Vince Holding Corp. (VNCE) CEO Lisa Klinger on Q2 2014Results - Earnings Call Transcript

So throughout regards to the particular pace associated with the newest item introductions, weinternally are incredibly focused obviously about our women's ready-to-wear business. your serieswill be open.

Additionally, on July 1, 2014, certain stockholders regarding the business considered a secondarypublic providing with the company's widespread stock, effortlessly proceeds going towards thestockholders.

Although it is extremely early, we're very pleased with the customer's response for you to this coolproduct extension. This particular slight deleverage has been again driven by investments to guideour different growth initiatives and costs essential for Vince in order to run like a stand-alone publiccompany.

From a real new class perspective, again nearly most of individuals new categories tend to becertified businesses, and then we do not have got access to or hold your stock with regard towomen's footwear, men's footwear or even children's wear.

In addition, we think these findings will validate our efforts to end up being able to improvemarketing and advertising investments and strategically expand our product offerings directly intorelated classes like handbag.

Richard Jaffe - Stifel Nicolaus

Lisa Klinger

We furthermore incurred higher deposition expenses even as strategically invested in new storeretailers and wholesale shop throughout shops. Adjusted diluted earnings per share elevated toalways be able to $0.28 throughout fiscal 2014 via $0.23 by utilizing an adjusted basis throughoutfiscal 2013.

Richard Jaffe - Stifel Nicolaus

We're delighted which were able to have a capsule collection out with regard to holiday. at theidentical period we also noticed double-digit increases throughout dresses, outerwear and alsoleather jackets.

Our stock balances will additionally be impacted through the rollout of our own omni-channelreplenishment program as well as received increases needed to support our all round sales growthas well as group expansion initiatives.

During your second-quarter we saw good growth in the UK, Canada and in addition the middle East,so we display traction within newer territories for example Germany, Turkey, Scandinavia along withBenelux. Ms. Whenever we initial do our research back throughout 2012, our awareness wasobviously a 20%. I feel the other thing that should end up being stated is often that our comp storesales growth charge ended up being slightly impacted by simply new retailers that people openedinside important markets, also because the undeniable fact that we remodeled Washington Street,

therefore basically, we observed slight negative impact in order to comps in the near-term, howevercertainly benefited greatly coming from elevated brand name awareness and share of the market astotal revenue grew overall during these markets, which usually we think is absolutely important.

So I believe the accurate secret drivers of growth in the near-term will continue to become women'sready-to-wear along with our men's sportswear business. Baird. Thank you. have an excellent day.

Jill Granoff

Sure. It's great chance for all regarding us to test along with learn. Lisa?

Gross profit within the second quarter of fiscal 2014 elevated 30.8% to $44 million coming from$33.6 million within the 2nd quarter regarding fiscal 2013 as being a results of each an boost in netrevenue as well being an boost in the gross gain rates.

We continue to exploit new sales opportunities throughout each and also every of our owndestination channels inside crucial markets and we remain focused on achieving gross margin rateexpansion through our various operational improvement initiatives, our significant growthpossibilities from the product, channel along with geographic perspective, combined using our loyaland also passionate customers whom adore us and commit have got us extremely pumped up aboutour future.

Question-and-Answer Session

Before completed within the contact up to questions, I want to thank our amazing Vince team insideNew York, LA and the field pertaining to their tireless efforts in building the actual manufacturerand also driving these impressive results, as well as our wholesale, licensing and also internationaldistribution partners to still showcase and support the brand. In the Program Of the next quarter,we maintained our leading place in women's contemporary apparel sweaters, knit tops along withblouses remained our largest categories. As the outcome of the much better product-to-marketplanning, we still lower our air shipment ratio through this past year throughout the second-quarter,so we believe there's still improvement available within this area.

Lisa Klinger

Jill Granoff

Operator

In regards to the 7.1% comps, we knew in which would be the problem that everyone was likely toask, and which we would project that a new sequential comparable store revenue would slow withinthe particular second-quarter, because clearly, we cycled in strong prior com performance.

For the quarter, our wholesale segment revenue increased 16.9% driven by simply strong domesticas well as international demand too as our growing licensing business. And Consequently I believewhenever you sort of pull it altogether, should you look at comp retailer performance, non-compperformance, along with e-commerce performance, we delivered 40% development in direct toconsumer overall, which I believe demonstrates that our strategies are generally working.

Domestically, we always pursue shop throughout shop investments, with plans to spread out 4 foryou to six additional domestic women shops during the next 1 / two of fiscal 2014, as well as 10 to

always be able to 14 further domestic men shops, because involving the strength of our new men'sassortment and also strong curiosity through a range of retail partners throughout accelerating ourmen's shop inside shop penetration.

First and also foremost, it is a goal in order to earn using product. so like a result, we do not reallyfeel stress inside our typical unit cost overall.

Matthew Boss - JPMorgan

It's all in the above. while the non-Vince organizations were separated

This comparable retailer sales performance was on top of your 28.8% boost last year to get a two-year stack more than 35% and also had been driven by simply relatively balanced rise in bothtransactions and transaction size.

This very helpful. Although we recognize that individuals cannot manage the actual macroeconomicenvironment, we are confident in our sales program and additionally the fantastic function becomingcarried out simply by design along with merchandising teams to supply compelling new servicetowards the marketplace.

Yes. Baird

Your gross margin performance clearly remains impressive, yet higher SG&A will be the offset. Thisparticular quarter's performance was credited for you to continued manufacturer momentum too asfar better trend in the high-end and also available luxury sectors.

This new product launch will mark a new main milestone within our evolution in order to learning tobe a global lifestyle brand, and we are really proud in the team and many kinds of they'veaccomplished to get us throughout to the marketplace prior to the important holiday season.

Matthew Boss - JPMorgan

So I would repeat the areas involving concentration simply to summarize will be our key marketstoday plus, as I stated newer markets, that would be Western Europe, China, Hong Kong and themiddle East.

The some other categories as I stated are usually certified classes to ensure that will not really be anew material top range mover, but we'll contribute to each margin and also bottom-line profitexpansion.

Certainly we think in which we have an opportunity to increase our advertising investment in our foryou to develop a brand name awareness along with our loyal client following. both of these storesare usually dual gender retailers and can increase our brand penetration in this important consumermarkets.

From the men's perspective, there we are seeking to elevate your assortment, we have been veryexcited about the fall collection, which is truly the initial collection developed with a new mensweardesigner [Nicky Wiseman], and the reaction continues in order to be tremendous.

Jill Granoff

But I think when we have spoken concerning the future, we now have asserted we will require anyhandful of years of investment coming from an SG&A perspective, along with wouldn't actually seeany kind of meaningful operating as well as EBIT margin expansion for 2 main to be able to 3 yearshas been the IPOs.

Richard Jaffe - Stifel Nicolaus

Capital expenditures for that 2nd quarter totaled $6 million regarding which in turn 2.2 million wasattributable to the real estate activity for example new along with remodeled shops as well as shopwithin shop build-out. We have to understand it's truly a little capital collection that's likely toprimarily become in the handful associated with Saks stores too as becoming a handful of our ownstores and our on the actual internet business. Thus as you take into consideration margins headingforward though, number one, do you see virtually any structural impediments about the grossmargins which we are generally able to find 50 or perhaps above. Thus clearly over the last 2 years,we've designed a lot of windows and also we simply completed an update to our marketplace studystudy so we happen to become able to be in any place to increase awareness among qualified clientsfrom 20% in order to 33%.

Mark Altschwager - Robert W. Baird

Operator

In regards to where we'll devote an advertising as well as marketing dollars, we tend to be headingto always invest at the particular rear of co-op advertising, which is obviously essential offered ourstrong wholesale business. Since any results of the IPO and also the associated restructuringtransactions, Vince became the just real operating enterprise involving Vince Holding Corp. andthen we just have baseline growth inside the business.

We delivered strong sales growth that could reach over 20% in Q2 even as again achieved double-digit raises across all distribution channels. Since the relaunch, our traffic is up and we've seenpositive customary action for you to our shop-the-look section, which in turn features resulted insideeffective wardrobing transactions.

Our 2nd significant growth chance is to expand our distribution. Jill?

One, the company now expects to accomplish total net revenue of 335 million to become able to 345million, including revenues coming from eight to become able to 9 new retail retailers along withcomparable retailer sales growth in the substantial single to low double-digit range. Thus we feelthat there may be great potential, at this point we are reticent to speak in regards to a amount untilwe've actually seen what are the first outcomes along with consumer reaction are, thus let's speakabout which are given the subsequent call.

I feel as you know, we were built using a 36%, practically 36% a couple involving years [Sak], whichwe are fairly proud involving within this relatively soft along with very promotional storeenvironment. Therefore we were built with a pretty balanced contribution associated with compgrowth coming from both an increasing transactions, as well as transaction side.

Good morning along with congratulations in an excellent second-quarter. Additionally, we're pleasedto document that we improved our gross margin price by simply 400 basis points more than lastyear's 2nd quarter, despite a relatively high promotional intensity in the retail store industry.

Thank anyone Lisa. Please just do it Ms. so is going to become $1 million in order to $2 million verytruthfully inside the fourth quarter.

Jill Granoff

Okay, I will consider it offline.

Lisa Klinger

Operator

Could anyone please converse just a little bit as well international growth and the opportunities,maybe which usually regions of the greatest performers proper now, whether or not awareness willbe highest as well as which in turn locations you're investing one of the most in.

Since the actual IPO within November 2013, we had voluntarily paid down $35.4 million with theinitial $170 million credit card debt outstanding, while investing at your rear of our numerousgrowth initiatives.

Thank an individual Jill as you talked about within our introductory comments. Consequently theparticular original reaction certainly in the press that will came in, the bloggers and also theinfluencers had been very strong.

Operator

The thing appear publications possess a fantastic ROI, we send them to homes, we have a call foryou to motion they tend to be driving to be able to stores. I mean, obviously, both associated withthose retailers are now being flagship retailers inside new York City, run more than the compaverage. and then secondly, how big of a business do you imagine handbags may be to suit yourcurrent needs more than the next number of years?

Your subsequent query comes from the collection regarding Mark Altschwager along with Robert W.Consequently that's in addition an area of growth

I feel I heard anyone say once you had been talking about the comp within the quarter, that will theaverage unit retail store improved. We appear forward to become able to speaking along togetherwith you once again within early December regarding our third quarter earnings call. A Couple Of ofthose shops opened inside the past few weeks in Boston along with Pasadena, so that as involvingtoday, September 3, the business offers 33 retailers inside the US, such as 27 a higher price shopsand 6 outlet stores.

In today's discussion, we have been presenting monetary brings about conformity along with GAAPwhich includes the particular financial outcomes of the non-Vince organizations for that 2nd quarterand also initial 50 % of fiscal 2013 as Discontinued Operations.

Operator

We opened three stores during the second-quarter; for you to dual gender shops in Boston, 1 uponNewbury Street, as well as these guys Chestnut Hill, and also our initial men's only retailer withinthe meatpacking district regarding New York. Also, we had raises throughout traffic, that I believe isreally good, as well as average unit retail. We will possibly be within our personal stores, also as on

Vince.com, then we do come using an exclusive partnership along with Saks Fifth Voie in roughly 26shops in addition Saks.com along with we're operating on a lot of different initiatives.

Sure, in the wedding you need to sort of go top to be able to bottom, really, we highlighted yourundeniable fact that we had an improved mix across a few higher margin product assortment as wellas a few associated with the mix that we have throughout the store, as well as that features beenroughly 145 basis points of the improvement, sort just good item contribution.

Operator

And then just in relation to the actual list comps, an individual offer a few useful colour about theback again half earlier. Granoff, I will flip the particular contact back up to you.

Also, earlier within August, we opened 2 additional stores. Upon a new GAAP basis, the businessreported net income for your 1st half of fiscal 2014 of $11.9 million, which includes your impact ofthe secondary offering cost, compared into a net loss involving $25.6 million for your initialassociated with fiscal 2013, which includes the impact associated with public a new transition costas well as the results with the non-Vince businesses that have got been separated upon November27, 2013.. Additionally, $3.5 million in the richesse invest throughout the quarter had beenattributable to always be able to our new headquarter and also showroom room within New York.

Just a new handful of quick questions, first, could you allow is truly a a feeling of the approach theoutlet comps are doing versus complete line. your line can be open.

promgirl

Consistent with the 2nd quarter, the actual deleverage within our SG&A rate for the 1st half hasbeen driven primarily through elevated investments support our growth initiatives and for Vince inorder to function as a stand-alone public company.

Jill Granoff

As the few fact, I'll become likely to Asia within October to meet using the Korean partners,Japanese partners. Thus the great majority regarding it is in women's ready-to-wear. on an adjustedbasis, net earnings for your very first associated with fiscal 2014 elevated 39.7% to $12.2 million, incontrast for you to $8.8 million for that 1st half of fiscal 2013, along with adjusted diluted earningsfor each share increased 39.1% to end up being able to $0.32 in contrast for you to $0.23, earned inthe 1st 1 / two of last year.

Lisa Klinger

Your next issue arrives from the collection involving Joan Payson along with Barclays. for people whocan't listen towards the entire reside broadcast, the replay will be available for 1 month upon ourwebsite at www.vince.com.

I think that we do discover consumers emphasis just a new little more on acquiring our put on now,and thus we're thinking about that will once we move forward using our 2015 collection exactlywhere we're previously operating on. so 90% of that stock totals within stores are generally bothselling at top dollar or even with a promotional rate right now. Initially i was surprised by that,nevertheless then whenever we reflected upon it ended up being not that will surprising, since wehardly devote any kind of money on marketing.

Jill I'm just trying to understand the change, a person got [25] within maintenance last year, thisyear anyone got [50] an enormous boost and make an effort to quantify that.

So there have been a large quantity of [consumer] challenges for one of the actual most partmerchants situated in Q2, as well as anything this was great overall. I just wished to talk any bit inregards for you to the pace of new item introduction, you realize we've seen a lot not too long agoalong with footwear, kids and the broader assortment overall. Consequently again, it absolutely wasan excellent healthy mix associated with both. (Operator Instructions). Reported diluted earnings foreach discuss for the second quarter of this coming year has been $0.27 in contrast to some dilutedloss per reveal for that 2nd quarter regarding fiscal 2013 of $0.40.

So again, we have got been extremely methodical and how we believe out our inventory plans andalso our getting choices therefore to help make sure channels, it's each genders, along with it'sclearly ratable across our revenue plan.

I guess the follow-on for the stock query thinking how that, I understand it's well balanced since itsessentially a new product, so I was wondering how its meant for all of your different channel,regardless of whether it's men's or even women's your main retail partners, your own retailers oreven what is going to be held for upon if that's going immediate for you to consumer.

Okay, as well as the topic involving comp, can you speak about I believe anyone opened your Sohoflagship last year about this time, then you have the actual Upper Westside store I believe that islarger when compared with your own typical store. again inside a relatively tough retail environmentthat was out there, viewing the actual wonderful boost in traffic that individuals found was reallygood.

Again within the fiscal 2014 outcome included a new secondary providing cost along with fiscal 2013results includes impact of public business transition price along with results of the actual non-Vinceevents businesses that possess been separated about November 27, 2013.

Evren Kopelman - Wells Fargo

Jill Granoff

We just lately conducted a pair of study studies among each current and qualified customers. Thuswhich means a complete lot a lot more us dollars regarding advertising investments.

So we presume extremely excellent about exactly where we have got been situated these days froma quality perspective via inventory, while the quantity could be higher looking at it in writing wethink in which it positions us very well for where we'd like to be for the back again 50 % of this yearfrom a revenue support perspective.

We will also opportunistically pursue locations in Japan and furthermore the UK, bringing our totalinternational shop within shop count after this season to some range of 12 to 14 shops. so the actualspring launch all round will have three collections throughout total. Excluding the actual secondaryoffering price and additionally the public company transition cost, adjusted selling, general andadministrative expenses as a percentage associated with sales elevated to become able to 31.3% thiscoming year via 26.4% last year.

So I feel the actual thrilling factor the handbags actually are true to become able to our core brandDNA, plus they tend to be modern and they are usually clean, great quality, substantial value.

Operating earnings for your second quarter of fiscal 2014 elevated 33.1% to end up being able to$19.9 million, in contrast to $15 million for that 2nd quarter associated with final year.

Building upon our good results in woman's footwear we launched men's footwear throughout Augustwithin 50 leading department and specialty doors, select Vince retail store shops and additionally onVince.com. completed its original public offering. Poland.

Mark Altschwager - Robert W Baird.

Mark we certainly get incorporated the early launch. your series is actually open.

We also elevated adjusted diluted earnings per share within the 2nd quarter through nearly 22% inorder to $0.28. I wish I could the identical with regard to leather, nevertheless that can be not yourcase, yet luckily we do a lot much more throughout cotton when compared with we do throughoutleather.

Taking into account our existing net sales, gross revenue along with SG&A forecast, we nowanticipate generating adjusted diluted earnings for each discuss regarding $0.90 to end up beingable to $0.94 for fiscal 2014 versus prior guidance associated with $0.88 to always be able to $0.92per share.

Joan Payson - Barclays

Three, we now expect you'll improve adjusted selling, general and also administrative expenses as apercent involving revenue by simply 200 to always be able to 275 time frame points over youradjusted fiscal 2013 rate regarding 25.6%, once we broaden our reach regarding operation, makeinvestments strategically inside marketing and advertising programs, as well as incur incrementalpublic company cost to get a full 12 month period.

As a portion regarding sales, adjusted operating margin for your all this coming year ended up being18% in comparison for you to 18.2% within the very first regarding fiscal 2013. I would now similarto to show the actual meeting over to Jennifer [Poland], Vice President, Finance. I believe I want tomake certain that everybody about the contact understands their particular inventory managementis actually clearly a premier priority with regard to this management team. Your Own line is open.

Jill Granoff - Chairman and also CEO

So, again we think (inaudible) but that's just a part of your underlying growth strategy. Now, I'll turnthe call up to Jill.

The operational improvements and also all involving the initiatives that will we've highlighted insidethe past that will Jill reiterated in your ex own remarks contributed concerning 85 basis points, andthen the entire direct to consumer increased penetration was about 55. Operator, we are generallyheading to now open up the particular call regarding questions.

Robbie Ohmes - Bank involving America/ Merrill Lynch

Certainly, we definitely had great international growth this quarter, and what we're viewing is thevery fact that the actual greatest market for us are generally truly the UK, Canada, Japan, and we'readditionally seeing great traction inside the Center East. so meaning we're not likely to discover ahuge effect on revenue line with regard to things such as women's footwear, men's footwear, as wellas the kids apparel lines. Therefore timing of receipts versus timings of revenue as well as shipmentswas a huge contributor in that year-over-year increase, nevertheless again it's most regulatedpresent as well as almost most of the offers order affect it. Your Own line will be open.

But all round I would say that, we're feeling extremely excellent about our typical unit cost, ifanything, we do believe which we'll end up being able to see improvement for the reason that area,which can be helping they are driving our gross margin expansion, simply because we've done issuesthrough consolidating our supplier base, we in addition use a new partner within Hong Kong whenyou mentioned.

We held a new press day inside late July exactly where we premiered our spring 2015 capsulecollection and we possess been delighted that the original market response was very favorable aswell as the product developed immediate excitement across Instagram and other social mediachannels.

So we feel this will be a great improvement over this period of time involving time. your line is open.

Evren Kopelman - Wells Fargo

I didn't hear, you broke up a bit bit within Richard. Next, in addition to the strong outcomesregarding active apparel along with certified categories, we're really happy to talk about the crucialpoints of our own new handbag collection, which in turn we developed in-house.

Joan Payson - Barclays

We recognize that we even now possess significant possibility to construct awareness program, andcan utilize these consumer analysis findings to aid us refine assortment strategies, strengthenmarketing along with advertising along with branding initiatives, along with identify further itemopportunities.

Selling, general and also administrative expenses in the 2nd quarter of fiscal 2014 had been $24.1million as well as 27% of sales in contrast to end up being able to $18.7 million or even 25.1%involving sales in the 2nd quarter associated with fiscal 2013. again structurally we'll find out howwe carry out by means of in which shift. Thank you. Offered these extremely exciting activities,along with our strong second-quarter performance, we now have increased our guidance for fiscal2014 as follows.

Richard Jaffe - Stifel Nicolaus

Before we get into the dialogue of our results, I must remind you in which virtually any forward-looking statements we help to make today are generally subject for you to our cautionary statementsregarding forward-looking statements found in our press launch along with SEC filings.

September 3, 2014 09:00 pm ET

Let me begin through stating that it absolutely was yet another terrific quarter for your Vince brand.Excluding the secondary offering expense as well as public company transition price in therespected period, adjusted selling, general as well as administrative expenses as becoming a percentregarding sales had been 26.3% throughout this quarter and 21.4% in the 2nd quarter associatedwith last year.

Richard Jaffe - Stifel Nicolaus

Lastly, as evidenced by simply our strange gross margin rate expansion, we continue to leverage ourscale in all round growth for you to acquire operational efficiencies. Welcome for you to our 2ndquarter and first half fiscal 2014 earnings conference call. Lisa you talked just a new little bit higherlevel upon only the stock stability after your quarter, but I was hoping if you could walk throughcould be, inside a tiny bit much more detail, could become bucket out some regarding thosecomponents in the inventory increase, just thus we can kind of appreciate the spot exactly where themajor dollar increases had been on the year-on-year basis.

Your subsequent issue comes from your series associated with Matthew Boss together withJPMorgan. Obviously, we have substantial hopes with regard to handbags as well, however youknow, obviously with regard to this coming year its capital collection within Q4, therefore that isactually not heading to become in which material, then according to our key learnings, we feel thatcan begin to ramp up over time.

So there is actually certainly nothing structural that want us to go back for the 50% [gross] marginrate that we had been at several years ago. Clearly, there is even now significant possibility toimprove awareness further, we'd such as to have it up in order to 50% the next couple of years,along with that's why we're seeking to boost your investment overall.

Now shifting towards the stability sheet, the company's money stability following the second quarterwere approximately $0.1 million once we more aggressively managed our credit card debt levels andalso interest expense. We are currently number 1 using Harvey Nichols Dubai and alsoBloomingdale Dubai so we observe that as getting a way to always be able to obtain opportunitygoing forward.

All lines are already positioned on mute to end up being able to stop just about any backgroundnoise. Are Usually these people comparable as well as different and then I feel in your guidance youare sort of implying which comps could reaccelerate within the again half from your 7.1 which youjust place up. That's actually an elevated assortment together with great branding details,interesting materials, and also we have been searching to address our wider put on occasions, alongwith we've released things such as suit separates et cetera.

We was lacking shops, we did not have stores, our website wasn't there to become able to be. butthe following point an individual know, it was almost all more than Instagram then everyone wasasking exactly where they are generally in a new position to purchase the bags and that will we wereviewing it as one of the actual frequently requested products about our website. Right After thespeaker's remarks, there will be a new question-and-answer session. Merely a simple clarification onthe handbags, is actually any kind of impact from your handbag launch incorporated inside therevised revenue guidance, if so can you quantify it. This kind of comparable store sales performancewas at your top of the 31.7% boost last year for any two-year stack of over 40% and has been driventhrough almost well-balanced increase in each transaction and transaction size.

Q2 2014 Earnings Conference Call

Gross gain for that very first of a fiscal 2014 increased 37.7% in order to $70.4 million via $51.2million within the 1st involving fiscal 2013. Our 1st store in the Philadelphia industry on WalnutStreet Downtown, too as a fresh retailer throughout Pasadena, California. How much ended upbeing what?

In just a few moments I will supply you by having an update on our various strategic initiatives aswell as our up-to-date guidance for fiscal 2014, nevertheless 1st I'd such as to show the actual call toLisa, that will supply extra details on our economic results for your second quarter along with initial50 % of 2014. Yet furthermore to that, we will be performing more year round print advertising.Third, we possess been focused on escalating brand name awareness to manage a vehicle additionaltraffic and build our loyal client following.

And how much involving this increase is associated for you to this rise in consumer selections whichyou brought inside the offerings pertaining to both men's and women's [progressive investment].

Jill Granoff

In addition, our e-commerce business continued its momentum thanks partly for you to goodscategory extension. The Particular boost in gross gain charge ended up being primarily driven by allround provide chain efficiencies, increased penetration throughout higher margin products and alsoelevated penetration involving sales, immediate to be able to consumer, our international's, and also

I licensing businesses.

Lisa Klinger

Lisa Klinger

Lisa Klinger

So again, we do not observe something structural that will stop us coming from achieving EBITmargin expansion inside the future either.

Vince Holding Corp. This will be monitored in more detail about an extremely standard basis, andalso which all round we are comfy along with where we are positioned, as actually our inventory willbe almost all relatively current, and is truly in a fantastic position to aid us acquire a growth aim forthe year.

Robbie Ohmes - Bank involving America/ Merrill Lynch

Now should you want require a look at the different buckets, we highlighted a few areas; so newstores, our replenishment program, and additionally the anticipated new shop inside shops,individuals 3 pieces contributed about 25% with the year-over-year increase. Your Own series will beopen.

I find these signs along with signs of examine department store assortment broadening and thinkingwhat the adjust could be year-over-year.

Can you talk for you to a couple of associated with the changes on the advertising front, what youcould anticipate going forward, and then your exactly where do you see manufacturer awarenessnowadays and also what do you believe the particular chance is certainly going forward?

Selling, general and also administrative expenses for your very first half of fiscal 2014 increased32.1% for you to $45.3 million as well as 31.7% regarding sales versus $34.3 million as well as29.9% involving sales within the corresponding period associated with time associated with finalyear. As Well As additionally whenever you look in a fully loaded cost, that includes logistics thatswitched via territory in order to duly paid for you to FOB to end up being able to provide us withhigher visibility over the provide chain.

From any licensing standpoint, we still discover strong demand for Vince women's footwear, whichcould be now bought from more than 350 points involving distribution world wide and it is amongthe particular bestselling contemporary footwear brand name at many in our wholesale partners.

So we would look for our year-over-year stock raises to commence out to always be able to slow, it'sheading to become at lower charge for your remaining portion involving the year, and also I believeas we've mentioned before, about year-end we could be searching for a year-over-year inventoryboost within the range of kind of 25% for you to 35% year-over-year.

There are no further concerns only from that time. Consequently the actual boost in theinternational licensing drove about a 115 foundation points.

Operating earnings for the first half increased $8.3 million or 49% to become able to $25.2 million,up coming from 16.9 million inside the initial regarding last year. so once again --.

Richard Jaffe - Stifel Nicolaus

Discussions of those non-GAAP measures and also reconciliations regarding these to his or her themajority of comparable GAAP measure are included in today's press release and the routine theretowhich are available inside the investor section of our website.

Congratulations by utilizing an excellent quarter. Through a global perspective, we are seeing stronggrowths driven through each new service introductions and also new companion relationships.

Our strong sales performance reinforces the proven fact that our compelling item assortment alongwith daily luxury necessities still resonate together with our broad consumer following. Right nowrelocating on to our immediate for you to consumer segment, we always grow our very productivestore footprint and which we think we get been on the particular correct track to spread out eightfor you to 9 new stores within fiscal 2014.

It would become a rather similar trend as in order to the we observed within the very first quarteronce more through cycling perspective, we had been cycling about a very strong 2nd quarter a yrago as well.

Operator

Given that we have now opened 5 stores year-to-date, we'll open three to four extra retailers insidethe stability in the year, and which we in addition use a sound real estate pipeline directly into 2015and also beyond along with numerous projects in several stages regarding negotiation.

In supplement we will be presenting financial outcomes relating to the second quarter as well asfirst half of fiscal 2013 on an adjusted schedule so as in order to exclude the impact of results withthe non-Vince companies along with particular public organization transition costs, also as fiscal2014 by using an adjusted basis, to end up being able to exclude the impact associated withsecondary providing expenses.

We are very excited relating to this revolution and how we run along with interact using our vendorsand believe this is planning to be an integral driver of our own long-term growth as well as revenueimprovement strategy. Inside addition, Vince carries on to have higher manufacturer affinity andobtain intent, where there are strong perceptions involving quality as well as value for that brand.

Jill Granoff

Diluted earnings for each reveal for your 1st up had been $0.31 in contrast into a net loss perdiscuss for your first half of a 12 months ago regarding $0.98.

We believe we possess a lengthy growth runway, plus a team is actually operating aggressively toconstruct the business enterprise along with cool product introduction, compelling buyingexperiences, also as demand creation initiatives.

Again, we are pleased with almost all the progress in which we've made. I will now turn theparticular contact again to Jill, consequently she could offer an individual by getting an update onour key strategic initiatives along with our updated outlook for your year. Throughout wholesale,

sales grew almost 17% driven by the strong performance throughout each our women's ready-t--wear along with certified footwear businesses , both domestically and internationally.

Analysts

Okay, and then lastly about the gross margin could a person quantify some regarding the buckets,you mention inside regards to your impact with the supply chain versus a quantity of the itemchannel mix contribution. We want to maintain dominance within tops, whilst radio broadening theactual assortment in order to encompass both check out toe look, therefore bigger emphasis uponbottoms and pants, too as addressing a broader selection of use occasions, such as dresses andthroughout addition outerwear, which in turn presently consists of jackets, and in addition the goodnews is, when we take a peek at our bestselling categories, we found significant amount regardingtraction within dresses as well as outer wears.

Operator

Excluding your secondary offering expense and pubic company transition cost, operating income forthat second quarter regarding this season elevated 15.8% and as any % involving revenue was 23%in contrast in order to 23.9% for the exact same period throughout fiscal 2013. We're performinggreat within Germany, Turkey. The Particular business has presented adjusted financial results forthat second quarter along with 1st 1 / 2 of each fiscal 2013 along with 2014 so as to supply investorswith further info to judge our comparable operating performance.

I just want to be sure that we reiterate that numerous involving the new item classes are licensed.Obviously we think these are usually very, very important coming from a brandname buildinginitiative, and which we enjoy the actual royalty income, which usually flows by means of to thebottom line almost dollar-to-dollar.

Your 1st query will come in the line associated with Evren Kopelman along with Wells Fargo.Consequently when we have been putting together our merchandising plans, we place together ourlion promises to reflect that, so we buy accordingly.

So we get been actually looking at all facets of expense not merely your raw material costs,nevertheless all round labor providing greater concentration to some select vendors and really justimproving our supply chain end in order to end. so we are usually truly not traversing to be able to amassive difference across a substantial price as well as outlet performance.

Joan Payson - Barclays

Jill Granoff

Jill Granoff

So we'll discover growth within our core skews, we by absolutely no means want just to end up beingable to walk far from our core, we wish to construct upon our core with some new productcategories such as dresses along with just like outerwear, and obviously we have seen an chancewithin the pants business as well, which usually from the way, does possess higher single-digitgrowth this past quarter. Thus that's why we've reaffirmed our comp guidance for your yearassociated with high single to always be able to low double-digit growth.

I am sorry, the actual customer choices, how much features customer options increased and just

how of that could be explainable would aid explain the stock buildup, that's just a lot more SKUs,much more style.

GAAP reported net income for that 2nd quarter involving this coming year elevated to become ableto $10.5 million in comparison to some net loss involving $10.5 million for your 2nd quarterassociated with fiscal 2013. Lisa, and then maybe just about the expense of good environment, via anAUC perspective, could you just might be converse to what you tend to be viewing from the cottonperspective when you look out or even currently now anyone need to look out more than type of yournext handful of seasons, then also how that will compares along with contrasts using some othercosts proper now.

Lisa Klinger

Again that's section of our merchandize lion plan associated with the way we buy it. (NYSE:VNCE)

As associated with the finish of the second quarter regarding fiscal 2014, the organization providessigned eight leases regarding shops that will are expected to open throughout fiscal 2014 or evenbeyond. Our direct in order to consumer segment sales increased 39.8% once we extra seven netnew retailers versus the second quarter regarding final fiscal year, and we grew comparable retailersales throughout the quarter by 7.1% more than the comparable period final year.

Erinn Murphy - Piper Jaffray

Operator

Our subsequent crucial initiative is often to optimize our mobile and tablet client expertise and alsoshowcase the new handbag launch inside the upcoming fourth quarter. Thank you. And Also thenamount two, is it fair to consider an accelerating pace involving EBIT margin expansion next seasonor even are there any constraints to be aware of this would hold the EBIT margin gains back thecoming year as well as beyond.

Additionally, we've lowered our freight costs through a variety of supply chain initiatives,streamlined our provide base, and just lately signed a contract using a preferred sourcing partnerinside Asia. Thus when they do join the actual base, it will be additive a lot such as when weadditional our Madison retailer last year.

Gross revenue as a portion involving net sales elevated 400 basis points to 49.3% through 45.3%inside fiscal 2013. Exactly what was your driver of that, could it have got been just the item mix shiftor perhaps did you in addition feel the markdown year-over-year, as well as promotion?

Evren Kopelman - Wells Fargo

Executives

Jill Granoff

You are breaking up truly poorly, I caught regarding 1 / two of anyone question.

Operator

Erinn Murphy - Piper Jaffray

Jill Granoff

Matthew Boss - JPMorgan

Robbie Ohmes - Bank of America/ Merrill Lynch

Erinn Murphy - Piper Jaffray

Erinn Murphy - Piper Jaffray

So we have been capable of decrease our agencies. Exactly what we're actually pleased with thesecond quarter ended up being increased traffic. Is Actually it simply the more comparisons or evenare there some other drivers for that fall season that offer you confidence that the comps couldpotentially move back to double-digit after which I use a quick follow-up thanks.

From an e-commerce prospective, we continue to focus on accelerating our digital growth supportedby recently relaunching the actual website. I am Jennifer Poland, Vice President involving Financeand becoming the member of me today will be Jill Granoff, our Chairman and Chief ExecutiveOfficer, and Lisa Klinger, our Chief Monetary Officer, that will most likely be your current speakersfor today's call.

That concludes my feedback relating to our second quarter and first half fiscal 2014 financeperformance. Our freshly elevated men's collection can be resonating using our store partners andconsumers alike, and we expect double-digit rise in menswear in the back again half of the actualyear.

We also certainly have some of this item put aside for fourth quarter off price shipments for you toour wholesales partners, after which obviously we program each along with every store along withallocate each along with every shop within our fleet too as e-commerce enterprise appropriately aswell.

Jill Granoff

Inventory after the next quarter involving fiscal 2014 had been $58.6 million versus $34 million as atFebruary 1, 2014 and $28 million at the conclusion of the 2nd quarter regarding fiscal 2013. Weremain centered on maximizing productivity inside our current wholesale doors selectively addingnew doors along with expanding our international presence.

Our comparable retailer revenue for that initial half of fiscal 2014 improve 9.2% more than theactual comparable 26 week time period pertaining to fiscal 2013. Consequently we think this willdrive several incrementality. Your rise in gross revenue was driven primarily from the almost 25%boost in net sales and an improve within the gross gain rate.

That was actually transfer of mix.

But we've stated previously that will the final yr we spent with regards to 2.6% associated withsales, along along with a aim this season is always to commit 3% involving revenue rationing inwhich approximately 4% associated with sales, obviously on the significantly higher revenue base.Thank you. Thus while we are throughout 47 countries today, we are heading to focus within ourfour largest markets those becoming Canada, UK, Japan and Korea.

Sure. We will still invest and also improve our investment within this location once we then look tomanage a vehicle greater awareness as well as carry on to create traffic increases.

Unidentified Corporate Participant

Now moving on for the fiscal 2014 first half results. you could now disconnect.

Again, it was an extremely well-balanced as well as similar styles inside the 1st quarter versus thesecond quarter, again via contribution regarding each tickets as well as transaction size. Certainly asizable portion of this has been spoken pertaining to through our wholesale partners coming fromtheir particular original top dollar orders.

So that's important. We get the strong double-digit growth, specifically impressive in mild in thesomewhat soft as well as extremely promotional retail environment.

Our second quarter and also first half earnings release as well as related monetary information aregenerally available about our web site below the investor section. Throughout the actual past, weconcentrated around the fall, we are now carrying out spring and also fall, we are doing dual genderadvertising, that we get not completed in the past.

But you will observe a number of subtle branding details in outside, simply because we know thatthat's crucial for women when they help make their particular handbag purchasing decision.

Lisa Klinger

Thank you Sally as well as excellent morning everyone. From now I want to become able to welcomeevery person for the Vince Holding Corporation 2nd Quarter along with Initial Half Fiscal 2014Earnings Conference Call.

prom dresses at promgirl

In regards to the back 50 % of the year, we would like easier comparisons as well as in add-on foryou to that, we're going to involve some new categories, so that will certainly assist in the storearena, especially along with handbags, which can be entirely new then we do get kids along withmen's in any few stores. We are particular to get one of those collections in period regardingholiday. We think these results further demonstrates the strength in our brand and also establishesVince as among your leading contemporary fashion suppliers in the marketplace today.

The fact that we had a strong revenue performance inside international along with licensing, andalso once more through licensing perspective, it does not drive a large amount of the top rangehowever it is actually relatively high contributor to always be able to gain becoming a 100% grossmargin business. Since these retailer solution your comp based, how ought to we anticipate that willto be able to impact, I didn't to end up being able to determine t, if you should figure out what oughtto we be cautious about in our models even as consider the particular quarterly impact.

Thank you Jennifer along with thank everyone regarding becoming a member of us. I would now liketo update an individual about that evolution as well as share with you our elevated economic outlookfor your year.

Our new handbag collection will officially launch within the fourth quarter in front of our first-quarter 2015 expectation that our really own retail stores as well as website as well as exclusively at

several key Saks domestic area at Saks.com.

So Saks has been very, very excited, we think we have been priced in a sweet spot in the industry aswe've discussed formerly because white area involving $500 to a $1000 a new square foot so we willhave very nice presentation about the floorboards based on which room permits in both designer orcontemporary area. Excluding the secondary providing cost as well as public organization transitioncost, adjusted operating earnings elevated 21% in comparison for the identical time period withinfiscal 2013.

Lisa Klinger - CFO

Your subsequent query will come in the series regarding Richard Jaffe regarding Stifel. These typesof retailers are still performing in or even a lot better than we projected and we view the men's justshop as an excellent understanding lab which will enable us to further optimize men's business.

We're so excited concerning the handbag launch, we did have a press preview and this completesocial media factor can be crazy. However could in addition, you speak a little bit about, what drovethe actual deceleration among 1Q, up 11% as well as 7% within the 2nd quarter, or maybe had beenthe greatest distinctions were?

It's nevertheless feeling rather promotional, thus we think we use a actually powerful fall collection,therefore we feel totally extremely confident inside a product offering, which is after your day isfinished . that we think differentiates us, yet I would be remiss if I didn't reiterate thatenvironmental surroundings is actually still challenging and promotional.

(Operator Instructions) your very first query comes from the series of Robby Ohmes with Bankinvolving America/ Merrill Lynch. during the second quarter, the business voluntarily reduced itscredit card debt by $10.4 million, resulting total credit card debt outstanding of $139.6 million asregarding August 2, 2014, comprised regarding $117 million of term loan financial debt as well as$22.6 million involving revolver debt.

Richard Jaffe - Stifel Nicolaus

Okay, that's good for you to yr and then Jill just last regarding you. This particular planned yr overyear improve ended up being primarily driven by the inclusion regarding seven net new retail storestores since 2nd quarter involving final year, any projection of 5 for you to 6 extra fiscal 2014retailer openings along with 15 in order to twenty new shops throughout shops anticipate to spreadout inside the back again 1 / two of fiscal 2014.

Finally, we anticipate our capital expenditures to be inside the $18 million to end up being able to$22 million range within fiscal 2014, as we open up new stores, add shop within shop locations,relocate along with combine our new York corporate offices and also make the move along withbroaden our LA offices.

After our prepared comments, we will most likely be accessible to adopt the concerns an individualhave for for as long as time permits. so these levels are relatively inside series using last year.

Thank everyone regarding listening along with participating within our contact today. Again, yourinventory reflects exactly where we find our sales. In your handbag launch, it sounds similar toyou've got excellent responses so far in the press, are a person in any position to speak just a newlittle extra at length about the assortment everything you nearly all excited about, then how should

we believe regarding a number of the product that flows in to your personal retail retailers with timepertaining to holiday prior to the large launch next spring.

Lisa Klinger

If you look throughout the board, we have been showing good year-over-year growth using ourimportant international department stores, great sell-through, and also we are in the top 5throughout most terms.

Again, when I claim that the inventories are usually primarily current, what I suggest there isactually certainly which more than 75% in our stock is at present selling at full price. Two, thecompany now expects gross margin expansion associated with 200 to be able to 275 basis factorsdriven primarily by margin charge raises because of to operational improvements as well as thehigher penetration associated with immediate for you to consumer sales.

As we continued in order to spend in our growth, our SG&A rate deleveraged primarily credited foryou to increase labor as well as occupancy costs related in order to our store growth strategy,strategic investments inside our marketing programme to construct awareness as well as guidebookvisitors to all of a distribution channels, investments inside new abilities to support our fadedinitiative, and also incremental expenses related for you to our public business status.

In summary, we remain optimistic about the stability of 2014, as well as the company's long-termprospect as getting a high-quality, growing rapidly luxury lifestyle brand. We additionally benefitedthrough seven new stores opened since Q2 last year as well as via traffic raises across the fleet.

Mark Altschwager - Robert W. In case you include the most recent season that we actually goslightly over 90%, to ensure that consists of what's at present for sale within our stores. This specificincrease was driven through 20.7% boost in wholesale segment sales as well as 40.7% improveinside our immediate to consumer segment sales.

I mean, look, we now have seen what competitors have been in a new position to do having aproductive handbag business. Well, within relation to a substantial price and outlet, both retailerscontinue to demonstrate positive comps, they are improving in both sales, productivity, too asoverall profitability and customarily most in our new shops are usually performing with or above ourinternal anticipations become that outlet or perhaps our top dollar stores. I want to welcomeeveryone of one to our 2nd quarter as well as first half fiscal 2014 Vince Earnings Call, we lookforward in order to today's discussion.

Your subsequent issue comes from your collection regarding Erinn Murphy along with Piper Jaffray.Additionally, the new Vince kids apparel series launched inside store in June in our premierdepartment shop partners and in addition at select Vince retail spots and on Vince.com.

We have got just hired a person being the director regarding Western Europe, recently joined us,thus we get been really looking forward to that. We adore your fact that it is a excellent deal moreseasonless, which you don't get sizes, and also it's much easier to sell online, that's a higher ticket,and we'll have good margins when it reaches scale. Thus we are seeing great growth there.

Evren Kopelman - Wells Fargo

In your immediate to be able to consumer segment, we delivered all round growth of almost 40%,along with 7.1% comparable retailer sales growth, marking our 19 consecutive quarter associated

with comp store increases. Additionally, much like our domestic wholesale strategy, we plan in orderto leverage the prosperity of prior shop throughout shop expansion strategy along with open up onefor you to two new shop within shop inside Korea inside the second 50 % of fiscal 2014.

And I know its early Jill but how does the general environment really feel early fall versus eke outjust any little advertising there throughout spring, just about any thoughts for us?

As Jill highlighted so when we anticipated, the business delivered strong total sales growth of 28.2%for that 2nd quarter using net revenue regarding $89.3 million, versus $74.3 million achievedthroughout the attached period within fiscal 2013.

So not necessarily substantial, once again because associated with the limited distribution and thebrief quantity involving time, however we do feel that it is really a clear milestone for people as weevolve to the lifestyle brand that we communicate, therefore coming from that perspective, we arevery excited that people had been able to get to the marketplace prior to the holiday season, and Iguess I'll refer to Jill on her long-term thoughts regarding handbags.

On an adjusted time frame net income for your 2nd quarter involving fiscal 2014 elevated for you to$10.8 million through $8.7 million within fiscal 2013, an increase regarding 25.2%. This particularpartner is in the process of staffing as well as opening a Vince office inside Hong Kong that mayexclusively assist us together with item development, quality assurance along with vendorevaluation, when you grow our company in the region.

I consider everyone knows in which cotton price is down, you know they might be the lowestamounts they happen in order to be within fairly several some moment and we possess beencertainly using that as a new possible opportunity to discuss much better AUCs with the crucialvendor partners. Coming From an EBIT perspective, again, we do not essentially provide help with2015 just yet.

We're dedicated to addressing a broader selection involving put on occasions along with ourcustomers are incredibly receptive for you to this expanded product assortment. you realize evenshould you consider rare occasions you are likely to notice toads, cross bodies, some clutches,nevertheless its really, really beautiful products, this features been created in Italy, it's truly nicedifficult perform details, and an individual may additionally notice subtle branding, obviously withinVince you don't see branding, presentation tend to be around the inside.

And in addition we've seen broad-based improvement in our e-commerce business. We're seeing anexcellent improve inside the editorial credits in which we're getting, in addition we're performing alot a lot more celebrity dressing, as well as we almost all know this is crucial in which you build abuzz.

Got it, which it truly is super helpful. the gross profit rate increase ended up being driven primarilythrough provide chain efficiencies, strong penetration throughout higher margin products, and alsoincreased sales penetration of your immediate to be able to consumer, our international, along withour licensing businesses.

Gross gain can be a percentage involving net sales for the first regarding fiscal 2014 elevated bysimply 470 time frame points to become able to 49.3% through 44.6% within the initial regardinglast year. the study reveal that coming from our final research within 2012, manufacturer awarenessamong qualified customers has grown significantly from 20% for you to 33%. Anyone truly examinethe company enterprise inside China, Hong Kong, simply because we do notice Asia as an integral

growth opportunity, in addition to that, we have got been buying Western Europe.

I would also similar to to point out in which upon November 27, 2013, Vince Holding Corp. We'reproud of our own strong second quarter 2014 economic performance and in addition the continuedprogress we're creating within our evolution in order to being a global, dual gender lifestyle brand.so exactly where is the assortment nowadays versus exactly where you want it to get throughoutregards to breadth along with depth, then a lot more broadly, how must we feel in regards to therevenue growth from higher productivity regarding core skews and bringing new customers to thebrand name versus these new offerings as well as higher discuss involving wallet coming fromexisting customers.

In addition, a few of our international partners are also acquiring our women's footwear inside theirvery excited in regards to always be able to the new elevated men's assortment that's starting to hitshops correct now. Thank you.

Based about this projected activity, we strategy to become able to end the year together withapproximately 26 in order to 32 total domestic shop within shops. We're furthermore viewing growthvia some associated with the new deals we signed in Western Europe, whether or perhaps not that'sBenelux or even Scandinavia. Vince's strong 2nd quarter as well as very first half performancefactors towards the energy of our own manufacturer and also product offering. We do possess sometiming shift, as many associated with you may well be conscious of fall is actually our largest sellingseason.

These adjusted results are non-GAAP measures and can include adjusted measures for exampleadjusted selling, general and administrative expenses, adjusted operating income, adjusted interestexpense, adjusted taxes, adjusted net earnings and adjusted earnings for each share.

We create these deliveries 830, 930, 1030, and so we does involve some timing along with receipt inour fall goods that are planned with regard to shipment as well as sale inside the third quarter.Consequently we presume really good with regards to that, all night forward, we are planning tocontinue to take the concentrated approach. but I would say that there wasn't any kind of sort ofsignificant transfer of traffic, in ticket, in AUR.

Lisa Klinger

This concludes today's conference call. Consequently we are investing there, we get beenpurchasing search engine optimization along with search results marketing to guide an electronicdigital growth projections, and then furthermore we're performing a lot more inside the PR arena,that we believe can be great. Consequently way we are very, really excited and a lot more in order tocome.

We are usually viewing great growth within our personal shops as well as traction inside thedepartment store doors. Net sales for the 26 week period were $142.8 million, a growth involving24.5% over the same time period last year. Thus individuals with regard to major pieces truly totalup for the 400 basis point improvement that individuals noticed in the quarter.

Good afternoon my name can be Sally as well as I will most likely be your own conference operatortoday