Vera Bradley revenues and earnings disappoint in Q3

By

Robin Driver

Published
Dec 12, 2018

Fort Wayne, Indiana-based handbag and luggage company Vera Bradley, Inc. announced declines in third-quarter sales on Wednesday but managed to swing a solid boost in earnings, which nonetheless came in under analysts’ estimates.

 
The company achieved $97.7 million in revenue in the third quarter ended November 3, 2018, down 14% from the $114.1 million reported in the prior-year period. The figure came in at the lower end of Vera Bradley’s guidance range of $98 million to $103 million and was under the $101.7 million predicted by analysts surveyed by FactSet, cited by MarketWatch.
 
By segment, the company’s direct revenues decreased 11.7% from $83.2 million to $73.5 million, due in part to a shift in the timing of promotional events. Comparable sales for the period fell 16.5%, reflecting a 13.1% decrease in comparable store sales and a 24.8% decrease in e-commerce sales.

Revenues in Vera Bradley’s indirect segment totaled $24.2 million, declining 21.7% in comparison to the $30.9 million achieved in the third quarter of the previous year.
 
Nonetheless, thanks to initiatives undertaken as part of its Vision 20/20 strategic plan, the company was able to increase its operating income to $5.3 million, representing 5.5% of net revenues, compared to $0.5 million, or 0.4% of net revenues, in the prior-year period.
 
Net income therefore came to $4.2 million, or 12 cents per diluted share, a strong rise from the $0.4 million (1 cent per diluted share) reported in the third quarter of fiscal 2018, when the company’s results were notably impacted by after-tax-charges amounting to $7.9 million, largely related to store impairment charges, severance charges and strategic plan consulting fees.
 
“We have made excellent progress on Vision 20/20 over the last several quarters.  During the last nine months, we have reduced clearance activity on verabradley.com and in our full-line stores by over 70% and increased our full-price selling in these channels by approximately 20%,” said Vera Bradley CEO Robert Wallstrom in a release. “Product innovation and newness are driving our brand appeal, and we have meaningfully reduced SG&A expenses through diligent expense management.”
 
The company’s EPS of 12 cents in the third quarter did, however, miss analysts’ expectations of 16 cents, a fact which, coupled with the brand’s revenue miss, sent Vera Bradley’s stock down 11% in premarket trading on Wednesday.
 
Year to date, the company’s revenue totaled $297.9 million, down from $322.6 million in the equivalent nine-month period in the previous year. Net income was $12.1 million, up from a net loss of $1.5 million a year earlier.
 
In the fourth quarter, Vera Bradley expects to see net revenues of between $114 million and $119 million, and non-GAAP diluted EPS in the range of $0.22 to $0.25.

The company also updated its full-year guidance and now predicts net revenues of $412 million to $417 million, as well as non-GAAP diluted EPS of between $0.57 and $0.60.