Cost cutting and some improving selling trends helped Vince report a profit for its third fiscal quarter.
Net income was $1 million or $0.08 per diluted share for the quarter ended Oct. 28, compared to a net loss of $5.2 million or $0.43 per share in the same period last year.
Excluding expenses related to its recent deal with Authentic Brands Group, adjusted net income for the third quarter of fiscal 2023 was $1.8 million, or $0.15 per share. Vince last spring struck a deal to transfer its intellectual property to a newly formed subsidiary of Authentic Brands Group, called ABG Vince, in return for $76.5 million in cash and a 25 percent membership interest in the subsidiary.
Total company net sales decreased 14.7 percent to $84.1 million compared to $98.6 million in the third quarter of fiscal 2022. The year-over-year decline was driven by the wind down of the Rebecca Taylor business, which the company said has been completed, and to a lesser extent a 6.2 percent decrease in Vince brand sales.
In other maneuvers helping Vince navigate the challenging macroeconomy, a program to reduce costs by $30 million over three years was recently implemented, involving streamlining manufacturing and production operations, reducing promotional activity and other efficiencies. A new five-year credit agreement for an $85 million senior secured asset-based revolving credit facility was signed, replacing the old credit facility and increasing financial flexibility, and the company phased out its Rebecca Taylor business so the team could concentrate on the Vince contemporary brand.
Gross profit was $37.2 million, or 44.2 percent of net sales, compared to gross profit of $29.8 million, or 30.2 percent of net sales, in the third quarter of fiscal 2022. The increase in gross margin rate was driven by about 790 basis points related to the wind down of Rebecca Taylor, which historically operated at a lower overall gross margin, as well as favorable year-over-year adjustments to inventory reserves, lower freight costs and lower promotional activity. These factors were partially offset by approximately 480 basis points of royalty expenses associated with the licensing agreement with ABG.
In his prepared statement Wednesday, Jack Schwefel, chief executive officer of Vince, said, “We are pleased with our third-quarter performance and the sequential improvement we delivered compared to the prior quarter despite incurring the first full period of royalty expenses. We are in the early stages of implementing our transformation program, which we expect to yield significant cost savings over the next three years to help to offset the changes to our cost structure given the royalty fees with our partnership with Authentic Brands Group. As we look ahead, we remain encouraged by the trends that we are seeing in the business as we continue to focus on driving improved profitability and positioning the company for long-term success.”
In other financial results, net inventory at the end of the third quarter of fiscal 2023 was $69.6 million compared to $116.4 million at the end of the third quarter of fiscal 2022. The year-over-year decrease in inventory was driven by the wind down of the Rebecca Taylor business as well as a decline in Vince as the company sold through higher levels of inventory from the prior year and rebalanced its inventory purchases for the current season.
Vince Holding Corp. operates the Vince brand women’s and men’s ready-to-wear business. Vince, established in 2002, is best known for creating “elevated yet understated pieces for every day effortless style,” the company indicated. Vince operates 49 full-price retail stores, 17 outlet stores, an e-commerce site and a subscription service called Vince Unfold. The company also distributes its fashion through wholesaling.
