Vince, continuing to show progress in its turnaround, practically doubled its net profit for the third quarter, raised its guidance for the year, and plans to open a store next year opposite Saks Fifth Avenue.
The company posted a net profit of $6.8 million, or 57 cents per diluted share for the quarter ended Nov. 3, from $3.5 million a year ago, or 41 cents per share.
Net sales in the quarter increased 5.6 percent to $83.5 million from $79.1 million a year ago. Comparable retail sales grew 14.1 percent and direct-to-consumer sales rose 17.1 percent. Wholesale sales were flat at $53 million, largely due to a narrowing of its department store distribution to focus on Nordstrom and Neiman Marcus which was offset by lower sales allowances.
Gross margin rate increased 250 basis points to 48.9 percent. Operating income increased 68.9 percent to $9 million.
By early afternoon, the stock rose 11 percent, or $1.12, to $11.27.
“Our third-quarter results reflect continued strength across several areas of our business,” said chief executive officer Brendan Hoffman. “Our retail segment delivered a 14.1 percent comp with continued momentum in our e-commerce business while in our wholesale segment, we saw continued strength in our department store doors with higher sell-through rates and further market share gains.
“During the third quarter, we opened two stores in premier locations and we recently signed a lease for a store in Midtown Manhattan across from Rockefeller Center,” Hoffman added. The new store will be located on 49th Street, just across the street from Saks Fifth Avenue and near Fifth Avenue. It’s expected to open in fall of 2019. This year, Vince pulled back on its distribution to Saks and Bloomingdale’s.
For the Midtown store, “We were able to achieve attractive economics,” Hoffman said during a conference call Thursday. “This is a great location across from Rockefeller Center, and we look forward to benefiting from the significant foot traffic. This location also plays nicely into our strategy to capture walk-away sales,” considering Vince no longer wholesales apparel to Saks.
Vince recently opened stores in Palisades Village, Calif., and Palm Beach Gardens, Fla.; two shops-in-shop in El Corte Inglés in Madrid and Marbella, and launched men’s wear in Japan and South Korea. In February, a shop-in-shop will open in Selfridges “after a strong performance in their multibrand area.”
“Overall, with another quarter of great results under our belt, combined with our performance through the Black Friday weekend, we are raising the low end of our full-year guidance and are more optimistic than ever about our ability to deliver profitable growth over the long term,” Hoffman said.
For fiscal 2018, the company now expects net sales to be between $277 million and $280 million. The company previously projected $273 million to $280 million in sales. In 2017, Vince generated sales of $272.6 million.
Operating income is now projected to be between $5 million and $7 million, excluding any potential non-cash asset impairment charges. The company previously projected operating income at $3 million to $7 million. In 2017, the company reported an operating loss of $18.3 million, which included a $5.1 million non-cash asset impairment charge related to property and equipment of certain retail stores.
Last month, Vince launched Unfold, a subscription rental service involving a $160 monthly fee to receive any four women’s garments at a time and keep up to 10 in your closet. There is also an option to buy the products and there is free shipping and returning.
Hoffman said he sees subscription shopping becoming increasingly popular. “While we do not expect a meaningful short-term financial impact and we are in early stages, we believe this will help to further expand brand awareness and has the potential to be an additional revenue stream,” he said.
In other maneuvers, Vince reestablished its replenishment assortment “to ensure we always have our customers’ everyday essentials,” which include Ts and stretch satin blouses for women, and men’s hoodies and Ts, among other items.
Hoffman also said the company’s emphasis on buy-now-wear-now is “definitely aligning with our customers’ needs” and that the brand is “winning with color as she loved our fall palette fused with shades of copper, ink blue, sandalwood and vintage rose, purposely designed to be paired together tonally. Our dresses and our bottoms business performed well with the strength in pants and skirts as we capitalized on trends including wide-leg pants, culottes and pleated skirts.
“We have also seen strength in our active leisure styles that are great for everyday wear,” Hoffman said.