The retailer’s Q3 performance reflects a continued emphasis on strengthening its full-price business while implementing a more efficient operating model as part of its ongoing transformation, noted Dave Stefko, Vince Holding interim chief executive officer, in the earnings call.
Although Q3 revenue slightly missed expectations, Vince Holding achieved profitability results within the previously provided guidance range, with the positive outcome primarily driven by an increase in gross margins.
Despite the drop in sales, the company's gross profit increased to $40.05m, or 50% of net sales, up from 44.2% in the same quarter last year. This improvement in gross margin rate was attributed to lower product costing and freight costs, as well as reduced promotional activity and discounting.
Vince Holding Q3 highlights
Operating income of Vince saw an increase, rising to $5.76m from $2.82m year-over-year.
Net income for the quarter stood at $4.34m, or $0.34 per diluted share, a significant increase from $983m, or $0.08 per share, reported in the third quarter of fiscal 2023.
The company's selling, general, and administrative expenses remained relatively stable at $34.3m, though they represented a higher percentage of sales compared to last year.
Vince ended the quarter with 61 company-operated stores, marking a net decrease of five stores since the third quarter of fiscal 2023.
Stefko said: "Our ongoing focus on driving a healthier, full-price business and executing on our Transformation Plan continues to yield strong results, as evidenced by the significant gross margin expansion and improved profitability we delivered in the third quarter compared to the prior year.
“While revenue fell slightly short of our expectations, primarily due to lower in-season reorders in our international wholesale business and lower than expected outlet channel sales, the underlying strength of the Vince brand continues to resonate with customers.”
The company remains cautious due to a shortened holiday season and consumer uncertainty but is optimistic about achieving its annual objectives. Vince's Transformation Program, announced on 31 October 2023, aims to save over $30m over three years, with around $10m expected in fiscal 2024 savings alone.
In both women's and men's categories, Vince’s knit offerings performed well as customers maintained a "buy now, wear now" approach.
The brand expressed satisfaction with its ability to continue selling through the summer collection at full price, as customers responded positively to the fabrics and colour choices. While the start of the season for sweaters and outerwear was slower due to unusually warm weather, the company concluded the fourth quarter with a solid full-price selection, which it expects to align better with the colder temperatures now.
Q4 and FY24 Outlook
Vince anticipates a low-single-digit range decrease in total company net sales for full-year fiscal 2024 compared to $292.9m in fiscal 2023. However, operating margin is expected to improve by 25 to 50 basis points excluding certain gains recorded earlier in the year.
For the fourth quarter of fiscal 2024, Vince forecasts net sales to vary from a mid-single-digit decrease to a low-single-digit increase compared to $75.3m in the fourth quarter of fiscal 2023. Operating margin for this period is projected to rise significantly by 200 to 300 basis points.
“As we look ahead, we expect to continue to execute a healthy full price business across all channels and are very encouraged by the results we have driven thus far in the fourth quarter. While we remain prudent with our outlook given the shortened holiday selling season and the ongoing uncertainty around the consumer, we believe we are well positioned to deliver on our objectives for this year," David Stefko added.
