For the three months ended Oct. 29, the company said net income fell 42.6 percent to $3.4 million, or 7 cents a diluted share, from $5.9 million, or 16 cents, a year ago. Net sales slipped 6 percent to $76 million from $80.9 million.
Wall Street’s consensus estimate was 8 cents on revenues of $82 million.
By business segment, the company said wholesale net sales fell 9.4 percent to $51.2 million, mostly due to a planned reduction in off-price orders. Direct-to-consumer net sales increased 1.6 percent to $24.8 million, while comparable sales fell 11.7 percent. The comps decline, which includes e-commerce sales, was attributed to a decrease in the average order value, as well as the decline in the number of transactions that resulted from lowered traffic and a reduction in promotional activity.
The company said gross profit was $38 million, or 50 percent of net sales, compared with $40 million, or 49.5 percent of net sales, in the year-ago quarter. The year-ago period included a benefit of $2 million from the recovery on inventory write-downs taken in the year-ago second quarter.
Brendan Hoffman, chief executive officer, said during the call to Wall Street analysts, “Overall, while our third-quarter sales came in below our expectations, we are pleased with the progress we’re making as we continue through a transitional phase at Vince.”
The first collection from the company’s founders — Rea Laccone and Christopher LaPolice, who returned to the brand last year — hit the sales floor during the quarter and Hoffman said “we received wide praise from both our wholesale partners and our retail customers for the return to high quality, great fit, fabrics and fashion. We are particularly encouraged by our performance at Nordstrom’s.”
Hoffman noted that the quarter saw continued traffic challenges, as well as warm weather. The company’s transition initiatives had negatively impacted near-term results to a “larger degree than we initially expected, particularly in our retail business. We nonetheless believe these measures are right for the business long-term,” he said.
The ceo also said the company is “committed to reestablishing Vince as a regular price brand in all channels of distribution,” adding that “while this will continue to present some top-line challenges in the short-term, we believe it is the right decision for the long-term integrity of the brand.” Other short-term pressures included the transition to a new warehouse, ongoing IT systems migration and a rethinking of its basics replenishment business.
Hoffman also noted that some product categories, such as outerwear, did not receive a full rework due to longer lead time requirements, and he called out men’s as another growth area for the brand. The third quarter saw some new fall product from the founders and the plan is to flow some of the spring assortment through in the fourth quarter.
Stifel’s Richard E. Jaffe has a “Buy” rating on the stock. He said that while improvements are evident in only a portion of the brand’s offerings, and challenges are expected to continue in the fourth quarter, “we believe that improvements will grow more pervasive through the first half of 2017 with the spring 2017 collection.”
For fiscal 2016, the company now expects diluted earnings per share between 0 cents and a loss of 7 cents, on net sales of $280 million to $290 million. Its previous guidance — when the company posted second-quarter results in September — was EPS between 0 cents and 6 cents, on net sales at $290 million to $305 million.
Shares of Vince rose 1.1 percent Thursday to close at $4.60 in Bid Board trading.