Vince.(VNCE) - 2025 Q4 - Annual Report

Part I Business Vince Holding Corp. operates the Vince brand through wholesale and direct-to-consumer channels under a long-term license agreement - The company operates primarily through two segments: Vince Wholesale and Vince Direct-to-consumer. It has wound down its Rebecca Taylor and Parker businesses[23][36] Net Sales by Segment (Fiscal Years 2024 & 2023, in thousands) | Segment | FY 2024 Net Sales | % of Total | FY 2023 Net Sales | % of Total | | :--- | :--- | :--- | :--- | :--- | | Vince Wholesale | $165,349 | 56.3% | $149,603 | 51.1% | | Vince Direct-to-consumer | $128,103 | 43.7% | $143,096 | 48.9% | | Total Vince Net Sales | $293,452 | 100.0% | $292,699 | 99.9% | - A single wholesale partner, Nordstrom Inc., accounted for 26% of net sales in fiscal 2024, up from 20% in fiscal 2023, highlighting significant customer concentration[24] - On January 22, 2025, P180, Inc. acquired a majority stake in the company from Sun Capital Partners, Inc[16][28] - The company sold its Vince brand intellectual property to ABG Vince on May 25, 2023, and now operates under a long-term license agreement, paying royalties on net sales[15][56][57] Vince Retail Store Count | Fiscal Year | 2024 | 2023 | | :--- | :--- | :--- | | Beginning of year | 63 | 67 | | Net (closed) opened | (6) | (4) | | End of year | 57 | 63 | Risk Factors The company faces significant risks related to its business, supply chain, technology, and corporate structure, including trade policies and license agreement terms Risks Related to Business and Industry Key business risks include U.S. trade policy changes, liquidity challenges, customer concentration, and strict terms of the ABG Vince license agreement - Changes to U.S. trade policy, including a new universal baseline tariff of 10% and a 145% tariff on most Chinese products announced in April 2025, significantly increase product costs and could materially affect financial condition[64][65] - The company's ability to service debt and fund operations is dependent on generating sufficient cash flow, which could be negatively impacted by tariffs, potentially affecting borrowing capacity under its credit facility[66] - The loss of, or a significant decrease in purchases from, its largest wholesale partner, which accounted for 26% of total revenue in fiscal 2024, could substantially reduce revenue[72] - The company's entire business relies on the License Agreement with ABG Vince. Failure to meet requirements such as minimum net sales, royalty payments, or maintaining a minimum of 45 retail stores could lead to termination of the license, resulting in a complete loss of revenue[76][77][58] - ABG Vince has broad approval rights over design, marketing, new customer accounts, and new retail locations, and can remove existing wholesale partners, which could constrain the company's ability to operate its business as intended[79] Risks Related to Supply Chain Supply chain risks include heavy reliance on foreign sourcing, particularly China, concentration among independent manufacturers, and centralized third-party distribution - The company is heavily reliant on foreign sourcing, with 66% of its product costs in fiscal 2024 related to production in China, exposing it to risks from tariffs, trade restrictions, and political instability[103] - The company relies on independent manufacturers without long-term agreements. The top five manufacturers accounted for approximately 59% of finished product production in fiscal 2024, creating a significant concentration risk[107] - The company's distribution relies on third-party facilities in California, Hong Kong, and Belgium. Disruptions at these locations, such as port delays in California, could harm the ability to meet customer demand and increase costs[112] Risks Related to Information Technology and Security IT risks include susceptibility to cyberattacks, challenges in system optimization, and the need to comply with evolving data privacy regulations - The company is subject to risks from cyber or malware attacks, which could disrupt operations, lead to data breaches, and result in significant expenses and reputational harm[117] - The company is continuously improving its IT systems. Failure to successfully optimize these systems, such as the customer data platform and e-commerce website, could harm business operations and financial results[118] - Failure to comply with various privacy laws and regulations, such as GDPR and CCPA, could result in governmental actions, litigation, and fines, adversely affecting the business[119] Risks Related to Structure and Ownership Structural risks include maintaining NYSE listing requirements, the influence of P180 as a controlled company, and reduced disclosure obligations as a smaller reporting company - The company must maintain certain financial criteria to keep its common stock listed on the NYSE, including a minimum market capitalization or stockholders' equity[121] - As of April 21, 2025, P180 owned approximately 56% of the company's common stock, making it a "controlled company." This gives P180 significant influence, and its interests may differ from those of other stockholders[122] - The company is a "smaller reporting company," which allows for reduced disclosure obligations, potentially making its common stock less attractive to investors[123] Unresolved Staff Comments The company has no unresolved staff comments to report - The company reports no unresolved staff comments[124] Cybersecurity The company maintains a cybersecurity risk management program with executive and board oversight, and has not identified any material incidents - The company employs a cybersecurity program with tools like network monitoring and vulnerability assessments, an incident response plan, and regular employee training to manage risks[125][126] - Cybersecurity governance involves a team led by the Chief Information Officer (CIO) for day-to-day management, with oversight from the Audit Committee of the Board of Directors, which receives regular reports[127][129][130] - The company has not identified any risks from past or current cybersecurity incidents that are reasonably likely to materially affect its business strategy, results of operations, or financial condition[128] Properties The company leases all its corporate and retail facilities, including 57 Vince stores and key offices in New York, Los Angeles, and Paris Significant Leased Corporate Facilities (as of Feb 1, 2025) | Location | Use | Approx. Square Footage | | :--- | :--- | :--- | | New York, NY | Corporate Office | 49,492 | | Los Angeles, CA | Vince Design Studio | 28,541 | | Paris, France | Vince Showroom | 4,209 | - As of February 1, 2025, the company operated 57 retail stores, comprising 43 full-price stores and 14 outlet stores[87][133][135] - The 57 company-operated Vince retail stores are all leased and occupy a total of 139,908 gross square feet[132][135] Legal Proceedings The company is involved in ordinary course legal proceedings, which are not expected to materially impact its financial position - The company is involved in ordinary course legal proceedings but does not expect them to have a material adverse impact on its financials[136] Mine Safety Disclosures This item is not applicable to the company - This item is not applicable to the company[137] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on the NYSE, has few record holders, and has never paid cash dividends due to growth plans and debt restrictions - The company's common stock trades on the NYSE under the symbol "VNCE"[139] - The company has never paid cash dividends and does not plan to in the foreseeable future, with payments also being restricted by debt covenants[141] - No shares of common stock were repurchased by the company in the fourth quarter of fiscal 2024[143] [Reserved]](index=23&type=section&id=Item%206.%20%5BReserved%5D) This section is intentionally reserved Management's Discussion and Analysis of Financial Condition and Results of Operations Fiscal 2024 saw flat net sales but a significant net loss due to a goodwill impairment, despite improved gross margin, with liquidity dependent on cash flow and credit facilities Results of Operations Fiscal 2024 net sales were flat, but a $32.0 million goodwill impairment led to a $19.0 million net loss, despite a 400 basis point increase in gross margin to 49.5% Fiscal 2024 vs. Fiscal 2023 Operating Results (in thousands, except per share data) | Metric | Fiscal 2024 | Fiscal 2023 | | :--- | :--- | :--- | | Net Sales | $293,452 | $292,890 | | Gross Profit | $145,179 | $133,292 | | Gross Margin % | 49.5% | 45.5% | | Impairment of goodwill | $31,973 | $0 | | (Loss) income from operations | ($17,176) | $31,624 | | Net (loss) income | ($19,047) | $25,446 | | Diluted (loss) earnings per share | ($1.51) | $2.04 | - The gross margin rate increased by 400 basis points to 49.5% in fiscal 2024, primarily due to a 330 basis point positive impact from lower promotional activity and a 320 basis point positive impact from lower product/freight costs. This was partially offset by a 150 basis point negative impact from new royalty expenses[159][167] - A goodwill impairment charge of $31,973 was recorded in fiscal 2024. In contrast, fiscal 2023 included a $32,808 gain on the sale of intangible assets[160] - SG&A expenses increased by 2.6% to $138.0 million, driven by higher rent expense ($4.7 million) and compensation ($4.3 million), partially offset by a decrease in transaction-related expenses ($5.0 million)[162][168] Performance by Segment Vince Wholesale sales grew 10.5% to $165.3 million with increased operating income, while Direct-to-consumer sales declined 10.5% to $128.1 million due to reduced promotions Segment Performance (Fiscal 2024 vs. 2023, in thousands) | Segment | FY24 Net Sales | FY23 Net Sales | FY24 Income from Ops | FY23 Income from Ops | | :--- | :--- | :--- | :--- | :--- | | Vince Wholesale | $165,349 | $149,603 | $57,905 | $43,416 | | Vince Direct-to-consumer | $128,103 | $143,096 | $2,970 | $5,774 | - Vince Wholesale net sales increased by 10.5% due to higher full-price shipments, and operating income increased by 33.4% due to higher sales and improved gross margin[177][178] - Vince Direct-to-consumer net sales decreased by 10.5%, with comparable sales (including e-commerce) down 4.8% primarily due to a decrease in promotional activity. Operating income fell due to lower sales and higher SG&A expenses[179][180] Liquidity and Capital Resources Liquidity is driven by cash from operations and an $85 million revolving credit facility, with fiscal 2024 seeing increased operating cash flow and significant debt repayments Summary of Cash Flows (in thousands) | Activity | Fiscal 2024 | Fiscal 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $22,059 | $1,640 | | Net cash (used in) provided by investing activities | ($4,232) | $75,540 | | Net cash used in financing activities | ($18,381) | ($77,079) | - In June 2023, the company entered into a new $85 million 2023 Revolving Credit Facility, replacing its previous 2018 facility. As of Feb 1, 2025, $11.4 million was outstanding with $39.8 million available[193][202][394] - On May 25, 2023, the company repaid and terminated its Term Loan Credit Facility using proceeds from the sale of its intellectual property[191][393] - In connection with the P180 Acquisition in January 2025, the company paid down $20.0 thousand of its Third Lien Credit Facility and had an additional $7.0 thousand forgiven, reducing the outstanding principal by approximately $27.0 thousand[214][378] Contractual Obligations As of February 1, 2025, total contractual obligations were $274.2 million, primarily comprising operating leases, guaranteed minimum royalties, and other purchase obligations Contractual Obligations as of February 1, 2025 (in thousands) | Obligation Type | 2025 | 2026-2027 | 2028-2029 | Thereafter | Total | | :--- | :--- | :--- | :--- | :--- | :--- | | Other contractual obligations | $40,887 | $5,898 | $0 | $0 | $46,785 | | Guaranteed Minimum Royalty | $11,000 | $22,000 | $22,000 | $33,000 | $88,000 | | Operating lease obligations | $22,466 | $37,159 | $32,442 | $39,608 | $131,675 | | Long-term debt obligations | $0 | $0 | $7,743 | $0 | $7,743 | | Total | $74,353 | $65,057 | $62,185 | $72,608 | $274,203 | Critical Accounting Estimates Critical accounting estimates include revenue recognition, inventory valuation, goodwill fair value assessment, and income taxes, all requiring significant management judgment - Revenue recognition requires significant estimates for variable consideration such as chargebacks, markdown allowances, and sales returns. A hypothetical 1% change in these reserves would impact accounts receivable and net sales by $69.0 thousand[222][225] - Inventory valuation is subjective and requires assessing the future desirability and pricing of out-of-season inventory. A hypothetical 1% change in the obsolescence reserve would impact inventory and cost of products sold by $25.0 thousand[226][228] - In fiscal 2024, the annual goodwill impairment test was based on the transaction price of the P180 Acquisition. This quantitative test determined the fair value of the Vince Wholesale reporting unit was below its carrying value, resulting in a full goodwill impairment charge of $31,973 thousand[232][339] - The company maintains a full valuation allowance on most of its deferred tax assets, as it does not believe it is more likely than not that they will be realized. The valuation allowance was $53.4 million as of February 1, 2025[237][447] Quantitative and Qualitative Disclosures About Market Risk The company is exempt from this disclosure requirement due to its status as a smaller reporting company - The company is exempt from this disclosure requirement due to its status as a "smaller reporting company"[239] Financial Statements and Supplementary Data This section presents the company's audited consolidated financial statements, including the independent auditor's report and detailed notes Report of Independent Registered Public Accounting Firm PricewaterhouseCoopers LLP issued an unqualified opinion on the financial statements, identifying revenue recognition as a critical audit matter - The auditor, PricewaterhouseCoopers LLP, issued an unqualified (clean) opinion on the company's consolidated financial statements[284] - The audit identified "Revenue Recognition" as a Critical Audit Matter, citing the high degree of auditor effort involved in performing procedures to test revenue transactions and balances[288][290] Consolidated Financial Statements The consolidated financial statements show total assets of $222.7 million and a net loss of $19.0 million for fiscal 2024, with $22.1 million in operating cash flow Consolidated Balance Sheet Summary (in thousands) | | Feb 1, 2025 | Feb 3, 2024 | | :--- | :--- | :--- | | Total Current Assets | $96,576 | $84,802 | | Total Assets | $222,735 | $225,149 | | Total Current Liabilities | $73,546 | $61,428 | | Total Liabilities | $180,976 | $178,000 | | Total Stockholders' Equity | $41,759 | $47,153 | Consolidated Statement of Operations Summary (in thousands) | | Fiscal Year 2024 | Fiscal Year 2023 | | :--- | :--- | :--- | | Net Sales | $293,452 | $292,890 | | Gross Profit | $145,179 | $133,292 | | (Loss) income from operations | ($17,176) | $31,624 | | Net (loss) income | ($19,047) | $25,446 | Notes to Consolidated Financial Statements The notes detail significant transactions, goodwill impairment, debt, income taxes, and lease obligations, providing comprehensive financial policy and data disclosure - Note 2 details several major transactions: the wind-down and sale of the Rebecca Taylor business, the sale of Parker intellectual property, the sale of Vince intellectual property to ABG Vince for $76.5 million cash and a 25% equity stake, and the P180 acquisition of a majority stake in the company[359][363][364][377] - Note 3 explains that the entire goodwill balance of $31,973 thousand was written off in fiscal 2024 as an impairment charge, triggered by the P180 Acquisition which was used to determine the fair value of the reporting unit[382][383] - Note 5 outlines the company's debt structure, including the $85 million 2023 Revolving Credit Facility and the Third Lien Credit Facility, which was significantly paid down and partially forgiven as part of the P180 acquisition[394][415] - Note 11 discloses that due to an ownership change from the P180 acquisition, the future use of NOLs is subject to a Section 382 limitation, leading to a write-off of $232.6 million in gross federal NOLs[446] - Note 12 shows total future lease payments of $131.7 million, with a weighted-average remaining lease term of 7 years and a discount rate of 7.15%[453][455] Changes in and Disagreements With Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants - The company reports no changes in or disagreements with its accountants[241] Controls and Procedures Management concluded that disclosure controls were ineffective due to a material weakness in IT general controls, for which a remediation plan is being implemented - The CEO and CFO concluded that disclosure controls and procedures were not effective as of the end of the fiscal year[244] - A material weakness in internal control over financial reporting exists due to inadequate IT general controls, specifically concerning user access and segregation of duties[250][251] - Management is executing a remediation plan that includes modifying system access rights, performing user access recertifications, and improving processes for user provisioning and de-provisioning[253][254][259] Other Information No directors or officers adopted, modified, or terminated Rule 10b5-1 trading arrangements during the fourth quarter of fiscal 2024 - No directors or officers engaged in new or modified 10b5-1 trading plans during the quarter ended February 1, 2025[257] Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable to the company - This item is not applicable to the company[258] Part III Directors, Executive Officers and Corporate Governance Information for this item is incorporated by reference from the company's definitive 2025 proxy statement - Information is incorporated by reference from the forthcoming proxy statement[261] Executive Compensation Information for this item is incorporated by reference from the company's definitive 2025 proxy statement - Information is incorporated by reference from the forthcoming proxy statement[262] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information for this item is incorporated by reference from the company's definitive 2025 proxy statement - Information is incorporated by reference from the forthcoming proxy statement[263] Certain Relationships and Related Transactions, and Director Independence Information for this item is incorporated by reference from the company's definitive 2025 proxy statement - Information is incorporated by reference from the forthcoming proxy statement[264] Principal Accountant Fees and Services Information for this item is incorporated by reference from the company's definitive 2025 proxy statement - Information is incorporated by reference from the forthcoming proxy statement[265] Part IV Exhibits and Financial Statement Schedules This section provides an index of all exhibits filed with the 10-K, including financial statements, material contracts, and executive certifications - This section provides an index of all exhibits filed with the 10-K, including material agreements and executive certifications[267][268] Form 10-K Summary The company provides no summary for this item - The company provides no summary for this item[273]