Vera Bradley's stock slides as earnings lag expectations ahead of a July brand refresh

By Ciara Linnane

Consumers are still being careful with discretionary spending amid high inflation

Vera Bradley Inc.'s stock tumbled 16% early Wednesday, after the women's clothing and accessories maker posted a surprise loss for its fiscal first quarter and sales that fell short of estimates.

Fort Wayne, Ind.-based Vera Bradley (VRA) said its customers, particularly those in the lower-income bracket, are still reeling from a lengthy period of high inflation.

"We are seeing the impact of reduced visits and spending across all household incomes and channels at Vera Bradley, especially in the under $75,000 households, where we have high penetration in our outlets," Chief Executive Jackie Ardrey said in prepared remarks.

In-line store and e-commerce revenues were down "modestly," and there was a boost from the shift of the company's annual outlet sale in Fort Wayne to the first quarter from the second quarter last year, she added.

"Overall, however, customers continued to be more discriminating with their discretionary spending in light of the macroeconomic environment," said Ardrey.

On a call with analysts, Ardrey acknowledged it was a "choppy" quarter with many of the same challenges seen last year and at other specialty retailers, and that the company was in a transitory phase, ahead of the July rollout of the consumer-facing part of its Project Restoration plan, which will see the introduction of new assortments late in the second quarter. Many of its partners ordered less for the quarter as they await the newer products.

"I'd like to note that we expected much of this turbulence and that our guidance for this year is unchanged," she said, according to a FactSet transcript.

Project Restoration aims to stabilize and grow revenue and restore profitability, by focusing on the consumer, brand, product and channel components of both its brands, the namesake Vera Bradley and handmade jewelry line Pura Vida.

The company posted a net loss of $8.1 million, or 26 cents a share, for the quarter to May 4, wider than the loss of $2.6 million, or 9 cents a share, posted in the year-earlier period.

The company's adjusted loss per share came to 21 cents, while FactSet was expecting per-share earnings of 4 cents.

Revenue fell to $80.6 million from $94.4 million a year ago and also lagged the FactSet consensus of $91.8 million.

On the Vera Bradley indirect side, revenue fell 25%, while sales at Pura Vida were down 37% in a continuation of prior-quarter trends.

The company is expecting a business acceleration in the second half as Project Restoration moves take effect and backed its existing guidance.

That still calls for fiscal 2025 revenue of $460 million to $480 million and for EPS of 54 cents to 62 cents. The FactSet consensus is for revenue of $473.5 million and EPS of 59 cents.

The company is focusing on brand relevancy, targeting casual and feminine tastes in the 35-year-old to 54-year-old age group, who value fashion and function, said Ardrey. The company is sticking with its distinctive colors and quilting, but will update with new prints, colors, styles and designs.

"We've created a multi-year customer file growth plan with a focus on this core consumer target, along with an appropriate level of marketing investment to acquire new customers as we launch new products and our refreshed brand vision in July," she said.

The company will focus on items it's best at, including hands-free crossbodies and belt bags, backpacks, travel, and the smaller items that fit inside bags like wallets and pouches.

For the outlet business, it plans to create special lines to differentiate from full-price stores and focus on high-traffic, productive locations and move out of non-productive ones.

The stock has gained 0.7% in the year to date, underperforming the S&P 500 , which has gained 12.7%.

-Ciara Linnane

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06-12-24 1121ET

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