Vince raises red flag following poor 4th quarter and 2016 results
Vince has huge concerns for its future following its fourth quarter and fiscal year 2016 results. The company posted sales decreases for both periods and a substantial net loss when compared to the results from the previous year.
The company said in the results, “There is substantial doubt about the company’s ability to continue as a going concern for the twelve months following the date that the financial statements are issued, specifically relating to its ability to comply with the consolidated net total leverage ratio under its term loan facility.” The assessment did not take into account plans to mitigate the doubt nor any actions the company may make to improve its capital structure.
Still, the doubt is alarming when considering that CEO Brendan Hoffman said in February that Vince succeeded in “resetting the brand aesthetic and merchandise” with the help of co-founders and consultants Rea Laccone and Christopher LaPolice. Hoffman sounded optimistic about the new direction after Vince ended its consulting agreement with Laccone and LaPolice in February, but he added that the financial results have not reflected any progress.
The results show that Vince has regressed, posting fiscal 2016 net sales of $268.2 million, an 11.3% decrease from the previous fiscal year, and comparable sales decreased 16.2%. Net loss for the year was $162.7 million, or $3.50 per share, compared to net income of $5.1 million, or $0.14 per diluted share, in the prior year.
Fourth quarter net sales of $63.9 million came in below expectations, and net loss for the quarter was $162.1 million, or $3.28 per share, compared to net income of $1.8 million, or $0.05 per diluted share, in the prior fourth quarter.
Comparable sales, including e-commerce, decreased 20.5% due to a decline in transactions, reduced traffic and a decline in average order value, and direct-to-consumer net sales fell 12.6% to $29.4 million.
Vince decided to suspend its net sales and earnings per share guidance as it completes its business transition. The company updated its fiscal guidance twice in December and January.
“This decision to suspend guidance was further driven by the difficult retail environment in which we continue to operate,” said Hoffman. “That said, we remain focused on expanding our direct-to-consumer business, optimizing our wholesale channel, and growing our international presence over the long-term.”
The company is encouraged by its direct-to-consumer channel, which improved in the first quarter and its e-commerce business, which led the segment.
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