Vera Bradley Announces Fiscal First Quarter 2019 Results
First quarter net revenues totaled
First quarter net loss totaled
Company ended the first quarter with a strong cash and investment position of
Management increases annual diluted EPS guidance range to
Comments on First Quarter Performance and Looking Ahead
Wallstrom continued, “Vision 20/20 – our plan to strengthen our brand and Company health by materially reducing clearance and realigning our expense structure – continues to be the driving force behind every action we take. We made excellent progress against our initiatives in the first quarter. We reduced clearance activity in our full-line stores and on verabradley.com by over 75% and increased full-price selling in these two channels in the high-single digit range. We continued to deliver on our SG&A reductions through diligent expense management, and we increased our year-over-year cash and investment balances by over
“A primary goal for fiscal 2019 is to drive brand desirability through product and marketing innovation, and we made substantial progress on these fronts as well.”
“By executing Vision 20/20, we expect that our business and brand will become healthier, operating performance will improve, and cash flows will remain strong over the next three years. We are laying the foundation of the future growth of the business,” Wallstrom concluded.
Summary of First Quarter Financial Performance
Net revenues totaled
For the current year first quarter, the Company posted a net loss of
First Quarter Details
The non-GAAP prior year first quarter income statement numbers referenced below exclude the previously disclosed severance charges.
Current year first quarter Direct segment revenues totaled
Indirect segment revenues decreased 22.9% to
Gross profit for the quarter totaled
Selling, General, and Administrative (“SG&A”) expense totaled
The Company’s operating loss totaled
By segment, Direct operating income was
Balance Sheet
Net capital spending for the first quarter totaled
Cash, cash equivalents, and investments as of
Quarter-end inventory was
Second Quarter and Fiscal Year 2019 Outlook
All numbers referenced below are non-GAAP. Prior year non-GAAP numbers exclude the previously disclosed severance charges, store impairment charges, strategic plan consulting fees, tax reform legislation charge, and other charges. The current year non-GAAP estimates below exclude similar charges.
For the second quarter of fiscal 2019, the Company expects:
- Net revenues of
$111 to $116 million compared to prior year second quarter revenues of$112.4 million . This estimate reflects the movement of approximately$6 million in revenues to the second quarter this year from the third quarter last year, related to promotional event timing shifts. - A gross profit percentage of flat to slightly down compared to 56.3% in the prior year second quarter. The gross profit rate may be down slightly due to promotional event shifts into the second quarter from the third quarter last year.
- SG&A expense of
$55.0 to $57.0 million compared to adjusted SG&A expense of$55.9 million in the prior year second quarter. The SG&A estimate reflects expense management and implementation of Vision 20/20 savings, offset by the timing of certain SG&A expenses (primarily marketing) expected to shift into the second quarter this year. - Diluted earnings per share of
$0.15 to $0.17 , based on diluted weighted-average shares outstanding of 35.7 million and an effective tax rate of 25.0%. The previously mentioned event shifts equate to incremental income of approximately$0.07 per diluted share in the current year second quarter. On a non-GAAP basis, excluding charges, adjusted net income totaled$4.6 million , or$0.13 per diluted share, in the prior year second quarter. - Inventory of
$85 to $95 million at the end of the second quarter, compared to$104.1 million at the end of last year’s second quarter.
For fiscal 2019, Company’s updated expectations are as follows:
- Net revenues of
$405 to $422 million compared to$454.6 million in fiscal 2018. - A gross profit percentage of 56.3% to 56.6% compared to the adjusted gross profit percentage of 56.1% in fiscal 2018. The gross profit percentage should be boosted by reduced reliance on clearance selling and lower product costs, partially offset by channel mix changes and expected overhead deleverage due to lower inventory levels.
- SG&A expense of
$210 to $215 million compared to adjusted SG&A expense of$221.4 million in fiscal 2018, reflecting expense management and implementation of Vision 20/20 savings. - Diluted earnings per share of
$0.40 to $0.50 , based on diluted weighted-average shares outstanding of 35.7 million and an effective tax rate of 25.0%. Excluding charges, adjusted diluted earnings per share totaled$0.60 last year. - Net capital spending of approximately
$10 million compared to$11.8 million in the prior year.
The prior fiscal year contained an extra (53rd) week. Management estimates that the additional week contributed approximately
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 Company believes that the non-GAAP measures presented in this earnings release, including prior year 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 results for the first quarter is scheduled for today,
About
The Company’s commitment to bringing more beauty into women’s lives includes its dedication to breast cancer research through the
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,
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 Vision 20/20; possible inability to successfully implement our long-term strategic plan; possible inability to successfully open new stores, close targeted 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
CONTACTS:
Investors:
jbentley@verabradley.com
(260) 207-5116
Media:
877-708-VERA (8372)
| Vera Bradley, Inc. | ||||||||||||
| Condensed Consolidated Balance Sheets | ||||||||||||
| (in thousands) | ||||||||||||
| (unaudited) | ||||||||||||
| May 5, 2018 |
February 3, 2018 |
April 29, 2017 |
||||||||||
| Assets | ||||||||||||
| Current assets: | ||||||||||||
| Cash and cash equivalents | $ | 61,403 | $ | 68,751 | $ | 74,400 | ||||||
| Short-term investments | 59,892 | 54,150 | 9,489 | |||||||||
| Accounts receivable, net | 17,523 | 15,566 | 22,693 | |||||||||
| Inventories | 86,188 | 87,838 | 105,421 | |||||||||
| Income taxes receivable | 4,575 | 4,391 | 5,722 | |||||||||
| Prepaid expenses and other current assets | 10,895 | 11,327 | 11,579 | |||||||||
| Total current assets | 240,476 | 242,023 | 229,304 | |||||||||
| Property, plant, and equipment, net | 86,411 | 86,463 | 100,566 | |||||||||
| Long-term investments | 10,992 | 15,515 | 17,519 | |||||||||
| Deferred income taxes | 5,437 | 5,385 | 12,672 | |||||||||
| Other assets | 1,183 | 1,283 | 2,222 | |||||||||
| Total assets | $ | 344,499 | $ | 350,669 | $ | 362,283 | ||||||
| Liabilities and Shareholders' Equity | ||||||||||||
| Current liabilities: | ||||||||||||
| Accounts payable | $ | 13,373 | $ | 13,503 | $ | 25,705 | ||||||
| Accrued employment costs | 6,181 | 13,616 | 10,743 | |||||||||
| Other accrued liabilities | 13,850 | 12,343 | 18,667 | |||||||||
| Income taxes payable | 906 | 812 | 681 | |||||||||
| Total current liabilities | 34,310 | 40,274 | 55,796 | |||||||||
| Long-term liabilities | 25,494 | 25,112 | 27,243 | |||||||||
| Total liabilities | 59,804 | 65,386 | 83,039 | |||||||||
| Shareholders' equity: | ||||||||||||
| Additional paid-in-capital | 91,569 | 91,192 | 89,438 | |||||||||
| Retained earnings | 269,867 | 270,783 | 259,718 | |||||||||
| Accumulated other comprehensive loss | (163 | ) | (114 | ) | (43 | ) | ||||||
| Treasury stock | (76,578 | ) | (76,578 | ) | (69,869 | ) | ||||||
| Total shareholders' equity | 284,695 | 285,283 | 279,244 | |||||||||
| Total liabilities and shareholders' equity | $ | 344,499 | $ | 350,669 | $ | 362,283 | ||||||
| Vera Bradley, Inc. | ||||||||
| Condensed Consolidated Statements of Income | ||||||||
| (in thousands, except per share amounts) | ||||||||
| (unaudited) | ||||||||
| Thirteen Weeks Ended | ||||||||
| May 5, 2018 |
April 29, 2017 |
|||||||
| Net revenues | $ | 86,591 | $ | 96,135 | ||||
| Cost of sales | 37,975 | 43,435 | ||||||
| Gross profit | 48,616 | 52,700 | ||||||
| Selling, general, and administrative expenses | 50,705 | 57,771 | ||||||
| Other income | 177 | 267 | ||||||
| Operating loss | (1,912 | ) | (4,804 | ) | ||||
| Interest income, net | (243 | ) | (39 | ) | ||||
| Loss before income taxes | (1,669 | ) | (4,765 | ) | ||||
| Income tax benefit | (299 | ) | (716 | ) | ||||
| Net loss | $ | (1,370 | ) | $ | (4,049 | ) | ||
| Basic weighted-average shares outstanding | 35,532 | 36,235 | ||||||
| Diluted weighted-average shares outstanding | 35,532 | 36,235 | ||||||
| Basic net loss per share | $ | (0.04 | ) | $ | (0.11 | ) | ||
| Diluted net loss per share | $ | (0.04 | ) | $ | (0.11 | ) | ||
| Vera Bradley, Inc. | ||||||||
| Condensed Consolidated Statements of Cash Flows | ||||||||
| (in thousands) | ||||||||
| (unaudited) | ||||||||
| Thirteen Weeks Ended | ||||||||
| May 5, 2018 |
April 29, 2017 |
|||||||
| Cash flows from operating activities | ||||||||
| Net loss | $ | (1,370 | ) | $ | (4,049 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation of property, plant, and equipment | 4,156 | 4,948 | ||||||
| Provision for doubtful accounts | 120 | 162 | ||||||
| Stock-based compensation | 899 | 1,278 | ||||||
| Deferred income taxes | (210 | ) | 867 | |||||
| Cash gain on investments | - | 152 | ||||||
| Other non-cash charges (gain), net | 35 | (19 | ) | |||||
| Changes in assets and liabilities: | ||||||||
| Accounts receivable | (1,417 | ) | 458 | |||||
| Inventories | 1,399 | (3,138 | ) | |||||
| Prepaid expenses and other assets | 532 | (748 | ) | |||||
| Accounts payable | (123 | ) | (6,040 | ) | ||||
| Income taxes | (90 | ) | (2,332 | ) | ||||
| Accrued and other liabilities | (5,777 | ) | (1,476 | ) | ||||
| Net cash used in operating activities | (1,846 | ) | (9,937 | ) | ||||
| Cash flows from investing activities | ||||||||
| Purchases of property, plant, and equipment | (3,677 | ) | (3,362 | ) | ||||
| Purchases of investments | (5,804 | ) | (26,975 | ) | ||||
| Proceeds from maturities and sales of investments | 4,505 | 30,000 | ||||||
| Net cash used in investing activities | (4,976 | ) | (337 | ) | ||||
| Cash flows from financing activities | ||||||||
| Tax withholdings for equity compensation | (522 | ) | (579 | ) | ||||
| Repurchase of common stock | - | (1,116 | ) | |||||
| Net cash used in financing activities | (522 | ) | (1,695 | ) | ||||
| Effect of exchange rate changes on cash and cash equivalents | (4 | ) | (6 | ) | ||||
| Net decrease in cash and cash equivalents | $ | (7,348 | ) | $ | (11,975 | ) | ||
| Cash and cash equivalents, beginning of period | 68,751 | 86,375 | ||||||
| Cash and cash equivalents, end of period | $ | 61,403 | $ | 74,400 | ||||
| Supplemental disclosure of cash flow information | ||||||||
| Cash (received) paid for income taxes, net | $ | (10 | ) | $ | 522 | |||
| 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 May 5, 2018 and April 29, 2017 | $ | - | $ | 83 | ||||
| Expenditures incurred but not yet paid as of February 3, 2018 and January 28, 2017 | $ | - | $ | - | ||||
| Purchases of property, plant, and equipment | ||||||||
| Expenditures incurred but not yet paid as of May 5, 2018 and April 29, 2017 | $ | 1,610 | $ | 2,780 | ||||
| Expenditures incurred but not yet paid as of February 3, 2018 and January 28, 2017 | $ | 1,183 | $ | 2,204 | ||||
| Vera Bradley, Inc. | ||||||||||||
| First Quarter Fiscal 2019 | ||||||||||||
| GAAP to Non-GAAP Reconciliation Thirteen Weeks Ended May 5, 2018 | ||||||||||||
| (in thousands, except per share amounts) | ||||||||||||
| (unaudited) | ||||||||||||
| Thirteen Weeks Ended | ||||||||||||
| As Reported | Other Items1 | Non-GAAP (Excluding Items) |
||||||||||
| Selling, general, and administrative expenses | $ | 50,705 | $ | - | $ | 50,705 | ||||||
| Operating loss | (1,912 | ) | - | (1,912 | ) | |||||||
| Loss before income taxes | (1,669 | ) | - | (1,669 | ) | |||||||
| Income tax benefit | (299 | ) | - | (299 | ) | |||||||
| Net loss | (1,370 | ) | - | (1,370 | ) | |||||||
| Diluted net loss per share | $ | (0.04 | ) | $ | - | $ | (0.04 | ) | ||||
| Direct segment operating income | $ | 7,290 | $ | - | $ | 7,290 | ||||||
| Indirect segment operating income | $ | 8,284 | $ | - | $ | 8,284 | ||||||
| Unallocated corporate expenses | $ | (17,486 | ) | $ | - | $ | (17,486 | ) | ||||
| 1There were no Other Items identified during the first quarter of fiscal 2019 | ||||||||||||
| 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 | |||||||||||||
Source: Vera Bradley, Inc.