Good day and thank you for standing by and welcome to the Vince Q3 2021 Earnings Conference Call. [Operator Instructions] I’d now like to hand the conference over to your speaker for today, Jean Fontana. Thank you. Please go ahead.

Thank you and good afternoon, everyone. Welcome to Vince Holding Corporation’s third quarter fiscal 2021 results conference call. Hosting the call today is Jack Schwefel, Chief Executive Officer and Dave Stefko, Chief Financial Officer. Before we begin, let me remind you that certain statements made on this call may constitute forward-looking statements, which are subject to risks and uncertainties that could cause actual results to differ from those that the company expects. Those risks and uncertainties are described in today’s press release and in the company’s SEC filings, which are available on the company’s website. Investors should not assume that statements made during the call will remain operative at a later time and the company undertakes no obligation to update any information discussed on the call. After the prepared remarks, management will be available to take your questions for as long as time permits. With that, I will turn the call over to Jack.

Thank you, Jean and thank you everyone for joining us this afternoon for a discussion of our third quarter performance. We are encouraged with the trends in our business given the many macro challenges facing the industry. We are pleased to see the momentum in our e-commerce business within our Vince brand. Our customers continue to love our sophisticated high-quality women’s and men’s assortments. Our men’s business has shown particular strength in the quarter, improving against both 2020 and 2019 levels. At Rebecca Taylor, we feel confident in the progress made on our brand turnaround and remain focused on driving key strategies. I will begin with a review of the performance of our Vince brand. Direct-to-consumer revenue sales have recovered to slightly above fiscal 2019 results, partially offset by sales pressure in the challenged wholesale channel. In spite of our current headwinds impacting the industry, the demand for the Vince brand remains strong and we remain confident in our ability to continue to drive further market share gains within the contemporary luxury category. Our business in the third quarter was fueled by dressier items as people return to the office and social activities. We continue to see a strong response to dresses, particularly versatile styles that can be dressed up or dressed down based on the occasion. Our latest collections have shifted to an emphasis of gifting and family theme messaging, including product for both comfortable gatherings and dressed-up events during the holidays. We have also seen a pickup in sweaters and outerwear as our customers are focused on buy now, wear now product. In direct-to-consumer, the continued momentum on our e-commerce business, which was up double-digit to 2019 levels was partially offset by softer than expected results in our retail stores. Looking at our store performance by region, we…

Thanks, Jack. We are pleased with the trends in our business as we remain focused on driving our key strategies. Total company net sales for the third quarter increased 26.7% to $87.5 million compared to $69 million in the third quarter of fiscal 2020. For the Vince brand, third quarter consolidated net sales increased 27.3% to $78.4 million compared to $61.6 million in the same prior year period. Our Vince direct-to-consumer segment sales increased 56.5% to $35.7 million in the third quarter, reflecting improved traffic trends, particularly in locations in our urban markets, which outpaced the store base in the quarter. In our Wholesale segment, net sales increased 10%. Despite supply chain challenges, which we expect to continue to impact the fourth quarter, we remain confident in our market share position within wholesale as Vince continues to outperform peers within the contemporary luxury category. Rebecca Taylor and Parker combined net sales increased 22.0% to $9.1 million as compared to the same period last year. We are encouraged with the progress we’re making as we complete our first year of redefining the Rebecca brand. Gross profit in the third quarter was $42.1 million or 48.2% of net sales. This compares to $31.7 million or 45.9% of net sales in the third quarter of last year. The 230 basis point increase in gross margin rate compared to the third quarter of fiscal 2020 was primarily due to lower promotional activity in the direct-to-consumer channel and lower year-over-year adjustments to inventory reserves, partially offset by higher freight costs. In the wholesale comp price channel, we are driving healthier margins. Selling, general, and administrative expenses in the quarter was $39.0 million or 44.6% of net sales as compared to $25.4 million or 36.8% of net sales for the third quarter of last year. The…

[Operator Instructions] Your first question comes from the line of Dana Telsey with Telsey Advisory Group.

Hi, good afternoon everyone. Nice to hear about the progress in the fourth quarter. As we hear about supply chain dynamics everyone lately and the headwinds there, how are you approaching it in terms of whether it’s port congestion, containers, what are you seeing? How much are you using air freight? And as we go into the first half of 2022, what are you expecting on any of these changes? And in particular, on the wholesale side of the business, are the order cancellations where you need now and the order book is more real, or how do you think of that? Thank you.

Hey Dana, thank you. A couple of thoughts here. We look at the spring – we look at the first six months of 2022, very similar to how we think about the back half of 2021, and we are planning for it that same way. We will continue to use air freight at exactly the same cadence we have been using it. I think on the longer term, we start to think about some changes in how we bring products to market. We are looking at Europe and South America to – and looking to lean on that in a more significant way in the future. That doesn’t happen overnight. We are just in the infancy of that. But we are somewhat pessimistic, and we are planning to be pessimistic on that. From a wholesale perspective, we are watching our partners who have been very, very slow to buy into inventory through 2021, begin to open that up a little bit and more front-loading of product. They went into this year with a by light and chase, and we chased with them. And fortunately, in most cases, we were able to make accommodations. We are seeing them get a little bit more religion about owning inventory at the beginning of season and as such that we think that will take a little bit of pressure off of us on it.

Got it. And then when you think about the DTC business. You commented on the stores and e-comm, what are you seeing different in the stores and the e-comm and impressive that your urban stores are showing improvement?

Yes. So, we will wait and very, very excited about that. And I think some of that is very attributable to just people beginning to buy more workwear. And whether they are going back to the office a day or two days or three days a week, they are realizing they need to make more investments there. We are excited about what we are seeing in direct-to-consumer. And probably the biggest change or evolution we are seeing is just that customer who shops us online and in store, we are very pleased with the initial results of our new POS, and it really is foundational for us in doing more omnichannel programs. In the POS system that we have just completed, allows us to capture customer information in a much more significant way than we were previously. We can build on that with – and we will build on that with customer data platform and loyalty programs in the future, which just give us more control of everything and then just have to buy stuff.

Got it. And then when you impact the gross margin and the SG&A, how much of an improvement in full price sales were there? And how much was the freight cost? It sounds like the full price sales helped to offset the higher freight costs. And then on the SG&A side, the rent concessions from last year, how long does that continue through or do we see SG&A return to some form of higher levels?

Yes. I will start with your last comment, Dana. On the – so from the rent concessions, the way the accounting works in the rent concessions, you kind of get a catch-up adjustment when you sign an amendment. So, as you look at those gains that you see in the quarter, they are kind of one-time gains and plus your rent costs are booked on a straight-line basis. So really, the SG&A that you have been seeing for the last couple of quarters is normalized rent expense. It’s really the prior year and the quarters that had the benefits as we signed those amendments. From a floor price basis, we definitely have seen a greater percentage of our business at a full price level. And even more so, as Jack mentioned, with the acceleration of the Vince gift card that we moved up into early November, that’s much more full price selling with a gift card so a better margin sale than what a Black Friday, Cyber Monday type of sale would have been.

Got it. And then just on the Rebecca Taylor side, I noticed in the operating income breakout. So, the sales improved, the loss increased, how do you unpack that?

A lot of that I would attribute to, we are starting to pound the drum a little bit louder here. We weren’t investing or spending previously on marketing. And we are starting to do that. And some of its branding, which won’t have an immediate cause effect with sales, but we will have a longer term effect. So, the investments that we have had to make to make sure that people know about the brand and that – how relevant we think we are show through in some of that.

Got it. Thank you.

Thank you.

And there are no further questions. I would like to turn the call back over to Jack.

Thank you, operator. With that, that will conclude today. We look forward to talking to you with Q4 earnings in April of 2022. Appreciate all of your time and attention on this and I hope you all have a great holiday and New Year and look forward to talking to you soon. Thank you.

Ladies and gentlemen, this concludes today’s conference call. Thank you for your participation. You may now disconnect.