Vera Bradley Q4 Profit, Sales Down, But Beats Estimates

verabradley2Fort Wayne, IN—Vera Bradley, Inc. today reported a 23% drop in its fourth quarter profit hit by a sales decline and a write-down on retired inventory. But the handbag and accessories company’s share rose since it still beat analysts’ estimates.

For the quarter ended Feb. 1, Vera Bradley posted a net profit of $19.4 million, or 48 cents a share, compared with a net profit of $25.1 million, or 62 cents a share, a year earlier. The latest period included inventory write-downs of 7 cents a share.

New 5-Year Plan Developed

Net revenue was down 3.1% to $157.5 million, but still above analysts’ estimate for $146.86 million in sales.

Gross margin narrowed to 52.9% from 57.9% due to the write-down, increased markdowns and a larger portion of sales of lower-margin items.

Comparable store sales were down 10% while e-commerce sales were down 7.2% which the company attributed to lower traffic, a lower average transaction size, and underperformance of product offerings, not to mention the severe winter weather.

Indirect sales fell 18%, mostly on lower orders from specialty retail accounts combined with the closing of about 400 wholesale accounts during the year.

Direct revenue, however, grew by 5.2%, while revenue in the company’s stores grew 14.5%, reflecting openings of new stores and outlets.

“Even though our fourth quarter revenues and earnings were below last year’s levels, the performance exceeded our previous guidance,” said CEO Robert Wallstrom. “We continue to face external headwinds and certain challenges within the business, and fiscal 2015 will be a year of transition for Vera Bradley.”

“We have spent the last few months developing our comprehensive five-year strategic plan designed to drive improved financial performance and shareholder value over the long-term. Our vision is to build on our rich heritage and establish Vera Bradley as a premium lifestyle brand that is relevant to the future, expanding our customer reach and growing our customer connections. The strategic plan is our roadmap to achieve that vision and encompasses three key elements–product, distribution channels, and marketing,” Wallstrom said.

For its full fiscal year, Vera Bradley reported net revenues of $536 million compared to $541.1 million for the prior year. Net income totaled $58.8 million, or $1.45 a share, compared to net income of $68.9 million, or $1.70 a share, a year earlier.

Looking ahead, Vera Bradley expects net revenue this year to be in the range of $545 million to $565 million with per share earnings from $1.20 to $1.30.

Analysts’ average estimate expects full year earnings of $1.50 a share on sales of $544.90 million.

 Toys Recalled

For the first quarter, the company forecast net revenue between $116 million to $120 million with earnings at 11 cents to 13 cents a share. Analysts’ consensus expects 22 cents a share on sales of $123.08 million.

In other Vera Bradley new today, the U.S. Consumer Product Safety Commission (CPSC) announced the recall of 98,000 units of two of the company’s toys.

The Vera Bradley Bear Ring Rattle and Bunny stuffed toys have white pom-pom tails that can detach from the body could present a choking hazard to small children. The company has received two reports of this occurring, but no injuries have been reported.

The toys were sold between September 2012 and January 2014 in retail and department stores and specialty gift shops.

 

 

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Jeff Prine

Jeff Prine, Editor at Large, Accessories Magazine
Jeff returns as a regular contributor to Accessories magazine. Initially Jeff worked as senior editor at Accessories more than 20 years ago and his love of the industry has followed him until present. Since his tenure here, Jeff has continued to report jewelry, watch and other luxury goods trends as executive editor at Modern Jeweler magazine, fashion director at Lustre, and as contributor on products and trends for consumer and trade publications and websites. In addition to his editorial experience, Jeff also served as an adjunct instructor for accessories merchandising at Fashion Institute of Technology. jeffp@busjour.com