Vera Bradley Designs, Inc
Aug 29, 2012

Vera Bradley Announces Fiscal 2013 Second Quarter Financial Results

FORT WAYNE, Ind., Aug. 29, 2012 (GLOBE NEWSWIRE) -- Vera Bradley, Inc. (Nasdaq:VRA) today announced its financial results for the fiscal 2013 second quarter ended July 28, 2012. The Company reported net revenues of $123.0 million for the second quarter, compared to $103.8 million in the second quarter of fiscal 2012, an increase of $19.2 million, or 18.5%. Diluted earnings per share for the quarter were $0.33, a decrease of 3% from earnings per share in the second quarter of fiscal 2012.

"Although there were many accomplishments during the quarter, results fell short of our expectations," said Michael C. Ray, Vera Bradley's Chief Executive Officer. "The second quarter was challenging in May and June as we managed a product portfolio that underperformed in the midst of an uncertain consumer environment. Sales trends improved in July, which benefited from the strong reception of our fall collections. We are also encouraged by our future product introductions; however, we remain cautious regarding the second half of the year. Overall, we continue to make progress executing our growth strategies and we remain optimistic about our long-term prospects."

By segment, Direct revenues increased 37.2% to $65.7 million, driven by the opening of 21 new stores since the second quarter of fiscal 2012, a comparable-store sales increase of 5.3%, and e-commerce revenue growth of 21.2%. Indirect revenues increased 2.6% to $57.3 million, in-line with our expectations.

Gross profit for the second quarter increased 15.1% to $68.6 million, resulting in gross margin of 55.8%, compared to gross margin of 57.5% in the prior year. The second quarter decline in gross margin was due to increased promotional activity, partially offset by positive channel mix, as the Direct segment becomes a larger percentage of our business, as well as operational savings.

Total SG&A expense was $47.8 million for the second quarter, compared to $39.1 million in the prior year. SG&A as a percentage of net revenues was unfavorable by 120 basis points compared to the prior year, due primarily to annualizing fiscal 2012 infrastructure investments made in the second half of last year and higher occupancy costs driven by opening full-price stores earlier than originally anticipated.

Operating income decreased 4.9% to $21.8 million, or 17.7% of net revenues, in the second quarter, compared to operating income of $22.9 million, or 22.1% of net revenues in the second quarter of fiscal 2012.

Net income for the quarter decreased $0.2 million to $13.4 million, or $0.33 per diluted share, compared to $13.6 million, or $0.34 per diluted share, in the second quarter of fiscal 2012.

Year-to-Date Results

For the twenty-six weeks ended July 28, 2012, net revenues increased 17.1% to $240.2 million, from $205.2 million in the same period in the prior year. By segment, Direct revenues increased 35.8% to $124.9 million, with comparable-store sales increasing 4.9%. Indirect revenues increased 1.9% to $115.3 million.

Operating income increased 1.5% to $42.6 million, or 17.7% of net revenues, for the twenty-six weeks, compared to operating income of $42.0 million, or 20.5% of net revenues.

Net income for the twenty-six weeks increased 4.6% to $26.0 million, or $0.64 per diluted share, compared to $24.9 million, or $0.61 per diluted share a year ago.

Cash flow from operations for the twenty-six weeks ended July 28, 2012 totaled $25.5 million, compared to a use of cash of $11.8 million for the same period in the prior year, primarily due to improved inventory management.

Outlook

For the third quarter of fiscal 2013, the Company expects net revenues to be in a range of $134 million to $136 million, compared to $121.1 million in the third quarter of fiscal 2012. Gross margin for the third quarter is expected to expand over the prior year by approximately 200 basis points of which approximately 120 basis points is attributable to a $3.5 million sale to the off price channel in the prior year.

Diluted earnings per share are expected to be in a range of $0.37 to $0.39. The earnings per share estimate assumes an effective tax rate of 39% and fully diluted weighted average shares outstanding of 40.5 million.

For fiscal 2013, the Company expects net revenues to be in a range of $531 million to $536 million. Gross margin for fiscal 2013 is expected to expand over the prior year by approximately 30 basis points.

Diluted earnings per share for the full year are expected to be in a range of $1.60 to $1.63. This guidance includes an effective tax rate of 39% and fully diluted weighted average shares outstanding of 40.6 million.

Call Information

A conference call to discuss fiscal 2013 second quarter results is scheduled for today, August 29, 2012, at 4:30 p.m. Eastern Time. A broadcast of the call will be available via Vera Bradley's Investor Relations section of its website, www.verabradley.com. In addition, a replay of the call will be available shortly after the conclusion of the call and remain available through September 12, 2012. To access the recording, listeners should dial (877) 870-5176, and enter the access code, 2089468.

About Vera Bradley, Inc.

Vera Bradley infuses color into all aspects of women's lives with vibrant handbags, accessories, luggage, eyewear, travel items and gifts. Founded in 1982 by Barbara Bradley Baekgaard and Patricia R. Miller, the brand inspires women to "be colorful" with designs that reflect their personal style. As of July 28, 2012, Vera Bradley accessories can be found in 60 retail stores in the U.S., 10 outlet stores, approximately 3,300 specialty retailers and online at verabradley.com. Vera Bradley employs approximately 2,000 and the company's fiscal 2012 sales were $461 million. The company's commitment to breast cancer research continues to expand through the Vera Bradley Foundation for Breast Cancer. For more information about Vera Bradley (Nasdaq: VRA), visit www.verabradley.com/mediaroom.

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 website 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 website 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 growth strategies or manage our growing business; possible inability to successfully open new stores as planned; and possible inability to sustain levels of comparable-store sales. For a discussion of these and other risks and uncertainties that could cause actual results to differ materially from those contained in our forward-looking statements, please refer to "Risk Factors" in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended January 28, 2012. 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)
       
       
 July 28,
2012
January 28,
2012
July 30,
2011
Assets      
Current assets:      
Cash and cash equivalents  $ 7,612  $ 4,922  $ 788
Accounts receivable, net  49,279  38,097  44,719
Inventories  117,895  106,967  118,105
Prepaid expenses and other current assets  8,177  8,343  7,246
Deferred income taxes  8,396  8,010  9,739
Total current assets  191,359  166,339  180,597
       
Property, plant, and equipment, net  70,220  52,312  45,049
Other assets  1,669  862  1,084
Total assets  $ 263,248  $ 219,513  $ 226,730
       
Liabilities and Shareholders' Equity      
Current liabilities:      
Accounts payable  $ 45,016  $ 27,276  $ 30,924
Accrued employment costs  11,209  15,738  11,960
Other accrued liabilities  17,693  15,297  12,934
Income taxes payable  --  1,705  405
Current portion of long-term debt  90  89  86
Total current liabilities  74,008  60,105  56,309
       
Long-term debt  25,301  25,095  71,590
Deferred income taxes  4,314  4,205  3,971
Other long-term liabilities  8,474  6,101  4,869
 Total liabilities  112,097  95,506  136,739
       
Shareholders' equity:      
Additional paid-in capital  74,752  73,590  72,661
Retained earnings  76,319  50,320  17,256
Accumulated other comprehensive income  80  97  74
Total shareholders' equity  151,151  124,007  89,991
Total liabilities and shareholders' equity  $ 263,248  $ 219,513  $ 226,730
       
         
Vera Bradley, Inc.
Condensed Consolidated Statements of Income
(in thousands, except per share amounts)
(unaudited)
         
         
 Thirteen Weeks EndedTwenty-Six Weeks Ended
 July 28,
2012
July 30,
2011
July 28,
2012
July 30,
2011
         
Net revenues  $ 123,037  $ 103,789  $ 240,238  $ 205,179
Cost of sales  54,425  44,161  106,324  89,107
 Gross profit  68,612  59,628  133,914  116,072
Selling, general, and administrative expenses  47,833  39,120  95,024  79,109
Other income  1,020  2,418  3,719  5,023
 Operating income  21,799  22,926  42,609  41,986
Interest expense, net  152  329  343  645
 Income before income taxes  21,647  22,597  42,266  41,341
Income tax expense  8,274  8,964  16,267  16,484
 Net income  $ 13,373  $ 13,633  $ 25,999  $ 24,857
         
Basic weighted-average shares outstanding  40,532  40,507  40,524  40,507
Diluted weighted-average shares outstanding  40,568  40,541  40,557  40,537
Basic earnings per share  $ 0.33  $ 0.34  $ 0.64  $ 0.61
Diluted earnings per share  0.33  0.34  0.64  0.61
         
     
Vera Bradley, Inc.
Consolidated Statements of Cash Flows
($ in thousands)
(unaudited)
     
     
 Twenty-Six Weeks Ended
 July 28,
2012
July 30,
2011
Cash flows from operating activities    
Net income  $ 25,999  $ 24,857
 Adjustments to reconcile net income to net cash provided by (used in) operating activities:    
 Depreciation of property, plant, and equipment  4,759  4,461
 Provision for doubtful accounts  347  75
 Loss on disposal of property, plant, and equipment  25  -- 
 Stock-based compensation  1,431  662
 Deferred income taxes  (277)  (325)
 Changes in assets and liabilities:    
 Accounts receivable  (11,529)  (10,495)
 Inventories  (10,928)  (21,388)
 Other assets  (641)  1,012
 Accounts payable  17,740  583
 Income taxes payable  (1,705)  (9,605)
 Accrued and other liabilities  240  (1,615)
Net cash provided by (used in) operating activities  25,461  (11,778)
     
Cash flows from investing activities    
 Purchases of property, plant, and equipment  (22,704)  (6,526)
Net cash used in investing activities  (22,704)  (6,526)
     
Cash flows from financing activities    
 Payments on financial-institution debt  (62,750)  (12,000)
 Borrowings on financial-institution debt  63,000  16,700
 Payments on vendor-financed debt  (43)  (40)
 Change in bank overdraft  --  329
 Tax withholdings for equity compensation  (269)  --
 Other  --  76
Net cash provided by (used in) financing activities  (62)  5,065
Effect of exchange rate changes on cash and cash equivalents  (5)  74
     
Net increase (decrease) in cash and cash equivalents  2,690  (13,165)
Cash and cash equivalents, beginning of period  4,922  13,953
Cash and cash equivalents, end of period  $ 7,612  $ 788
     
CONTACT: Investors:

         

         Vera Bradley

         Paul G. Blair

         pblair@verabradley.com

         (260) 207-5183

         

         ICR, Inc.

         Joseph Teklits

         Jean Fontana

         Jean.fontana@icrinc.com

         (203) 682-8200

         

         Media:

         

         877-708-VERA (8372)

         Mediacontact@verabradley.com