Since going public in November 2013, Vince has enjoyed a stellar run, with sales growing in the high single and double-digits every quarter.
But the horizon is looking suddenly bleak. In July, both Vince's CEO and chief creative officer departed unexpectedly, and on Thursday the company announced that, for the first time going public, it had lost rather than made money. Overall, net sales declined 10.4 percent year-over-year to $80 million in the second fiscal quarter, with a net loss of $5 million, down from a net income of $10.5 million in the same period a year ago.
Vince's wholesale business was the biggest culprit, with sales in that division down 21.6 percent to $58.3 million. The company has been actively shifting its business away from wholesale for some time, noting in March that department stores' moves to buy more conservatively, purchase less product up front and reorder only as needed do not bode well for the long-term. But in the second quarter, sell-throughs and reorders were much lower than expected, and the brand's off-price retail partners were flooded with inventory. "In order for us to move forward with our strategy to reduce sales to off-price retailers and to enhance our brand positioning, we made the decision to dispose of the vast majority of prior year product," Interim CEO Mark Brody said in a statement.
Costs related to Vince's second public offering and severance for the above-mentioned executives also weighed down on profits. Without the sizable inventory write-down and management transition costs, net income for the quarter would have tallied $5.2 million, the company said.
On the bright side, sales made through Vince's own stores increased 44.7 percent to $21.7 million, with comparable store sales up 13.4 percent (including e-commerce). The company currently has 42 stores in operation.
But the rest of the year isn't looking so great. Vince reduced its guidance for the full fiscal year, explaining that it's seeing "continued weakness" in wholesale as well as a "recent softening" in its own store channels. Brody said the company will focus "foremost on making exceptional products with the style and fits that align with our customers' expectations" and is taking steps "to enhance our product assortment and improve operational performance, including tighter inventory and procurement practices, which will also help lead to a more carefully managed distribution in the off-price channel." Store openings will continue as planned.
Investors were not at all pleased, with shares falling 37 percent to $5.79 on Friday morning.