Ladies and gentlemen, thank you for standing by, and welcome to Vince Q4 2020 Earnings Conference Call. [Operator Instructions] Thank you. I would now turn the conference over to Amy Levy. You may begin. .

Thank you, and good afternoon, everyone. Welcome to Vince Holding Corp.'s preliminary fourth quarter fiscal 2020 results conference call. Hosting the call today is Jack Schwefel, Chief Executive Officer; and David Stefko, 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 the 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 preliminary and historical financial results in conformity with GAAP and on an adjusted basis.

Discussion of these non-GAAP measures and information on reconciliations of them to their most comparable GAAP measures are included into these press release and related schedules, which are available in the investors section of the company's website at investors.vince.com.

After the prepared remarks, management will be available to take your questions for as long as time permits. Now, I'll turn the call over to Jack..

Great. Thank you, Amy. And thank you everyone for joining us this afternoon. I'm pleased to be here today as the CEO of Vince Holding Corporation.

Vince and Rebecca Taylor are two distinct iconic brands that I believe that have extraordinary potential as global fashion brands, since this powerful brand recognition a heritage of designing quality and strong consumer connections. The Rebecca Taylor brand possesses the DNA to achieve similar levels of recognition and popularity in the future.

I look forward to working with the teams as we leverage omni channel focus and data driven merchandising and marketing approach to help each of these brands achieve their long term potential. To begin, I'd like to share a little bit of why I joined the company and what I see in each of these brands. And we'll begin with Vince.

Since the brand was founded in 2002 it has become a symbol of sophisticated, effortless style, and over the years has developed a strong and loyal customer base. A friend who I would describe as having exceptional taste, recently spoke of the Vince brand has the best of America and I agree.

The brand's distinct positioning is one of beautifully designed and crafted products, high quality fabrications, and easy to wear styles. We are extremely fortunate to have such talent in a creative director Caroline, and her design team. As we continue to design our collections to embrace the lifestyle of our customers.

We will continue to leverage Vince's strong brand equity and expand awareness as we increase our focus on the direct to consumer channel. The Commerce site serves to engage consumers and we have an opportunity to enhance our direct to consumer channel to the commencement of our omni channel capabilities.

Our stores play a vital role in driving brand awareness and engagement. Turning to Rebecca Taylor and equally enthusiastic and optimistic about the future of this brand. Rebecca Taylor is a small jewel known for its romantic feminine style.

The work the team has done to return to the brand's heritage serves as a starting point to reinterpret and modernize the collections for today's one. The team pulled back the assortment and eliminate one of the seasonal collections in order to properly reset the brand for the future.

There could be no better time for this relaunch to occur as we emerge from the pandemic. Under Stephen Catherine vision we took a step back to assess the brand position in preparation for spring 2021 relaunch romanticism redefine. Rebecca has expanded from dresses and occasionwear to a complete lifestyle offering.

New categories include sweaters with romantic caplet details, outerwear, exaggerated silhouettes, sophisticated trousers and every day knitwear. Each piece thoughtfully designed for decidedly elegant way of dressing that defines romance for today.

The relaunch coincides with the brand's new digital first strategy including a completely redesigned website. The launch of SMS program and updated set experience and rebeccataylor.com and a focus on segmentation and personalization.

I am also very pleased to be working with an accomplished team as we emerge from the pandemic with two incredible brands with significant growth potential.

The organization under David stuccos leadership successfully navigated through this unprecedented period by managing expenses and maximizing liquidity while continuing to engage the customers and generate demand. The team was able to advance the Strategic Initiatives despite the challenges presented by the pandemic.

Events we launched inclusive sizing in 2020, to better address our customer demand, and expand our customer following Additionally, the organization took its first step to omni channel 2020 by combining our e-commerce and our wholesale warehouses, forming one virtual warehouse. As we work towards being fully omni channel by 2021.

The current investment in implementation of an enhanced point of sale system will allow us to reach this goal. The team has done an exceptional job over this past year, and I look forward to working with them to continue to build upon all this progress.

The direct to consumer business continues to improve sequentially and we have maintained strong relationships with our wholesale partners, where some of our peers have seen deeper pull backs and in some cases relationships in.

Further we believe we have actually taken market share during the pandemic, which is a remarkable feat that speaks to the power of the Vince brand.

Looking forward my priorities in the first 90 days will include further appointing myself with the broader teams, as well as outside partners, including wholesale accounts, vendors and landlords, who will also evaluate the business across operations and processes to gain greater insight into our capabilities and infrastructure and determine where we will need to invest and improve the business.

During this time, liquidity will remain a priority and we will also remain diligent in our expense structure while limiting any potential investments to critical areas. Over the near term, we will look to capitalize on the growing consumer confidence as the vaccine rollout continues.

Overall, I believe that there are a number of opportunities ahead, and I'm very excited to work closely with the entire team to ensure we are enhancing the business in profitability and shareholder value over the long term.

I look forward to providing you with additional details on our go forward strategy and update you on our initial progress on our next call. With this I will turn it over to Dave. .

Thanks, Jack. Before I discuss the financials, I would like to point out that the results we are reporting today are preliminary. As we are finalizing the analysis of a non-cash deferred tax item related to the valuation of our deferred tax assets and the income implication of the Cares Act they're on.

We believe this item will have an increasing effect on our provision for income taxes, net loss, and loss per share in the range of $0.10 and $0.15 per share for the fourth quarter. I would like to stress this is a non-cash, non-income from operations item.

Looking back on 2020, we successfully navigated the pandemic through swift measures to reduce expenses, manage liquidity, and protect our business. We work closely with our wholesale channel partners, along with our landlords and vendors during this time, and we truly appreciate your partnership.

Most of all, I want to thank our teams across the organization for their commitment and hard work for which I am extremely grateful. As we look ahead, we are encouraged by the rollout of the vaccine and excited about the future of our brands.

I look forward to working with Jack as we capitalize on the strength of our brands to emerge from the print pandemic as a leader in contemporary luxury. Turning to our preliminary financial results. Total company net sales for the fourth quarter decreased 28.4% to $74.8 million compared to $104.4 million in the fourth quarter of fiscal 2019.

This is a notable improvement to the 34% decline in the third quarter. For the Vince [ph] brand fourth quarter consolidated net sales decreased 20.4% to $69.5 million compared to $87.3 million in the same prior year period. Our events direct to consumer segments sales decreased 28.4% to $30.4 million in the fourth quarter.

This decline reflects continued reduced traffic trends in early markets in New York and California. Although some of our retail stores were slower to recover, we still saw some improvement in his channel.

We saw improvement in the traffic trends, and relatively better performance in retail stores in the Midwest, Florida and Texas as the pace of COVID recovery was more pronounced in these regions. The sales decrease in retail stores was partially offset by a low change growth in our e-commerce business, which as a reminder, includes Vince unfold.

In our wholesale segment, while net sales declined 12.9% we remain confident in our market share position within this segment, as Vince continues to outperform peers within the contemporary luxury category. On the international front, we are very excited about the opening of our new Australia shopping shop locations.

These three locations that had a strong start, significantly exceeding our expectations, and we have a fourth location as planned to open in the first week of May. Notably, we saw strong full price selling at our new shop and shops during the end of season sale period in Australia, a great indication of the potential for this market.

Rebecca Taylor and Parker combined net sales decreased 68.9% to $5.3 million as compared to the same period last year. As we have shared in the past with the COVID crisis, we have paused the development of new products for our Parker business to focus resources on the operations of our events and Rebecca Taylor brands.

This contributed to about a third of the sales decline. For Rebecca Taylor, the decline was largely due to the plant elimination of one of the seasonal collections as we reset the brand, and also the timing of spring 2021 shipments. Nevertheless, we are very pleased with response to our new product offering within the wholesale segment.

Gross profit in the fourth quarter was $27.6 million, or 36.9% of net sales. This compares to $46.2 million, or 44.2% of net sales in the fourth quarter of last year.

The decrease in gross margin rate was primarily due to increased promotional activity, higher year-on-year adjustments to inventory reserves, and the de leveraging of supply chain costs partially offset by a decrease in sales allowances for wholesale partners.

Selling, general administrative expenses in the quarter were [Technical Difficulty] 42.1% of net sales, as compared to $49.3 million or 47.2% of net sales for the fourth quarter of last year. As a result of the actions taken to reduce costs of the COVID pandemic, we decreased SG&A dollars by $17.8 million in the fourth quarter.

This decrease was primarily the result of lower payroll and compensation expense, rent concessions, reduced marketing spend, and prudent expense management.

Operating loss for the fourth quarter was $3.9 million, compared to a loss of $3.3 million in the same period last year, which included approximately $2.9 million of costs associated with the acquisition of Rebecca Taylor and Parker and $0.2 million in non-cash asset impairment charges.

Preliminary net loss for the fourth quarter, excluding the previously mentioned non-cash deferred tax item was $5.7 million or $0.48 loss per diluted share, compared to net income of $51.7 million or $4.29 per diluted share in the fourth quarter last year. Excluding a TRA adjustment of $56 million.

The cost associated with acquisition of Rebecca Taylor and Parker and non-cash asset impairment charges adjusted net loss for the fourth quarter of fiscal 2019 was $1.2 million or $0.10 loss per share. Moving on now to the balance sheet. Borrowings under our debt agreements totaled $85.9 million.

As a reminder, this includes $20.7 million from the thirdly credit facility we entered into with an affiliate of some capital in December of 2020. We ended the quarter with availability of $30.2 million under our revolving credit facility.

We continue to take steps to manage our liquidity and maintain financial flexibility, and we believe we have adequate funds to effectively operate our business. As part of this on April 26 of this year we entered into a sixth amendment to our existing term loan credit facility.

This term loan amendment extends the waiver of our fixed charge coverage measurement until January of 2023 to create more flexibility, as we recover from the pandemic. Until January of 2023 this will continue to be subject to the current springing covenant.

We concurrently entered into a Sixth Amendment to our existing revolver facility, which consents to the term loan amendment. Moving to inventory. Net inventory was $68.2 million at the end of the fourth quarter, as compared to $66.4 million at the end of the fourth quarter last year.

We continue to work through COVID impacted excess inventory from fall 2020 in prior seasons, as retail traffic trends began to improve, we're seeing increased demand for product from the off price channel.

In addition, majority of spring shipments arrived in the first quarter of 2021 as compared to the fourth quarter last year, due to our decision to minimize air freighted product. But we expect inventory to be up mid-single digits in the first quarter, we anticipate the balance of newness versus prior season inventory to continue to improve.

As stated in our press release published this afternoon. Due to the low visibility and uncertainty related to the impact of COVID-19. We will not be providing formal guidance at this time.

With that said, We're pleased with the pace of recovery and our sales, which are expected to be approximately 40% to 50% for the first quarter of fiscal 2021 as compared to the same period last year in line with our expectations.

Like many others in the industry, Port congestion is creating delays in shipping as expected to impact the timing of deliveries and cost pressures during 2021. For fiscal 2021, we're planning capital expenditures net of 10 allowances to be below that of 2020.

Our capital expenditure plans include new store openings, as well as IT investments specifically related to our efforts to become fully omnichannel. As we have done over the last two years, we will continue to pursue short term leases with attractive terms, opportunistically.

Looking ahead, we're optimistic about our future with the vaccine rollout, consumers are beginning to return to more normal lifestyles, which is driving spending on apparel accessories. Within the past few weeks, we've started to see increased demand for occasion products, including dresses and dress pants.

This increased demand combined with our new product gives us confidence that we will continue to see sequential improvement in our performance. We are encouraged by recent trends as we continue to recover from COVID. We will continue to manage our expenses and inventory conservatively. Given that there still remains limited certainty at this time.

This concludes my comments regarding our fourth quarter. We will now take your questions.

Operator?.

[Operator Instructions] And your first question comes from Dana Telsey with Telsey Advisory Group..

Good afternoon, everyone. And welcome Jack. And hello, Dave and Amy.

Jack, you’re newer to the company, what attracted you to Vince and can just expand on what you see is the growth potential in each of the brands?.

Sure, be happy to do that. You know, as I said it, I’m very excited about this opportunity for a multitude of reasons. I think that while Vince is just as been an amazing design company, I think it has a wonderful reputation. I think it deserves to have a bigger form than it has to date.

I can easily see the brand being much larger than it is today, especially internationally. I think the efforts to date on direct to consumer allow us to grow in that venue in a very large way as well.

As they look at Rebecca Taylor, I think it's much more in a gestation period and has not really been fully articulated either on the wholesale or direct to consumer. And I think its ability to grow internationally will also be extreme. So excited about the fairways in front of us for both those brands..

Thank you. And then Dave, as you think about margins and inventory levels, work the impact of Port congestion.

Now obviously you mentioned that timing of bringing in some of the [indiscernible] in the first quarter versus the fourth quarter minimize air freight? What are you seeing as timing and poor congestion? And is it more on the side in China or is it here in the US getting labor to get the goods off the containers and how is this impacting wholesale orders?.

Well, I mean, one thing is we're not seeing anything different than anybody else's.

And so, you know, yesterday is, it's really, you see, ask what is impacting what side there is the port congestion in the US, but then there was also the container, you know misalignment around the world, and the ability in Asia to obtain containers, and where you need them is even something as issues as the Suez Canal, well, we don't utilize the Suez Canal, and put in a lot of containers out of place from a training perspective, in order to recover.

So a lot of us are seeing that we're seeing increased rates both on ocean, and then as people move their demand to air, you know, you see increased rates from an air freight perspective, which are already increased because of the limited air traffic or airplanes that have been flying, just from a consumer travel perspective.

So we will manage it appropriately, we'll continue to look at where we can use ocean freight, and where we need to use air freight to manage it from a cost side but also, we have to be smart from his perspective of making sure we can deliver, when our wholesale partners and our stores in e-com, we need to product for instance, just an example Nordstrom anniversary.

So we need to have the product here in time for the anniversary. So we'll continue to manage it from that perspective..

And then your thoughts on occupies [ph]? How important is the occupies [ph] channel? How big do you want it to be compared to the other customers in wholesale? And how are you planning it?.

We've seen our price over the last two, three years. Dana, we've had years where off price, you know, has been let's say we've seen years, we've grown $10 million in the years, we've declined.

2020 was a softer year from the perspective of how folks are managing their open divide dollars and that probably led some degree to some of the decline we saw in the fourth quarter when you look at our results, compared to the prior year.

But it's like anywhere else is the consumer is now getting out there to shop more recently over the last three to six weeks. We are seeing off price opened by dollars any increase, because people are back, traffic is back, people are shopping their stores. And everybody has been very responsible from trying to manage their inventories.

That's what we're seeing now these opportunities from an inventory perspective open backup, and you open the buy dollars are increasing to support that..

Got it. And it does sound like that the reopening that we've been hearing about whether it's coming from stimulus saving, things reopening and dress the events.

Are you seeing that too? It sounds like what the pants what you mentioned with the dresses, there's a pickup, and you see that in any of the urban areas are those still the last ones come back?.

You know, we're actually very pleased with what we're seeing going on both with our wholesale partners, our sell through is there as well as what we're starting to see in our own direct to consumer businesses.

And while we saw you know, as Dave mentioned, we saw great strength earlier from Florida and Texas, we are beginning to see some of these urban areas really pick up specifically in the northeast and California..

And then balance sheet, anything we should be watching for on the balance sheet as they move through 2021 that would impact one quarter with another that we should be mindful of?.

Having nothing specific Dana. From our balance sheet perspective I mean, it's, as we said, I said in my comments, because of the timing of shipments will see higher inventory level come the first quarter.

Number two it’s the inventory flow, you're always looking at again, we're going to be impacted by our ability to Air Products versus ocean products and the timing of where some items hit the last week of a quarter or the first week of quarters.

So our inventory will fluctuate from that reason that's not to have that much impact from a sales perspective though..

And then just lastly, what are you seeing in terms of raw material costs and pricing, how that will differ this year from last year?.

Yeah, from a pricing perspective, you know we will price what the value of the brand is, you know, we'll look at costs, we'll manage costs, like we always have, what we won't do is change anything to compromise quality. Quality is what Vince has always stood for. You know, we certainly are having the same attitude as we look at Rebecca Taylor.

So quality while he's the number one. The price of goods will fluctuate based on market conditions, what the market supports..

Thank you. .

And there are no further questions. I will now turn the conference back over to Jack Schwefel for closing remarks..

Thank you, operator. And thank you for joining us on this call today. In closing, I just like to reiterate that I am very much aligned with the strategic direction of both Vince and Rebecca Taylor brands, and will be maniacally focused on execution.

And we look forward to updating you on our progress in the future, and thank you again for your time today..

Ladies and gentlemen, this concludes today's conference call. Thank you for participating as you may now disconnect..