Reviving Vince: Anatomy of a Rebound
CEO Brendan Hoffman on how Vince got its act together again and what lies ahead.
Like other fashion executives, China is top of mind for Brendan Hoffman, chief executive officer of Vince Holdings Corp. But his head is wrapped around developing Vince stores in China while also dealing with new tariffs.
“We are in the later stages of identifying a partner and expect in 2020 to be opening our first stores there,” Hoffman said in an exclusive interview at the Vince showroom on Fifth Avenue in Manhattan. “Brands that we sit with here in the United States — Kate Spade, Burberry, Sandro, Maje, others — have upwards of 50 stand-alone locations there already. It feels very natural, as I walked the malls, to see Vince over there.”
In late July, Hoffman visited the IFC, Jing An Kerry Centre, Pacific Place and Times Square shopping centers in Hong Kong and Shanghai, among others. “It was an eye-opener. The malls are beautiful. They’re pristine, with open spaces, lots of pop-ups and activations, and they’re busy all times of day.
“It was the first time I’ve been to
China in 12 years that it wasn’t primarily a sourcing trip. I did meet with a lot of suppliers. I am less worried about prices going up than maintaining quality. But this last trip was truly to identify if there was an opportunity for Vince to roll out our own brand there. It was immediately evident to me, based on the kind of brands there, that this is absolutely the time for Vince to launch stores in China and Hong Kong,” the ceo said.
What’s also evident is that after two and half years of heavy lifting, from narrowing wholesale distribution to renegotiating store leases and remaking the creative team, Vince has been stabilized and has shifted into growth mode. That distinct Californianinspired, easy, understated styling is once again resonating with consumers.
Last quarter, Vince advanced into the black and raised its outlook for the year to between $295 million and $305 million in sales from an earlier forecast of $290 million to $300 million. This compares to sales of $279 million in fiscal 2018.
Operating income is projected at between $7.5 million and $9.5 million for 2019, up from a previous forecast of $7 million to $9 million. This compares to operating income of $4.1 million in fiscal 2018. Vince has shown operating income growth in five of the last six quarters.
Net earnings reached $1 million in the quarter ended Aug. 3, versus a net loss of $3.8 million a year earlier, while net sales increased 13 percent to $71.4 million, and the stock closed at $18.24, a peak level for the past 52 weeks.
“The business has turned around now and is in an aggressive growth mode opening stores, extending products, entering countries around the world, enhancing our digital capabilities and defining the customer journey to become omnichannel,” said Hoffman. “It’s pragmatic growth. It’s not happening overnight.”
Last week Vince stores opened in the South Kensington section of London, at
169 Draycott Avenue, and at 609 Fifth Avenue on East 49th Street in Manhattan. The 1,400-square-foot London unit is the first owned international store for Vince. There’s a franchised store in Tokyo.
Both stores are bright, spacious and neutral in tone, Mediterranean-inspired and modeled after the Vince flagship opened last year in Palisades Village in Pacific Palisades, Calif. There’s simplicity in the design, reflecting the brand’s ethos of understated luxury, a modicum of mannequins, and at the Manhattan store, there are two long, gently curved vintage leather sofas that draw the visitor in and offset the rectangular space. The Manhattan store offers all Vince categories — women’s and men’s apparel and footwear, handbags and home — across about 2,800 square feet.
Vince has been opening four or five stores domestically over the last few years and has units in most gateway cities. “We will continue to look for second locations in some gateway cities like Chicago,” Hoffman said. “In the Bay Area, we just opened our third store in Santana Row in San Jose.
There could be opportunities north of San Francisco.” Secondary markets such as Nashville, Charlotte, Cleveland and New Orleans are being eyed, as are resort areas like the Hamptons and Aspen, Hoffman said.
“With the opening in London, we will continue to look at other cities in Europe,” said Hoffman. Vince has shop-in-shops in Selfridges and Harvey Nichols and will introduce a shop inside Harrods next year. The brand is also sold at department and specialty stores in Europe such as Printemps and El Corte Inglés and has a showroom in Paris for international accounts. Ten percent of its business is generated overseas.
“We love street locations, lifestyle centers, but we also do well in high-end malls in gateway cities,” said Hoffman.
Vince has been signing short-term, often two-year, leases with lower rents, in Short Hills, Palm Desert, Palm Beach, Naples and Santana Row, among other locations. “Nothing gets a retailer into more trouble than having long-term leases at locations where business goes backwards,” Hoffman said. “That was part of our problem a few years back. Now landlords have been very cooperative.” Despite the short-term character of the leases, “Our intent is to be in these spaces for a long time without having to put ourselves in difficult situations.”
After going public in November 2013, Vince fell victim to overexpansion, too many points of distribution, product issues, stock price declines and executive turnover, on top of having costly leases. Sourcing switches led to a reduction in quality.
“The brand lost its way,” said Hoffman, who joined Vince in October 2015 to revive it, after ceo stints at Bon-Ton, Lord &
Taylor and Neiman Marcus Direct.
Among his early initiatives at Vince, Hoffman brought the brand’s founders Rea Laccone and Christopher LaPolice back to the business. They founded Vince in 2002, sold it to Kellwood in 2006 and retired in 2013. Kellwood was purchased by Sun Capital in 2008, which owns 73 percent of Vince.
“Rea and Christopher returned for a year and a half and got us back to the factories, the fabrications, and the luxe we used to be in. It was hard work,” Hoffman recalled.
In 2017, the ceo made two more critical decisions. Vince dropped two of its biggest accounts, Bloomingdale’s and Saks Fifth Avenue, and decided to pump up business with Nordstrom and Neiman Marcus. It relieved some of the overdistribution and created a new wholesale base to build upon. In addition, Sun Capital backstopped a $25 million rights offering, providing ample liquidity for Vince to implement its recovery.
Also in 2017, Caroline Belhumeur was named senior vice president and creative director, and Marie Fogel became head of merchandising, production and product development, in a restructuring of the team at the brand’s Los Angeles design studio.
“The biggest change Caroline and
Marie brought to Vince is embracing the DNA, what made the brand important to begin with, the California roots, the effortlessness, the sophisticated, understated ease and luxury. Its understated luxury pieces, easy, relaxed, uncomplicated. But they added an element of femininity to the line. There are lot more prints, a lot more color,” said Hoffman.
“They also helped drive our success by making Vince much more seasonably appropriate with fabric weights. Vince used to be more on a designer cadence, flying in product in advance of need. In June and July we brought in sweaters and coats. Customers years ago would buy that in anticipation of the weather changing. Now we live in an instant-gratification world. It’s buy now, wear now. That’s the discipline Caroline and Marie brought to Vince and it’s been a huge part of the revitalization of the brand. We used to merchandise ►