Vince (VNCE) Q4 2025 Earnings Call Transcript

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DATE

Wednesday, April 15, 2026 at 8:30 a.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Brendan Hoffman
• Chief Financial Officer — Yuji Okumura

TAKEAWAYS

• Total Net Sales -- $83.7 million, a 4.7% increase driven by significant growth in direct-to-consumer.
• Direct-to-Consumer Sales -- Increased 10.4%, with both e-commerce and stores contributing to the result.
• Wholesale Sales -- Decreased 1.2%, primarily due to paused shipments to Saks Global, resulting in a $2 million sales headwind.
• Gross Profit -- $41.1 million, representing 49.1% of net sales versus 50.1% in the prior year quarter.
• Gross Margin Decline -- Decreased by 300 basis points from higher tariffs, 160 basis points from promotional activity, and 125 basis points from increased freight, partially offset by a 380 basis point benefit from higher pricing.
• SG&A Expenses -- $44 million, 52.6% of net sales; increase primarily due to $6 million bad debt expense linked to Saks Global reorganization.
• Operating Loss -- $(2.9) million; compares to $(29.7) million in the prior year period.
• Adjusted Operating Income -- $3.1 million, up from $2.5 million on a like-for-like basis.
• Net Loss -- $(3.6) million, or $(0.28) per share; improved from $(28.3) million, or $(2.24) per share, last year.
• Adjusted Net Income -- $2.4 million, or $0.18 per share, compared to $0.8 million, or $0.06 per share in the prior year’s adjusted results.
• Adjusted EBITDA -- $4.5 million, down from $5.4 million in the prior year period.
• Inventory -- $66.2 million, mainly rising due to $4.8 million in higher carrying value from tariffs.
• Interest Expense -- $0.7 million, down from $1.6 million in the prior period as a result of paydown on the third lien facility.
• Long-Term Debt -- $19.5 million at period end.
• Sales Outlook Q1 -- Expected total net sales growth of 8.5%-10.5%, adjusted EBITDA margin between negative 1.5% and negative 2.5%.
• Full-Year Sales Outlook -- Projected net sales growth of 3%-6%, adjusted operating income margin of 3.5%-4%, and adjusted EBITDA margin of 5%-5.5%.
• Men's Segment -- Ended with approximately 24% of sales; target is expansion toward 30% penetration via wholesale growth and expanded store and online assortments.
• International Expansion -- Marylebone, London store exceeded expectations and further flagship openings in gateway cities such as Paris are under consideration.
• Digital & Drop Ship Initiatives -- Expansion into handbags, tailored clothing, belts, and accessories via drop ship is planned for spring, providing incremental revenue with minimal inventory risk.
• Platform Strategy -- Management is evaluating opportunities to support external brands on the company’s operational platform, signaling potential for additional revenue streams.

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RISKS

• $6 million bad debt expense associated with Saks Global reorganization increased SG&A costs and directly impacted operating income.
• Gross margin was pressured by higher tariffs, promotional event discounts, and elevated freight costs, together reducing margin by nearly 6 percentage points before partial offset from pricing actions.
• Tariff-driven inventory cost increases added $4.8 million to inventory valuations, raising potential inventory risk in uncertain demand environments.

SUMMARY

Management provided detailed segment-level sales performance data, identifying direct-to-consumer as the primary growth driver while wholesale faced headwinds from Saks Global disruption. Incremental tariff and freight costs reduced profitability but were partially counteracted by higher pricing and maintained unit sales, with adjusted income and margins reflecting this dynamic. Capital allocation emphasized international flagship expansion, drop-ship category growth, and leveraging the Vince platform to serve additional brands as future revenue contributors.

• The spring expansion into new drop-shipped categories is designed to drive incremental topline growth without incremental inventory risk, according to management’s stated strategy.
• Net interest expense for the quarter decreased to $0.7 million compared to $1.6 million in the prior year, primarily due to paydown of the third lien facility during January 2025.
• Management described the company's store performance as “the best performance I've seen over the course of 6 months in our stores in my 6 years here on and off.”
• Expansion of the men's category, which management aims to increase from 24% to 30% of sales, is expected to come from both wholesale and direct-to-consumer channels.
• Management stated, “any change in penetration from this one partner going forward will be offset by strength elsewhere in the channel, given our diversified base and strong relationships across our wholesale business.”

INDUSTRY GLOSSARY

• Drop Ship: A fulfillment model where sales are made by the company but inventory and order fulfillment is handled by third-party licensed partners, reducing inventory holding risks.
• SG&A: Selling, general, and administrative expenses; includes overhead costs not directly tied to production.
• IMU: Initial markup; the difference between cost and initial selling price, a key driver of gross margin in apparel retail.

Full Conference Call Transcript

Brendan Hoffman: Thank you, and good morning, everyone. I'm incredibly proud of the strong operating results we are announcing today, highlighting the exceptional momentum we delivered at the end of the year that has continued into the start of fiscal 2026. As we announced earlier this year, we saw incredible strength in our direct-to-consumer business over the holiday period, and that remained the case throughout the full quarter. For the fourth quarter, sales in our direct-to-consumer business increased about 10% compared to last year, supported by our ongoing efforts in improving the customer experience and by the strategic pricing actions taken earlier in the fall.

For the overall quarter, sales were up nearly 5% compared to last year and profitability outpacing the high end of our prior guidance range. We are especially proud of this performance given the disruption we experienced with developments from Saks Global, which presented a headwind to sales of approximately $2 million in the quarter. With the recent reorganization of Saks Global, we now have more clarity into the situation and are working with our partners there as they move forward in their plans. As a reminder, Saks Global recently represented less than 7% of our total sales. We remain supportive and confident in the new leadership team's ability to stabilize the business.

We believe any change in penetration from this one partner going forward will be offset by strength elsewhere in the channel, given our diversified base and strong relationships across our wholesale business. This is a credit to not only our strong partnerships, but to the great product that is resonating across both men's and women's. We were also really pleased as we continue to elevate the product offering appealing to our broad customer base. This strong performance supported by our fiscal 2025 results, which delivered sales growth of over 2% and adjusted EBITDA growth of about 8% despite contending with approximately $8 million of incremental tariff costs.

As we have discussed, our teams have done a tremendous job in mitigating the tariff pressures we faced. We acted swiftly, diversifying our sourcing across Asia and globally while working closely with manufacturing partners to maintain the quality standards that define Vince. We also implemented strategic pricing increases while maintaining unit sales validating the strength and quality of our product. As we enter fiscal 2026, I am encouraged by the growth we are continuing to drive, and I'm more confident than ever in the trajectory ahead for Vince Holding Corp. Given this, we are exploring opportunities to continue to invest in the customer experience within our full-price direct-to-consumer business.

We are looking at areas like special events, people and store operations, including remodels and new store openings, while also continuing to leverage our digital platform and expand drop ship to additional categories. In spring 2026, these categories will include handbags, tailored clothing, belts and accessories, creating revenue opportunity with minimal inventory risk for the business. In addition, we are continuing to scale our men's business. We ended the year with men's representing approximately 24% of total sales and continue to see opportunity to expand this to 30% penetration, driven by growth in wholesale partnerships and expanded assortments in our own stores and online.

And with respect to our international business, our second London store in Marylebone exceeded expectations this year and validated our thoughts on further international expansion. This success gives us confidence to explore additional flagship opportunities in gateway cities like Paris in the next 2 years. Finally, the strategy, I believe, will really help to accelerate our growth is our focus on maximizing Vince Holding Corp as a platform. While we do not have anything yet to report, we are continuing to look for opportunities to leverage our platform our world-class team and capabilities to support additional brands. This will create a new revenue stream for Vince Holding Corp.

We could not be more enthused by our partnership with ABG, which not only opens channels for us, but also provides great opportunities with respect to marketing and engaging customers. We are thrilled to partner with the ABG team with a recent event at the Masters last week, and we are looking forward to doing similar types of interactive activations with the team for future high-profile events. This is in addition to the elevated outreach that we are also doing in partnership with our wholesale partners.

Following the successful brand events at the end of last year with Nordstrom and celebrating our holiday campaign at our Madison Avenue, New York City flagship, we have continued the storytelling around the Vince brand. We recently celebrated an exclusive capsule collection for Spring 2026 as part of Bloomingdale's California Love campaign and hosted an influencer and editor event to showcase the capsule and preview of our Spring 2026 collection with over 100 editors and influencers in attendance. As part of the event, we also co-hosted a private VIC dinner with Bloomingdale VICs complete with a fashion show and model presentation to great success. Fiscal '26 is off to a strong start in all accounts.

As Yuji will review and as seen in our outlook in today's press release, the momentum we ended fiscal '25 with has continued across all channels. Our full-price business has never been stronger, reflecting the customers' continued love for the product and value they see for the brand. We believe macro events aside, we are positioned well to continue to deliver healthy profitable growth. A little over a year ago, I returned to Vince as CEO. I cannot emphasize enough the pride that I have in our team, our business and the results we have delivered to date. I want to thank our incredible associates for their dedication and execution throughout fiscal '25.

Their ability to evolve the product, maintain quality and execute against our strategic priorities gives me tremendous confidence in the future. We are operating from a position of strength with disciplined execution and a clear road map for growth. I look forward to updating you on our progress as we move through the year. Now I'll turn it over to Yuji to discuss our financial results and outlook in more detail.

Yuji Okumura: Thank you, Brendan, and good morning, everyone. As Brendan reviewed, our fourth quarter performance reflected ongoing strong momentum in our direct-to-consumer segment that we are pleased to see continue into the start of the new year. Before I discuss our first quarter and fiscal 2026 outlook, let me review our fourth quarter results in more detail. Total company net sales for the fourth quarter increased 4.7% to $83.7 million compared to $80 million in the fourth quarter of fiscal 2024. With respect to channel performance, our direct-to-consumer segment increased 10.4%, driven by strong performances across both our e-commerce business and stores.

This performance offset the 1.2% decline in our wholesale channel, largely driven by the decision to pause shipments to Saks Global. Gross profit in the fourth quarter was $41.1 million or 49.1% of net sales. This compares to $40.1 million or 50.1% of net sales in the fourth quarter of last year. The decrease in gross margin rate was primarily driven by approximately 300 basis points due to the unfavorable impact of higher tariffs, 160 basis points due to the success of our promotional Black Friday and Cyber Monday events and approximately 125 basis points due to increased freight costs. These factors were partially offset by a favorable impact of approximately 380 basis points, primarily due to higher pricing.

Selling, general and administrative expenses in the quarter were $44 million or 52.6% of net sales as compared to $37.8 million or 47.2% of net sales for the fourth quarter of last year. The increase in SG&A dollars was primarily driven by $6 million of bad debt expense related to Saks reorganization. Loss from operations for the fourth quarter was $2.9 million compared to loss from operations of $29.7 million in the same period last year. Adjusted operating income, which excludes the $6 million related to the Saks reorganization, was $3.1 million.

This is compared to adjusted operating income of $2.5 million in the same period last year, excluding the impact of goodwill impairment charges and P180 transaction expenses incurred in the period. Net interest expense for the quarter decreased to $0.7 million compared to $1.6 million in the prior year. The decrease was primarily due to paydown of the third lien facility which occurred during January 2025. At the end of the fourth quarter of fiscal 2025, our long-term debt balance was $19.5 million. Income tax expense was $0.5 million compared to $2 million income tax benefit in the same period last year.

The year-over-year change is primarily driven by tax benefit taken in the prior comparative quarter due to the reversal of the noncash deferred tax liability associated with the goodwill impairment, which previously could not be used as a source of income to support the realization of certain deferred tax assets related to company's net operating losses. Net loss for the fourth quarter was $3.6 million or a loss per share of $0.28 compared to a net loss of $28.3 million or a loss per share of $2.24 in the fourth quarter of last year. Adjusted net income for the fourth quarter of fiscal 2025, which excludes the bad debt expense previously reviewed, was $2.4 million or $0.18 per share.

This is compared to the prior year period adjusted net income of $0.8 million or $0.06 per share, which excludes the impact of the goodwill impairment charge and its associated tax impact and the transaction expenses incurred during that period. Adjusted EBITDA was $4.5 million for the fourth quarter compared to $5.4 million in the prior year. This performance capped off a solid year overall despite navigating a highly dynamic environment, resulting in a net sales growth of 2.2% reported net income of $6.4 million and adjusted EBITDA of $15.1 million. Please refer to our press release for more details on our full year performance and reconciliation of non-GAAP measures. Moving to the balance sheet.

Net inventory was $66.2 million at the end of fourth quarter as compared to $59.1 million at the end of fourth quarter last year. The year-over-year increase was primarily driven by approximately $4.8 million higher inventory carrying value due to tariffs. Turning to our outlook. As discussed, we have seen the momentum experienced in the fourth quarter continue into the start of fiscal 2026. In addition, our outlook assumes a reduced reciprocal tariff rate of 15% which we expect any benefit to be largely offset by the increase in supply chain costs driven by the rise in fuel and shipping costs. We are also not assuming any benefit with respect to potential tariff refunds.

For the first quarter, we expect total net sales growth of approximately 8.5% to 10.5%, adjusted operating loss as a percentage of net sales of approximately negative 3.5% to negative 4.5% and adjusted EBITDA as a percentage of net sales to be approximately negative 1.5% to negative 2.5%, reflecting year-over-year expansion compared to negative 5.2% in the prior year period. For the full year fiscal 2026, we expect net sales growth to be approximately 3% to 6%, adjusted operating income as a percentage of net sales to be approximately 3.5% to 4% and for adjusted EBITDA as a percentage of net sales to be approximately 5% to 5.5%, compared to the 5% in the prior year.

In summary, we are very pleased with our strong end of fiscal 2025 and the momentum we are driving to start fiscal 2026, underscoring our team's disciplined approach and our commitment to executing on our objectives. This concludes our remarks, and I'll now turn it over to the operator to open the call for questions.

Operator: [Operator Instructions] Your first question comes from Eric Beder with SCC Research.

Eric Beder: Congratulations on a great year. I want to talk a little bit about some of the changes you're doing in terms of the stores. So talk to me about -- so in our store business, we saw continued emphasis kind of on showing more color and a growing emphasis on some of the newer categories like drop shipping and suiting and handbags. So what should we be seeing as we move through 2026 in terms of how the stores are going to tweak for kind of these changes to maximize kind of further growth?

Brendan Hoffman: Yes. I think we're continuing to experiment with some of our store setups, especially as we do some renovations. We pull out some legacy cash wraps, which opens up the stores, allows us to better showcase the way Caroline and the team envisioned kind of the way people are outfitting, mixing and matching and some doing group sets with our product. I think in terms of the other categories you mentioned, drop ship is a tool we are able to use online to take advantage of our licensed partners inventory. We started with shoes, with Caleres and we'll add in handbags, suitings, accessories in Q2.

But to your point about being able to showcase some of these categories in the stores, I've always felt that was taught by our founders that it's important to have some more texture in the store that can only be given by having additional categories beyond just apparel. And so I think we are strategically utilizing those categories like handbags and accessories and cold weather and some others to provide more interest when the consumer is shopping. To the extent they become real revenue drivers, I mean, that's a bonus. And I think we have that potential, but more so online because of the drop ship.

But it also allows us to storytell better, both in-store and with some of our social media and digital marketing. So we're really pleased with the way we've been able to expand categories and the partnership with Authentic Brands to drive that.

Eric Beder: Great. And when we look at -- I know that there was some of a -- what's the word here. There were some of -- the tariffs kind of was kind of a little bit of shock in terms of this. But how should we be thinking about for this year and going forward in terms of the potential for both domestic and international stores? I know you mentioned Paris and London stores have done really well. How should we be thinking about the potential here in the U.S. now that we're, for you to say it's somewhat more normalized than we were last year.

Brendan Hoffman: Yes. I think in terms of domestic stores. We're going to open some, we're going to close some. We obviously are very enthusiastic about the performance we had in Q4 with our stores. And as we mentioned in our remarks, that's continued in Q1. Probably the best performance I've seen over the course of 6 months in our stores in my 6 years here on and off. So I'm more bullish than ever on our ability to really drive productivity in our stores. And that gives me more confidence and the team more confidence to go out there and look for new locations.

I don't think at the end of the day, you will see a huge increase in our store count. I think it will be -- hopefully, incrementally, we'll be able to add a few. But I think in large part, we're in most of the markets we want to be in, and it's more about rationalizing some of the stores and driving more productivity through the existing boxes. I think internationally, as you mentioned, Paris would be probably first on our wish list in terms of the next international gateway. We've had such great success with our Marylebone store in London, and I visited it in about 6 weeks ago.

And truly, it's as good as stores we have in our fleet in terms of representing the Vince brand, where it's located amongst our peers. And I think if anything, it's just raised the bar for us in Paris because to the extent we are able to find something in Paris, it really needs to be a flagship store. We don't really have much representation in Paris. So we want to put our best foot forward, which just makes it a little bit more difficult to find the right location as opposed to finding a secondary store, but I think it's all for the right reasons. And so we'll continue to assess and update you as we have more information.

Eric Beder: And last question on wholesale. So Nordstrom, you've expanded now to all Nordstrom stores, both men and women. When you look -- and they are a significant part of your business. When you look at the whole wholesale piece, is it adding new partners becoming deeper into the partners you have? How should we be thinking about how wholesale can continue to evolve?

Brendan Hoffman: Yes. Thanks, Eric. Yes. I think it's becoming more -- continuing to become more important with the partners we have only because we're in most of the partners that are appropriate for men's, whether it be department stores or specialty stores. We clearly have a lot more growth in Bloomingdale's based on the fact that we've only been back with them for about 4 or 5 years, just gone men's all doors. And you see their results, and we have a great relationship with Olivier and Denise and the team there. We just did an event with them out in L.A. that was terrific. We just did an event with the Nordstrom team, Jamie Nordstrom in Dallas.

So continuing to push that relationship. And then cautiously optimistic that Saks Global, Saks and Neiman and Bergdorf will -- are moving in the right direction. We obviously went through the trials and tribulations last year and took a hit in Q4. But with the new -- the old team, new team back with Geoffrey and Lana and then, of course, Tracy at Bergdorf. We know all of them well, and Darcy. And so we're hopeful that we can get that business back on track. But currently, clearly, Nordstrom's and Bloomingdale's are what's driving our wholesale business.

Operator: Your next question comes from Michael Kupinski with Noble Capital.

Michael Kupinski: I offer my congratulations on a great quarter and a great year as well. I was just wondering, there's been some reports that there has been renewed amount of traffic in malls and stores as well. And I was just wondering overall, are we -- are you seeing that trend? Or is that just some headline news that it's just not really translating into what is actual out there?

Brendan Hoffman: Yes. I can't speak to the macro environment. But certainly, us, as an example, is consistent with that. Again, we've had a great 6-month run with our store business, driven by traffic, driven by conversion, driven by the increased prices that have been so well absorbed. And we have some malls, but then we have a lot of lifestyle and street front centers. And just couldn't be more pleased with some of the outsized performance we're seeing. And I think some of it has to do with the centers themselves and how they've kind of expanded and reinvented themselves. We have a great lifestyle store in Chestnut Hill.

I hadn't been there in 5, 6 years since I've been going from Vince. I went and visited and the center is double what it once was. So that just brings more traffic and we're advantaged there. So some of these malls are investing in themselves and adding in new tenants are expanding, and that's all really positive for bringing qualified traffic that then we could take advantage of.

Michael Kupinski: Great. And have you seen more -- where have you seen more of the pressure from competitors recently? I was just wondering if you can just kind of give us the lay of the land on the competition in your lane.

Brendan Hoffman: Again, I think we're taking market share in our lane. So we certainly respect the peer brands we sit with and a lot of them are -- they're all navigating the same issues we are and some doing it well and some struggling. But I don't think our peer group has shifted all that much in the last few years.

And as I just kind of implied with the retail locations, the centers, we actually do better when we're surrounded by our peer group and some luxury players to provide some context in, because I think we show up so well, especially with the product doing so well right now when people can compare and contrast us to some of the others that we're neighbors with.

Michael Kupinski: And I know that you tapped on this with a couple of Eric's good questions. I was just wondering, where do you see the most operating leverage that you have untapped right now? And what are some of the more internal bottlenecks that you might be actively working on to remove?

Brendan Hoffman: Yes. Well, I think prior to me returning, the team did a great job with their transformation process and really improved margin through IMU. And some of that. Thankfully, we did that because obviously, there were in our challenges now with some of the input costs with -- depending on what happens with tariffs. And as Yuji mentioned, with some of the disruption around fuel. But as those things start to play out and hopefully normalize, I think we'll have an opportunity longer term to recapture gross margin accretion.

I think also as we start to grow the business and you saw our forecast for this year, that would really be a breakout for us to get out of that $300 million collar we've been in, we should start to get some SG&A leverage and be able to make some investments back in the business to sustain this growth or be more of a catalyst for this growth. And then as I've mentioned in the past, we're actively looking at other ways we can utilize our platform in partnerships.

So we think we have a lot of different levers to pull, and we're hoping that some of the macro issues start to subside, but really proud of the way we got through the last 12 months and couldn't be more confident with how we're situated for success.

Operator: This concludes the question-and-answer session. I'll turn the call to Brendan for closing remarks.

Brendan Hoffman: Great. Thank you, everyone. We appreciate your continued interest in Vince, and we look forward to updating you on our Q1 results in June. Have a good day.

Operator: This concludes today's conference call. Thank you for joining. You may now disconnect.

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