Vera Bradley Designs, Inc
May 31, 2017

Vera Bradley Announces Fiscal First Quarter 2018 Results

First quarter net revenues totaled $96.1 million, in line with guidance

First quarter net loss on a GAAP basis totaled ($4.0) million, or ($0.11) per diluted share; first quarter net loss on a non-GAAP basis (excluding severance charges) totaled ($3.2) million, or ($0.09) per diluted share

Company ended the first quarter with a strong cash and investment position of $101.4 million, no debt, and year-over-year inventories down 7.0%

Management reiterates annual guidance

FORT WAYNE, Ind., May 31, 2017 (GLOBE NEWSWIRE) -- Vera Bradley, Inc. (Nasdaq:VRA) ("Vera Bradley" or the "Company") today announced its financial results for the fiscal first quarter ended April 29, 2017.

Comments on First Quarter Performance

Robert Wallstrom, Chief Executive Officer, noted, "Challenges in the retail environment continued into the first quarter, although April sales trends did improve over those in February and March.  Total revenues were in line with our expectations while our gross profit percentage was slightly below our guidance.  Our first quarter net loss per share of $0.09 (excluding severance charges) was better than guidance, primarily due to expense management, the timing of certain expenses, and a lower-than-expected tax rate." 

Summary of First Quarter Financial Performance

Net revenues totaled $96.1 million for the current year first quarter ended April 29, 2017, compared to $105.2 million in the prior year first quarter ended April 30, 2016.

For the current year first quarter, the Company posted a net loss of ($4.0) million, or ($0.11) per diluted share.  These results included $0.8 million of after-tax severance charges.  On a non-GAAP basis, excluding these charges, the Company's net loss totaled ($3.2) million, or ($0.09) per diluted share.

For the prior year first quarter, the Company recorded net income of $2.4 million, or $0.06 per diluted share.  

Looking Ahead

Wallstrom further noted, "As a reminder, our primary objective in fiscal 2018 is to increase our customer count.  In order to do this, we must:

"We believe executing these three key goals can position Vera Bradley for the future and improved profitability," Wallstrom concluded.  

First Quarter Details

The non-GAAP current first quarter income statement numbers referenced below exclude the previously disclosed severance charges.

Current year first quarter net revenues of $96.1 million were in line with the Company's guidance range of $94 million to $99 million.  Prior year first quarter revenues totaled $105.2 million.

Current year first quarter Direct segment revenues totaled $68.8 million, a 5.6% decrease from $72.9 million in the prior year first quarter.  Comparable sales (including e-commerce) decreased 12.5% for the quarter (reflecting a 7.8% decline in comparable store sales and a 22.0% decrease in e-commerce sales), which was partially offset by new store growth (the Company opened three full-line and eight factory outlet stores during the past 12 months).  First quarter comparable sales were negatively impacted by year-over-year declines in store and e-commerce traffic, and, as expected, e-commerce sales were partially impacted by the conversion to a new platform.  

As expected, Indirect segment revenues decreased 15.3% to $27.3 million from $32.2 million in the prior year first quarter, reflecting a reduction in the number of specialty accounts coupled with a reduction in orders from both specialty accounts and certain key accounts.  

Gross profit for the quarter totaled $52.7 million, or 54.8% of net revenues, compared to $59.7 million, or 56.7% of net revenues, in the prior year first quarter.  The year-over-year 190 basis point gross profit percentage decline primarily related to channel mix changes and increased promotional activity at the Company's factory outlet stores, which also caused the gross profit percentage to fall modestly below the low end of the guidance range of 55.0% to 55.5%.  

Selling, General, and Administrative ("SG&A") expense totaled $57.8 million, or 60.1% of net revenues, in the current year first quarter, compared to $56.4 million, or 53.6% of net revenues, in the prior year first quarter.  On a non-GAAP basis, excluding severance charges, SG&A expense totaled $56.4 million, or 58.7% of net revenues, in the current year first quarter.  Excluding charges, SG&A dollars were essentially flat on a year-over-year basis.  The SG&A expense rate was lower than the Company's guidance of 61.1% to 63.3% due to expense management and the timing of approximately $1.0 million of marketing expenses that are expected to be incurred in the remaining three quarters.         

The Company's operating loss totaled ($4.8) million, or (5.0%) of net revenues, in the current year first quarter, compared to operating income of $3.9 million, or 3.7% of net revenues, in the prior year first quarter.  On a non-GAAP basis, excluding severance charges, the Company's operating loss totaled ($3.5) million, or (3.6%) of net revenues, in the current year first quarter. 

By segment, Direct operating income was $6.8 million, or 9.9% of sales, compared to $12.1 million, or 16.6% of sales, in the prior year, and Indirect operating income was $9.4 million, or 34.6% of sales, compared to $12.6 million, or 39.1% of sales, in the prior year.  

Net capital spending for the first quarter totaled $3.4 million. 

During the first quarter, the Company repurchased approximately $1.2 million worth of its common stock (approximately 132,000 shares at an average price of $9.11).  The Company has approximately $20.1 million remaining under its share repurchase authorization.  

Cash, cash equivalents, and investments as of April 29, 2017 totaled $101.4 million compared to $81.8 million at the end of last year's first quarter.  The Company had no debt outstanding at quarter end.  Quarter-end inventory was $105.4 million compared to $113.4 million last year and in line with guidance of $100 million to $110 million.   

Second Quarter and Fiscal Year 2018 Outlook

The prior year non-GAAP numbers referenced below exclude store impairment charges (recorded in the second, third, and fourth quarters), certain severance charges (recorded in the second quarter), and the release of certain income tax reserves no longer deemed necessary (recorded in the third quarter).  Current year estimates do not include severance, impairment, store closing, or other charges.

For the second quarter of fiscal 2018, the Company expects:

For fiscal 2018 (which includes a 53rd week), the Company expectations are as follows: 

Disclosure Regarding Non-GAAP Measures

The Company's management does not, nor does it suggest that investors should, consider the supplemental non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with accounting principles generally accepted in the United States ("GAAP"). Further, the non-GAAP measures utilized by the Company may be unique to the Company, as they may be different from non-GAAP measures used by other companies.

The Company believes that the non-GAAP measures presented in this earnings release, including current year first quarter selling, general, and administrative expenses; operating loss; net loss and diluted loss per share, along with the associated percentages of net revenues, are helpful to investors because they allow for a more direct comparison of the Company's year-over-year performance and are consistent with management's evaluation of business performance.   A reconciliation of the non-GAAP measures to the most directly comparable GAAP measures can be found in the Company's supplemental schedules included in this earnings release.  

Call Information

A conference call to discuss fiscal first quarter results is scheduled for today, Wednesday, May 31, 2017, at 9:30 a.m. Eastern Time.  A broadcast of the call will be available via Vera Bradley's Investor Relations section of its website, www.verabradley.com.  Alternatively, interested parties may dial into the call at 1-(800) 949-2163, and enter the access code 7320726.  A replay will be available shortly after the conclusion of the call and remain available through June 14, 2017.  To access the recording, listeners should dial 1-(844) 512-2921, and enter the access code 7320726.

About Vera Bradley, Inc.

Vera Bradley is a leading designer of women's handbags, luggage and travel items, fashion and home accessories, and unique gifts.  Founded in 1982 by friends Barbara Bradley Baekgaard and Patricia R. Miller, the brand's innovative designs, iconic patterns, and brilliant colors continue to inspire and connect women unlike any other brand in the global marketplace. 

Vera Bradley offers a unique, multi-channel sales model as well as a focus on service and a high level of customer engagement.  The Company sells its products through two reportable segments: Direct and Indirect.  The Direct business consists of sales of Vera Bradley products through the Company's full-line and factory outlet stores in the United States, verabradley.com, eBay, and its annual outlet sale in Fort Wayne, Indiana.  The Indirect business consists of sales of Vera Bradley products to approximately 2,400 specialty retail locations, substantially all of which are located in the United States, as well as select department stores, national accounts, third party e-commerce sites, its wholesale business in Japan, and third-party inventory liquidators.

The Company's commitment to bringing more beauty into women's lives includes its dedication to breast cancer research through the Vera Bradley Foundation for Breast Cancer. 

Website Information

We routinely post important information for investors on our website www.verabradley.com in the "Investor Relations" section. We intend to use this webpage as a means of disclosing material, non-public information and for complying with our disclosure obligations under Regulation FD. Accordingly, investors should monitor the Investor Relations section of our website, in addition to following our press releases, SEC filings, public conference calls, presentations and webcasts. The information contained on, or that may be accessed through, our webpage is not incorporated by reference into, and is not a part of, this document.

Vera Bradley Safe Harbor Statement

Certain statements in this release are "forward-looking statements" made pursuant to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995.  Such forward-looking statements reflect the Company's current expectations or beliefs concerning future events and are subject to various risks and uncertainties that may cause actual results to differ materially from those that we expected, including: possible adverse changes in general economic conditions and their impact on consumer confidence and spending; possible inability to predict and respond in a timely manner to changes in consumer demand; possible loss of key management or design associates or inability to attract and retain the talent required for our business; possible inability to maintain and enhance our brand; possible inability to successfully implement our long-term strategic plan; possible inability to successfully open new stores and/or operate current stores as planned; adverse changes in the cost of raw materials and labor used to manufacture our products; possible adverse effects resulting from a significant disruption in our single distribution facility; and possible ramifications from the payment card incident disclosed in October 2016.  More information on potential factors that could affect the Company's financial results is included from time to time in the "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections of the Company's public reports filed with the SEC, including the Company's Form 10-K for the fiscal year ended January 28, 2017.  We undertake no obligation to publicly update or revise any forward-looking statement.  Financial schedules are attached to this release.

       
Vera Bradley, Inc. 
Condensed Consolidated Balance Sheets 
(in thousands) 
(unaudited) 
       
 April 29,
2017
 January 28,
2017
 April 30,
2016
 
Assets      
Current assets:      
Cash and cash equivalents$74,400  $86,375  $51,813  
Short-term investments 9,489   30,152   30,013  
Accounts receivable, net 22,693   23,313   27,691  
Inventories 105,421   102,283   113,412  
Income taxes receivable 5,722   3,217   2,766  
Prepaid expenses and other current assets 11,579   10,237   11,947  
Total current assets 229,304   255,577   237,642  
       
Property, plant, and equipment, net 100,566   101,577   114,904  
Long-term investments 17,519   -   -  
Deferred income taxes 12,672   13,539   11,142  
Other assets 2,222   2,816   2,057  
Total assets$362,283  $373,509  $365,745  
       
Liabilities and Shareholders' Equity      
Current liabilities:      
Accounts payable$25,705  $32,619  $26,378  
Accrued employment costs 10,743   12,474   10,503  
Other accrued liabilities 18,667   16,906   17,155  
Income taxes payable 681   508   -  
Total current liabilities 55,796   62,507   54,036  
       
Long-term liabilities 27,243   27,216   29,445  
Total liabilities 83,039   89,723   83,481  
       
Shareholders' equity:      
Additional paid-in-capital 89,438   88,739   85,706  
Retained earnings 259,718   263,767   246,427  
Accumulated other comprehensive loss (43)  (50)  (38) 
Treasury stock (69,869)  (68,670)  (49,831) 
Total shareholders' equity 279,244   283,786   282,264  
Total liabilities and shareholders' equity$362,283  $373,509  $365,745  
       

 

Vera Bradley, Inc.
Condensed Consolidated Statements of Income
(in thousands, except per share amounts)
(unaudited)
     
     
 Thirteen Weeks Ended 
 April 29,
2017
 April 30,
2016
 
     
Net revenues$96,135  $105,181 
Cost of sales 43,435   45,525 
Gross profit 52,700   59,656 
Selling, general, and administrative expenses 57,771   56,376 
Other income 267   577 
Operating (loss) income (4,804)  3,857 
Interest (income) expense, net (39)  48 
(Loss) income before income taxes (4,765)  3,809 
Income tax (benefit) expense (716)  1,391 
Net (loss) income$(4,049) $2,418 
     
Basic weighted-average shares outstanding 36,235   37,547 
Diluted weighted-average shares outstanding 36,235   37,724 
     
Basic net (loss) income per share$(0.11) $0.06 
Diluted net (loss) income per share$(0.11) $0.06 

 

Vera Bradley, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
    
    
 Thirteen Weeks Ended
 April 29,
2017
 April 30,
2016
Cash flows from operating activities   
Net (loss) income$(4,049) $2,418 
Adjustments to reconcile net (loss) income to net cash used in operating activities:   
Depreciation of property, plant, and equipment 4,948   4,702 
Provision for doubtful accounts 162   23 
Stock-based compensation 1,278   842 
Deferred income taxes 867   221 
Cash gain on investments 152   - 
Other non-cash gain, net (19)  (13)
Changes in assets and liabilities:   
Accounts receivable 458   3,580 
Inventories (3,138)  178 
Prepaid expenses and other assets (748)  (1,749)
Accounts payable (6,040)  1,262 
Income taxes (2,332)  (12,066)
Accrued and other liabilities (1,476)  (3,395)
Net cash used in operating activities (9,937)  (3,997)
    
Cash flows from investing activities   
Purchases of property, plant, and equipment (3,362)  (5,594)
Purchases of investments (26,975)  (30,000)
Proceeds from maturity of investment 30,000   - 
Net cash used in investing activities (337)  (35,594)
    
Cash flows from financing activities   
Tax withholdings for equity compensation (579)  (572)
Repurchase of common stock (1,116)  (5,694)
Other financing activities, net -   (16)
Net cash used in financing activities (1,695)  (6,282)
Effect of exchange rate changes on cash and cash equivalents (6)  5 
    
Net decrease in cash and cash equivalents$(11,975) $(45,868)
Cash and cash equivalents, beginning of period 86,375   97,681 
Cash and cash equivalents, end of period$74,400  $51,813 
    
Supplemental disclosure of cash flow information   
Cash paid for income taxes, net$522  $13,223 
Supplemental disclosure of non-cash activity   
Non-cash operating, investing, and financing activities   
Repurchase of common stock   
Expenditures incurred but not yet paid as of April 29, 2017 and April 30, 2016$83  $426 
Expenditures incurred but not yet paid as of January 28, 2017 and January 30, 2016$-  $436 
Purchases of property, plant, and equipment   
Expenditures incurred but not yet paid as of April 29, 2017 and April 30, 2016$2,780  $3,173 
Expenditures incurred but not yet paid as of January 28, 2017 and January 30, 2016$2,204  $2,872 
    

 

Vera Bradley, Inc.
First Quarter Fiscal 2018
GAAP to Non-GAAP Reconciliation Thirteen Weeks Ended April 29, 2017
(in thousands, except per share amounts)
(unaudited)
 Thirteen Weeks Ended 
 As Reported Other Items1 Non-GAAP
(Excluding Items)
 
Selling, general, and administrative expenses$57,771  $1,325  $56,446  
Operating loss (4,804)  (1,325)  (3,479) 
Loss before income taxes (4,765)  (1,325)  (3,440) 
Income tax benefit (716)  (487)  (229) 
Net loss (4,049)  (838)  (3,211) 
Diluted net loss per share$(0.11) $(0.02) $(0.09) 
       
Direct segment operating income$6,812  $-  $6,812  
Indirect segment operating income$9,446  $-  $9,446  
Unallocated corporate expenses$(21,062) $(1,325) $(19,737) 
       
1Items are for severance charges
 

 

Vera Bradley, Inc.
First Quarter Fiscal 2017
GAAP to Non-GAAP Reconciliation Thirteen Weeks Ended April 30, 2016
(in thousands, except per share amounts)
(unaudited)
 Thirteen Weeks Ended 
 As Reported Other Items1 Non-GAAP
(Excluding Items)
 
Selling, general, and administrative expenses$56,376  $- $56,376  
Operating income 3,857   -  3,857  
Income before income taxes 3,809   -  3,809  
Income tax expense 1,391   -  1,391  
Net income 2,418   -  2,418  
Diluted net income per share$0.06  $- $0.06  
       
Direct segment operating income$12,137  $- $12,137  
Indirect segment operating income$12,598  $- $12,598  
Unallocated corporate expenses$(20,878) $- $(20,878) 
       
1There were no Other Items identified during the first quarter of fiscal 2017         
       

CONTACTS:
Investors:
Julia Bentley, VP of Investor Relations and Communications
jbentley@verabradley.com 
(260) 207-5116

Media:	  
877-708-VERA (8372)