Shares of Vince Holding Corp. fell 19.3 percent in trading Tuesday after the company reported third-quarter results that beat Wall Street’s estimates but saw gross margins below expectations and slowing growth in same-store sales.
For the three months ended Nov. 1, net income was $13.3 million, or 35 cents a diluted share, against a net loss of $2.4 million, or 9 cents, a year ago. The year-ago loss was due to costs incurred in connection to its initial public offering, which was completed on Nov. 27, 2013. Net sales rose 20 percent to $102.9 million from $85.8 million. That included a 17.3 percent increase in wholesale sales to $78.9 million and a 30.2 percent jump on direct-to-consumer sales to $24 million. Comparable-store sales rose 5.2 percent. Analysts were expecting 33 cents on an estimated sales volume of $99.4 million.
According to Stifel analyst Richard E. Jaffe, third-quarter results were solid, but gross margins were below expectations (up 50 basis points compared with Stifel’s estimate of an improvement of 95 basis points). Wells Fargo’s Evren Kopelman noted that same-store sales growth missed the consensus estimate of over 10 percent. And while J.P. Morgan’s Matthew R. Boss said two straight quarters of slowing “core” same-store sales was a concern, he also noted that inventory levels were up 46 percent year-over-year, something to monitor even though the company said levels were higher due to new stores, replenishment and the launch of handbags.
Shares of Vince on Tuesday closed at $29.48 in Big Board trading.
Jill Granoff, chairman and chief executive officer of Vince, said that the company remains “confident in our strategy to deliver 15 to 20 percent net sales growth and 20 to 25 percent net income growth annually.”
When the company posted second-quarter results in September, it raised the forecast for fiscal 2014 adjusted diluted earnings per share to a range of 90 cents to 94 cents from 88 cents to 92 cents. On Tuesday, the company reaffirmed that estimate, and said total net sales are expected to be between $335 million to $345 million.
Granoff said that the company expects to open a showroom in Paris in time for the February market. The plan is to showcase women’s ready-to-wear, men’s, handbags and footwear.
The company recently launched three handbag categories and is working on a fourth, according to Granoff, who added that with the approach of colder weather, there’s been an “acceleration in the [sales of] iconic product Vince is known for, its cashmere and leather products. The fashion pieces are selling more as people add to their wardrobes.”