Vince Holding Corp (VNCE -0.68%) formerly labeled Apparel Holding Corp, recently held its IPO on Nov. 22, 2013. At the opening of the market, the company's shares began trading for $29.50, climbing to upwards of $30.48 and closing at $28.66. Its public launch was quite profitable, since its IPO was priced at $20 a share.
Vince Holding Corp's performance during its IPO is yet another example of how the fashion industry is taking Wall Street by storm. Two years ago, the fashion apparel and accessories company Michael Kors (CPRI -2.72%) rocked Wall Street with its public debut. Shares of Michael Kors traded for upwards of $25 a piece, raising $944 million by market close. Investors are thus asking themselves if Vince Holding Corp could be the next Michael Kors.
Taking an inside look at Vince
Founded in 2002, Vince Holding Corp began as a fashion designer for women's knitted apparel and cashmere sweaters. Over time, the company has expanded its brand to include a men's apparel collection, denim, leather, outerwear, and most recently, footwear. Vince Holding Corp's apparel embodies casual sophistication with an effortless, classic look.
Over the past decade, Vince has picked up momentum through e-commerce, wholesale distribution, and direct-to-consumer sales; it also operates 27 company-owned stores, and the company anticipates opening 100 stores nationwide and expanding its brand internationally.
Trailing behind its idol
Aside from Vince Holding Corp having a field day following its IPO, it has a long way to go to catch up to Michael Kors. Looking at its net sales, the company appears to be growing steadily with sales increasing by 13% between fiscal 2010 and fiscal 2011, and then 6.8% between fiscal 2011 and fiscal 2012.
Unfortunately, the company has yet to make a profit with a loss of over $100,000 in each of the past three fiscal years. This is a concern for investors and something to keep an eye on. If Vince Holding Corp is determined to be the next Michael Kors, it needs to change its current business model to mirror that of Michael Kors.
|
FINANCIALS |
First Six Months fiscal 2013 |
FY 2012 |
FY 2011 |
FY 2010 |
|---|---|---|---|---|
|
Net Sales |
$363,967 |
$707,995, 6.8% |
$662, 846, 13% |
$586,574 |
|
Net Loss |
(25,643) |
(107,709) |
(147,866) |
(104,478) |
Making necessary changes
Vince Holding Corp should expand its fashion collections to include more than just apparel, shoes, and a few accessories if it wants to succeed. Like Michael Kors, the company should add items like handbags, watches, jewelry, and wallets to its product line. This move would do wonders for the company by giving consumers more options and styles to choose from.
In addition, Vince Holding Corp should transition the majority of its sales so that they come from company-owned stores and its Vince.com website instead of coming from major department stores. If one of these retailers were to drop Vince brands from its sales floor, it could mean bad news for the company. Because of this, Vince Holding Corp should begin opening new stores as well as ensure that its website is up to par with the latest design and technology features to effectively market its products.
A glimpse into reality
One thing that separates fashion designers like Michael Kors and Ralph Lauren (RL -1.02%) from Vince Holding Corp is that Michael Kors and Ralph Lauren are household names. Michael Kors and Ralph Lauren are iconic figures in the fashion industry because their labels have received high recognition among consumers and offer more than just apparel and shoes. Vince Holding Corp should learn a thing or two from these companies if it hopes to reach their level.
|
Company Name |
Market Capitalization |
Trailing 12-month EPS FY 2012 |
Trailing Price to Earnings Ratio |
|---|---|---|---|
|
Michael Kors |
$16.65 Billion |
$1.97 |
41.66 |
|
Ralph Lauren |
$15.77 Billion |
$8.00 |
20.83 |
|
Vince Holding Corp |
$1.14 Billion |
$(4.02) |
n/a |
Looking at this chart, it is clear that Vince Holding Corp is nowhere near Michael Kors or Ralph Lauren in terms of market capitalization; this could mean future potential losses for investors. Ralph Lauren is doing the best in trailing-twelve-month EPS for fiscal 2012, earning $8.00 a share. Michael Kors, on the other hand, has the best price-to-earnings ratio due to profits banked for fiscal 2012. Vince Holding Corp's figures spell out overall disappointment unless the company can start making a profit. It should be noted that the reported numbers through the end of the third quarter include both non-Vince (other Kellwood brands) and Vince sales. For Vince-only information Foolish investors should refer to the supplemental section of the companies' latest 10-Q.
Foolish takeaway
For all Foolish investors out there, placing your money on Michael Kors will likely earn you the most bang for your buck. In its most recently completed quarter, Michael Kors had a 39% increase in total revenues and a 49% increase in net income over the same period a year ago. Investors should keep an eye on Vince Holding Corp over the next several years before investing any money, however; as of now, it will not be in the same league as Michael Kors or Ralph Lauren anytime soon.
