Vince Holding Corp.

Hello and welcome to the Finch Holding Corp fourth quarter and full year fiscal 2025 results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. And if you would like to ask a question during this time, please press star 1 on your telephone keypad. I would now like to turn the conference over to Akiko Okuma, Chief Administrative Officer and General Counsel. You may begin.

Thank you and good morning, everyone. Welcome to Vince Holdings' fourth quarter and full year fiscal 2025 results conference call. Hosting the call today is Brendan Hoffman, Chief Executive Officer, and Yuji Okumura, Chief Financial Officer. Before we begin, let me remind you that certain statements made on this call may constitute forward-looking statements which are subject to risks and uncertainties that could cause actual results to differ from those that the company expects. Those risks and uncertainties are described in today's press release and in the company's SEC filings, which are available on the company's website. Investors should not assume that statements made during the call will remain operative at a later time, and the company undertakes no obligation to update any information discussed on the call. In addition, in today's discussion, the company is presenting its financial results in conformity with GAAP and on an adjusted basis. The adjusted results that the company presents today are non-GAAP measures. Discussions of these non-GAAP measures and information on reconciliations of them to their most comparable GAAP measures are included in today's press release and related schedules, which are available in the investor section of the company's website at investors.fin.com. Now I'll turn the call over to Brendan.

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 ranges. We are especially proud of this performance given the disruption we experienced with developments from Sachs Global, which presented a headwind to sales of approximately $2 million in the quarter. With the recent reorganization of SACS 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, SACS 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're 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 in incremental tariff costs. As we have discussed, our teams have done a tremendous job in mitigating the tariff pressures we face. We acted swiftly, diversifying our sourcing across Asia and globally, while working closely with manufacturing partners to maintain the quality standards that define VINs. We also implemented strategic pricing increases while maintaining unit sales, validating the strength and quality of our products. 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 dropship to additional categories. In spring 2026, these categories will include handbags, tailored clothing, belts, and accessories, creating revenue opportunities with minimal inventory risk for the business. In addition, we are continuing to scale our men's business. At the end of the year, with men's representing approximately 24% of total sales, we 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. 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 few years. Finally, the strategy I believe will really help to accelerate our growth is our focus on maximizing Vince Holden 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 were thrilled to partner with the ABG team with a recent event at the Masters last week, and we're 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 event 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 on all accounts. As UG 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 customer's 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 roadmap 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.

Thank you, Brendan, and good morning, everyone. As Brendan reviewed, our fourth quarter performance reflected ongoing strong momentum in our direct consumer segment, and we are pleased to see continuing to 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 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 Tiger 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 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 SAC's reorganization. loss from operation 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 factory organization 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 benefits taken in the prior comparative quarter due to the reversal of the non-cash 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 companies' net operating losses. Net loss for the fourth quarter was $3.6 million or loss per share of $0.28 compared to net loss of $28.3 million or 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 cast 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 the fiscal 2025 and the momentum we're 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.

Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. If you would like to withdraw your questions, please press star 1 again. Please ensure that your phone is not on mute when called upon. Thank you. Your first question comes from Eric Better with SCC Research. Your line is open.

Good morning. Congratulations on a great year.

Thank you, Eric. Thank you.

Let's 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 are 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 further growth?

Yeah, I think, you know, we're continuing to experiment with some of our store setups, especially as we do some renovations. We pull out from legacy cash wraps, which opens up the stores, allows us to better showcase, you know, the way Caroline and the team envision 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, you know, Drop Ship is a tool we are able to use online to take advantage of. our licensed partners inventory. You know, we started with shoes with Golaris, 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, you know, I've always felt it 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 dropship. 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. but the way we've been able to expand categories and the partnership with authentic brands to drive that.

Great. And when we look at that, I know that there was some of a – the tariffs kind of was kind of a little bit of a shock in terms of, 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, I guess, trading this day at somewhat more normalized than we were in the past year?

Yeah. You know, 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 six months in our stores in my six 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'll be, you know, 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, you know, internationally, as you mentioned, Paris would be, you know, probably first on our wish list in terms of the next international gateway. We've had such great success with our Marleybone store in London, and I visited it about six weeks ago. And truly, it's as good a store as 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.

And last question on wholesale. So Nordstrom, you've expanded down to all Nordstrom stores, both men and women. Now, when you look at, and they're a significant part of your business, and you look at the whole wholesale piece, is it adding new partners, becoming deeper into the partners you have? How is she thinking about how wholesale can continue to evolve? Thank you.

Yeah, thanks, Eric. Yeah, I think it's becoming more important, continuing to become more important with the partners we have, only because we're in most of the partners that, you know, 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 four or five years, just on men's all doors, and, you know, you see their results, and we have a great relationship with Olivia 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, you know, cautiously optimistic that SACS Global, SACS and Neiman's and Bergdorf's, you know, are moving in the right direction. You know, we obviously went through the trials and tribulations last year and took a hit in Q4. But, you know, with the old team, new team back with Jeff Waugh and Lana and, of course, Tracy at Bergdorf. You know, we know all them well in Darcy. And so we're hopeful that we can get that business back on track. But, you know, currently, clearly Nordstrom's and Bloomingdale's are what's driving our wholesale business.

Great. Thank you.

Your next question comes from Michael Kapinski with Noble Capital. Please go ahead.

Thank you, and I offer my congratulations on a great quarter and a great year as well. I was just wondering, you know, 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 you seeing that trend, or is that just, you know, some headline news that's just not really translating into what is actual and out there?

Yeah, I can't speak to the macro environment, but certainly us, you know, as an example, it's consistent with that. You know, and we've had a great six-month run with our store business. driven by traffic, driven by conversion, driven by the increased prices that have been so well absorbed. And, you know, we have some malls, but then we have a lot of lifestyle and streetfront 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. You know, we have a great lifestyle store in Chestnut Hill. I haven't been there in five, six years since I've been gone from Vince. I went and visited, and the center is double what it once was. So that just brings more traffic, and, you know, we're advantaged there. So some of these malls are investing in themselves and adding in new tenants or expanding, and that's all really positive for bringing qualified traffic that then we can take advantage of.

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.

You know, again, I think we're taking market share in our lane, so we certainly respect the peer brands we sit with, and, you know, a lot of them are – they're all navigating the same issues we are, and some doing it well and some struggling, but – You know, 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, you know, our peer group and some luxury players to provide some context. 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.

And I know that you tacked 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 on TAPS right now? And what are some of the more internal bottlenecks that you might be actively working on to remove?

Yeah, well, I think, you know, prior to me returning, you know, the team did a great job with the transformation process and really improved margin through IMU. And you know, 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, you know, and as Eugene mentioned with some of the disruption around fuel. But as those things start to play out, you know, 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 our forecast for this year, you know, that would really be a breakout for us to get out of that $300 million dollar 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 and or be more of a catalyst for this growth. And then as I've mentioned in the past, you know, we're actively looking at other ways we can utilize our platform and in partnerships. So we think we have a lot of different levers to pull and, you know, we're hoping that some of the macro issues start to subside, but really proud of the way we got through, you know, the last 12 months and couldn't be more confident with how we're situated for success.

That sounds great. Congratulations again. Thanks, Michael.

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

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.

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