VNCE Vince Holding Corp

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

 

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended August 3, 2024

Or

 

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-36212

 

VINCE HOLDING CORP.

(Exact name of registrant as specified in its charter)

 

Delaware	75-3264870
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

500 5th Avenue—20th Floor

New York, New York 10110

(Address of principal executive offices) (Zip code)

(212) 944-2600

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, $0.01 par value per share		VNCE		New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer		☐		Accelerated filer	☐
Non-accelerated filer		☒		Smaller reporting company	☒
				Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August 31, 2024, the registrant had 12,603,386 shares of common stock, $0.01 par value per share, outstanding.

 

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VINCE HOLDING CORP. AND SUBSIDIARIES

TABLE OF CONTENTS

			Page Number
PART I. FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements:		4
	a)	Unaudited Condensed Consolidated Balance Sheets at August 3, 2024 and February 3, 2024	4
	b)	Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the three and six months ended August 3, 2024 and July 29, 2023	5
	c)	Unaudited Condensed Consolidated Statements of Stockholders' Equity for the three and six months ended August 3, 2024 and July 29, 2023	6
	d)	Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended August 3, 2024 and July 29, 2023	8
	e)	Notes to Unaudited Condensed Consolidated Financial Statements	9
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations		24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		34
Item 4.	Controls and Procedures		35
PART II. OTHER INFORMATION			36
Item 1.	Legal Proceedings		36
Item 1A.	Risk Factors		36
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		36
Item 3.	Defaults Upon Senior Securities		36
Item 4.	Mine Safety Disclosures		36
Item 5.	Other Information		36
Item 6.	Exhibits		36

 

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INTRODUCTORY NOTE

On November 27, 2013, Vince Holding Corp. ("VHC" or the "Company"), previously known as Apparel Holding Corp., closed an initial public offering ("IPO") of its common stock and completed a series of restructuring transactions (the "Restructuring Transactions") through which Kellwood Holding, LLC acquired the non-Vince businesses, which included Kellwood Company, LLC, from the Company. The Company continues to own and operate the Vince business, which includes V Opco, LLC (formerly, Vince, LLC) ("V Opco").

Prior to the IPO and the Restructuring Transactions, VHC was a diversified apparel company operating a broad portfolio of fashion brands, which included the Vince business. As a result of the IPO and Restructuring Transactions, the non-Vince businesses were separated from the Vince business, and the stockholders immediately prior to the consummation of the Restructuring Transactions (the "Pre-IPO Stockholders") (through their ownership of Kellwood Holding, LLC) retained the full ownership and control of the non-Vince businesses.

On April 21, 2023, V Opco, the Company's wholly owned indirect subsidiary, entered into an Intellectual Property Asset Purchase Agreement (the "Asset Purchase Agreement"), by and among V Opco, ABG-Vince, LLC (f/k/a ABG-Viking, LLC) ("ABG Vince"), a newly formed indirect subsidiary of Authentic Brands Group, LLC, the Company and ABG Intermediate Holdings 2 LLC, whereby V Opco sold its intellectual property assets related to the business operated under the Vince brand to ABG Vince at closing (the "Asset Sale"). The Company closed the Asset Sale on May 25, 2023.

On May 3, 2024, V Opco completed a nominal sale (the "Transaction") for $1.00 (one dollar) of all outstanding shares of Rebecca Taylor, Inc., which held the Rebecca Taylor business prior to the wind-down (defined below), to Nova Acquisitions, LLC. Nova Acquisitions, LLC is wholly owned by James Carroll, who served as the sole director and officer of Rebecca Taylor, Inc. at the time of the Transaction, pursuant to a service agreement between Mr. Carroll and Rebecca Taylor, Inc. that was previously entered into in September 2022 in connection with the wind-down. Following the completion of the Transaction, there exists no relationship or arrangement whatsoever between Mr. Carroll and the Company or any of its affiliates. The Transaction was completed pursuant to a Stock Purchase Agreement (the “SPA”), dated May 3, 2024, entered into between V Opco and Nova Acquisitions, LLC.

For purposes of this Quarterly Report, the "Company," "we," and "our," refer to Vince Holding Corp. and our wholly owned subsidiaries, including Vince Intermediate Holding, LLC ("Vince Intermediate") and V Opco. References to "Vince," "Rebecca Taylor" or "Parker" refer only to the referenced brands.

DISCLOSURES REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, and any statements incorporated by reference herein, contain forward-looking statements under the Private Securities Litigation Reform Act of 1995. Forward-looking statements are indicated by words or phrases such as "may," "will," "should," "believe," "expect," "seek," "anticipate," "intend," "estimate," "plan," "target," "project," "forecast," "envision" and other similar phrases. Although we believe the assumptions and expectations reflected in these forward-looking statements are reasonable, these assumptions and expectations may not prove to be correct and we may not achieve the results or benefits anticipated. These forward-looking statements are not guarantees of actual results, and our actual results may differ materially from those suggested in the forward-looking statements. These forward-looking statements involve a number of risks and uncertainties, some of which are beyond our control, including, without limitation: our ability to maintain the license agreement with ABG Vince; ABG Vince's expansion of the Vince brand into other categories and territories; ABG Vince's approval rights and other actions; our ability to maintain adequate cash flow from operations or availability under our revolving credit facility to meet our liquidity needs; our ability to realize the benefits of our strategic initiatives; our ability to execute and realize the enhanced profitability expectations of our transformation program; our ability to improve our profitability; the execution and management of our direct-to-consumer business growth plans; our ability to make lease payments when due; our ability to maintain our larger wholesale partners; our ability to remediate the identified material weakness in our internal control over financial reporting; our ability to comply with domestic and international laws, regulations and orders; our ability to anticipate and/or react to changes in customer demand and attract new customers, including in connection with making inventory commitments; our ability to remain competitive in the areas of merchandise quality, price, breadth of selection and customer service; our ability to attract and retain key personnel; seasonal and quarterly variations in our revenue and income; general economic conditions; further impairment of our goodwill; our ability to mitigate system security risk issues, such as cyber or malware attacks, as well as other major system failures; our ability to optimize our systems, processes and functions; our ability to comply with privacy-related obligations; our ability to ensure the proper operation of the distribution facilities by third-party logistics providers; fluctuations in the price, availability and quality of raw materials; commodity, raw material and other cost increases; the extent of our foreign sourcing; our reliance on independent manufacturers; other tax matters; and other factors as set forth from time to time in our Securities and Exchange Commission filings, including those described in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on May 2, 2024 (the "2023 Annual Report on Form 10-K") under the heading "Part I, Item 1A—Risk Factors." We intend these forward-looking statements to speak only as of the date of this Quarterly Report on Form 10-Q and do not undertake to update or revise them as more information becomes available, except as required by law.

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PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

VINCE HOLDING CORP. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(in thousands, except share and per share data, unaudited)

 

		August 3,				February 3,
		2024				2024
Assets
Current assets:
Cash and cash equivalents		$	711			$	357
Trade receivables, net of allowance for doubtful accounts of $329 and $377 at August 3, 2024 and February 3, 2024, respectively			35,054				20,671
Inventories, net			66,343				58,777
Prepaid expenses and other current assets1			6,564				4,997
Total current assets			108,672				84,802
Property and equipment, net			6,298				6,972
Operating lease right-of-use assets, net			79,659				73,003
Goodwill			31,973				31,973
Equity method investment			24,727				26,147
Other assets			2,294				2,252
Total assets		$	253,623			$	225,149
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable		$	36,736			$	31,678
Accrued salaries and employee benefits			6,442				3,967
Other accrued expenses2			9,545				8,980
Short-term lease liabilities			14,787				16,803
Total current liabilities			67,510				61,428
Long-term debt3			54,401				43,950
Long-term lease liabilities			75,704				67,705
Deferred income tax liability			3,567				4,913
Commitments and contingencies (Note 10)
Stockholders' equity:
Common stock at $0.01 par value (100,000,000 shares authorized, 12,603,273 and 12,506,556 shares issued and outstanding at August 3, 2024 and February 3, 2024, respectively)			126				125
Additional paid-in capital			1,144,948				1,144,740
Accumulated deficit			(1,092,685	)			(1,097,634	)
Accumulated other comprehensive income (loss)			52				(78	)
Total stockholders' equity			52,441				47,153
Total liabilities and stockholders' equity		$	253,623			$	225,149

 

 

1 Includes prepaid royalty expense of $749 as of August 3, 2024, which is with a related party.

2 Includes accrued royalty expense of $361 as of February 3, 2024, which is with a related party.

3 Includes Third Lien Credit Facility, which is with a related party, of $32,260 and $29,982 as of August 3, 2024 and February 3, 2024, respectively.

 

 

 

See notes to unaudited condensed consolidated financial statements.

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VINCE HOLDING CORP. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

(in thousands, except share and per share data, unaudited)

 

		Three Months Ended								Six Months Ended
		August 3,				July 29,				August 3,				July 29,
		2024				2023				2024				2023
Net sales		$	74,169			$	69,447			$	133,340			$	133,503
Cost of products sold4			39,038				37,099				68,296				71,563
Gross profit			35,131				32,348				65,044				61,940
Gain on sale of intangible assets			—				(32,043	)			—				(32,808	)
Gain on sale of subsidiary			—				—				(7,634	)			—
Selling, general and administrative expenses			34,001				31,541				65,944				64,274
Income from operations			1,130				32,850				6,734				30,474
Interest expense, net5			1,647				4,137				3,293				7,427
(Loss) income before income taxes and equity in net income (loss) of equity method investment			(517	)			28,713				3,441				23,047
Benefit for income taxes			(794	)			(592	)			(1,681	)			(5,877	)
Income before equity in net income (loss) of equity method investment			277				29,305				5,122				28,924
Equity in net income (loss) of equity method investment			292				207				(173	)			207
Net income		$	569			$	29,512			$	4,949			$	29,131
Other comprehensive income:
Foreign currency translation adjustments			7				7				130				5
Comprehensive income		$	576			$	29,519			$	5,079			$	29,136
Earnings per share:
Basic earnings per share		$	0.05			$	2.37			$	0.39			$	2.35
Diluted earnings per share		$	0.05			$	2.36			$	0.39			$	2.34
Weighted average shares outstanding:
Basic			12,569,488				12,428,339				12,538,695				12,385,347
Diluted			12,617,085				12,479,667				12,606,575				12,470,085

 

 

 

4 Includes royalty expense of $3,713 and $6,401 for the three and six months ended August 3, 2024, respectively, and $2,235 for the three and six months ended July 29, 2023, respectively, which is with a related party.

5 Includes capitalized PIK interest with the Third Lien Credit Facility of $1,147 and $2,278 for the three and six months ended August 3, 2024, respectively, and $960 and $1,873 for the three and six months ended July 29, 2023, respectively, which is with a related party.

 

 

 

See notes to unaudited condensed consolidated financial statements.

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VINCE HOLDING CORP. AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders' Equity

(in thousands, except share amounts, unaudited)

 

		Common Stock
		Number of Shares Outstanding				Par Value				Additional Paid-In Capital				Accumulated Deficit				Accumulated Other Comprehensive Loss				Total Stockholders' Equity
Balance as of February 3, 2024			12,506,556			$	125			$	1,144,740			$	(1,097,634	)		$	(78	)		$	47,153
Comprehensive income:
Net income			—				—				—				4,380				—				4,380
Foreign currency translation adjustment			—				—				—				—				123				123
Share-based compensation expense			—				—				(5	)			—				—				(5	)
Restricted stock unit vestings			1,486				—				—				—				—				—
Tax withholdings related to restricted stock vesting			(611	)			—				(2	)			—				—				(2	)
Issuance of common stock related to Employee Stock Purchase Plan ("ESPP")			2,484				—				7				—				—				7
Balance as of May 4, 2024			12,509,915			$	125			$	1,144,740			$	(1,093,254	)		$	45			$	51,656
Comprehensive income:
Net income			—				—				—				569				—				569
Foreign currency translation adjustment			—				—				—				—				7				7
Share-based compensation expense			—				—				255				—				—				255
Restricted stock unit vestings			119,053				1				(1	)			—				—				—
Tax withholdings related to restricted stock vesting			(30,804	)			—				(53	)			—				—				(53	)
Issuance of common stock related to ESPP			5,109				—				7				—				—				7
Balance as of August 3, 2024			12,603,273			$	126			$	1,144,948			$	(1,092,685	)		$	52			$	52,441

 

See notes to unaudited condensed consolidated financial statements.

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VINCE HOLDING CORP. AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders' Equity

(in thousands, except share amounts, unaudited)

		Common Stock
		Number of Shares Outstanding				Par Value				Additional Paid-In Capital				Accumulated Deficit				Accumulated Other Comprehensive Loss				Total Stockholders' Equity
Balance as of January 28, 2023			12,335,405			$	123			$	1,143,295			$	(1,123,080	)		$	(81	)		$	20,257
Comprehensive loss:
Net loss			—				—				—				(381	)			—				(381	)
Foreign currency translation adjustment			—				—				—				—				(2	)			(2	)
Share-based compensation expense			—				—				420				—				—				420
Restricted stock unit vestings			34,983				1				—				—				—				1
Tax withholdings related to restricted stock vesting			(1,148	)			—				(8	)			—				—				(8	)
Issuance of common stock related to ESPP			1,885				—				14				—				—				14
Balance as of April 29, 2023			12,371,125			$	124			$	1,143,721			$	(1,123,461	)		$	(83	)		$	20,301
Comprehensive loss:
Net income			—				—				—				29,512				—				29,512
Foreign currency translation adjustment			—				—				—				—				7				7
Share-based compensation expense			—				—				393				—				—				393
Restricted stock unit vestings			134,995				1				(1	)			—				—				—
Tax withholdings related to restricted stock vesting			(23,695	)			—				(126	)			—				—				(126	)
Issuance of common stock related to ESPP			4,239				—				12				—				—				12
Balance as of July 29, 2023			12,486,664			$	125			$	1,143,999			$	(1,093,949	)		$	(76	)		$	50,099

 

See notes to unaudited condensed consolidated financial statements.

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VINCE HOLDING CORP. AND SUBSIDIARIES

 

Condensed Consolidated Statements of Cash Flows

(in thousands, unaudited)

 

		Six Months Ended
		August 3, 2024				July 29, 2023
Operating activities
Net income		$	4,949			$	29,131
Add (deduct) items not affecting operating cash flows:
Depreciation and amortization			2,035				2,538
Allowance for doubtful accounts			13				63
Gain on sale of intangible assets			—				(32,808	)
Gain on sale of subsidiary			(7,634	)			—
Loss on disposal of property and equipment			33				140
Amortization of deferred financing costs			158				593
Deferred income taxes			(1,346	)			(5,958	)
Share-based compensation expense			250				813
Capitalized PIK Interest due to loan with related party			2,278				1,873
Loss on debt extinguishment			—				3,136
Equity in net loss of equity method investment, net of distributions			1,420				(207	)
Changes in assets and liabilities:
Receivables, net			(14,396	)			(189	)
Inventories			(7,564	)			4,939
Prepaid expenses and other current assets			(2,281	)			(2,263	)
Accounts payable and accrued expenses			15,740				(17,947	)
Other assets and liabilities			(727	)			(4,014	)
Net cash used in operating activities			(7,072	)			(20,160	)
Investing activities
Payments for capital expenditures			(1,421	)			(377	)
Transaction costs related to equity method investment			—				(525	)
Proceeds from sale of intangible assets			—				77,525
Net cash (used in) provided by investing activities			(1,421	)			76,623
Financing activities
Proceeds from borrowings under the Revolving Credit Facilities			99,700				173,665
Repayment of borrowings under the Revolving Credit Facilities			(91,570	)			(192,486	)
Repayment of borrowings under the Term Loan Facilities			—				(29,378	)
Tax withholdings related to restricted stock vesting			(55	)			(134	)
Proceeds from stock option exercises, restricted stock vesting, and issuance of common stock under employee stock purchase plan			14				27
Financing fees			(8	)			(3,002	)
Net cash provided by (used in) financing activities			8,081				(51,308	)
(Decrease) increase in cash, cash equivalents, and restricted cash			(412	)			5,155
Effect of exchange rate changes on cash, cash equivalents, and restricted cash			1				3
Cash, cash equivalents, and restricted cash, beginning of period			1,219				1,116
Cash, cash equivalents, and restricted cash, end of period			808				6,274
Less: restricted cash at end of period			97				5,405
Cash and cash equivalents per balance sheet at end of period		$	711			$	869
Supplemental Disclosures of Cash Flow Information
Cash payments for interest		$	854			$	5,088
Cash payments for income taxes, net of refunds			138				39
Supplemental Disclosures of Non-Cash Investing and Financing Activities
Non-cash equity method investment			—				25,500
Capital expenditures in accounts payable and accrued liabilities			219				91
Deferred financing fees in accrued liabilities			—				311

 

See notes to unaudited condensed consolidated financial statements.

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VINCE HOLDING CORP. AND SUBSIDIARIES

Notes to the Unaudited Condensed Consolidated Financial Statements

(in thousands, except share and per share data)

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