Vince Cuts Deal With Authentic Brands Group
Count Vince as the latest fashion brand to come into the orbit of Authentic Brands Group.
In what it dubbed “a transformative strategic partnership,” Vince Holding Group said it plans to transfer its intellectual property to a newly formed Authentic subsidiary, ABG Vince, in return for $76.5 million in cash and a 25 percent membership interest in the subsidiary.
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The deal marks something of a changeup for Authentic, which has made a name for itself buying up brands and then finding licensing partners. With Vince, the branding giant is buying three-fourths of the brand and has a built-in supplier — the parent company that is already producing the line.
Vince will continue on as a public company led by chief executive officer Jack Schwefel and plans to use proceeds from the deal to increase its working capital and repay $27.7 million outstanding under a term loan credit facility.
The two signed a 10-year license that will allow Vince to continue running its current wholesale, retail and e-commerce operations, with the option for eight 10-year renewals.
On a conference call with analysts — that included no Q&A — Schwefel said the partnership “will position Vince for its next chapter.”
“We believe this partnership will allow our teams to focus on our core ready to wear assortment for both women’s and men’s and build on our profitable domestic wholesale business while focusing on the execution of our key year term strategic growth initiatives,” the CEO said.
These initiatives include making full use of the company’s recently beefed up e-commerce capabilities, which allow for a more data-driven approach. The company is also looking to expand internationally and grow the men’s business, which is testing a men’s only store.
While Schwefel said the Authentic deal will allow Vince “to operate the business substantially in the same manner as we do today,” things have also clearly changed and there is a very important new voice at the brand.
Jamie Salter, founder, chairman and CEO of Authentic, said: “We are excited to partner with Jack and the VNCE management team as we expect to mutually benefit from the strength of the Vince brand that has been developed over the past 20 years. The addition of another luxury brand to our formidable portfolio is timely as we see demand for luxury goods growing in key markets around the world.”
It’s been a long road to here for Vince, which was founded in 2002 and sold to what was then Kellwood Co. in 2006, which was in turn taken private by private equity giant Sun Capital partners. Vince, as the most promising growth vehicle at Kellwood, was taken public again in 2013 but has struggled to gain traction.
The ABG deal, for which investment bankers Solomon Partners advised Vince, is expected to close in the second quarter of this year.
Vince will join Authentic’s stable of more than 40 brands, which includes Reebok, Brooks Brothers, Barneys New York, Nautica, Jones New York and Van Heusen.
Shares of Vince fell 4.3 percent to $6.90 on Wall Street Monday as investors digested the deal and the company’s latest results. That left the company with a market capitalization of $85 million.
Vince reported that fourth-quarter losses widened to $11 million, or 89 cents a dilute share, from $2.7 million, or 23 cents, a year earlier.
Gross profits slipped to 39.6 percent of sales, down from 44 percent a year earlier, reflecting an increase in price promotions, higher sales allowances at wholesale, adjustments to inventory reserves and the wind down of the Rebecca Taylor business.
Sales for the three months ended slipped 7.8 percent to $91.3 million from $99 million. Sales under the Vince brand slipped 8 percent.
All together last year, Vince posted net losses of $38.3 million on a 10.8 percent rise in sales to $357.4 million.
Now Schwefel is looking to the future, which after the deal will include a healthier balance sheet, as well as $11 million in annual minimum payments to ABG Vince.
“We see opportunities to continue to build our international presence through our wholesale and retail channels and expand our men’s business as we continue to operate in major regions including Europe, Canada, and Asia,” the CEO said. “In Asia where the pandemic has taken far longer to dissipate, we see long-term growth potential in Korea, Japan, and especially China. Our men’s business represented less than 20 percent of our 2022 revenue performance, and we believe we can grow this business to approximately 30 percent of our top line performance in the next four years.”
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