce is one bright spot for Vince so far this year, with growth that was only described by Hoffman as “double-digit.” Online performance for 2016 was not disclosed, but Hoffman said Vince is “poised to capitalize” on the channel.
While Hoffman took the financial reveal as an opportunity to expound opportunities for Vince, the brand has been described as in reset-mode for some time.
When Vince founders Rea Laccone and Christopher LaPolice left the company in February, for the second time, only 15 months into a two-year consulting agreement, Hoffman said the company had “largely accomplished our objective of resetting the brand aesthetic and merchandise offering.” He also noted financial results at the time “do not yet reflect the progress we have made.”
In early April Hoffman raised the possibility of “a scenario in which we do not meet our financial covenants” after disclosing Vince had entered into an amendment letter with Bank of America to borrow against its $20 million in cash holdings.
Vince also received a downgrade from Moody’s Investors Service, mainly due to a recent $1.7 million payment the holding company made to an operating subsidiary to maintain compliance with a $175 million term loan due 2019.
Although Vince said it will likely make future such compliance payments, Moody’s pointed out that the company is only allowed two such “equity cures” in a given four-quarter period, leaving the possibility of default wide open.
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