Luxe Clothier Vince Holding Fashions A Growth Runway

By
A A A

The team at Vince Holding wasted no time getting its high-end contemporary fashion brand all glammed up with new products and categories after hitting the Wall Street runway late last year.

Vince is a premium clothing brand known for its collection of everyday luxury essentials for women -- from slouchy cashmere sweaters and understated leather jackets for colder temperatures to flowy silk blouses and linen pants for the warm seasons.

Since going public in November,Vince ( VNCE ) has woven a new pattern for growth, which includes expanding its product offerings into new categories such as handbags. The idea is to evolve into a lifestyle brand and strengthen its position with the company's wholesale partners, including upscale department stores such as Neiman Marcus,Nordstrom ( JWN ) and Saks Fifth Avenue (owned by Canada'sHudson's Bay (HBC), as well as its own namesake retail stores.

Men And Children Next

In addition to women's clothing, which accounts for about 85% of sales, Vince offers women's footwear through a licensing arrangement and is about to launch men's footwear with the same licensing partner,Brown Shoe ( BWS ). The line will come out in July, according to WWD.com.

Vince also plans to launch children's apparel through a licensing partner in this year's second half. Early next year, the company plans to launch a handbag collection and other accessories.

"This is a company that starts with a very distinct point of view in apparel, which today makes up the majority of its business," said Piper Jaffray analyst Erinn Murphy.

"It's taking that everyday luxury aesthetic and pushing it into different categories," she said. "The biggest opportunity is their next big launch of handbags and accessories in early 2015."

The move into handbags and accessories would put Vince in a market between players like "jet-set" lifestyle brandMichael Kors Holdings ( KORS ) and traditional European luxury players such as Celine and Louis Vuitton, Murphy adds.

Murphy says that Vince is positioned to fare well in this category. It's a premium brand that's priced closer to luxury than so-called "accessible luxury," she says, with sweaters from around $225 to $400, leather jackets at $995 and tops from $100 to $200.

"What's unique about its positioning is it's taking what we believe is white space in the handbag market," said Murphy.

She expects Vince's handbags to be priced between $700 to $1,000 in department stores, which she says would be a "sweet spot."

There are few brands around that price point, she says, which means Vince could capture not only the "trade-up consumer but the trade-down consumer."

That price would compare with handbags priced at around $300 to $400, where there are many competitors -- such as Michael Kors,Coach ( COH ), Tory Burch andKate Spade (KATE).

Sweet Spot In Pricing

The luxury end of the market is priced between $1,200 and $3,000.

As Vince extends into accessories, it has a "good opportunity" in that space, Murphy adds.

"It already has a captive audience in the premium wholesale market domestically because of how well it's performing in women's apparel," she said.

Murphy says that Vince prevails as the No. 1 contemporary apparel brand in Nordstrom, Saks and Neiman Marcus.

Vince has been faring handsomely on the financial front with its current lineup of products. In its fourth quarter ended Feb. 1, its first as a public company, earnings grew 15% to 23 cents a share. Sales grew 21% to $87.8 million.

Analysts surveyed by Thomson Reuters expect earnings to rise 21% to 88 cents a share in 2015. They see a 30% gain in 2016 and a 13% increase in 2017.

Prior to the IPO and related restructuring transactions, Vince Holding was a diversified apparel company operating a broad portfolio of fashion brands, including Vince. As a result of the IPO and the related restructuring transaction, the non-Vince businesses were separated out, and Vince became the sole operating business of Vince Holding.

Management is eying several growth drivers for the company in addition to expansion into new product categories.

Covering New Territory

As of March 27, Vince had 28 stores in the U.S., 22 of which are full-price stores and six of which are outlet stores. It's on track to open six to eight new stores in the 2014 fiscal year, with a "strong pipeline for 2015 and beyond," said CEO Jill Granoff on the fourth-quarter conference call.

Murphy estimates that Vince could grow its retail-store base domestically to 100 over time.

As of Feb. 1, Vince products were sold to consumers via about 2,300 points of distribution through its wholesale partners.

Vince's U.S. wholesale business represented 71% of sales in fiscal 2013, and international wholesale represented 8%.

In fiscal 2013, Vince opened 90 new shop-in-shops globally in the wholesale channel, and it expects to open more.

"Given the success" of its shop-in-shop investments last year, it's planning to open an additional 15 to 25 domestic shops in fiscal 2014, to bring the total at the end of fiscal year to 26 to 36 domestic shops, Granoff said on the call.

On the product front, the company is looking to expand its existing categories with an "increased focus" on outerwear and dresses, said Granoff. It's also planning to launch an "elevated" product assortment in its men's business in the fall.

Vince is also pursuing international expansion, which includes opening free-standing stores.

The company recently opened its second Vince store in Istanbul, Turkey, with its distribution partner. Vince is also actively looking to lease its first international showroom in Paris to further build the brand's European business, Granoff said.

William Blair & Co. analyst Amy Noblin called Vince a "rapidly growing accessible-luxury brand" in her initiation report on the company.

She said it's "well positioned" to capitalize on three trends including the "growth in the number of and wealth of global luxury consumers; a designer customer that is trading down; and consumers increasingly cross-shopping and mixing higher- and lower-end merchandise."

Noblin says the Vince brand has developed a "cult following" for its everyday luxury essential products.

"The brand differentiates itself through a clean, modern and somewhat timeless aesthetic that is comfortable and effortless," she wrote.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas

Referenced Stocks: VNCE , JWN , BWS , KORS , COH

Investor's Business Daily

Investor's Business Daily

More from Investor's Business Daily:

Related Videos

The Pumpkin Carvers
The Pumpkin Carvers                 

Stocks

Referenced

Most Active by Volume

70,551,174
  • $97.565 ▲ 3.00%
40,529,900
  • $45.005 ▲ 0.39%
40,472,310
  • $70.81 ▲ 2.22%
34,420,106
  • $15.535 ▲ 0.10%
28,682,281
  • $22.50 ▼ 9.35%
28,311,840
  • $10.97 ▲ 11.37%
27,337,238
  • $28.735 ▲ 0.75%
26,919,406
  • $3.44 ▼ 1.15%
As of 7/23/2014, 02:08 PM