Vince Holding Corp. has had a turbulent two days.
Shares in the company plummeted 18.7 percent Tuesday, one day after the apparel firm said its chief executive officer Jill Granoff had resigned.
The company said late Monday that Granoff will remain ceo through a “transition period to ensure an orderly” changeover to new leadership. Granoff, who joined Kellwood Co. in May 2012 as its ceo, made the move over to Vince to focus on accelerating the brand’s growth. She and her management team ultimately took the company public in a November 2013 initial public offering. Granoff could not be reached for comment Tuesday.
Shares of Vince closed at $9.72 in Big Board trading. The firm’s shares hit a 52-week low of $9.46 in intraday trading. The 52-week high was $39.08, well above the $28.66 that shares closed the day of its IPO, when they opened at $29.50.
The shake-up at Vince could indicate a more hands-on role being taken by the company’s chairman, Marc J. Leder, who will head the search for Granoff’s successor, with the current plan to work with an executive search firm to identify potential ceo candidates.
Leder is also co-ceo of Sun Capital Partners, the private equity firm that acquired Kellwood in February 2008 for $762 million. Vince was part of the Kellwood portfolio at the time of the acquisition. Sun, which still owns Kellwood, retains a 55 percent stake in Vince, and Leder also is an individual stakeholder in the brand.
A rumbling or two surfaced that something might be remiss at Vince last month when Leder, who joined the Vince board in April 2014, became chairman of the apparel firm and succeeded Granoff, who had been named chairman a year earlier. More rumblings surfaced a few weeks later when Lisa Klinger, who was hired in December 2012 as chief financial officer and has expertise in taking companies public, submitted her resignation.
The change in the board structure followed the firm’s first-quarter earnings report on June 4. While the company posted diluted earnings per share of 6 cents on net revenues of $59.8 million — Wall Street consensus was an expectation of 5 cents on revenues of $59.5 million — disappointment reigned after the firm lowered guidance for the full fiscal year “based on current business trends and other macro dynamics,” owing mostly to company expectations of a low double-digit decline in its domestic wholesale channel. The company was still projecting double-digit sales growth in its retail, e-commerce, international and licensing channels.
It isn’t clear yet whether second-quarter results will be disappointing enough to necessitate the reorganization of the Vince management team, although internally many trends and projections can be discerned already from preliminary results.
An individual on the mergers and acquisitions side observed that sometimes the problem with companies connected to private equity is that there is the pressure to grow fast in order to hasten the pace of return on investment. He explained, “That creates pressure on the management team to make decisions that they might not have made if the company was on its own. This can be from where to spend money or a decision to expand too fast, such as opening freestanding stores.”
A slowdown in Vince’s growth has meant that Wall Street analysts have maintained either a “neutral” or “hold” rating on the company’s shares.
On Tuesday, Stifel’s Richard E. Jaffe, who reiterated his “hold” rating, said, “Given the recent leadership changes, weak results over the past few quarters and cautious guidance for 2015, we believe the outlook for Vince has grown more speculative.”
Matthew R. Boss at J.P. Morgan, who gave Vince a “neutral” rating, has a “$9 December 2016 price target,” noting that the “overall promotional backdrop has intensified — lack of newness in apparel, slowing accessories industry growth rate, expanded capacity with online entrants — with off-price making up a larger component of wholesale growth across branded apparel.” Boss said Vince is about 70 percent wholesale today.
Mark Altschwager of Baird also maintained his “neutral” rating on the stock, but lowered his price target to $13 from $15 a share, noting that, “We continue to see growth opportunities over the next several years as Vince expands its product assortment [men’s footwear, handbags, accessories] grows internationally and streamlines operations.”
Altschwager added that retailers are adapting to lower category growth due to reduced traffic and deflationary pricing.
One apparel executive, who spoke on the condition of anonymity, said, “The contemporary market, in particular, is pressured. Sales have been slowing at retail and that will continue.”
Not helping is also the slowing sales in accessories, as evidenced by some of Vince’s competitors in the handbag category such as Michael Kors, Kate Spade and Coach. The handbag category is an area where Vince was planning on expanding its offerings further.
In addition, Vince has had a revolving door of designers since the departure of Vince cofounders Rea Laccone and Christopher LaPolice in January 2013. LaPolice handled sales and marketing, and Lacccone was responsible for design, merchandising and production.
After they left, Doo-Ri Chung assumed the design reins, joining as creative director. She relocated to Los Angeles in January 2013, where she oversaw design, product development and branding initiatives. Chung’s tenure was brief — she left in October 2013. The design duties were then overseen by Karin Gregersen, president of Vince since May 2013, who added the title of chief creative officer in October 2013. Gregersen previously worked at Chloé-Richemont for 13 years.
The Vince management team that took the company public included Granoff, Klinger and Gregersen. Gregersen’s resignation was also disclosed Monday.
Vince said Monday that Livia Lee has been hired as senior vice president of merchandising.
As Vince works out a new strategy, one source said even with new management and design teams in place, that might not be enough for the brand. The company, which hasn’t held a runway show during New York Fashion Week in the last few seasons, still needs to invest in getting Vince’s brand awareness in front of consumers. “Having the right product isn’t enough. You still need buzz around the brand,” this person said.
Daniel Castle, managing director of strategic business development, who oversees the lifestyle division at Saban Brands, said in managing brands that need revitalizing, both marketing and public relations are required to enable that reconnection with the consumer. And while different forms of marketing can often times be expensive, sometimes “shifting the focus to public relations and social media can create just as visible a presence in the consumer mindset than the cost for advertising, with costly activations such as events, print, television or radio placement. Efforts toward product placement and celebrity placement can garner similar results and benefits to capture the consumer wallet.”