Vince Holding Corp., seeing COVID-19 cut short momentum at the Vince brand, reported an operating loss of $21.9 million in the first quarter ended May 2, compared to an operating loss of $6.23 million in the year-ago period.
Total sales decreased 47.3 percent to $39 million last quarter compared to $74 million in the first quarter of fiscal 2019.
Vince brand net sales decreased 47.7 percent to $28.8 million. Vince brand wholesale segment sales decreased 60.8 percent to $10.7 million compared to the first quarter of fiscal 2019.
Vince brand direct-to-consumer segment sales decreased 34.9 percent to $18.1 million compared to the first quarter of fiscal 2019.
At Rebecca Taylor and Parker, which were acquired last year, net sales decreased 45.8 percent to $10.2 million.
Vince Holdings temporarily closed all of its stores in mid-March due to the coronavirus but currently has reopened 10 — five in Florida, three in Texas and one each in Atlanta and Scottsdale, Ariz. The company ended the first quarter with 69 company-operated Vince and Rebecca Taylor stores.
The results are preliminary and subject to change following the completion of quarterly financial closing procedures. The preliminary results do not include the non-cash impact of goodwill and intangible asset impairment charges, long-lived asset or other finite-lived intangible asset impairment charges, which are expected to have a material impact on the results. In addition, preliminary results exclude any benefit from the re-measurement of the liability related to the company’s tax receivable agreement, the TRA.
Like other brands and retailers, business at Vince was fine until the coronavirus outbreak.
“The momentum in the Vince brand full-price retail and e-commerce channels continued into February 2020. Beginning in March, at the onset of the COVID-19 pandemic and subsequent temporary store closures, we had to respond quickly to the downturn in our business,” Brendan Hoffman, chief executive officer, said Tuesday. “Through this crisis our teams have demonstrated incredible resiliency, agility and creativity executing under pressure and with limited resources. Our near-term priorities have been shifted toward actions necessary to reduce costs and enhance liquidity through the difficult environment. We also quickly elevated efforts toward Vince’s e-commerce channel to serve and engage with our customers. We remained active in e-mail, Instagram and social media providing content relevant to the current environment, which contributed to strong growth in traffic and conversions.
“Despite the near-term challenges related to COVID-19, I am no less excited about the long-term opportunities for our business. The Vince brand has steadily gained market share over the last five years and has a proven track of growth in our direct-to-consumer and wholesale channels. The brand’s distinct aesthetic of effortless luxury and its comfortable casual essentials offering aligns well with the strong trend toward comfort as we move toward a work-from-home lifestyle.
“Rebecca Taylor has strong brand equity and its own modern luxury aesthetic where we see white space opportunity in the contemporary fashion landscape. We continue to believe that we can create the success we have achieved at Vince by executing a similar strategic playbook. We look forward to fully resuming our multiple growth strategies as we emerge from the pandemic.”
In other results, gross profit was $16 million, or 41 percent of net sales, compared to gross profit of $37.9 million, or 51.2 percent of net sales, in the year-ago quarter. The decrease in the gross margin rate was primarily due to year-over-year adjustments to inventory reserves, increased promotional activity and deleveraging of supply chain costs. This was partially offset by lower sales allowances and a channel mix shift at the Vince brand.
Cash and cash equivalents were $26.6 million at the end of the first quarter compared to $1 million for the same period last year. The increase in cash reflects borrowings on the company’s revolving credit facility as part of its efforts to protect liquidity during the COVID-19 crisis.
Total borrowings under the company’s debt agreements totaled $88.4 million, reflecting an increase of $25.8 million since the same period last year.
Net inventory at the end of the first quarter of fiscal 2020 was $68.1 million compared to $66 million at the year-ago quarter.
Due to the uncertainty related to COVID-19, the company did not provide an outlook for fiscal 2020 but warned, “The COVID-19 pandemic remains volatile and continues to evolve on a daily basis, which could negatively affect the outcome of the measures intended to address its impact and/or our current expectations of the company’s future business performance.”