Vince Holding Stock Is Firing on All Cylinders in the Retail Space
Vince Holding Corp (NYSE:VNCE) is a new public company that has only been on the NYSE for eight months. The company is engaged in the design, merchandise, wholesale, and retail of contemporary fashion brands products. It operates through two segments: “Wholesale” and “Direct-To-Consumer.” The company offers a range of women’s products, such as cashmere sweaters, silk blouses, leather and suede leggings and jackets, dresses, denim, tanks, T-shirts, pants, and footwear. It also has men’s products that comprise T-shirts, knit and woven tops, sweaters, denim, pants, blazers, outerwear, and leather jackets. It operates 28 stores, which include 22 full-price retail stores and 6 outlet stores and Vince.com. The company also offers its products through approximately 2,300 stores across 47 countries. It markets its products through traditional media, digital media, and social media. The company is firing on all cylinders and the stock, while dropping after going public, has recently come on strong on the back of a fantastic report and outlook.
Net sales for the first-quarter of fiscal 2014 were $53.5 million, up 32.4 percent over the $40.4 million achieved during the first-quarter of fiscal 2013. Comparable store sales for the first-quarter of fiscal 2014 increased 11.1 percent over the first-quarter of fiscal 2013. Gross profit in the first-quarter of fiscal 2014 increased 50.8 percent to $26.4 million from $17.5 million in the first-quarter of fiscal 2013. Gross profit as a percentage of net sales increased to 49.4 percent from 43.4 percent in fiscal 2013. Expenses in the first-quarter of fiscal 2014 were $21.2 million or 39.7 percent of sales compared to $15.6 million or 38.7 percent of sales in the first-quarter of fiscal 2013, including public company transition costs. Operating income for the first-quarter of fiscal 2014 increased 174 percent to $5.2 million compared to $1.9 million for the first-quarter of fiscal 2013.
Excluding public company transition costs from operating income for the first-quarter of fiscal 2013, operating income for the first-quarter of fiscal 2014 increased 64.1 percent compared to the same period in fiscal 2013 and, as a percent of sales, was 9.7 percent for the first-quarter of fiscal 2014 compared to 7.9 percent for the same period in fiscal 2013. Net income for the first-quarter of fiscal 2014 was $1.4 million compared to a net loss of ($15.1) million for the first quarter of fiscal 2013. Diluted earnings per share for the first-quarter of fiscal 2014 was $0.04 compared to a net loss per share for the first-quarter of fiscal 2013 of ($0.58). On an adjusted basis, first quarter diluted earnings per share was $0.00 in the first quarter of fiscal 2013. This was an impressive turn-around.
The company is also managing its debt well. The company’s cash balance at the end of the first-quarter was $21.8 million. The company paid down $20.0 million of debt during the first-quarter of fiscal 2014, resulting in total debt outstanding of $150.0 million as of May 3, 2014. Inventory at the end of the first-quarter of fiscal 2014 was $31.9 million versus $34.0 million as of February 1, 2014 and $20.1 million at the end of the first-quarter of fiscal 2013. Finally, capital expenditures during the first quarter of fiscal 2014 totaled $1.3 million, $1.0 million of which was attributable to real estate activities, such as new and remodeled stores and shop-in-shop build-outs. Jill Granoff, Chair and Chief Executive Officer of Vince, stated the following:
It was another terrific quarter for the Vince brand as we again delivered double-digit growth across all distribution channels. In our wholesale segment, sales increased nearly 29 percent driven by strong performance in both women’s ready-to-wear and men’s sportswear. In our direct-to-consumer segment, sales increased over 41 percent driven by 11.1 percent comparable store sales growth, six net new stores, and continued strong momentum in our e-commerce business, which benefited from our website re-launch in February. These results demonstrate that our everyday luxury essentials continue to resonate with our broad customer following.
We are proud of our strong first-quarter 2014 performance and we are even more excited about the continued progress we are making in our evolution to becoming a global, dual-gender lifestyle brand. Our apparel business remains solid, our licensed women’s footwear business is gaining momentum and next month we will launch children’s wear and men’s footwear, both new licensed categories. We are also making progress on several operational improvement initiatives that we expect will drive additional gross margin rate expansion during the remainder of fiscal 2014. Given these activities, along with our strong first-quarter performance, we have increased our expectation for fiscal 2014 diluted earnings per share to $0.88 to $0.92 from $0.85 to $0.90 per share.
That’s right, looking ahead the company has guided higher. The company expects to achieve total net sales of $325 million to $340 million, including revenues from 7 to 8 new retail stores and comparable store sales growth in the high single-digit to low double-digit range. It expects to expand gross margin 150 to 250 basis points. Finally, the company will spend $17 million to $22 million in capital expenditures and will bring in diluted earnings per share of $0.88 to $0.92. Given the incredible year over year improvement and the bullish outlook, it is hard not to recommend this stock. I think it can move substantially higher in the coming years.
Disclosure: Christopher F. Davis holds no position in Vince Holdings and but may initiate a long position in the next 72 hours. He has a buy rating on the stock and a $46 price target.