Fort Wayne, IN—Vera Bradley Inc. Wednesday reported an increase in profit and sales surpassing analysts’ estimates. But shares in the handbag and accessories company fell in early trading today due to what analysts’ called a weak forecast for the next year.
For the period ended Feb. 2, Vera Bradley post a net earnings increase of 25% to of $25.1 million, or 62 cents a share, up from $20.1 million, or 50 cents a share, a year earlier. Net revenue grew 21% to $162.6 million.
That was better than analysts’ average estimate that expected a profit of 57 cents per share on revenue of $151.9 million.
Gross margin widened to 57.9% from 56.4%, driven by operational efficiencies, lower freight costs and a favorable channel mix driven by growth in full-price stores.
Comparable store sales decreased 0.4% compared to a 9.3% increase in fourth quarter a year ago since the company decided to hold discounting to planned levels and full-price stores during the holiday season.
Direct revenues climbed 27%, a result of growth across all of the company’s channels, while indirect revenue improved 11% to $59 million. E-commerce net revenues rose 23% or $9.7 million, and accounted for about 32% of total net revenues during the quarter.
The company also said it had positive momentum at Dillard’s where it now has 284 locations.
“Fiscal 2013 represents another outstanding year for Vera Bradley, as reflected in our record-setting fourth quarter and full year results, particularly in the midst of a difficult consumer environment,” said Michael Ray, chief executive. “Despite current headwinds, I feel confident in our team’s ability to deliver on our fiscal 2014 priorities.”
Those headwinds caused Vera Bradley to issue a conservative forecast for its first quarter 2014 and fiscal full year 2014.
Inventory Issues to Linger?
For first quarter, the company forecast earnings of 20 cents to 22 cents a share on revenue of $120 million to $122 million, while analysts estimate much higher: 35 cents a share in earnings on sales of $132.11 million.
For the full fiscal year 2014, Vera Bradley expects earnings of $1.83 to $1.88 a share on revenues of $585 million to $590 million. But analysts currently estimate earnings of $1.87 a share on revenues of $601.56 million.
The lower-than-expected outlook tended to overshadow the company’s strong fourth quarter showing, edging the stock price down in early trading
“Vera Bradley’s long lead times and low turnover may cause inventory issues to linger, as evidenced by the 18 to 24 months it took to recover from its last inventory problem less than three years ago,” said Ike Bochco, analyst at Agee & Leach, noting Vera Bradleys’ revenue has slowed down while inventory levels are up 23% and could be up 40% to 45% by the end of its first quarter.
If the inventory level continues to rise it could pressure gross margins and be a serious concern given the slowing sales trends, Bochco said.
Vera Bradley also announced that Bonita Inza has joined the company as executive vice president of sales and marketing. Ray said Inza, who has 30 years retail experience in executive positions at William-Sonoma, Bath & Body Works and T-Mobile, “will help us execute our growth plans not only through product connections, but through those based on customer experiences and relationships, something intrinsically rooted in the strength of our brand.”
In other news today, Vera Bradley announced Vera Bradley Baby, now available at Vera Bradley retail stores, participating retail partners, and verabradley.com.
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