Vince Posts 6600% EPS Jump in Fiscal Q2

Key Points

• Non-GAAP earnings per share climbed to $0.38 in Q2 FY2025, reflecting strong non-GAAP profit growth despite sales softness.

• Gross margin improved 3.0 percentage points to 50.4% in Q2 FY2025, supported by lower product costs and higher pricing.

• Direct-to-consumer sales rose 5.5%, leading to a return to profitability for the segment.

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Vince (NYSE:VNCE), a luxury apparel company known for its minimalist, high-quality clothing, reported earnings for the second quarter of fiscal 2025 on September 10, 2025. The most notable news from the release was a sharp increase in non-GAAP earnings per share to $0.38, driven primarily by improved profitability. Gross margins strengthened and direct-to-consumer channel growth offset ongoing wholesale pressures. The quarter showed better-than-expected profit margins, but top-line sales still dipped slightly. Overall, the period showed progress on several critical fronts, although some positive profit effects were non-recurring.

Business Overview and Success Factors

Vince designs and sells everyday luxury apparel, including clothing, footwear, and accessories for men and women. The company sells its products through two main channels: wholesale (sales to department stores and specialty retailers) and direct-to-consumer, which includes branded retail stores, an online store, and a clothing subscription service called Vince Unfold.

The company's recent strategic focus has been to reduce its reliance on wholesale partners—especially since more than a quarter of total sales in FY2024 came from Nordstrom—and to grow its direct-to-consumer operations. Success for Vince depends on maintaining premium brand identity, robust supply chain management (especially given tariff uncertainty), and improving the profitability mix between its sales channels. Diversifying away from third-party retailers and carefully managing production costs are both critical for the company’s long-term stability.

Quarter Review: Financial and Operational Highlights

Revenue declined 1.3% during the second quarter of fiscal 2025, mainly due to a 5.1% drop in the wholesale segment. The decline in wholesale revenue was mostly attributed to the timing of fall shipments, which shifted as a result of tariff uncertainty. The wholesale segment remains a source of risk for Vince, as dependence on large partners such as Nordstrom can be volatile. Even with falling wholesale revenue, Vince's wholesale segment profits edged up slightly, as higher selling prices and lower markdowns supported margins.

In contrast, direct-to-consumer sales rose 5.5%. This segment covers Vince's own retail stores, e-commerce, and the Vince Unfold subscription service. The segment returned to profitability.

Gross margin improved 3.0 percentage points to 50.4%. This was driven by better product costing and successful price increases, which more than offset higher tariffs and rising freight costs. The company recorded a one-time $7.2 million Employee Retention Credit (ERC) tax benefit related to payroll taxes from earlier periods. Of this, $5.6 million reduced selling, general, and administrative expenses, while $1.6 million was recorded as interest income.

Operating expenses (SG&A) fell by approximately 24%, primarily due to a one-time payroll tax credit, dropping from 45.8% to 35.2% of sales. The company also continued to run a leaner retail operation, with 58 stores at the end of the quarter versus 61 a year ago. Net inventory at the end of the quarter was $76.7 million compared to $66.3 million a year earlier, reflecting both higher tariff-related costs and strategic early shipping of fall merchandise. Total company borrowings shrank to $31.1 million, down from $54.4 million a year ago. Vince maintains $42.6 million in available credit.

Products, Licensing, and Supply Chain

Vince's products include core luxury apparel items such as sweaters, tees, knitwear, footwear, and accessories for both men and women. Though management highlighted a “strong customer reception” for collections and noted a longer full-price selling season, which means items sold at full value for an extended period before promotions began. This supports higher margins.

Licensing remains a background support for Vince through its agreement with Authentic Brands Group (ABG). The company is required to pay minimum annual royalties of $11 million under this agreement for use of the Vince trademark.

Supply chain management was a continued focus due to ongoing tariff pressures and reliance on Asia-based manufacturers, especially in China. About two-thirds of products were sourced from China in FY2024, increasing exposure to shifting trade policies. Higher inventory costs were partly due to tariff-driven price increases on imported goods, and Vince moved to ship products earlier to avoid tariff hikes where possible. Management pointed to ongoing efforts to pivot production to other regions and to work with suppliers to contain costs.

Looking Ahead: Outlook and Watch Points

For Q3 FY2025, management forecasts net sales to be flat to up 3% compared to the same quarter last year, with an adjusted EBITDA margin between 2% and 5% for Q3 FY2025. The leadership team anticipates $4 million to $5 million in incremental tariff costs for Q3 FY2025, but expects to offset about half of these through new sourcing, price adjustments, and other vendor negotiations. No full-year guidance has been issued, consistent with Vince's cautious approach from earlier in the year.

Investors should monitor direct-to-consumer growth and the evolution of inventory levels—especially if demand slows. Also important will be the sustainability of margin gains now that the one-time ERC tax benefit has been recognized. The company's financial flexibility is currently supported by lower borrowing and more available credit.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

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