Vince.(VNCE)2024-06-18 14:40Financial Data and Key Metrics - Total company net sales for Q1 2024 decreased by 7.6% to $59.2 million compared to $64.1 million in Q1 2023 [22] - Gross profit in Q1 2024 was $29.9 million, or 50.6% of net sales, compared to $29.6 million, or 46.2% of net sales in Q1 2023 [26] - Operating income for Q1 2024 was $5.6 million, compared to an operating loss of $2.4 million in the same period last year [28] - Adjusted net loss for Q1 2024 was $3.3 million, or $0.26 per share, compared to an adjusted net loss of $4.4 million, or $0.36 per share in Q1 2023 [33] - Net inventory at the end of Q1 2024 was $56.7 million, down from $80 million at the end of Q1 2023 [34] Business Line Performance - Vince Brand sales declined by 7.5% year-over-year, driven by declines in both wholesale and direct-to-consumer (DTC) segments [23] - DTC channel, excluding store closures, slightly outperformed the wholesale channel [9] - Full-price sales penetration increased by almost 500 basis points compared to the prior year [25] - The company is on track to expand men's business to 30% of total revenues over the next three years [12] Market Performance - The company saw strong customer reception in women's knits and casual dresses, and men's linen fabrications [8] - Internationally, performance is similar to the U.S., with growth opportunities in Asia, though inconsistent performance in the two stores opened there [43] - The company is focusing on expanding brand awareness in key markets like New York, LA, and Miami through events and marketing efforts [14] Strategic Direction and Industry Competition - The company is reducing promotional activity in both wholesale and DTC channels to drive full-price sales [7][10] - The company is leveraging its customer data platform to enhance customer engagement and loyalty, particularly with top customers who drive 35% of demand in the full-price DTC business [15][16] - The company is expanding its men's business and enhancing customer acquisition efforts, including reengaging in brand awareness and marketing strategies [13] - The company is benefiting from its partnership with Authentic Brands Group (ABG) and its ownership stake in ABG Vince, which is expected to offset royalty expenses [17][18] Management Commentary on Operating Environment and Future Outlook - The company expects Q2 2024 total net sales to be relatively flat to down low single digits compared to the prior year period [35] - Operating margin for Q2 2024 is expected to decline by 500 to 750 basis points compared to last year's adjusted operating margin of 4.1% [36] - For the full year, the company expects total net sales to grow in the low single digits compared to fiscal 2023, with operating margin flat to up 25 basis points [39][40] - The company is confident in its long-term growth strategy, particularly in expanding its men's business and improving customer engagement [12][19] Other Important Information - The company completed the wind down of the Rebecca Taylor business, resulting in a one-time gain of $7.6 million [28] - The company is targeting over $30 million in savings over three years as part of its transformation plan, which remains on track [18] - The company is launching the Vince Taylor clothing line later this year and will introduce a collection of handbags, belts, and small leather goods under the Vince label in 2025 [18] Q&A Session Summary Question: International Market Performance and Opportunities - The company is seeing similar performance internationally as in the U.S., with growth opportunities in Asia, though inconsistent performance in the two stores opened there [43] Question: Store Closures and Long-Term Growth Strategy - Store closures impacted year-over-year sales, but the company sees stores as part of its long-term growth strategy, with potential expansion in markets like Chicago, Dallas, and Houston [44][45] Question: Pricing Strategy and Outlet Channel - The company has completed the reset period for pricing and off-price business, with a focus on normalizing wholesale off-price and managing inventory better going forward [47][48] Question: SG&A Normalization - The company expects SG&A to normalize as it progresses through the year, with the impact of short-term incentive compensation plans mitigating as sales build in the back half of the year [49][50] Question: Cost Initiatives and Margin Improvement - The company realized approximately 240 basis points of margin improvement in Q1 2024, with cost initiatives expected to build throughout the year, particularly in the back half [53][54] Question: Revenue Guidance and Challenges - The company expects a stronger performance in the second half of the year, driven by its key selling season in fall and holiday, and improved wholesale business [57][58] Question: Growth Opportunities in Men's Category - The company is focusing on a new planned program in the men's category, with expectations for growth in the back half of the year [60]