Good morning, everyone. Please welcome Vince Holding Corp. Vince Holding Corp is a global retail company that operates the Vince brand-
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women's and men's ready-to-wear business. Vince, established in 2002, is a leading global luxury apparel and accessories brand, best known for creating elevated, yet understated pieces for everyday effortless style. Before we begin, I would like to remind everyone that certain comments made during these remarks may constitute forward-looking statements and are made pursuant to, and within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to both known and unknown risks and uncertainties that could cause actual results to differ materially from such statements. Those risks and uncertainties are described in our presentation slides and our SEC filings. Any forward-looking statements made as of today, are made as of today, and we don't undertake any obligation to update any of these forward-looking statements. With that out of the way, I welcome the team.
Good. Thank you, Caitlin. Good morning. I'm Jack Schwefel. I'm the CEO of Vince Holding Corp. I'm joined this morning by John Szczepanski, our CFO. So thank you for being here. I'm gonna take you through a quick presentation about the company, and want to start here with. Just give you a little bit of background. Vince is a 22-year-old company. I'm here for, March will make three years as the Chief Executive Officer. Really want to talk about what some of the key investment opportunities here and what the highlights of the company are. Vince is a global retailer and wholesaler, operating in over 45 countries. Really a leading premium contemporary brand with a really attractive demographics of our customers, really attracting a lot of affluence.
We're gonna talk about our strategic positioning and our ability to grow today. One of the things that I think we're most excited about is just how scalable we believe those opportunities are. We'll talk about the, you know, just the enhancements we've made over the last year and a half that have really positioned us for where we want to be, and our focus on truly improving the productivity and the profitability of this business. From a brand overview, you know, we operate today in the United States and 44 other countries, both at retail and at wholesale. We have wholly owned store in the United Kingdom, as well as, you know, 64 stores here in the United States. Full price, 48 full-price stores, plus one full-price store in London.
I'm excited about our opportunities as we start to expand into Asia with stores. Two stores in China so far, and we'll talk a little bit more about that. As we think about the brand, I think about the word that comes to mind, the words that are important to this brand. Quality would probably be the one I'd start with. As we do any customer research, that's really what comes through over and over, is the customers' love of the quality of the products we make. We tend to be very classic with our product. We don't really worry as quite so much about trend. We are informed by fashion, but not slaves to it. Other words that just come through are understated.
You know, we're living in a moment right now where there's a lot of conversation about understated luxury. Vince has been quiet luxury for over 20 years. Quick timeline of where we've come from and how we've gotten to here. Company started, as I said, in 2002. In 2007, the men's division was added. Opened our first retail store soon after that, and as you can see, some of the other milestone events. Probably the one I'll call out here that's most key to why we're here today and talking today is this past May, our intellectual property agreement that we went into with Authentic Brands Group, and I'll elaborate later on.
But really a pivotal key moment for the brand and an ability for us to move in a different direction. From a category standpoint, we're very, you know, fairly wide here with all women's and men's apparel and all the categories that go through that. Over the last few years, we've also ventured out into a few licensing programs with shoes, with some accessories, soft accessories, meaning like cold weather accessories, and a little bit of home and baby. As we talk about the customer and talk about the demographics, let's look at this a little more. Similar to what we said about brand attributes, quality runs through that. Craftsmanship also runs through this. Understated luxury.
Key components, there's a casual effortlessness about our brand that the customer tells us over and over that that's important. And when I say customer, I don't just mean our, you know, the consumer, it's also the department stores that we talk about and talk with and, and partner with on a, in a very, very regular basis. The consumer is about 80% female, 20% male. That's a key point there, 'cause I think that in and of itself is one of the first, one of the big opportunities for us to grow this brand. Our core customer is between 30 and 50, though it definitely transcends lower and absolutely transcends higher. Key affluence there, and as I said before, truly informed by fashion, but not really a trend brand.
So we're able to really hold on to inventory and hold on to product, you know, for longer periods of times than a typical fashion retailer would. As we look at our customer and do different research, which she has told us, and he has told us, is, you know, we, we've looked at who are the comparable brands. We know that we have strengths and, you know, biggest towering strength is in sweaters and in cashmere. And we look at who the group of competitors that our customer identifies as who are the analogous brands that she buys when she buys Vince. And again, remember, this is all our own customer data. This is not external, this is internal.
And clearly, you know, we resonate there and with a product group that
Or a competitor landscape that we would think would be the, you know, exactly what it should be. What gets very interesting is when we look at a category like leather and leather outerwear, and you see there where it really is a step up for us in terms of the other brands that she sees as analogous, are significantly above us from a luxury standpoint, and we think that's really a towering strength of the brand. It's something that we really are looking to exploit on a much bigger basis, going forward, especially internationally, where there is a lot less price resistance and an ability for us to drive margins at a higher place. The collection's widely appreciated by key opinion makers around the world. We loved seeing Taylor Swift three times in Q3 in our product.
She was in our product almost as much as she was in Kansas City Chiefs product, so we really, really liked that. Everybody has their problems, right? As we look at just this is just a snapshot of some of the influencers that we see wearing our product over the last year. You know, it's a really diverse, interesting group. You know, it's actors, actresses, rap stars, you know, truly, you know, great icons, politicians, the world's sexiest man. In fact, when Patrick Dempsey was photographed for his shoot for People magazine's Sexiest Man Alive, he was wearing Vince. We were quite pleased with that. We talked a little bit about social. Social is really playing a key role as we go forward here on really, you know, being, you know, becoming evangelists for our brand.
We have over 1 million followers in our social networks. I'm really happy to tell you that over the last three years, we've grown that, you know, these follows in a significant way. We've watched the Instagram following grow by close to 45% over the last three years. We've watched Facebook grow by 21% and Pinterest by 28%. Still very underpenetrated, especially in a couple places that we think we can grow faster. Again, tends to be very skewed female. About just over half of our social media is happening right now from the U.S. There's a big smattering of it over in Europe and just starting to scratch the surface in Asia, which again, becomes a really big opportunity for us going forward.
Just a quick group of some of the, the editorial, editorials that we're seeing over the last year in the different magazines and publications that are covering us and, and talking about us on a regular basis. A lot of this is review. None of this is paid. I'll talk a little bit about the business. Started as a wholesale company, you know, have great wholesale roots. When we talk about who our partners are domestically and, and, and internationally, really a choice group. You know, there's. Literally, the sun never sets on Vince, Vince product around the world. We're in the right doors, in the right countries, in the right places, so we're very, very excited about that.
Our domestic group is one we're very proud of and think that we're, you know, in all of the right locations that we should be from a department store and specialty retail. The way our wholesale breaks out, wholesale is just over half of our total business, and we look at it this way, that domestically, it's about 82%. International wholesale is about 18%. The wholesale business internationally is one that's really ideal because it's something that we can grow, really grow quickly on. We have the right points of distribution domestically. I don't see that changing radically over the next couple of years. I think there's a lot more business to exploit domestically from wholesale, especially on the men's side.
We'll look at a couple of non-traditional models over the next year in terms of concession with certain, with certain doors, with certain partners, to see if we can't grow the business faster. We'll take on a little bit more inventory risk because we want to see those doors get a lot more inventory and think that we're not maximizing that business. Internationally, it's about really expanding points of distribution. We're gonna key in on a couple of markets over the next 18-24 months, specifically London, U.K. We like our partnerships there, but we think that we can do a lot more with that, and they're receptive to doing things a little bit differently with us as well. Now switch gears here and talk about direct-to-consumer and start with retail.
Today, we sit with 48 stores around the country, and if my numbers are one or two off, it's because we're in the midst of moving some stores literally at the end of this month. 47 full-price. What's interesting about that is, think of it this way: Our two biggest markets are the New York metropolitan tri-state area and Southern California. Each of those markets has 12 full-price stores. Neither of those markets are remotely full. They're... I can look at two or three locations in either of those markets to densify and get more volume out of them without cannibalizing our existing businesses. If you look at markets three, four, five, and six, which are the, you know, which would be Chicago, Phoenix, Dallas, and Houston, in no specific order, they're all single-store markets.
There's about 12-15 stores just filling in those markets. However, I mean, while I want to do that, and we ultimately will do that over time, what we've also seen is we opened the Denver location, our single store in Denver, and our single store in Charlotte in the last two years. We've also watched that in the first year of operating those stores, we've seen a significant increase in our e-commerce business in those markets. So new markets are quite attractive to us, and I look at where we're not. We're only in 16 of the top 25 retail trade areas of the country, which gives us a lot of targets to look out to grow, not just the retail base, but also the omni-channel e-commerce base. When we talk about e-commerce, we're a little bit underdeveloped here.
We're playing some catch up, but I'm excited about the progress we've made in the last year and a half. We changed platforms. We elevated our platform to Salesforce.com's most recent offering, and what that has done for us is just greatly increased the speed. That was done in the fall of 2022. And we've seen over the last year some real dividends from that. We're watching conversion go up. We're watching, you know, the cart abandonment really go down. In addition to that, we also, in fall and winter of 2022, installed a customer data platform, so we're able to mine our own data at this point. This last year has been all about acquiring more data and acquiring more customer information.
We're now beginning to be able to personalize and optimize our communication with those customers, and ultimately the goal there is to get them buying a little bit more. On the short horizon, in 2024, we'll look to do things like loyalty and really make this a little bit more scientific in terms of getting her who makes 2.2 purchases a year to get her to three purchases a year and beyond that. Probably a good time for me to talk a little bit about what we did in May with Authentic Brands Group and why we did what we did. We entered into an agreement this last May with Authentic Brands, where we set up a new company, ABG Vince, and 100% of the intellectual property went in that.
We retained 25% of that, and ABG retains 75% of it. The proceeds of that transaction, the $76.5 million, was used to really clean up our balance sheet and put us in a place where we really have a lot more control of our forward destiny. We were able to refinance our debt and get ourselves to a place where we really have control of the situation. You know, we need to make this really clear, we're eight months removed from that transaction. We continue to design, manufacture, ship, and sell our own products. We do that in all the territories that we have been trading in and the areas that we designated we wanted to trade in in the future.
So materially, what we do as an OpCo has not really changed. Our agreement with ABG is in place for the next 90 years. So this is something that doesn't really change, and we move forward. Candidly, I like the deal a lot because it really also focuses my merchant team and my design team on the categories that really drive our business. And it's very easy in a fashion business and a design-driven business to chase shiny objects and go after things that are small volume but high labor, high intensity of focus. We've really kind of removed that and really get to a place now where we just drive our apparel business in a big way.
As part of that, as part of the ABG deal, you know, we do now incur royalties, and it's because of that, this last summer, my team and I endeavored into an exercise with McKinsey to really look at where can we take some cost out to sort of offset where those royalties will be. We've identified $30 million in the next three years, $10 million a year. We're excited about that. We are gonna do this on our own. We've set up our own transformation office. We're in the midst of really getting that going, and think that the $30 million is a target that's quite attainable for us over the next three years, and that will in effect undo any detrimental effect to our profitability that the royalties incur.
Now let's talk about the fun stuff, like, how do we grow this business? Now that we're positioned financially where we can do this, now that we've removed some of the obstacles, how do we go forward? A few things. Look, this is a great brand. I was excited to come here three years ago 'cause I've known this brand for 22 years. I've watched it grow, I've been a customer, I've been a competitor, and I've always been a fan of it, and I'm excited that we can actually move this in a different direction now. The McKinsey work really sets us up for this, too, because it, as I said, we get now to worry about the things that really matter to the business. Lots to do here.
Lots to really talk about in terms of of how we move this forward. Our international expansion is probably the thing that's one of the most attractive. We're already in 44 countries, but I think we're highly underpenetrated in most of the places we trade. One of the places you'll see us move fairly quickly on is in China. We've already opened 2 stores with a partner. The partner is a it's a wholesale relationship that will evolve over the next year into a full joint venture. It's a long-term partner who we've been doing business with in Hong Kong for close to 15 years. The first store opened a little over a year ago in Shanghai, in Shanghai Réel. The second store opened this past November in Nanjing.
We have a big store opening coming this May in Beijing, and then we move from there. We think that this is a market where, you know, given some of the economic turmoil that's going on in China, the luxury market's quickly pivoting to the contemporary fashion market, and we think that we can have a real strong seat at the table here for this. In terms of other international markets, again, being very, very precise and surgical, we're really gonna go after some opportunities in London. We have a single store there, opened literally months before the pandemic. Now that we've been able to operate it continually without interruption, we are really pleased with its performance. Down the road, we will add stores.
I'm not in any rush to run and put a second and third store in London, but ultimately we will. I think there's other capital things that are more important first, but, like the performance of that, love our business with Selfridges as well as Harvey Nichols. And again, these are partners that are very reasonable in terms of us doing something a little bit out of the ordinary, in terms of doing concession models and things like that. The men's business, as I mentioned, is about 20%... Last year, it was about 20% of our total volume. We're looking for this to grow to 30% over the next three to four years. We see it in our direct-to-consumer business, especially in certain stores.
We've been opportunistic here in trying to grow men's in a few different ways. We recently opened a men's only store in Roosevelt Field on Long Island, really more as a test than a test to just see what we can do from a product expansion standpoint and how the consumer reacts to a men's only store. Don't have it on the books yet, but looking to, you know, opportunistically to do something similar in the Southern California market, and probably we'll do that next year. But we do think that there's huge opportunity here, not just in retail, not just in e-commerce, but also in wholesale and especially in international. So again, 20%, trying to grow that to 30%.
And by the way, that's doing that naturally, organically, not doing it in terms of because we think we're gonna lose business in, in women's. We continue to see growth in women's, but think that the men's growth can be exponentially larger than that. Let me talk about stores. I talked a little bit before, what-- you know, we sit today with 47 stores, and if you ask me what the scale could be, is I think we could be somewhere between 80 and 90 stores domestically, easily. Not running to do that tomorrow. We're not gonna put out a plan that we're saying we're doing 10 stores a year for the next five years.
We'll be opportunistic with that, with a couple of new markets a year, making sure that we can operate those stores in a way that it can be as productive as we think it should be. As we, you know, as we move this forward, we just, you know, we also just... Again, it's worth a moment here just to say that there's four big initiatives here that we're excited about. It's the international piece, it's the men's piece, it's continuing to grow e-commerce, and it's also the domestic retail piece. The other entities in the company can grow as well, but these are the ones that we think will be the rocket ships for us going forward.
So with that, I was gonna hand the mic over to John and let him talk a little bit about some of our financial business.
Thanks, Jack. Good morning, everyone. John Szczepanski, CFO. While it's early days, this is week two for me. As similar to Jack, I've long watched this brand and admired it for its timelessness, and that design aesthetic that is never in fashion or out of fashion, and that has really resonated with me. As I get closer into working with the brand and the team, two things that shine for me is, one is the product, and as Jack said, product quality is paramount. The consumer is loyal and affluent, and those attributes are really strong underpinnings for the brand. The second piece is people and this team, and what I've seen from this management team so far shows that they can execute, we all can execute.
Hopefully, we'll see some of this start to play out in the financials that we present here. This is a run rate of revenue over the last seven years. You'll see it's pretty consistent from a growth perspective in the aggregate, about 2.5% CAGR, over the last seven years. What really comes out to me, and as Jack articulated about the DTC strategy, is that pivot into DTC. The DTC growth over this time is more than double that of the consolidated company. When you look back to 2016, where we were more 2/3-1/3 wholesale to DTC, we're now more balanced at 50/50 and looking to continue those trends as Jack articulated, in terms of the DTC growth going forward.
From a financial results perspective, looking more near in, you know, this is our, our latest quarter results from Q3. And while the top line is down roughly 6%, quality of sale is, is up. So when you look at this mix, really cleaning up some of the off-price sales from the prior year, really resulting in that bottom line operating margin expansion of 100 basis points, really fueled by that better promotional activity, improved full price, off-price mix, and some tailwinds on input costs, all helping to fund this new royalty stream that we have to Authentic.
So this is a result that we are expecting to continue as we look forward, and as the strategies that Jack just articulated come to fruition down the road in future quarters. And then from a balance sheet perspective, this is really the result of that transaction. You see, overall, we were able to pay down our first lien loan. We were able to pay down a lot of the credit facility. We entered into a new credit agreement expiring in 2028 for $85 million. And overall, net debt is about half. So really strengthening the balance sheet, providing a good foundation to grow the strategy and to support the strategies. And we're gonna continue to look at the balance sheet, look at cash flow, look at working capital to optimize this going forward.
That really wraps it up. I'll close here and maybe we have a little bit of time for questions.
Yeah, you know, I wanted to add one point that I was remiss on before, is part of our initiatives, one of the things that strengthens us so much, too, is just the relationship with Authentic Brands. It's already paid some dividends for us in terms of real estate negotiations domestically. Authentic's a $25 billion company. I ran into a little bit of headwinds with one specific location with a major mall operator and was able to make a phone call and have ABG make a phone call, and literally that problem went away. I don't know that that will happen.
I don't think that will happen with every case, but it's nice to have a partner that can act, that actually has a little bit of clout and can actually move things beyond our, what our $300 million business allows us to do. As we were signing the agreements with Authentic, it was in May, we were going into the weekend where the Formula One race happened in Miami, and their presence at that race was dramatic. It was really, you know, quite large, and you clearly understood that they were there, and they're there in a big way, especially with David Beckham. I looked at, you know. We've had initial conversations on how do we partner with that? How do we become part of that?
Because I'm convinced the F1 customer, the F1 fan is a Vince customer or could be a Vince customer. So in the future, I think there's places with marketing, with ABG, where we can really partner and use their very, very loud drum to bang the Vince drum. So more to come on that, but again, very optimistic that we can use Jamie's organization and really further our own organization with that. Okay, great. Thank you.