Things aren't looking good at Vince. On Friday, the casual luxury brand announced, alongside a disappointing fiscal 2016 earnings report, that it has "substantial doubt" about its ability to stay in business for the next 12 months.
Sales in the fourth quarter declined 21.9 percent; for the year, they were down 11.3 percent to $268.2 million, and the company saw a net loss of $162.7 million, compared with income of $1.8 million the previous year. The news sent shares plummeting 41 percent Friday following the announcement.
Like many apparel brands, Vince has had a tumultuous past couple of years. After going public in 2013, the brand has seen a revolving door of creative leadership, from Doo-Ri Chung to Natalie Ratabesi to Karin Gregersen, who, along with the CEO, resigned suddenly in 2015. Later that year, new CEO Brendan Hoffman hired back the label's co-founders Rea Laccone and Christopher LaPolice as consultants; they left, again, earlier this year, not long after the company hired Tomoko Ogura from Barneys. Revenue-wise, the brand has hit some bumps along the road as it's struggled with common issues like declining traffic in the department stores on which it heavily relies, excessive discounting and a decline in quality due to production changes; but 2016 marks it's sharpest decline yet, which is particularly alarming given all of the changes it had already put in place to turn itself around.
In a conference call with investors and analysts Friday, Hoffman blamed much of the loss on the company's transition to a new IP and distribution system, which caused delayed shipments, which resulted in cancelled orders. The company also saw disappointing performance with its pre-spring inventory because there were not enough "buy now, wear now" options. "These factors, in addition to the malaise in the apparel industry, continue to weigh on our business," he said.
The company said the "substantial doubt" announcement had to do with its ability to maintain debt below levels previously agreed upon with its lenders; at the end of fiscal 2016, Vince had $21 million cash and $50 million in debt. Vince said it is in talks to secure additional financing to stay afloat in the short term, and Hoffman spent much of Friday's call outlining the longterm turnaround plans. Style-wise, the brand, which largely focuses on wardrobe staples and workwear, plans to introduce more "fashion and femininity," as well as incorporating more "buy now, wear now" pieces. The company has also begun working with its former factories and fabric mills to improve quality. It will also increase focus on its direct-to-consumer business, particularly online, and ramp up social-media marketing. It intends to open at least one store in fiscal 2017, in addition to expanding existing locations, and more in 2018 (assuming it's still in business). Currently, Vince has 54 stores in the U.S. — 40 full-price and 14 off-price.
Hoffman didn't speak much about if and how the rehiring of brand's co-founders, which was partially seen as a move to improve relationships with wholesale partners, helped with recent turnaround efforts. Asked about this during the call, Hoffman said little more than that "their work was done" and that "department stores are being very cautious." He noted that the company is in the process of "analyzing" its wholesale business to "determine if there's a better opportunity."
As the company scrambles to paint an optimistic future, it's impossible not to have doubts given the growing list of retailers, from American Apparel to BCBG to Payless, that have declared bankruptcy and closed stores recently following similar struggles. American Apparel, in fact, issued a very similar announcement prior to its first bankruptcy filing, following its own debt issues.