Vince New York Retail

Vince is getting tighter with Nordstrom and the Neiman Marcus Group and narrowing its wholesale distribution.

“We have made a strategic decision to change our wholesale distribution by entering into exciting arrangements with Neiman’s and Nordstrom,” Brendan Hoffman, chief executive officer of Vince Holding Corp., told WWD. “I think the business got too fragmented, with too many points of distribution in difficult malls.

“As we get into 2018, this will be a net positive, certainly on the bottom line. We see this as a growth opportunity for us as we move forward. We can be a lot more powerful focusing in on Neiman’s and Nordstrom. They are giving us great support.”

While pumping up with Neiman’s and Nordstrom, effective next year with the spring collection, most Vince products, including apparel, will no longer be sold at Bloomingdale’s and Saks Fifth Avenue, which have been important partners with Vince for years. However, Vince shoes, which are the only licensed products in the line, will still be sold at Saks and Bloomingdale’s.

Hoffman declined to discuss the situation with Saks and Bloomingdale’s, but one source close to Saks said, “Saks and Vince came together on the decision. It was mutual.”

According to Hoffman, the move will also enable Vince to put greater effort into its direct-to-consumer business, expand with new categories such as home goods and handbags, both launching later this year, and potentially open new stores with  shorter-term leases. “We are beginning some dialogue” with landlords, he said. He sees the possibility of opening stores with two-year leases and very favorable rent terms as malls are anxious to refill vacated space. Vince currently has 55 company-operated stores.

It’s possible that Vince, with fewer points of distribution, becomes less promotional, though it remains to be seen whether the brand will make up the lost volume by narrowing the number of stores it sells.

“We have had a very constructive relationship and sizable business with Vince for years,” said Pete Nordstrom, copresident of Nordstrom Inc.  “Brendan approached us about looking at our partnership differently and with more of a sense of strategic partnership. It’s in that spirit that we enter into this arrangement.”

Jim Gold, president and chief merchandising officer of Neiman Marcus Group, said his company was entering into a “new strategic partnership with Vince. Together, we will invest in the brand to better serve the Neiman Marcus customer.”

Among the changes, Nordstrom will add Vince men’s wear to additional doors, and Nordstrom and Neiman’s will give greater exposure to the brand on their web sites and in catalogues. There will also be better positioning on selling floors. Vince is already widely distributed at Nordstrom and Neiman’s. “Nordstrom and Neiman’s are excited there are sales out there for them to grab,” Hoffman said.

Vince will continue to distribute to specialty stores. Vince is also discontinuing its distribution to Lord & Taylor but the volume at that retailer with Vince has been far less significant than Saks or Bloomingdale’s.

Separately, Vince reported a net loss of $10.1 million, or 20 cents a share, for the second quarter ended July 29, compared to a net loss of $2 million, or 4 cents a share, for the second quarter of fiscal 2016. The net loss for the 2016 period included a $3.3 million income tax benefit. Gross profit was $25.6 million, compared to gross profit of $27.4 million a year ago.

The prior-year results reflected a $1.9 million benefit from favorable adjustments to inventory reserves. In addition, gross margin in the second quarter of fiscal 2017 was negatively impacted by higher markdowns in the direct-to-consumer segment, and higher product and supply chain costs, partially offset by decreased discounts and allowances in the wholesale segment, the company said.

The operating loss was $8.9 million, compared to an operating loss of $4.3 million for the second quarter of fiscal 2016.

Net sales increased 0.2 percent to $60.8 million, from $60.7 million in the year-ago quarter. Wholesale sales decreased 0.9 percent to $39.3 million, primarily due to a reduction in sales internationally. Direct-to-consumer segment sales increased 2.3 percent to $21.6 million. Comparable sales decreased 0.8 percent due to a decrease in average order value.

The numbers were not surprising since Vince pre-released estimated results last month, saying it expected to report a loss from operations of between $8.5 million and $9.5 million and net sales of between $60 million and $62 million.

“We were pleased to see the stabilization in net sales during the second quarter, which showed significant sequential improvement versus our first quarter results,” Hoffman said on Thursday. “In our wholesale business, sales decreased slightly, due to a reduction in international sales. We also saw disruption in receipt flows for pre-fall and fall deliveries. In our direct-to-consumer segment, we saw sequential improvement in sales, with strong sales growth in our e-commerce business. In addition, we were very pleased with the positive sell-through that we have seen for our fall product thus far in our retail channel.”

In other news, the company closed on its $30 million rights offering this week. It’s expected to be funded by the end of the week, giving Vince greater financial flexibility and improving the balance sheet.  Vince has an agreement from its principal shareholder, Sun Capital, to backstop the offering.