September 11, 2013

Vera Bradley Announces Fiscal 2014 Second Quarter Financial Results

  • Net revenues increased 1.9% to $125.4 million.

  • Direct net revenues increased 14.2%, including a decrease of 3.7% in comparable-store sales; Indirect net revenues decreased 12.2%.

  • Diluted EPS were $0.37 compared to $0.33 in the second quarter of fiscal 2013.

FORT WAYNE, Ind., Sept. 11, 2013 (GLOBE NEWSWIRE) -- Vera Bradley, Inc. (Nasdaq:VRA) today announced its financial results for the fiscal 2014 second quarter ended August 3, 2013. The Company reported net revenues of $125.4 million for the second quarter, compared to $123.0 million in the second quarter of fiscal 2013, an increase of $2.3 million, or 1.9%. Diluted earnings per share for the quarter were $0.37, an increase of 11.6% over earnings per share in the second quarter of fiscal 2013.

"We managed through considerable headwinds in the second quarter, yet delivered results in line with our expectations," said Michael C. Ray, Vera Bradley's Chief Executive Officer. "Nonetheless, our product offering underperformed in the midst of an uncertain consumer environment, which affected traffic in our retail stores. While we are encouraged by our strategic progress and remain optimistic about our long-term prospects, we continue to have a cautious outlook for the remainder of the year."

In the Direct segment, revenues increased 14.2% to $75.0 million, as a result of growth across all channels. In stores, net revenues grew 23.7% during the quarter, primarily a result of opening 20 full-price and four outlet stores since the second quarter of fiscal 2013. Comparable store sales decreased 3.7% during the quarter due to underperformance of the product offering and reduced traffic. E-commerce revenue grew 1.4% due to continued growth in website traffic, offset by reduced conversion. Indirect revenues decreased 12.2% to $50.4 million, primarily due to cautious ordering from specialty retailers.

Gross profit for the second quarter increased 4.6% to $71.8 million, resulting in a gross margin of 57.2%, compared to 55.8% for the same period in the prior year. The second quarter increase in gross margin was due primarily to fewer incentives offered to specialty retailers compared to the prior year.

Total SG&A expense was $48.3 million for the second quarter, compared to $47.8 million in the prior year. SG&A as a percentage of net revenues was favorable by 30 basis points compared to the same period in prior year, due primarily to cost management efforts, as well as reductions in variable compensation expense associated with company performance. This benefit was partially offset by the deleveraging of store operating expenses.

Operating income increased 10.4% to $24.1 million, or 19.2% of net revenues, in the second quarter compared to operating income of $21.8 million, or 17.7% of net revenues, in the second quarter of fiscal 2013.

Net income for the quarter increased $1.6 million to $15.0 million, or $0.37 per diluted share, compared to $13.4 million, or $0.33 per diluted share, in the second quarter of fiscal 2013.

Year-to-Date Results

For the twenty-six weeks ended August 3, 2013, net revenues increased 3.4% to $248.4 million, from $240.2 million in the same period in the prior year. By segment, Direct revenues increased 19.0% to $148.7 million, with a comparable-store sales decline of 1.8%. Indirect revenues decreased 13.5% to $99.7 million.

Operating income decreased 7.9% to $39.3 million, or 15.8% of net revenues, for the twenty-six weeks compared to operating income of $42.6 million, or 17.7% of net revenues, in the prior year.

Net income for the twenty-six weeks decreased 7.2% to $24.1 million, or $0.59 per diluted share, compared to $26.0 million, or $0.64 per diluted share, a year ago.

Cash flow from operations for the twenty-six weeks ended August 3, 2013 totaled $27.0 million compared to $25.5 million for the same period in the prior year.

Outlook

For the third quarter of fiscal 2014, the Company expects net revenues to be in a range of $128 million to $130 million, compared to $138 million in the third quarter of fiscal 2013. Gross margin for the third quarter is expected to decline over the prior year by 280 to 300 basis points primarily due to a shift in sales mix between the full-price and discount channels and increased promotional activity.

Diluted earnings per share are expected to be in a range of $0.33 to $0.35. The earnings per share estimate assumes an effective tax rate of 38% and fully diluted weighted average shares outstanding of 40.6 million.

For fiscal 2014, the Company expects net revenues to be in a range of $535 million to $540 million. Gross margin for fiscal 2014 is expected to decline 100 to 125 basis points.

Diluted earnings per share for the full year are expected to be in a range of $1.47 to $1.52. This guidance includes an effective tax rate of 38% and fully diluted weighted average shares outstanding of 40.6 million.

Call Information

A conference call to discuss fiscal 2014 second quarter results is scheduled for today, September 11, 2013, 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 December 10, 2013. To access the recording, listeners should dial (877) 870-5176, and enter the access code, 1575606.

About Vera Bradley, Inc.

Vera Bradley is a leading designer of women's handbags and accessories, luggage and travel items, eyewear, stationery and gifts. Founded in 1982 by friends Barbara Bradley Baekgaard and Patricia R. Miller, the brand's iconic designs and versatile styles offer women of all ages a colorful way to accessorize every look. Vera Bradley offers a unique, multi-channel sales model as well as a focus on service and a high level of engagement with fans. Fiscal 2013 net revenues increased by 17% to $541 million. The company's commitment to breast cancer research continues to increase its reach 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 February 2, 2013. 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)
    
    
 August 3,
2013
February 2,
2013
July 28,
2012
Assets      
Current assets:   
Cash and cash equivalents  $ 9,331  $ 9,603  $ 7,612
Accounts receivable, net  35,494  34,811  49,279
Inventories  142,864  131,562  117,895
Prepaid expenses and other current assets  9,706  11,016  8,177
Deferred income taxes  12,372  11,348  8,396
Total current assets  209,767  198,340  191,359
       
Property, plant, and equipment, net  82,346  77,211  70,220
Other assets  1,438  1,768  1,669
Total assets  $ 293,551  $ 277,319  $ 263,248
       
Liabilities and Shareholders' Equity      
Current liabilities:      
Accounts payable  $ 26,224  $ 14,853  $ 45,016
Accrued employment costs  8,442  14,162  11,209
Other accrued liabilities  19,967  16,532  17,693
Income taxes payable  2,026  7,094  --
Current portion of long-term debt  --   58  90
Total current liabilities  56,659  52,699  74,008
       
Long-term debt  --  15,037  25,301
Deferred income taxes  6,123  6,078  4,314
Other long-term liabilities  11,300  9,250  8,474
Total liabilities  74,082  83,064  112,097
       
Shareholders' equity:      
Additional paid-in capital  77,029  75,675  74,752
Retained earnings  143,330  119,190  76,319
Accumulated other comprehensive income  (890)  (610)  80
Total shareholders' equity  219,469  194,255  151,151
Total liabilities and shareholders' equity  $ 293,551  $ 277,319  $ 263,248
 
 
 
Vera Bradley, Inc.
Condensed Consolidated Statements of Income
(in thousands, except per share amounts)
(unaudited)
       
       
 Thirteen Weeks EndedTwenty-Six Weeks Ended
 August 3,
2013
July 28,
2012
August 3,
2013
July 28,
2012
       
Net revenues  $ 125,372  $ 123,037  $ 248,405  $ 240,238
Cost of sales  53,599  54,425  108,166  106,324
Gross profit  71,773  68,612  140,239  133,914
Selling, general, and administrative expenses  48,336  47,833  103,563  95,024
Other income  630  1,020  2,581  3,719
Operating income  24,067  21,799  39,257  42,609
Interest expense, net  82  152  223  343
Income before income taxes  23,985  21,647  39,034  42,266
Income tax expense  9,034  8,274  14,894  16,267
Net income  $ 14,951  $ 13,373  $ 24,140  $ 25,999
         
Basic weighted-average shares outstanding  40,603  40,532  40,592  40,524
Diluted weighted-average shares outstanding  40,623  40,568  40,624  40,557
Basic earnings per share  $ 0.37  $ 0.33  $ 0.59  $ 0.64
Diluted earnings per share  $ 0.37  $ 0.33  $ 0.59  $ 0.64
 
 
 
Vera Bradley, Inc.
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
     
     
 Twenty-Six Weeks Ended
 August 3,
2013
July 28,
2012
Cash flows from operating activities  
Net income  $ 24,140  $ 25,999
Adjustments to reconcile net income to net cash provided by    
(used in) operating activities:    
Depreciation of property, plant, and equipment  6,796  4,759
Provision for doubtful accounts  (117)  347
Loss on disposal of property, plant, and equipment  9  25
Stock-based compensation  1,820  1,431
Deferred income taxes  (1,039)  (277)
Changes in assets and liabilities:    
Accounts receivable  (566)  (11,529)
Inventories  (11,507)  (10,928)
Prepaid expenses and other assets  1,640  (641)
Accounts payable  11,371  17,740
Income taxes payable  (5,068)  (1,705)
Accrued and other liabilities  (475)  240
Net cash provided by operating activities  27,004  25,461
   
Cash flows from investing activities  
Purchases of property, plant, and equipment  (11,976)  (22,704)
Net cash used in investing activities  (11,976)  (22,704)
   
Cash flows from financing activities  
Payments on financial-institution debt  (45,000)  (62,750)
Borrowings on financial-institution debt  30,000  63,000
Tax withholdings for equity compensation  145  (269)
Other financing activities, net  (406)  (43)
Net cash used in financing activities  (15,261)  (62)
Effect of exchange rate changes on cash and cash equivalents  (39)  (5)
     
Net increase (decrease) in cash and cash equivalents  (272)  2,690
Cash and cash equivalents, beginning of period  9,603  4,922
Cash and cash equivalents, end of period  $ 9,331  $ 7,612
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


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