Vince Holdings (VNCE) Is A Complete Mess

In the stock market, a stock that looks cheap but keeps going down is known as a “falling knife”.

If that’s the case, Vince Holdings (VNCE) could be considered a “falling broadsword”!

When the stock first showed up in the Magic Formula screens on March 23 at $17, it had fallen over 54% since peaking over $37 last November.

Since then, an almost unreal string of negative news has sent the stock tumbling even more, dropping an additional 76% into “penny stock” territory, today trading right at about $4.

What in the world happened, and at these levels, has the stock finally reached the point where it can bottom out and start going up again? Could Vince actually represent value here?

The Story Was Good…

Vince is an upscale apparel and accessories company. They design and market clothing, shoes, and handbags. Most sales are for women’s products, about 88% in 2014.

76% of the company’s sales are through the wholesale channel, where they can be found in over 2,400 stores. Vince’s main partners are Nordstrom, Saks, and Neiman Marcus, which each account for over 10% of sales, with the 3 combined driving over 50% of sales. The bulk of wholesale is done in the United States, with just 9% of the segment’s sales coming internationally.

The company also entered the direct-to-consumer (D2C) channel about 7 years ago, and today has about 40 Vince-branded stores, as well as an e-commerce website. Management has long said they believe that the U.S. can support up to 100 Vince stores, so they are less than halfway to that target.

For years, Vince looked like the next up-and-coming fashion brand. From 2011 through last year, Vince grew its revenues at a compound annual rate of nearly 25%, while growing operating income at an equally impressive 22% per year. With under $350 million in sales, and big international and D2C opportunities, Vince looked like an intriguing investment. The stock IPO’d in 2013 at $20, rose 43% on its first day, and continued to climb up near $40. Investors remembering the explosive performance of similar companies like Michael Kors (KORS) piled into VNCE. Things were going well.