Vera Bradley Designs, Inc
Mar 11, 2015

Vera Bradley Announces Fourth Quarter and Fiscal Year 2015 Results

Net revenues from continuing operations totaled $152.6 million for the fourth quarter and $509.0 million for the fiscal year

Income from continuing operations totaled $17.3 million, or $0.43 per diluted share, for the quarter, and $40.8 million, or $1.00 per diluted share, for the fiscal year

Company ends fiscal year with strong cash position of $112.3 million and year-over-year inventories down 28.1%

FORT WAYNE, Ind., March 11, 2015 (GLOBE NEWSWIRE) -- Vera Bradley, Inc. (Nasdaq:VRA) ("Vera Bradley" or the "Company") today announced its financial results for the fourth quarter and fiscal year ended January 31, 2015 ("fiscal 2015").

Summary of Financial Performance

Net revenues from continuing operations totaled $152.6 million for the current year fourth quarter ended January 31, 2015, compared to $156.4 million in the prior year fourth quarter ended February 1, 2014.

For the current year fourth quarter, the Company recorded net income from continuing operations of $17.3 million, or $0.43 per diluted share. Those results included a net after-tax benefit of $0.2 million comprised of:

In the prior year fourth quarter ended February 1, 2014, income from continuing operations totaled $19.9 million, or $0.49 per diluted share. These results included an after-tax inventory write-down of $3.0 million, or $0.07 per share.

Net revenues from continuing operations totaled $509.0 million for fiscal 2015, compared to $530.9 million for the fiscal year ended February 1, 2014 ("fiscal 2014"). Net income from continuing operations totaled $40.8 million, or $1.00 per diluted share, for fiscal 2015. Those results included the aforementioned net after-tax benefit of $0.2 million. Net income from continuing operations totaled $60.1 million, or $1.48 per diluted share, for fiscal 2014, which included the aforementioned inventory write-down.

Comments on Fiscal 2015 Accomplishments

Robert Wallstrom, Chief Executive Officer, noted, "Even though our fourth quarter revenues were challenging and fell below our expectations, we were able to deliver earnings per share within our guidance."

"Fiscal 2015 was certainly a year of transition for Vera Bradley," Wallstrom commented. "We made substantial progress against our long-term strategic plan. Specifically:

Looking Ahead

Wallstrom noted, "While we have made progress on our key initiatives, the overall business trends remain difficult. By this time, we had expected to regain momentum in the business, but that has not happened. Our core customers are continuing to buy our products. However, our primary issue is that we have not attracted enough new customers to the brand, and therefore, both traffic and sales remain extremely challenging.   

"We remain committed to our long-term strategic plan. In fact, based on the challenges we are facing in traffic and sales trends, we are more convinced than ever that our strategies to innovate and modernize our products, distribution, and marketing are the right ones for the future."  

Wallstrom continued, "In fiscal 2016, we are focusing on attracting new customers to the brand. Specifically:

"As always, we expect to carefully manage our expenses but intend to redeploy any savings realized into areas such as marketing and e-commerce that will strengthen and grow the business for the long-term," Wallstrom added.  Management expects that the closure of its domestic manufacturing facility will reduce operating costs by approximately $12.0 million annually beginning in the fourth quarter of fiscal 2016.

Wallstrom concluded, "We continue to believe that we can reach $1 billion in sales and a high-teen operating margin in the future but that it will take longer to achieve these goals than the five years we originally projected."

Discontinued Operations

In June 2014, the Company entered into a five-year agreement with Mitsubishi Corporation Fashion Company and Look Inc. to import and distribute Vera Bradley products in Japan. As a result of moving to this wholesale business model, the Company exited its direct business in Japan during the third quarter of fiscal 2015 and is accounting for it as a discontinued operation. Income statement numbers referenced in this release reflect the Company's continuing operations.

Fourth Quarter Details

Current year fourth quarter net revenues of $152.6 million fell below the Company's guidance of $158 million to $163 million. Prior year fourth quarter revenues totaled $156.4 million.

Current year fourth quarter Direct segment revenues totaled $107.7 million, a 0.1% increase from $107.6 million in the prior year fourth quarter. In the Company's stores, fourth quarter year-over-year net revenues grew 6.6%, reflecting the opening of 13 full-line and 14 factory outlet stores during the past 12 months. Comparable sales (including e-commerce) decreased 14.4% for the quarter (reflecting a 20.7% decline in comparable store sales and a 7.3% decrease in e-commerce sales). As expected, fourth quarter comparable store sales were negatively impacted by year-over-year declines in store traffic.   

Indirect segment revenues decreased 8.0% to $44.9 million from $48.9 million in the prior year fourth quarter, primarily due to lower re-orders from the Company's specialty retail accounts as well as a reduction in the number of specialty retail accounts.   

Gross profit for the quarter totaled $80.0 million, or 52.4% of net revenues, compared to $82.6 million, or 52.8% of net revenues, in the prior year fourth quarter. The current year gross margin rate was negatively impacted by approximately 160 basis points related to charges associated with the planned closing of its domestic manufacturing facility, partially offset by the benefit for gift card breakage. Excluding these items, the realized gross margin rate would have been consistent with guidance of 53.5% to 54.5%. The prior year fourth quarter gross margin rate was negatively impacted by about 300 basis points due to the aforementioned fabric and baby category inventory write-down. Excluding the current year charges and the prior year write-down, the year-over-year gross margin rate declined, primarily due to increased promotional activity. 

SG&A expense totaled $54.7 million, or 35.8% of net revenues, in the current year fourth quarter, compared to $52.5 million, or 33.6% of net revenues, in the prior year fourth quarter. As expected, SG&A dollars increased over the prior year primarily due to strategic investments including new store expenses, key management additions, marketing, and e-commerce initiatives. The realized SG&A expense rate was in line with the Company's guidance of 35.5% to 36.5%.      

Operating income totaled $25.9 million, or 17.0% of net revenues, in the current year fourth quarter, compared to $31.3 million, or 20.0% of net revenues, in the prior year fourth quarter. By segment, Direct operating income was $29.4 million, or 27.3% of sales, consistent with the prior year, and Indirect operating income was $15.6 million, or 34.8% of sales, compared to $18.6 million, or 38.1% of sales, in the prior year.

The effective tax rate was 32.9% for the quarter compared to 36.1% in the prior year fourth quarter. The current year effective tax rate was positively impacted by approximately 500 basis points due to the previously mentioned tax adjustment related to Japan.  Excluding this tax adjustment, the year-over-year increase in the effective rate was due primarily to an increase in non-deductible items for tax purposes along with a slight increase in the overall state tax rate. 

Fiscal Year 2015 Details

Fiscal year 2015 net revenues totaled $509.0 million, compared to $530.9 million last year. 

Direct segment revenues totaled $335.6 million for the year, a 4.5% increase over $321.1 million in the prior year. In the Company's stores, current year-over-year net revenues grew 6.5%, reflecting the opening of 13 full-line and 14 factory outlet stores during the past 12 months, which was partially offset by a comparable store sales decline. Comparable sales (including e-commerce) fell 7.6% for the year (reflecting a 16.1% decline in comparable store sales and a 3.9% increase in e-commerce sales).   

For the year, Indirect segment revenues decreased 17.4% to $173.4 million from $209.8 million in the prior year, primarily due to lower re-orders from the Company's specialty retail accounts as well as a reduction in the number of specialty retail accounts.   

Gross profit for the year totaled $269.0 million, or 52.9% of net revenues, compared to $292.2 million, or 55.0% of net revenues, in the comparable prior year period. The year-over-year decline in gross margin rate was primarily related to increased year-over-year promotional activity. 

SG&A expense totaled $208.7 million, or 41.0% of net revenues, in the current year, compared to $201.2 million, or 37.9% of net revenues, in the prior year. As expected, SG&A dollars increased over the prior year primarily due to strategic investments including new store expenses, key management additions, marketing, and e-commerce initiatives.

Operating income totaled $64.1 million, or 12.6% of net revenues, for the year, compared to $95.8 million, or 18.0% of net revenues, in the prior year.   By segment, Direct operating income was $74.1 million, or 22.1% of sales, compared to $81.2 million, or 25.3% of sales, last year, and Indirect operating income was $66.2 million, or 38.2% of sales, compared to $84.1 million, or 40.1% of sales, in the prior year.

The effective tax rate was 35.9% for the year compared to 36.8% in the prior year.  

Cash flow from operating activities for the year totaled $103.8 million, compared to $87.9 million for the same period last year. The improvement was driven primarily by improved inventory management.

Cash and cash equivalents as of January 31, 2015 totaled $112.3 million compared to $59.2 million at last fiscal year end. The Company had no debt outstanding at fiscal year end. Year-end inventory was $98.4 million, below guidance of $100 million to $110 million and compared to $136.9 million last year. Net capital spending for the year totaled $37.1 million, slightly below guidance of $40 million due to timing of certain expenditures related to the corporate campus consolidation.

During the fourth quarter, the Company repurchased approximately $9.4 million of common stock under its $40 million share repurchase plan (equating to approximately 452,000 shares at an average price of $20.83). This brings the year-to-date total repurchases to approximately $13.0 million (equating to approximately 621,000 shares at an average price of $20.87).

First Quarter and Fiscal Year 2016 Outlook

Guidance below is on a continuing operations basis and excludes estimated restructuring and other charges of $6.0 million to $7.0 million ($3.8 million to $4.5 million after tax) that will be recorded in the first quarter of fiscal 2016, related to the closing of the Company's domestic manufacturing facility and other cost saving measures. 

For the first quarter of fiscal 2016, the Company expects:

For fiscal 2016, the Company expects:

Call Information

A conference call to discuss fiscal 2015 fourth quarter and year-end results is scheduled for today, Wednesday, March 11, 2015, 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 (800) 946-0722, and enter the access code 1250315. A replay of the call will be available shortly after the conclusion of the call and remain available through March 25, 2015. To access the recording, listeners should dial (877) 870-5176, and enter the access code 1250315.

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 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 2,700 specialty retail doors, 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 liquidation.

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 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 growth strategies or manage our growing business; possible inability to successfully open new stores as planned; adverse changes in the cost of raw materials and labor used to manufacture our products; and possible adverse effects resulting from a significant disruption in our single distribution facility. 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 1, 2014 and Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarter ended November 1, 2014. We undertake no obligation to publicly update or revise any forward-looking statement. Financial schedules are attached to this release.

 
Vera Bradley, Inc.
Consolidated Balance Sheets
(in thousands)
(unaudited)
   
 January 31,
2015
February 1,
2014
Assets    
Current assets:  
Cash and cash equivalents  $ 112,292  $ 59,215
Accounts receivable, net  31,374  29,174
Inventories  98,403  136,923
Income taxes receivable  3,208  --
Prepaid expenses and other current assets  9,100  9,952
Deferred income taxes  13,320  13,094
Total current assets  267,697  248,358
     
Property, plant, and equipment, net  109,003  84,940
Other assets  584  1,085
Total assets  $ 377,284  $ 334,383
     
Liabilities and Shareholders' Equity    
Current liabilities:    
Accounts payable  $ 32,906  $ 27,745
Accrued employment costs  14,595  10,586
Other accrued liabilities  15,548  14,891
Income taxes payable  --  1,625
Total current liabilities  63,049  54,847
     
Deferred income taxes  5,297  4,643
Other long-term liabilities  24,467  19,746
Total liabilities  92,813  79,236
     
Shareholders' equity:    
Additional paid-in-capital  80,992  78,153
Retained earnings  216,451  178,002
Accumulated other comprehensive loss  (15)  (1,008)
Treasury stock  (12,957)  --
Total shareholders' equity  284,471  255,147
Total liabilities and shareholders' equity  $ 377,284  $ 334,383
 
 
Vera Bradley, Inc.
Consolidated Statements of Income
(in thousands, except per share amounts)
(unaudited)
       
 Thirteen Weeks EndedFifty-Two Weeks Ended
 January 31,
2015
February 1,
2014
January 31,
2015
February 1,
2014
         
Net revenues  $ 152,629  $ 156,419  $ 508,990  $ 530,896
Cost of sales  72,587  73,784  239,981  238,684
Gross profit  80,042  82,635  269,009  292,212
Selling, general, and administrative expenses  54,693  52,540  208,675  201,231
Other income  584  1,168  3,736  4,776
Operating income  25,933  31,263  64,070  95,757
Interest expense, net  88  101  407  571
Income from continuing operations before income taxes  25,845  31,162  63,663  95,186
Income tax expense  8,502  11,258  22,828  35,057
Income from continuing operations   17,343  19,904  40,835  60,129
Loss from discontinued operations, net of taxes  --   (458)  (2,386)  (1,317)
Net income  $ 17,343  $ 19,446  $ 38,449  $ 58,812
         
Basic weighted-average shares outstanding  40,286  40,606  40,568  40,599
Diluted weighted-average shares outstanding  40,371  40,694  40,632  40,648
         
Net income (loss) per share - basic        
Continuing operations  $ 0.43  $ 0.49  $ 1.01  $ 1.48
Discontinued operations  --   (0.01)  (0.06)  (0.03)
Net income   $ 0.43  $ 0.48  $ 0.95  $ 1.45
         
Net income (loss) per share - diluted        
Continuing operations  $ 0.43  $ 0.49  $ 1.00  $ 1.48
Discontinued operations  --   (0.01)  (0.06)  (0.03)
Net income  $ 0.43  $ 0.48  $ 0.95  $ 1.45
 
 
Vera Bradley, Inc.
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
     
 Fifty-Two Weeks Ended
 January 31,
2015
February 1,
2014
Cash flows from operating activities    
Net income  $ 38,449  $ 58,812
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation of property, plant, and equipment  15,216  15,104
Provision for doubtful accounts  (148)  (153)
Loss on disposal of property, plant, and equipment  21  29
Stock-based compensation  3,513  2,950
Deferred income taxes  428  (3,241)
Discontinued operations  996  -- 
Changes in assets and liabilities:    
Accounts receivable  (2,052)  7,933
Inventories  38,520  (5,682)
Prepaid expenses and other assets  1,353  1,747
Accounts payable  2,873  12,892
Income taxes  (4,833)  (5,469)
Accrued and other liabilities  9,476  2,942
Net cash provided by operating activities  103,812  87,864
   
Cash flows from investing activities  
Purchases of property, plant, and equipment  (37,128)  (22,862)
Net cash used in investing activities  (37,128)  (22,862)
   
Cash flows from financing activities  
Payments on financial-institution debt  --  (45,000)
Borrowings on financial-institution debt  --  30,000
Tax withholdings for equity compensation  (674)  (412)
Repurchase of common stock  (12,841)  --
Other financing activities, net  (89)  99
Net cash used in financing activities  (13,604)  (15,313)
Effect of exchange rate changes on cash and cash equivalents  (3)  (77)
     
Net increase in cash and cash equivalents  $ 53,077  $ 49,612
Cash and cash equivalents, beginning of period  59,215  9,603
Cash and cash equivalents, end of period  $ 112,292  $ 59,215
     
Supplemental disclosure of cash-flow information    
Income taxes paid  $ 25,957  $ 42,287
Interest paid  $ 275  $ 161
Supplemental disclosure of non-cash activity    
Non-cash operating, investing, and financing activities    
Repurchase of common stock incurred but not yet paid  $ 116  $ --
Property, plant, and equipment expenditures incurred but not yet paid  $ 2,172  $ --
 
 
Vera Bradley, Inc.
Supplemental Statements of Income Fiscal 20151
(in thousands, except per share amounts)
(unaudited)
      
 Thirteen Weeks EndedFifty-Two
 Weeks Ended
 May 3,
2014
August 2,
2014
November 1,
2014
January 31,
2015
January 31,
2015
           
Net revenues  $ 112,197  $ 118,960  $ 125,204  $ 152,629  $ 508,990
Cost of sales  52,442  55,516  59,436  72,587  239,981
Gross profit  59,755  63,444  65,768  80,042  269,009
Selling, general, and administrative expenses  50,045  50,663  53,274  54,693  208,675
Other income  1,577  465  1,110  584  3,736
Operating income from continuing operations  11,287  13,246  13,604  25,933  64,070
Interest expense, net  80  24  215  88  407
Income from continuing operations before income taxes  11,207  13,222  13,389  25,845  63,663
Income tax expense  4,330  5,328  4,668  8,502  22,828
Income from continuing operations  6,877  7,894  8,721  17,343  40,835
Discontinued operations, net of income taxes  (310)  (296)  (1,780)  --   (2,386)
Net income  $ 6,567  $ 7,598  $ 6,941  $ 17,343  $ 38,449
           
Basic weighted-average shares outstanding  40,639  40,686  40,663  40,286  40,568
Diluted weighted-average shares outstanding  40,725  40,719  40,716  40,371  40,632
           
Net income (loss) per share - basic          
Continuing operations  $ 0.17  $ 0.19  $ 0.21  $ 0.43  $ 1.01
Discontinued operations  (0.01)  (0.01)  (0.04)  --   (0.06)
Net income  $ 0.16  $ 0.19  $ 0.17  $ 0.43  $ 0.95
           
Net income (loss) per share - diluted          
Continuing operations  $ 0.17  $ 0.19  $ 0.21  $ 0.43  $ 1.00
Discontinued operations  (0.01)  (0.01)  (0.04)  --   (0.06)
Net income  $ 0.16  $ 0.19  $ 0.17  $ 0.43  $ 0.95
      
1On June 4, 2014, the Company entered into a five-year agreement with Mitsubishi Corporation and Look Inc. to import and distribute Vera Bradley products in Japan. The supplemental schedule provided above recasts the Company's quarterly and annual income statements for fiscal 2015 to present the Japan results as discontinued operations.
 
 
Vera Bradley, Inc.
Supplemental Statements of Income Fiscal 20141
(in thousands, except per share amounts)
(unaudited)
      
 Thirteen Weeks EndedFifty-Two
 Weeks Ended
 May 4,
2013
August 3,
2013
November 2,
2013
February 1,
2014
February 1,
 2014
           
Net revenues  $ 121,559  $ 123,969  $ 128,949  $ 156,419  $ 530,896
Cost of sales  54,085  53,105  57,710  73,784  238,684
Gross profit  67,474  70,864  71,239  82,635  292,212
Selling, general, and administrative expenses  54,015  47,111  47,565  52,540  201,231
Other income  1,951  630  1,027  1,168  4,776
Operating income from continuing operations  15,410  24,383  24,701  31,263  95,757
Interest expense, net  204  127  139  101  571
Income from continuing operations before income taxes  15,206  24,256  24,562  31,162  95,186
Income tax expense  5,860  9,034  8,905  11,258  35,057
Income from continuing operations  9,346  15,222  15,657  19,904  60,129
Discontinued operations, net of income taxes  (157)  (271)  (431)  (458)  (1,317)
Net income  $ 9,189  $ 14,951  $ 15,226  $ 19,446  $ 58,812
           
Basic weighted-average shares outstanding  40,580  40,603  40,605  40,606  40,599
Diluted weighted-average shares outstanding  40,624  40,623  40,652  40,694  40,648
           
Net income (loss) per share - basic          
Continuing operations  $ 0.23  $ 0.37  $ 0.39  $ 0.49  $ 1.48
Discontinued operations  --   (0.01)  (0.01)  (0.01)  (0.03)
As reported  $ 0.23  $ 0.37  $ 0.37  $ 0.48  $ 1.45
           
Net income (loss) per share - diluted          
Continuing operations  $ 0.23  $ 0.37  $ 0.39  $ 0.49  $ 1.48
Discontinued operations  --   (0.01)  (0.01)  (0.01)  (0.03)
As reported  $ 0.23  $ 0.37  $ 0.37  $ 0.48  $ 1.45
           
1On June 4, 2014, the Company entered into a five-year agreement with Mitsubishi Corporation and Look Inc. to import and distribute Vera Bradley products in Japan. The supplemental schedule provided above recasts the Company's quarterly and annual income statements for fiscal 2014 to present the Japan results as discontinued operations.
CONTACT: Investors:

         Julia Bentley, VP of Investor Relations and Communications

         jbentley@verabradley.com

         (260) 207-5116

         

         Media:

         877-708-VERA (8372)