Vera Bradley Q3 Profit Up 37%, But Conservative for Q4

Fort Wayne, IN—Vera Bradley reported Wednesday that its third quarter profit jumped 37% as sales increased, but its fourth quarter and full year sales estimates disappointed retail analysts.

For the quarter ended Oct. 27, the handbag, luggage and accessories company posted net income of $17.7 million, or 44 cents a share, compared to $13 million, or 32 cents a share, last year. That was better than analysts’ average estimate expected, 38 cents a share.

Included in the figure was a $1.2 million charge for inventory damaged by water and $15 million worth of inventory ordered ahead of schedule due to an inventory process issue which has been resolved. Company executives told analysts on a conference call that they expect to sell most of the additional inventory since it includes bestselling styles.

Net revenue grew 14.2% to $138.3 million. Analysts had expected revenue of $135.3 million.

“We are pleased with the strength of our operating results in the third quarter. Our brand and product offering continue to resonate with consumers resulting in meaningful growth across our business segments,” said Michael C. Ray, Vera Bradley’s chief executive.

In the brand’s direct segment, revenue increased 23.6% to $64.3 million, primarily driven by growth across in both full-price and outlet stores.

Revenue in its stores grew 44% due to both the opening of 17 full-price and 3 outlet stores during the past year, as well as a comparable-store sales increase of 7.1%.

Full Year Forecast Miss Analysts’ Estimates

E-commerce sales were up 1.2% on top of a 55% increase in third quarter last year.

Indirect revenues increased 7.1% to $74.0 million due to strong demand for “our product portfolio through specialty retail and department store partners.”

Gross margin widened to 58% from 54.2% in the prior year mostly due to operational efficiencies, prior year opportunistic sale of retired inventory and lower input costs, partially offset by a $1.2 million charge related to damaged inventory written off during the quarter.”

Despite the strong third quarter results, Vera Bradley gave a more conservative fourth quarter forecast than analysts’ consensus. The company expects earnings of 55 to 57 cents a share on sales of $147 million to $152 million. But analysts’ estimate is for earnings of 60 cents a share on sales of $159.52 million.

“We are excited about the balance of the holiday season and remain optimistic about the long term prospects for Vera Bradley,” Ray said.

Looking ahead to its full year results, the company now expects earnings of $1.63 to $1.65 a share, up from its previous estimate of $1.60 to $1.63 a share.

Full year net revenue is now forecast at $526 million to $531 million, down from a prior estimate of $531 million to $536 million.

Analysts’ consensus for Vera Bradley’s full year is for earnings of $1.62 a share on revenue of $535.07 million.

 

 

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