Vera Bradley Q1 Profit Down 27%; CEO to Retire

In Reports, What's New, Industry News by Jeff Prine

Summer at Vera BradleyFort Wayne, IN—Vera Bradley Inc. reported Wednesday that its first quarter profit fell 27% squeezed by increased costs and lower operating margins that offset a 5% sales increase.

For the quarter ended May 4, the handbag and accessories company posted earnings of $9.2 million, or 23 a share, compared with $12.6 million, or 31 cents a share, a year earlier. Despite the drop, the company’s earnings still beat analysts’ estimate for 21 cents a share.

Net sales rose 5% to $123 million ahead of analysts’ forecast for $121.01 million in sales.

Sales in its direct segment grew 24% to $73.7 million due to growth across all channels.

Comparable store sales edged up 0.9%. Meanwhile, in the indirect segment, sales declined 15% to $49.3 million, due to cautious ordering from its specialty retailers, the company said.

Operating margin slid to 12.3% from 17.8% a year ago. And gross margin narrowed to 55.6% from 55.7% as input costs rose 5.1%. Selling, general and administrative expenses rose 17%.

Retiring CEO to Stay On During Transition

For its current quarter, Vera Bradley forecast earnings of 31 cents to 33 cents a share on sales of $123 million to $126 million. Analysts’ consensus expects 39 cents a share on sales of $136 million.

The company also lowered its full year forecast to earnings of $1.74 to $1.78 a share on sales of $570 million to $575 million. In March, the company predicted per share earnings of $1.83 to $1.88 on sales of $585 million to $590 million.

In addition, Michael C. Ray, chief executive officer, is expected to retire although he will remain chief executive through a transition period and will continue to serve on the board of directors.

Executive search firm Spencer Stuart has been hired to find Ray’s replacement. Ray joined Vera Bradley as director of finance in 1998, and has served as executive vice president of sales and marketing and national sales director. He became chief executive in 2007 and has been on the board since 2010.

“My time here has been exciting and incredibly fulfilling, and I am grateful to our founders Barbara Baekgaard and Patricia Miller for allowing me to be part of the Vera Bradley story,” Ray said in the announcement. “While it is difficult to think of leaving this very special organization, I believe it is the right time for the company to pursue a new leader who has the extensive retail and brand management experience that Vera Bradley needs to advance into its next phase of growth and success.”


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