Ladies and gentlemen, thank you for standing by. Welcome to the Vince First Quarter 2024 Earnings Conference Call. All lines have been placed on mute during the presentation portion of this call. [Operator Instructions] I would now like to hand the conference call over to our host, Akiko Okuma. Please go ahead.

Thank you, and good morning, everyone. Welcome to Vince Holding Corp's first quarter fiscal 2024 results conference call. Hosting the call today is Dave Stefko, Interim Chief Executive Officer; and John Szczepanski, 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. In addition, in today's discussion, the company is presenting its financial results in conformity with GAAP and on an adjusted basis. The adjusted results that the company presents today are non-GAAP measures. Discussions of these non-GAAP measures and information on reconciliations of them to their most comparable GAAP measures are included in today's press release and related schedules, which are available in the Investors section of the company's website at investors.vince.com. Now I'll turn the call over to Dave.

Thank you, Akiko and thank you everyone for joining us this morning. I will begin with a review of highlights from our first quarter performance before turning the call over to John to discuss our financial results and outlook in more detail. Our first quarter sales results were in line with the high end of our expectations, while we delivered better than expected adjusted operating margin performance as we continue to drive gross margin expansion and maintain strong expense disciplines. Our results also reflect our strategic actions focused on driving improved full-price performance as we continue to pull back in our off-price business in our wholesale channel, as well as the reduced promotional activity in our direct-to-consumer channel. In addition to these actions, we are continuing to see strong customer reception to our assortments focused on luxurious contemporary wardrobe staples. Customers continue to gravitate toward our timeless casual pieces that can be styled up or down depending on the occasion. During the quarter in women's, we saw strong customer reception in our knits and casual dresses and in men's, he responded well to our linen fabrications in both tops and bottoms. Our direct-to-consumer channel, excluding the impact from store closures, slightly outperformed our wholesale channel. As mentioned, we continue to pull back our promotional activity across e-commerce and our stores, enabling a stronger full-price business and healthier customer file. In the quarter, we delivered a mid-single-digit increase in our full-price customer segment and while this did not offset the impact of the lower promotional activity, it is yet another data point that has given us further confidence in our plans and expectations as we look ahead. In wholesale, we have also continued to strengthen our partnerships. During the quarter we continued to be a top brand for many of our…

Thank you, Dave and good morning everyone. As Dave discussed, we are pleased to have delivered first quarter revenue in line with the high end of our guidance along with better than expected adjusted operating margin as we continue to execute an improved full-price business, manage expenses with discipline and deliver on our transformation plan objectives. Turning now to our results in more detail. Total company net sales for the first quarter decreased 7.6% to $59.2 million compared to $64.1 million in the first quarter of fiscal 2023, which included $0.1 million in Rebecca Taylor and Parker segment sales, which has been wound down. The year-over-year decline in total company net sales was driven by the 7.5% decline in Vince Brand sales due to year-over-year declines in both our wholesale and direct-to-consumer segments as we continued to pull back in our off-price business within our wholesale channel as well as on promotions in the direct-to-consumer segment. In addition, our direct-to-consumer segment was impacted by the closure of three full-price and two outlet stores as well as the temporary closure of one of our full-price stores due to renovations. The impact from these closures resulted in approximately half of the decline we experienced in the direct-to-consumer channel. Excluding the impact from store closures, we continue to see stores outperform e-commerce and attribute some of this to a greater impact from the pullback in promotions on the online business compared to stores. As Dave noted, we are pleased with the full-price business we are driving as reflected in our customer file as well as sales mix. In the quarter, full-price sales penetration increased almost 500 basis points compared to the prior year. Gross profit in the first quarter was $29.9 million or 50.6% of net sales. This compares to $29.6 million or…

Thank you. [Operator Instructions] Our first question comes from the line of Eric Beder of Small Cap Consumer Research. Your line is now open. Please go ahead.

Good morning. Congratulations on the quarter upside.

Thanks, Eric.

I have a few questions here. Let's start with what are you seeing in terms of international? I know that's primarily a wholesale business as you talk about, the wholesale book has been strong. What are you seeing internationally? What are the opportunities there going forward?

We're seeing similar performance internationally as we are in the US. We've talked in the past about growth opportunities specifically in Asia. We have opened two stores in Asia that we have seen I would say inconsistent performance to date amongst those two stores and looking at similar to here in the U.S. in some investments that we should be making from a marketing perspective. But right now, Eric we're focused long-term on trying to understand the Asia market.

Okay. You mentioned that store closures were part of the reason why the year-over-year sales were down. I know that you kind of, I don't expect you're going to be doing stores this year, but how do stores fit in as the longer-term growth opportunity here as you refocus even more on the full-price customer and providing that higher level of service and driving I mentioned the stores? Where do stores fit in terms of potential expansion going forward?

It's certainly part of the longer-term growth strategy. Again, if you go back 2023 for us was more of a, as a transformative year. As we improved the health of the business in late 2023 and mid-2024, we've been discussing, it's kind of been a focus on the core business of resetting the promotional cadence and the wholesale off-price and focusing on our transformation program and looking at our customer data platform. How do we utilize that to drive growth? So from a customer data platform we get a lot of information. We are doing a market study as we've talked about if you look at concentration of our over 60 stores, we have a lot of stores in the New York, LA area. But when you look at markets like Chicago, we have one or two stores. In Dallas we have one store. In Houston we have two stores. There are just so many markets that we have opportunities in. So we certainly are looking at that. And as we look into late 2024 and 2025, we will look at new and existing store opportunities in the U.S. and international also. But the focus right now for 2024 is on the core of business and making sure that we achieve our goals for this year.

Kind of speaking about the core, you've talked before about how lowering the -- the drive to lower prices has been kind of pushed to the exact opposite, and you're clearing out the outlet channel. When do you expect that to be done and when do you expect the pricing to be kind of where you want it to be in terms of the mix of outlet, non-outlet, in terms of the pricing, also in terms of full-price and non-full price? When do you think that process is nearing the end?

Yes Eric, it's John. I'll take that. I think when we look at how we completed Q1, that's really the end of that reset period. We're now going into, starting in our fiscal Q2, certainly recapitalizing into the demand that we see in the wholesale channel and having an appropriate balance between wholesale full-price and off-price certainly from here on, from here on out. From an outlet perspective, from a DTC outlet perspective, we're also looking at the fleet and then looking at our pricing strategies with regards to a more healthier excess liquidation, if you will, going forward. So between normalizing wholesale off-price and the fact that we're managing inventory so much better now and expected into the future, we expect that equation to be optimized as we go through the balance of this year and then setting us up for good position going forward.

That actually is a great next fall. How do you think about normalizing in SG&A. I know you have multiple flows here in terms of project transformation, in terms of short-term incentive costs. So how should we be thinking about how the SG&A flows and when does that kind of hit, what we should consider kind of normalized levels, I guess, for comparison purposes going forward?

Yes, Eric, great question. So when you think about where the company has been last year, there was no short-term incentive plan established because of the challenging financial situation of the company. As we reset into this year, as we set goals for our teams, it was appropriate to reset and reestablish a short-term incentive comp program. And as you saw in the quarter, that impact was the primary driver for the SG&A deleverage that we saw year-over-year. Certainly, Q1 is our lightest quarter in terms of revenue footprint. So the impact of that should mitigate as we go through the balance of the year, as our sales build, especially in the back half of the year into our key selling season. So our outlook includes the incorporation of a program, again, not to the same order of magnitude as what we've seen in Q1.

Great. Well, congrats and look forward to seeing what's happening the rest of the year. It should be fun. Thank you.

Thanks Eric.

Thanks, Eric.

The next question comes from Michael Kupinski of Noble Financial Capital Markets. Your line is now open. Please go ahead.

Thank you and let me offer my congratulations as well. First of all, given the improvement in margins, I was just wondering if you can identify for us how much of the cost initiatives, I mean you are targeting $10 million for the year, how much of that was reflected in the quarter? And I know that you mentioned 240 basis points, which I would assume would be like maybe 1.2 million, if my math is correct. And I was just wondering if that was the number that you realized towards that $10 million goal. And then if you can just talk a little bit about what will be the cadence of those cost cut initiatives throughout the year?

Great, great question, Mike. So as you think about our margin improvement, the year is just starting. Our cadence for transformation since it's more COGS related will definitely follow the penetration of sales by quarter throughout the year. So again, with Q1 being our lightest quarter, we should see a build as it relates to the COGS portion going through the course of the year. We're happy with where we ended transformation in Q1. We feel we're ahead of schedule in terms of what we were expecting. What we are monitoring right now is really the impacts of DTC deceleration as we come off of that promotional cadence, as well as the return rates that are amplified given, especially in e.com given the fact that we're definitely moving away from higher discounts. And last year we had -- really the promotions were tied to end-of-sale activities with no returns. So that piece is becoming more magnified and we're monitoring that as potential offsets to the real upside that we're seeing in transformation.

Got you. And so, if you were to look at the margin prospect, I suppose if assuming that the $10 million is fully realized would that largely fall into the third quarter then, I mean proportionately?

I would say it would be more proportional with our level of COGS and sales as we progress, so not completely back half of the year weighted, but certainly more weighted to the back half of the year given that penetration of business flow.

Got you. And then on the revenue side, can you talk a little bit about the variables that are baked into your favorable revenue guide for the year? Because certainly based on your 2Q guide, you would look for a much stronger performance in the second half. And I was just wondering if you can just talk a little bit about maybe some of the -- while you obviously have identified some positive outlook, I was just wondering what would be the possible challenges in terms of achieving your revenue targets for the fiscal full year as you see it?

Yes, we're monitoring our DTC trends, as we called out. We're monitoring some of that sales deceleration from the promotional activity, the return rates in our e-com channel. But we're really, as we approach our key selling season in fall and holiday, that's where our product performs best. So we expect really a good trend reversal as we get into Q3, Q4, and the back half of the year. And also, we've talked a lot, and Dave has mentioned this too, about the work we've done around the customer database. We expect a lot of those efforts to start getting traction as we enter those key selling seasons. The other driver in our back half of the year weight in terms of revenue is our wholesale business. We talked to the fact that because of the financial constraints we had last year, we really couldn't match supply with the demand we saw in the wholesale channel. This is really our moment to level set that for fall holiday, for our Q3, Q4 selling cycle in the wholesale channel, and we're looking to capitalize on that demand. Right now where we stand, we've completed all of the major markets that relate to the shipping cycle this fiscal year and we can say that we've got more than 85% of our order book filled for those shipping windows through the balance of the year, so that also gives us some good confidence about the back half of the year guide.

Got you. In terms of just the product itself, you mentioned men's as being a really key category for you and you mentioned linens. But I was just wondering in terms of categories that you might find that are growth opportunities in the men's category, if you could just kind of identify for us what are some of the bets that you're making in terms of the back half in terms of that particular category?

Yes. Biggest category we're focused on from a growth perspective is a new planned program that we're working on and so we hope that we see some value from that back half of the year.

Got you. Okay, that's all I have. Thank you.

Great, thank you.

As there are no additional questions waiting at this time, I'd like to hand the conference back over to Dave Stefko for closing remarks.

Okay, thanks. Thank you all for joining us today. We will speak to you again on our second quarter earnings call, which will be in September and with that, have a great day. Thank you.

Ladies and gentlemen, this concludes today's call. Have a great rest of your day. You may now disconnect your line.