Good afternoon. My name is Mike, and I’ll be your conference operator today. At this time, I would like to welcome everyone to the Vince Holding Corp. Q4 2015 Earnings Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] I will now turn the call over to Jennifer Pohland, VP of Finance. You may begin your conference.

Thank you, Mike, and good afternoon, everyone. Welcome to our fourth quarter and full year fiscal 2015 earnings conference call. I am Jennifer Pohland, Vice President of Finance. Joining me today is Brendan Hoffman, our Chairman and Chief Executive Officer; and Dave Stefko, our Chief Financial Officer, who will be your speakers for today’s call. Before we begin, let me remind you that certain statements made on this call may constitute forward-looking statements, which are subject to risks and uncertainties that could cause actual results to differ from those that we expect. Those risks and uncertainties are described in today’s press release and in the Company’s SEC filings, which are available on the Company’s website. Investors should not assume that statements made during the call will remain operative at a later time and the Company undertakes no obligation to update any information discussed on the call. In addition, in today’s discussion, we are presenting our financial results in conformity with GAAP and on an adjusted basis. The adjusted results that we present today are non-GAAP measures. Discussions of these non-GAAP measures and reconciliations of them to their most comparable GAAP measures are included in today’s press release and related schedules, which are available in the Investors section of our website at investors.vince.com. After our prepared comments, we will be available to take your questions for as long as time permits. Now, I’ll turn the call over to Brendan.

Thank you, Jen, and thanks everyone for joining us today. I’ve been at Vince for five months now, and one of my primary goals was to build the strong foundation and position the Company to succeed over the long term. Everything we have done since that point has been moving us toward that goal. I am pleased with the progress we have made and proud of the work that we have done thus far. We are making great strides with our product, our top priority, as we work to create everyday casual luxury essentials with modern effortless style. As you know, our founders Rea Laccone and Christopher LaPolice recently returned to Vince as consultants to oversee our product and merchandising. In addition, we have added a new artistic director overseeing all categories along with new leads in both product development and production, all three of them previously worked with Rea and Christopher to build Vince. Last month was the first market that featured products from them and our design team and we are very encouraged by response that we received. Our wholesale partners were thrilled to see that we have recaptured the brand DNA that had made us so successful in years past. And we were pleased to see that the very emotional connection that our partners had towards the brand has been restored. The team has done a fantastic job creating a collection that embodies the brand with fashion that is both fresh and relevant to multiple generations. Vince remains a leading brand with our department store partners and we believe we have an opportunity to further strengthen our market share position based on the positive reaction we received to the new collection. I am confident that we are on the right path. However, given the timing of Rea…

Thank you, Brendan. For the fourth quarter, net sales decreased 13.6% to $81.8 million versus $94.7 million in the prior year period. Our wholesale channel sales were down 30.2% to $48.1 million due primarily to a decline in our U.S. wholesale segment and to a lesser extent, declines in our international and licensing businesses. Our direct-to-consumer segment sales increased 30.5% to $33.7 million in the fourth quarter driven by the addition of 11 new stores since the fourth quarter of last year as well as a 10.7% increase in comparable store sales including e-commerce. The increase in comparable stores sales was driven mainly by an increase in the number of transactions. Moving onto profitability, gross profit in the fourth quarter was $41 million or 50.1% of net sales, which includes a $2.2 million benefit from the recovery on inventory write-downs taken in the second quarter. Excluding this benefit, gross profit was $38.8 million or 47.5% of net sales. This compares to $45.8 million or 48.3% of sales in the fourth quarter of last year. The adjusted gross margin decline was due primarily to increased discounts and mark downs partially offset by a channel mix shift to the retail channel and an increased mix of full-priced channel sales. Selling, general and administrative expenses in the quarter were $36.2 million or 44.2% of sales. This includes a $300,000 favorable adjustment to management transition costs taken in the second quarter. Excluding this favorable impact, selling, general and administrative costs were $36.5 million or 44.6% of net sales in the quarter. This compares to $25.5 million or 26.9% of sales for the fourth quarter of last year. The increase in SG&A was largely driven by store labor and occupancy cost associated with 11 new store openings since the end of fiscal 2014 as well…

[Operator Instructions] Your first question is from Ed Yruma from KeyBanc Capital Markets.

Hi, this is Jessica Schmidt on for Ed. Thanks for taking my question. So, I know inventory builds in the off-price channel has been a particular issue that you’ve been working to improve. But how do you feel about levels in the channel now; do you think that you’ve cleaned them up or I guess is there still more that you could work through?

We have still inventories that we need to move through, but we did get our off-price channel sales for the year close or in line. We’ve talked about a target of 20% to 25%, we made an improvement in that area and we’re targeting to be in that range for 2016 also.

And then in terms of the pause on the handbag business, I guess what do you think the handbags missed about the Vince brand? And then specifically on pricing, where do you think the Vince handbag should sit because I know that it moved from a sub 1,000 price points to then well below 500, but I guess what would be more appropriate?

I think that’s what we’re trying to establish. And in part, it will be dictated by the design talent that we can recruit. But I think that when I got here, it was a -- I was a little confused by the customer we were going after with our handbags as it relates to our core ready-to-wear. And then shortly after when Rea and Christopher came back and it was clear that the product offering was going to be elevated, the handbags just weren’t congruent with what we want the brand to stand far. So, as I mentioned in my remarks, we look at this year as a time to reset the brand and take some short-term hits to try and build a more -- a better foundation and a more profitable brand in the future. And so, we do believe that handbags and accessories are a big part of that but just felt it was better to -- rather than trying to reposition the handbag line while we were continuing to market it, to just take a pause, we hope it’s a short pause, and then come back stronger at. And we’ll see it at the price points. I think there will be a range of price points that like with the apparel will be a value, but that value isn’t necessarily the cheapest product out there.

The next question is from Jeff Van Sinderen from B. Riley.

Maybe we can just start, if you could give us any insight into the e-commerce versus brick-and-mortar comps. I was wondering also what drove transactions to be up, was that driven by discounting? I know you mentioned, you’re still working through some inventory, although I wasn’t totally clear if that was related to full-price or just an issue of off-price? And then, maybe if you could just touch on gross margin for wholesale and retail for Q4, if there is any color you could give us there? And then discounting and promotional levels by channel in Q4 versus last year? Thanks.

We do not split out brick-and-mortar stores from the e-commence side. I will tell you that the growth in transactions is driven naturally from the growth that you see in just traffic overall. And frankly, we’re happy with our e-commerce business and we see similar growth in that area that other e-commerce platforms are seeing. So, it’s definitely not from discounting, as Brendan mentioned to. We’re going more away from discounting; we eliminated promotions in the back half of fiscal 2015. And as we’ve talked about, the elimination of a promotion, a full rate promotion that we ran, that was ran last year in the first quarter of 2016.

Yes. And you’ll even see next month we have re-anniversary our friends and family event from last year. This year, we’re going to be much quieter about how we market it, both last we had details on the stores, we actually had sandwich boards out there. We did lots of email blasts, lots of affiliate marketing. This year, it’s really going to be -- it’s a bi-invitation event that’s going to be our customers. And so, we think that it will reset the brand and be more reflective of the brand we’re aspiring to be, and also as I mentioned in my remarks, be more cognizant of the fact that we have a big wholesale business. And when we promote within our own stores that directly impacts our wholesale business; and in many cases, they’ll price match us which just exacerbates all the promotions that are going on out there.

And maybe you could give us a little more detail on what you’re seeing in your wholesale order book. I know you gave some broad brush strokes there. But just wondering how much of the fall book is in at this point? Where are the relatively weakest and strongest areas? And I think you mentioned you see that evolving in second half. Maybe you could just give us a little more detail there, just wondering if second half order book for wholesale is expected to down overall, that’d be helpful.

So, I am not going to give you specifics, but I can give you little bit more color. So, in February, we had our fall market, as I mentioned, which is end of July, August, September deliveries, three months of deliveries. So, I am talking specifically for women’s wholesale apparel. This was the first collection that Rea and her team did and Christopher oversaw the presentation and the marketing. We were thrilled with the reaction we got there. There was standing ovation from one account that I won’t mention and tremendous enthusiasm across the board. The accounts are generally cautious because business is -- that’s a tough environment out there, which we were anticipating. So, we know that the orders are much more -- we are bullish than the path we’ve been on and the trend of the business. But we also were anticipating having to earn our way back into major growth orders. And so we think fall is a great start. It gives us the platform and the assortment out there that we need. And as I mentioned in my remarks, we’re happy to what demand outweighs supply because that hasn’t happened here in a while. Fall, when it delivers will sit with some of the summer deliveries that will still be on the floor and start to be marked down which is why I mentioned holiday as being when you’ll see the newest weekly [ph] assortment from the new team fully represented in both our wholesale partners and our own stores. And I think as they come back for market in June to place holiday or we call it pre-spring, I think they’ll be able to come back up with a little bit more confidence even though they won’t have selling on the fall merchandise but having had some time to digest what they saw in terms of the elevated product that they now can expect from Vince.

I’m sorry, just to clarify; are you saying that the fall order book is still down but you’re expecting it to be up for holiday; is that how I should read into it?

I didn’t give you any specifics on that, I just said we -- they came in line with what we had anticipated, which was reflective of the environment and their enthusiasm for the line, kind of balance together. So, we’re very comfortable that the orders will place to a level that will allow Vince to start to grow again and then hopefully anticipate further growth in terms of the orders as we move forward.

The next question is from Matthew Boss from JP Morgan.

Hi. It’s Christina [ph] on for Matt. In that roughly flat gross margin guidance that is down 20 basis points, how should we be thinking about the cadence throughout the year is and the drivers there?

I mean I think it’s -- we really haven’t gone down from the core standpoint, we don’t give. We expect if the back half of the year obviously to be a higher margin rate based on our expectation of seeing better full-price selling, from that standpoint, we’re still on the first-half of the year working through the spring product that was inherited. And appropriately, we would anticipate a higher mark down rate necessary there than we would in our fall product.

I mean we also -- we want to support our wholesale partners and make sure any liabilities we have in spring are taken care of so that we can clear the desks and give the new product every opportunity to perform, which we think we’re in the process of doing. And the product, as I mentioned in my remarks, it’s more depth and less breadth, and it’s a much more edited collection as over the last couple of years the assortment has gone way too wide. Now, we’re much more focused, which we think will allow us to stay and stock on best sellers, chase the winners. And really the goal, as I continue to talk about internally and externally, is raising our regular price selling that’s gotten away from us. We’ve become a very promotional brand over the last few years, both out of necessity and because of steps we’ve taken in our own direct-to-consumer channels. And as we’ve discussed, we’re working hard these last six months and the next few months to clean that up in anticipation of the elevated product and how it will connect with the consumer.

And then on your debt levels at this point, so with the rights offering you mentioned in line to pay down additional debt and to use the proceeds, do you have a target leverage ratio that you’re looking at or target amount of debt that you’d be more comfortable with and kind of time horizon behind that?

I guess that’s not really, I mean the Company is sitting on a $45 million of term approximately; two years ago it was $170 million. We will pay our revolver down completely with the rights offering in addition to settling our TRA liability that we have sitting on our balance sheet and then have that cash available for operations and investment going forward and have the full use of our revolver going forward So, we’re comfortable with where the rights offering is going to position us.

[Operator Instructions] The next question is from Richard Jaffe from Stifel.

If you could just comment on the store portfolio, you talked about I guess cleaning up or doing some work on some stores. Are there stores that are underperforming that you would consider closing, adding the store portfolio down? And given the tremendous direct-to-consumer without being specific, was it driven by the online business or the new retail stores; is the retail or the brick-and-mortar business really growing as strongly as direct-to-consumer or equally?

So, the remarks I made earlier were specific to the look and feel and ambiance of the store, the store environment, so we’re going to pick couple one store in the Los Angeles area, one store here in the city and just kind of reset them and hope that can be the kind of benchmark and the window into how we want all of our customer touch points to look like. So that wasn’t reflective of any numbers or anything. Certainly, we continue and we will continue to look at store portfolio. We certainly expect to continue to grow our retail footprint. Do we have stores that are underperforming? Sure, I mean the business has been so tough for us over the last year or so that clearly our own stores are impacted by the product we’ve delivering. So, as we talk about addressing the portfolio, we have to do it understanding that we have high expectations for how these stores will start to perform in the back half of the year and into 2017 and don’t want to make any premature decisions until we see what the stores can do with the Vince product of going forward. And as we look for new locations, we just want to make sure that it’s in environments and we’re surrounded by where we believe our customer shops. And so we’re kind of evaluating that now to make sure that we make decisions appropriate for the way we reset the brand.

Just a question on margins in stores, did the full-line -- or the full-price stores and the direct channel become a venue for lot of the clearance activity? Just concerned about the margins going forward in stores than that but if you…?

No, I mean that -- coming from the department stores, I mean the mark up and margin environment so different in specialty store, even all the promotion doesn’t ding [ph] you too badly. That’s why in my remarks I talked about handcuffing our wholesale partners with some of our promotions and training our customers buy on sales. So, I mean we liquidated a lot of the over-merchandise, the overstocks through the off-price channels, both our own outlets and aggressively through third parties that they’ve alluded to pulling back. And one thing that’s important to me and Rea and Christopher is making sure that product whatever has the Vince label is reflective of the Vince brand. So, we thought that’s one of the reasons why handbags is being re-launched. Same thing with what’s in the outlet stores. We want what’s in the outlet stores to be reflective of the Vince brand because we that customer in many ways showcases her label more than somebody buys it at the full price store. So, we don’t want somebody to be introduced to the brand and see inferior product. So, we’re working hard, as I mentioned in my remarks, to make sure we’re able to produce products for the off-price channels that is worthy of the Vince label.

There are no further questions at this time. I will turn the call back over to the presenters.

Okay. Well, thank you everyone. We look forward to getting back to you after our Q1 ends sometime in late May. Thank you very much.