Vince (NYSE:VNCE), the newly public luxury brand, has just released its earnings report for the fourth-quarter of fiscal 2013. The results came in mixed in comparison with expectations and the stock has reacted by moving slightly higher, so let's break it all down to determine if this is our opportunity to buy or if we should hold off on an investment for now.
The first earnings release
The fourth-quarter report on March 27 came as the first release from Vince since it went public and the results were mixed in comparison with expectations; here's a breakdown and a year-over-year comparison of the results:
|Earnings Per Share||$0.23||$0.21|
|Revenue||$87.76 million||$88.19 million|
Vince's earnings per share increased 15% and revenue increased 20.5% year-over-year, driven by strong comparable-store sales growth of 12.2%; this represented the 17th consecutive quarter of positive comparable-store sales growth. Gross profit rose 22.9% to $40.14 million and the gross margin expanded 80 basis points to 45.7%, which is impressive given the highly promotional retail environment the company faced during the holiday season.
Vince opened one full-priced retail store during the quarter in the Upper West Side of Manhattan, which brought its total store count to 28. The company now operates 22 full-price retail stores, six outlet stores, and its e-commerce site vince.com, and it also has over 2,300 retail partners in 47 countries.
Overall, Vince posted strong year-over-year earnings results, regardless of whether it met earnings expectations or not, and I believe the stock reacted correctly by moving higher. Before we draw our final conclusion on whether we should buy today, let's take a look at the company's outlook on the fiscal year ahead...
What will the future hold?
In its report, Vince also provided its outlook on fiscal 2014. Here's a summary of what the company expects to accomplish:
- Earnings per share of $0.85-$0.90
- Revenue of $325 million-$340 million
- Comparable-store sales growth in the high single-digit to low double-digit range
- Gross margin expansion of 150-250 basis points
- Open six to eight new retail stores
A competitor for Vince to emulate
Michael Kors (NYSE:CPRI) is one of Vince's largest competitors and the one company that I believe it should try to emulate the most. Michael Kors is royalty in the luxury industry and Vince is an up-and-comer, so let's see how the two fare in a year-over-year comparison on three key metrics. Let's also look at an overview of Kors' report and one thing Vince could do to pump up its growth:
|Earnings Per Share Growth||15%||73.4%|
|Comp.-Store Sales Growth||12.2%||27.8%|
Michael Kors reported earnings per share of $1.11 and revenue of $1.01 billion on Feb. 4, which far exceeded analysts' expectations, and it achieved its 31st consecutive quarter of positive comparable-store sales growth. Gross profit jumped 61.6% and its gross margin expanded 100 basis points to 61.2%, which resulted in an all-around blowout quarter.
Michael Kors operates 533 locations worldwide in comparison with Vince's mere 28, but Kors' expansion has been powered by its growing popularity over the last couple of years. I believe Vince has the potential to grow into a powerhouse like Michael Kors, but it has a long road ahead of it at its current pace.
To speed things up, I would like to see Vince start licensing locations immediately in order to get its stores and products into as many markets as possible and grow its brand awareness. Michael Kors has been a licensing machine over the years, especially in international markets, and this has allowed it to build up capital to open company-owned locations in its most-desired markets. If Vince were to follow this model, I think it could begin to double its earnings and revenue every year, surpassing its current mid-teens growth.
The Foolish bottom line
Vince delivered strong results in its first quarterly report as a public company and its outlook on fiscal 2014 calls for significant growth. The stock reacted by rising 1.6% on the day of the release and I believe it has plenty of room left to run. A Foolish investor who looks to pick up a position in the growing luxury industry should take a closer look at Vince because it has the potential to outperform the overall market for many years to come.
Joseph Solitro owns shares of Michael Kors Holdings. The Motley Fool recommends Michael Kors Holdings. The Motley Fool owns shares of Michael Kors Holdings. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.