Luxury brand Vince on Friday reported that it received a written de-listing warning from the New York Stock Exchange, which requires a company’s 30-trading day average closing stock price to be above $1.00, its 30-trading day average market capitalization to be at least $50 million and its stockholders’ equity to be at least $50 million, according to a press release.
The luxury brand said it expects to notify NYSE that it intends to cure the deficiencies set forth in the notice, which includes submission of a business plan by July 1. Vince must also bring its share price and consecutive 30 trading-day average share price above $1.00 by Nov. 17. To do that the company may pursue corporate actions such as a reverse stock split, which would require the approval of a majority of the Company’s stockholders.
Separately, the company also said that it received a Rights Offering Commitment Letter from global investment firm Sun Capital Partners V, L.P. that provides $30 million of cash proceeds in the event that Vince conducts a rights offering of its common stock to its stockholders, according to another company press release.
Despite making adjustments to firm up Vince as a high-fashion brand, the company has failed to adequately meet shoppers’ expectations for quick turnarounds on new designs, and it was further hampered by overall softness in apparel sales in the fourth quarter, CEO Brendan Hoffman told analysts in April on an earnings call, according to a transcript from Seeking Alpha.
At that time, the company reported that there is "substantial doubt" regarding the company’s ability to continue as a going concern for the next twelve months, according to a press release. Of particular concern is its ability to comply with the consolidated net total leverage ratio under its term loan facility. Fourth quarter net sales fell 21.9% to $63.9 million from $81.8 million in the year-ago period. That and its fourth quarter and fiscal year report have sent shares tumbling.
For the full year, net sales fell 11.3% to $268.2 million, down from $302.5 million in 2015. Wholesale segment net sales dropped 15.5% to $170.1 million and direct-to-consumer segment net sales fell 3.1% to $98.1 million. Same-store sales including e-commerce sales fell 16.2% compared to the prior year period the company said. Net loss for the year was $162.7 million, or $3.50 per share, compared to net income in 2015 of $5.1 million 14 cents per diluted share. The company’s decision to suspend guidance was “driven by the difficult retail environment in which we continue to operate,” according to a press release.
The company spent last year addressing its design issues, and feedback from its wholesale partners, store associates and customers were used by the design team in upcoming collections, Hoffman said. Moving forward the company's assortment will include more feminine styles for women. “Our assortments in 2017 will select fabrications and color palettes that are wearable in the current season, a better balance category offering as we intensified classifications such as outerwear and bottoms and a more appropriate mix of fashion versus core basics.”
But delays in shipments, especially to the company’s off-price channels, as well as canceled orders and returns helped bloat inventory. As it addresses those issues, Vince is also working to avoid markdowns. “[W]e also realize in the current environment, we need to be relatively competitive to our peers,” he said. “Going forward [we] will further refine our strategy to ensure that we balance our promotions and messaging with protecting brand integrity.”
The company’s wholesale business is suffering along with the high-end department stores it furnishes with goods. Last month, Moody’s Investors Service released a report forecasting a 1% decline in sales and a 7% to 8% decrease in operating profits for department store retailers this year, not even counting struggling Sears. Department stores have been hard hit by shifts in shopping habits, slowing mall traffic and competition from e-commerce and off-price retailers, according to that report.
The company, however, is seeing results from new efforts to interact with customers online, which has led to Q1 double-digit growth e-commerce growth. Sales in stores also improved in the first quarter, executives said, with sales in physical stores down in the high single range, “far less than they did in the fourth quarter,” according to Hoffman.
As part of its turnaround, the company will also revamp some of its existing stores, open a store in Honolulu, HI in May and add men's fashions to its flagship Madison Avenue store. Vince recently launched a collection of accessories from third-party sources, including jewelry, art, bags, sunglasses and home décor items to be sold online and in Los Angeles and New York.