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Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 ___________________________ 
FORM 10-Q
___________________________ 
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended April 30, 2022
OR
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From                      to                     
Commission File Number: 001-34918
 
___________________________ 
https://cdn.kscope.io/b50c5c96efabff7238be80d17c99e383-vra-20220430_g1.jpg
VERA BRADLEY, INC.
(Exact name of registrant as specified in its charter)
 ___________________________ 
 
Indiana 27-2935063
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification No.)
12420 Stonebridge Road,
Roanoke, Indiana
 46783
(Address of principal executive offices) (Zip Code)
(877) 708-8372
(Registrant’s telephone number, including area code)
None
(Former name, former address and former fiscal year, if changed since last report)
 ___________________________ 
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading Symbol(s)Name of each exchange on which registered
Common Stock, without par valueVRANASDAQ Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer ¨  Accelerated filer x
Non-accelerated filer 
¨  (Do not check if a smaller reporting company)
  Smaller reporting company 
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  x
The registrant had 31,458,289 shares of its common stock outstanding as of June 1, 2022.



Table of Contents
TABLE OF CONTENTS
 
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 5.
Item 6.

2

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FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements that are subject to risks and uncertainties. All statements other than statements of historical or current fact included in this report are forward-looking statements. Forward-looking statements include references to our current expectations and projections relating to our financial condition, results of operations, plans, objectives, strategies, future performance, and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “plan,” “intend,” “believe,” “may,” “might,” “will,” “should,” “can have,” and “likely” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. For example, all statements we make relating to our estimated and projected earnings, revenues, costs, expenditures, cash flows, growth rates, and financial results, our plans and objectives for future operations, growth, initiatives, or strategies, or the expected outcome or impact of pending or threatened litigation are forward-looking statements. All forward-looking statements are subject to 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 consumer spending, including political unrest, social unrest, acts of war and terrorism, inflation, impacts related to variants of the novel coronavirus (COVID-19) outbreak, and other related matters;
public health pandemics, including the continued outbreak of COVID-19 and actions to contain the spread of the virus by governmental or other actors;
possible inability to successfully implement our long-term strategic plans;
possible declines in our comparable sales;
possible inability to maintain and enhance our brands;
possible failure of our multi-channel distribution model;
possible inability to predict and respond in a timely manner to changes in consumer demand;
possible inability to successfully open new stores and/or operate current stores as planned;
possible loss of key management associates or inability to attract and retain the talent required for our business;
possible data security or privacy breaches or disruptions in our computer systems or website;
possible disruptions in our supply chain;
possible new or increased tariffs on our products that could lead to increased product costs and lower profit margins; and
possible inability to successfully implement integration strategies related to the Pura Vida business and possible inability to derive expected benefits from or to successfully integrate any future business acquisition.
We derive many of our forward-looking statements from our operating plans and forecasts, which are based upon detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect our actual results.
For a discussion of the above described risks and uncertainties 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 Item 1A of our Annual Report on Form 10-K for the fiscal year ended January 29, 2022, as well as in Item 1A herein.
We caution you that the risks and uncertainties identified by us may not be all of the factors that are important to you. Furthermore, the forward-looking statements included in this report are made only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events, or otherwise, except as required by law.

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PART I. FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

Vera Bradley, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
 
April 30,
2022
January 29,
2022
Assets
Current assets:
Cash and cash equivalents$63,987 $88,436 
Accounts receivable, net20,115 20,681 
Inventories161,787 144,881 
Income taxes receivable3,466 9,391 
Prepaid expenses and other current assets17,458 15,928 
Total current assets266,813 279,317 
Operating right-of-use assets79,827 79,873 
Property, plant, and equipment, net60,032 59,941 
Intangible assets, net43,454 44,223 
Goodwill44,254 44,254 
Deferred income taxes3,980 3,857 
Other assets5,337 6,081 
Total assets$503,697 $517,546 
Liabilities, Redeemable Noncontrolling Interest, and Shareholders’ Equity
Current liabilities:
Accounts payable$39,327 $30,492 
Accrued employment costs7,897 12,463 
Short-term operating lease liabilities17,288 18,699 
Other accrued liabilities17,298 16,422 
Total current liabilities81,810 78,076 
Long-term operating lease liabilities81,513 80,861 
Other long-term liabilities168 195 
Total liabilities163,491 159,132 
Commitments and contingencies
Redeemable noncontrolling interest31,092 30,974 
Shareholders’ equity:
Preferred stock; 5,000 shares authorized, no shares issued or outstanding
  
Common stock, without par value; 200,000 shares authorized, 42,834 and 42,429 shares issued and 32,152 and 33,170 shares outstanding, respectively
  
Additional paid-in-capital107,040 107,907 
Retained earnings327,390 334,364 
Accumulated other comprehensive loss(60)(29)
Treasury stock(125,256)(114,802)
Total shareholders’ equity of Vera Bradley, Inc.309,114 327,440 
Total liabilities, redeemable noncontrolling interest, and shareholders’ equity$503,697 $517,546 

The accompanying notes are an integral part of these financial statements.
4

Table of Contents
Vera Bradley, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
 
 Thirteen Weeks Ended
 April 30,
2022
May 1,
2021
Net revenues$98,459 $109,094 
Cost of sales45,945 49,930 
Gross profit52,514 59,164 
Selling, general, and administrative expenses60,914 60,896 
Other income (loss), net167 (227)
Operating loss(8,233)(1,959)
Interest expense, net40 90 
Loss before income taxes(8,273)(2,049)
Income tax benefit(1,563)(531)
Net loss(6,710)(1,518)
Less: Net income attributable to redeemable noncontrolling interest264 627 
Net loss attributable to Vera Bradley, Inc.$(6,974)$(2,145)
Basic weighted-average shares outstanding32,672 33,590 
Diluted weighted-average shares outstanding32,672 33,590 
Basic net loss per share available to Vera Bradley, Inc. common shareholders$(0.21)$(0.06)
Diluted net loss per share available to Vera Bradley, Inc. common shareholders$(0.21)$(0.06)
The accompanying notes are an integral part of these financial statements.
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Table of Contents
Vera Bradley, Inc.
Condensed Consolidated Statements of Comprehensive Income
(in thousands)
(unaudited)
 
 Thirteen Weeks Ended
 April 30,
2022
May 1,
2021
Net loss$(6,710)$(1,518)
Unrealized loss on available-for-sale debt investments (2)
Cumulative translation adjustment(31)(6)
Comprehensive loss, net of tax(6,741)(1,526)
Less: Comprehensive income attributable to redeemable noncontrolling interest264 627 
Comprehensive loss attributable to Vera Bradley, Inc.$(7,005)$(2,153)
The accompanying notes are an integral part of these financial statements.
6

Table of Contents
Vera Bradley, Inc.
Condensed Consolidated Statements of Shareholders’ Equity
(in thousands, except share data)
(unaudited)
 Number of Shares 
 Common
Stock
Treasury
Stock
Additional
Paid-in
Capital
Retained EarningsAccumulated
Other
Comprehensive Loss
Treasury
Stock
Total Shareholders’
Equity of Vera Bradley, Inc.
Balance at January 29, 202233,170,430 9,258,741 $107,907 $334,364 $(29)$(114,802)$327,440 
Net loss attributable to Vera Bradley, Inc.— — — (6,974)— — (6,974)
Translation adjustments— — — — (31)— (31)
Restricted shares vested, net of repurchase for taxes404,469 — (1,410)— — — (1,410)
Stock-based compensation— — 543 — — — 543 
Treasury stock purchased(1,423,096)1,423,096    (10,454)(10,454)
Balance at April 30, 202232,151,803 10,681,837 $107,040 $327,390 $(60)$(125,256)$309,114 
Number of Shares
Common
Stock
Treasury
Stock
Additional
Paid-in
Capital
Retained EarningsAccumulated
Other
Comprehensive Income (Loss)
Treasury
Stock
Total Shareholders’
Equity of Vera Bradley, Inc.
Balance at January 30, 202133,414,490 8,393,207 $105,433 $316,526 $8 $(107,060)$314,907 
Net loss attributable to Vera Bradley, Inc.  — (2,145)— — (2,145)
Translation adjustments  — — (6)— (6)
Unrealized loss on available-for-sale debt investments  — — (2)— (2)
Restricted shares vested, net of repurchase for taxes570,562  (2,171)— — — (2,171)
Stock-based compensation— — 1,814 — — — 1,814 
Balance at May 1, 202133,985,052 8,393,207 $105,076 $314,381 $ $(107,060)$312,397 
The accompanying notes are an integral part of these financial statements.
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Vera Bradley, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
 
 Thirteen Weeks Ended
 April 30,
2022
May 1,
2021
Cash flows from operating activities
Net loss$(6,710)$(1,518)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation of property, plant, and equipment2,192 2,286 
Amortization of operating right-of-use assets5,260 4,930 
Impairment charges 592  
Amortization of intangible assets769 769 
Provision for doubtful accounts(143)(66)
Stock-based compensation543 1,814 
Deferred income taxes(123)369 
Other non-cash gain, net (45)
Changes in assets and liabilities:
Accounts receivable709 5,664 
Inventories(16,906)(8,919)
Prepaid expenses and other assets(786)(779)
Accounts payable8,165 (4,234)
Income taxes 5,925 (1,731)
Operating lease liabilities, net(6,565)(6,800)
Accrued and other liabilities(4,004)(1,780)
Net cash used in operating activities(11,082)(10,040)
Cash flows from investing activities
Purchases of property, plant, and equipment(1,745)(503)
Proceeds from disposal of property, plant, and equipment 45 
Net cash used in investing activities(1,745)(458)
Cash flows from financing activities
Tax withholdings for equity compensation(1,410)(2,171)
Repurchase of common stock(10,035) 
Distributions to redeemable noncontrolling interest(146)(129)
Net cash used in financing activities(11,591)(2,300)
Effect of exchange rate changes on cash and cash equivalents(31)(6)
Net decrease in cash and cash equivalents(24,449)(12,804)
Cash and cash equivalents, beginning of period88,436 64,175 
Cash and cash equivalents, end of period$63,987 $51,371 














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Table of Contents
Vera Bradley, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(continued)
(unaudited)
 Thirteen Weeks Ended
 April 30,
2022
May 1,
2021
Supplemental disclosure of cash flow information
Cash (received) paid for income taxes, net$(7,359)$858 
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 30, 2022 and May 1, 2021$419 $ 
Expenditures incurred but not yet paid as of January 29, 2022 and January 30, 2021$ $ 
Purchases of property, plant, and equipment
Expenditures incurred but not yet paid as of April 30, 2022 and May 1, 2021$788 $565 
Expenditures incurred but not yet paid as of January 29, 2022 and January 30, 2021$250 $343 
Refer to Note 3 herein for supplemental cash flow information regarding the Company’s leases.
The accompanying notes are an integral part of these financial statements.
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Vera Bradley, Inc.
Notes to the Condensed Consolidated Financial Statements
(unaudited)

1.Description of the Company and Basis of Presentation
The term “Company” refers to Vera Bradley, Inc. and its wholly and majority owned subsidiaries, except where the context requires otherwise or where otherwise indicated.
Vera Bradley, Inc. operates two unique lifestyle brands – Vera Bradley and Pura Vida. We believe Vera Bradley and Pura Vida are complementary businesses, both with devoted, emotionally-connected, and multi-generational female customer bases; alignment as causal, comfortable, affordable, and fun brands; positioning as “gifting” and socially-connected brands; strong, entrepreneurial cultures; a keen focus on community, charity, and social consciousness; multi-channel distribution strategies; and talented leadership teams aligned and committed to the long-term success of their brands.
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.
In July 2019, Vera Bradley, Inc. acquired a 75% interest in Creative Genius, Inc., which also operates under the name Pura Vida Bracelets (“Pura Vida”). Pura Vida, based in La Jolla, California, is a rapidly growing, digitally native lifestyle brand that we believe deeply resonates with its loyal consumer following. The Pura Vida brand has a differentiated and expanding offering of bracelets, jewelry, and other lifestyle accessories.
The Company has three reportable segments: Vera Bradley Direct (“VB Direct”), Vera Bradley Indirect (“VB Indirect”), and Pura Vida.
The VB Direct business consists of sales of Vera Bradley products through Vera Bradley full-line and factory outlet stores in the United States; verabradley.com and verabradley.ca; the Vera Bradley online outlet site; and typically the Vera Bradley annual outlet sale in Fort Wayne, Indiana. As of April 30, 2022, the Company operated 67 full-line stores and 77 factory outlet stores. In light of the COVID-19 pandemic, the Company cancelled its calendar year 2022 and 2021 annual outlet sales.
The VB Indirect business consists of sales of Vera Bradley products to approximately 1,800 specialty retail locations, substantially all of which are located in the United States, as well as department stores, national accounts, third-party e-commerce sites, third-party inventory liquidators, and royalties recognized through licensing agreements related to the Vera Bradley brand.
The Pura Vida segment represents revenues generated through the Pura Vida websites, www.puravidabracelets.com, www.puravidabracelets.eu, and www.puravidabracelets.ca, the distribution of Pura Vida-branded products to wholesale retailers, substantially all of which are located in the United States, as well as through its first retail store which opened in August 2021.
The accompanying unaudited consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted as permitted by such rules and regulations. These interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 29, 2022, filed with the SEC.
The interim financial statements reflect all adjustments that are, in the opinion of management, necessary to present fairly the results for the interim periods presented. All such adjustments are of a normal, recurring nature. The results of operations for the thirteen weeks ended April 30, 2022, are not necessarily indicative of the results to be expected for the full fiscal year including, in part, due to the uncertainty of macroeconomic factors on future periods, including inflation and the continued impacts of the disruptions caused by the COVID-19 pandemic, among other related matters.



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Vera Bradley, Inc.
Notes to the Condensed Consolidated Financial Statements
(unaudited)

Principles of Consolidation
The condensed consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries, and its majority owned subsidiary, Pura Vida. The Company has eliminated intercompany balances and transactions in consolidation.
Fiscal Periods
The Company’s fiscal year ends on the Saturday closest to January 31. References to the fiscal quarters ended April 30, 2022 and May 1, 2021 refer to the thirteen week periods ended on those dates.
Recently Issued Accounting Pronouncements
There were no new accounting pronouncements issued or which became effective during the thirteen weeks ended April 30, 2022, which had, or are expected to have, a significant impact on the Company's Consolidated Financial Statements.

2.Revenue from Contracts with Customers

Disaggregation of Revenue
The following presents the Company's net revenues disaggregated by product category for the thirteen weeks ended April 30, 2022 and May 1, 2021 (in thousands):
Thirteen Weeks Ended
April 30, 2022
VB Direct SegmentVB Indirect SegmentPura Vida SegmentTotal
Product categories
Bags$26,132 $9,451 $63 $35,646 
Travel15,088 3,073  18,161 
Accessories11,499 1,768 18,860 32,127 
Home5,722 1,126  6,848 
Apparel/Footwear(6)
1,903 500 436 2,839 
Other1,292 (1)1,059 (2)487 (3)2,838 
Total net revenues$61,636 (4)$16,977 (5)$19,846 (4)$98,459 
(1) Primarily includes net revenues from stationery, freight, and gift card breakage.
(2) Primarily includes net revenues from licensing agreements and freight.
(3) Related to freight.
(4) Net revenues were related to product sales recognized at a point in time.
(5) $16.2 million of net revenues related to product sales recognized at a point in time and $0.8 million of net revenues related to sales-based royalties recognized over time.
(6) Includes mask sales.
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Vera Bradley, Inc.
Notes to the Condensed Consolidated Financial Statements
(unaudited)
Thirteen Weeks Ended
May 1, 2021
VB Direct SegmentVB Indirect SegmentPura Vida SegmentTotal
Product categories
Bags$26,438 $8,050 $ $34,488 
Travel15,179 2,567  17,746 
Accessories11,861 2,227 25,511 39,599 
Home6,538 737  7,275 
Apparel/Footwear(6)
5,361 671 628 6,660 
Other1,355 (1)1,012 (2)959 (3)3,326 
Total net revenues$66,732 (4)$15,264 (5)$27,098 (4)$109,094 
(1) Primarily includes net revenues from freight, stationery, and gift card breakage.
(2) Primarily includes net revenues from licensing agreements and freight.
(3) Related to freight.
(4) Net revenues were related to product sales recognized at a point in time.
(5) $14.5 million of net revenues related to product sales recognized at a point in time and $0.8 million of net revenues related to sales-based royalties recognized over time.
(6) Includes mask sales.

Contract Balances
Contract liabilities as of April 30, 2022 and January 29, 2022, were $3.4 million and $3.9 million, respectively. The balance as of April 30, 2022 and January 29, 2022 consisted of unredeemed gift cards, unearned revenue related to the monthly bracelet and jewelry clubs of the Pura Vida segment, Pura Vida loyalty club points, Pura Vida customer deposits and payments collected before shipment, and an immaterial amount of unearned revenue for pre-payments of royalties in certain of the Company’s licensing arrangements. These contract liabilities are recognized within other accrued liabilities on the Company’s Condensed Consolidated Balance Sheets. Substantially all contract liabilities are recognized within one year. The Company did not have contract assets as of April 30, 2022 and January 29, 2022.
The balance for accounts receivable from contracts with customers, net of allowances, as of April 30, 2022 and January 29, 2022, was $18.9 million and $18.1 million, respectively, which is recognized within accounts receivable, net, on the Company’s Condensed Consolidated Balance Sheets. The provision for doubtful accounts was $1.1 million and $1.2 million as of April 30, 2022 and January 29, 2022, respectively. The provision for doubtful accounts is based upon the likelihood of default expected during the life of the receivable.
    
Performance Obligations
The performance obligations for the VB Direct, VB Indirect, and Pura Vida segments include the promise to transfer distinct goods (or a bundle of distinct goods). The VB Indirect segment also includes the right to access intellectual property (“IP”) related to the Vera Bradley brand.
Remaining Performance Obligations
The Company does not have remaining performance obligations in excess of one year or contracts that it does not have the right to invoice as of April 30, 2022.

3.Leases
Discount Rate
The weighted-average discount rate as of April 30, 2022, and May 1, 2021 was 4.9% and 4.8%, respectively. The discount rate is not readily determinable in the lease; therefore, the Company estimated the incremental borrowing
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Vera Bradley, Inc.
Notes to the Condensed Consolidated Financial Statements
(unaudited)
rate, at the commencement date of each lease, which is the rate of interest it would have to borrow on a collateralized basis over a similar term with similar payments.

Leases Not Yet Commenced
As of April 30, 2022, the Company had a total of five Vera Bradley and Pura Vida retail store leases which were executed, but it did not have control of the underlying assets; therefore, the lease liability and right-of-use asset are not recorded on the Condensed Consolidated Balance Sheet. These leases contain undiscounted lease payments, which will be included in the determination of the lease liability, totaling approximately $10.4 million and have terms of up to 10 years commencing in fiscal year 2023.

Amounts Recognized in the Condensed Consolidated Financial Statements
The following lease expense is recorded within cost of sales for the Asia sourcing office and certain equipment leases and within selling, general, and administrative expenses for all other leases, including retail store leases, in the Company's Condensed Consolidated Statement of Operations for the thirteen weeks ended April 30, 2022 and May 1, 2021 (in thousands):
Thirteen Weeks Ended
April 30, 2022May 1, 2021
Operating lease cost$6,250 $5,870 
Variable lease cost1,418 1,482 
Short-term lease cost214 193 
Total lease cost$7,882 $7,545 

The weighted-average remaining lease term as of April 30, 2022 and May 1, 2021 was 5.5 years and 5.4 years, respectively.

Supplemental operating cash flow information was as follows (in thousands):
Thirteen Weeks Ended
April 30, 2022May 1, 2021
Cash paid for amounts included in the measurement of operating lease liabilities (1)
$4,989 $11,055 
Right-of-use assets increase as a result of new and modified operating lease liabilities, net$5,788 $2,403 
(1) $2.5 million of lease liabilities were recorded within accounts payable on the Company's Consolidated Balance Sheets as of April 30, 2022. $2.5 million of lease liabilities were recorded within accounts payable on the Company's Consolidated Balance Sheets as of January 30, 2021, and were paid in the first quarter of fiscal 2022.

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Vera Bradley, Inc.
Notes to the Condensed Consolidated Financial Statements
(unaudited)
4.Earnings Per Share
Basic earnings per share is computed based on the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed based on the weighted-average number of common shares outstanding, plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method. Dilutive potential common shares represent outstanding restricted stock units.
On July 16, 2019, as contemplated by the Interest Purchase Agreement, the Company and certain of its subsidiaries and the owners of the remaining twenty-five percent (25%) ownership interest in Pura Vida (the “Sellers”) which was not acquired by the Company (the “Remaining Pura Vida Interest”) entered into a Put/Call Agreement (the “Put/Call Agreement”). Pursuant to the Put/Call Agreement, and subject to the terms and conditions thereof, the Sellers have the right to sell all of the Remaining Pura Vida Interest to the Company, and the Company has the right to purchase all of the Remaining Pura Vida Interests from Sellers, in each case generally at any time following the fifth anniversary of the closing date of the transaction until the tenth anniversary thereof. The purchase price for any Remaining Pura Vida Interest put to, or called by, the Company will be determined based on the arithmetic average of a multiple of adjusted EBITDA of Pura Vida and a multiple of adjusted EBITDA of the Company, as defined in the Put/Call Agreement, over the twelve-month period ending on the last day of the month immediately preceding the month in which an exercise notice is delivered by a relevant party.
As a result of this redemption feature, the Company recorded the noncontrolling interest as redeemable and classified it in temporary equity within its Condensed Consolidated Balance Sheets initially at its acquisition-date fair value. The noncontrolling interest is adjusted each reporting period for income (or loss) attributable to the noncontrolling interest. A measurement period adjustment, if any, is then made to adjust the noncontrolling interest to the higher of the redemption value or carrying value each reporting period. These adjustments are recognized through retained earnings and are not reflected in net income or net income attributable to Vera Bradley, Inc. When calculating earnings per share attributable to Vera Bradley, Inc., the Company adjusts the net income attributable to Vera Bradley, Inc. for the measurement period adjustment to the extent the redemption value exceeds the fair value of the noncontrolling interest on a cumulative basis.
The components of basic and diluted earnings per share were as follows (in thousands, except per share data):
 
 Thirteen Weeks Ended
 April 30,
2022
May 1,
2021
Numerator:
Net loss$(6,710)$(1,518)
Less: Net income attributable to redeemable noncontrolling interest264 627 
Net loss attributable to Vera Bradley, Inc.$(6,974)$(2,145)
Denominator:
Weighted-average number of common shares (basic)32,672 33,590 
Dilutive effect of stock-based awards  
Weighted-average number of common shares (diluted)32,672 33,590 
Net loss per share available to Vera Bradley, Inc. common shareholders:
Basic$(0.21)$(0.06)
Diluted$(0.21)$(0.06)
For the thirteen weeks ended April 30, 2022 and May 1, 2021, all potential common shares were excluded from the diluted share calculation because they were anti-dilutive due to the net loss in the period.

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Vera Bradley, Inc.
Notes to the Condensed Consolidated Financial Statements
(unaudited)
5.Fair Value of Financial Instruments
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities measured at fair value are classified using the following hierarchy, which is based upon the transparency of inputs to the valuation as of the measurement date:
Level 1 – Quoted prices in active markets for identical assets or liabilities;
Level 2 – Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly;
Level 3 – Unobservable inputs based on the Company’s own assumptions.
The classification of fair value measurements within the hierarchy is based upon the lowest level of input that is significant to the measurement.
The carrying amounts reflected on the Condensed Consolidated Balance Sheets for cash and cash equivalents, accounts receivable, other current assets, and accounts payable as of April 30, 2022 and January 29, 2022, approximated their fair values.
The following table details the fair value measurements of the Company's investments as of April 30, 2022 and January 29, 2022 (in thousands):
Level 1Level 2Level 3
April 30, 2022January 29, 2022April 30, 2022January 29, 2022April 30, 2022January 29, 2022
Cash equivalents(1)
$2,856 $2,856 $ $ $ $ 
(1) Cash equivalents represent a money market fund that has a maturity of three months or less at the date of purchase. Due to the short maturity, the Company believes the carrying value approximates fair value.
The Company assesses potential impairments to its long-lived assets, which includes property, plant, and equipment and lease right-of-use assets, on a quarterly basis or whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. Store-level assets and right-of-use assets are grouped at the individual store-level for the purpose of the impairment assessment. Recoverability of an asset group is measured by a comparison of the carrying amount of an asset group to its estimated undiscounted future cash flows expected to be generated by the asset group. If the carrying amount of the asset group exceeds its estimated undiscounted future cash flows, an impairment charge is recognized as the amount by which the carrying amount of the asset group exceeds the fair value of the asset group. The fair value of the store assets is determined using the discounted future cash flow method of anticipated cash flows through the store’s lease-end date using fair value measurement inputs classified as Level 3. The fair value of right-of-use assets is estimated using market comparative information for similar properties. Level 3 inputs are derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. The Company recorded a lease right-of-use asset impairment charge of $0.6 million during the thirteen weeks ended April 30, 2022. There were no impairment charges for the thirteen weeks ended May 1, 2021.
Assets recognized or disclosed at fair value on the consolidated financial statements on a nonrecurring basis include items such as property, plant, and equipment, including leasehold improvements, and operating lease assets, as well as assets related to the Pura Vida acquisition including goodwill and intangible assets. These assets are measured at fair value if determined to be impaired.
The discounted cash flow models used to estimate the applicable fair values involve numerous estimates and assumptions that are highly subjective. Changes to these estimates and assumptions could materially impact the fair value estimates. The estimates and assumptions critical to the overall fair value estimates include: (1) estimated future cash flow generated at the store level; (2) discount rates used to derive the present value factors used in determining the fair values; and (3) market rentals at the retail store. These and other estimates and assumptions are impacted by economic conditions and our expectations and may change in the future based on period-specific facts and circumstances. If economic conditions were to deteriorate, future impairment charges may be required which may be material.

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Vera Bradley, Inc.
Notes to the Condensed Consolidated Financial Statements
(unaudited)
6.Debt
On September 7, 2018, Vera Bradley Designs, Inc. (“VBD”), a wholly-owned subsidiary of the Company, entered into an asset-based revolving Credit Agreement (the “Credit Agreement”) among VBD, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders from time to time party thereto. The Credit Agreement provides for certain credit facilities to VBD in an aggregate principal amount not to initially exceed the lesser of $75.0 million or the amount of borrowing availability determined in accordance with a borrowing base of certain assets. Any proceeds of the credit facilities will be used to finance general corporate purposes of VBD and its subsidiaries, including but not limited to Vera Bradley International, LLC and Vera Bradley Sales, LLC (collectively, the “Named Subsidiaries”). The Credit Agreement also contains an option for VBD to arrange with lenders to increase the aggregate principal amount by up to $25.0 million.
Amounts outstanding under the Credit Agreement bear interest at a per annum rate equal to either (i) for CBFR borrowings (including swingline loans), the CB Floating Rate, where the CB Floating Rate is the prime rate which shall never be less than the adjusted one month LIBOR rate on such day, plus the Applicable Rate, where the Applicable Rate is a percentage spread ranging from -1.00% to -1.50% or (ii) for each eurodollar borrowing, the Adjusted LIBO Rate, where the Adjusted LIBO Rate is the LIBO rate for such interest period multiplied by the statutory reserve rate, for the interest period in effect for such borrowing, plus the Applicable Rate, where the Applicable Rate is a percentage ranging from 1.00% to 1.30%. The applicable CB Floating Rate, Adjusted LIBO Rate, or LIBO Rate shall be determined by the administrative agent. The Credit Agreement also requires VBD to pay a commitment fee for the unused portion of the revolving facility of up to 0.20% per annum.
VBD’s obligations under the Credit Agreement are guaranteed by the Company and the Named Subsidiaries. The obligations of VBD under the Credit Agreement are secured by substantially all of the respective assets of VBD, the Company, and the Named Subsidiaries and are further secured by the equity interests in VBD and the Named Subsidiaries.
The Credit Agreement contains various affirmative and negative covenants, including restrictions on the Company's ability to incur debt or liens; engage in mergers or consolidations; make certain investments, acquisitions, loans, and advances; sell assets; enter into certain swap agreements; pay dividends or make distributions or make other restricted payments; engage in certain transactions with affiliates; and amend, modify, or waive any of its rights related to subordinated indebtedness and certain charter and other organizational, governing, and material agreements. The Company may avoid certain of such restrictions by meeting payment conditions defined in the Credit Agreement.
The Credit Agreement also requires the Loan Parties to maintain a minimum fixed charge coverage ratio of 1.00 during periods when borrowing availability is less than the greater of (A) $7.5 million, and (B) 10% of the lesser of (i) the aggregate revolving commitment, and (ii) the borrowing base. The fixed charge coverage ratio, availability, aggregate revolving commitment, and the borrowing base are further defined in the Credit Agreement.
The Credit Agreement contains customary events of default, including, among other things: (i) the failure to pay any principal, interest, or other fees under the Credit Agreement; (ii) the making of any materially incorrect representation or warranty; (iii) the failure to observe or perform any covenant, condition, or agreement in the Credit Agreement or related agreements; (iv) a cross default with respect to other material indebtedness; (v) bankruptcy and insolvency events; (vi) unsatisfied material final judgments; (vii) Employee Retirement Income Security Act of 1974 (“ERISA”) events that could reasonably be expected to have a material adverse effect; and (viii) a change in control (as defined in the Credit Agreement).
Any commitments made under the Credit Agreement mature on September 7, 2023.
As of April 30, 2022 and January 29, 2022, the Company had no borrowings outstanding and availability of $75.0 million under the Credit Agreement.

7.Income Taxes
The provision for income taxes for interim periods is based on an estimate of the annual effective tax rate adjusted to reflect the impact of discrete items. Management judgment is required in projecting ordinary income to estimate the Company’s annual effective tax rate.
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Vera Bradley, Inc.
Notes to the Condensed Consolidated Financial Statements
(unaudited)
The effective tax rate for the thirteen weeks ended April 30, 2022, was 18.9%, compared to 25.9% for the thirteen weeks ended May 1, 2021. The year-over-year effective tax rate decrease was primarily due to the relative impact of permanent and discrete items in the current-year period compared to the prior-year period, primarily as a result of stock-based compensation.

8.Stock-Based Compensation
The Company recognizes stock-based compensation expense, for its awards of restricted stock units, in an amount equal to the fair market value of the underlying stock on the grant date of the respective award.
The Company reserved 3,000,000 shares of common stock for issuance or transfer under the 2020 Equity and Incentive Plan, which allows for grants of restricted stock units, as well as other equity awards. The Company maintains the 2010 Equity and Incentive Plan for awards granted prior to the effectiveness of the 2020 Equity and Incentive Plan.
Awards of Restricted Stock Units
During the thirteen weeks ended April 30, 2022, the Company granted 841,369 time-based and performance-based restricted stock units with an aggregate fair value of $6.3 million to certain employees and non-employee directors under the 2020 Equity and Incentive Plan compared to 640,007 time-based and performance-based restricted stock units with an aggregate fair value of $6.6 million in the same period of the prior year.
The majority of the time-based restricted stock units vest and settle in shares of the Company’s common stock, on a one-for-one basis, in equal installments on each of the first three anniversaries of the grant date. Restricted stock units issued to non-employee directors vest after a one-year period from the grant date. The Company recognizes the expense relating to these units, net of estimated forfeitures, on a straight-line basis over the vesting period.
Performance-based restricted stock units vest upon the completion of a three-year period of time (cliff vesting), subject to the employee’s continuing employment throughout and the Company’s achievement of annual earnings per share targets, or other Company performance targets, during the three-year performance period. The Company recognizes the expense relating to these units, net of estimated forfeitures, based on the probable outcome of achievement of the financial targets, on a straight-line basis over three years.
The following table sets forth a summary of restricted stock unit activity for the thirteen weeks ended April 30, 2022 (units in thousands):
 
 Time-based
Restricted Stock Units
Performance-based
Restricted Stock Units
 Number of
Units
Weighted-
Average
Grant
Date Fair
Value
(per unit)
Number of
Units
Weighted-
Average
Grant
Date Fair
Value
(per unit)
Nonvested units outstanding at January 29, 2022855 $7.43 708 $7.95 
Granted472 7.47 369 7.47 
Vested(424)7.73 (174)13.10 
Forfeited(3)7.67 (2)7.63 
Nonvested units outstanding at April 30, 2022900 $7.31 901 $6.75 
As of April 30, 2022, there was $7.9 million of total unrecognized compensation cost, net of estimated forfeitures, related to nonvested restricted stock units. That cost is expected to be recognized over a weighted-average period of 1.9 years, subject to meeting performance conditions.

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Vera Bradley, Inc.
Notes to the Condensed Consolidated Financial Statements
(unaudited)
9.Commitments and Contingencies
The Company is subject to various claims and contingencies arising in the normal course of business, including those relating to product liability, legal claims, employee benefits, environmental issues, and other matters. Management believes that at this time it is not probable that any of these claims will have a material adverse effect on the Company’s financial condition, results of operations, or cash flows. However, the outcomes of legal proceedings and claims brought against the Company are subject to uncertainty, and future developments could cause these actions or claims, individually or in aggregate, to have a material adverse effect on the Company’s financial condition, results of operations, or cash flows of a particular reporting period.
In August of 2019, Vesi Incorporated (“Vesi”) filed suit against the Company in the U.S. District Court for the Southern District of Ohio related to the Company’s licensing business and alleging breach of fiduciary duty, unfair competition, defamation, and tortious interference with prospective business relationships. The complaint seeks damages in an amount not less than $10.0 million for punitive damages, attorney fees, prejudgment interest, and any other additional relief. The Company has denied any liability and intends to vigorously defend itself in the case. In November 2019, the Company filed a counterclaim against the principals of Vesi as personal guarantors for monies owed to the Company by Vesi. The Company has filed a motion for summary judgement asking the Court to dismiss all claims with prejudice and grant judgement on its counterclaim. The motion is fully briefed and the Company is awaiting a decision from the Court. At this time, we are not able to estimate a possible loss or range of loss that may result from this matter or to determine whether such loss, if any, would have a material adverse effect on our financial condition or results of operations due to the fact that the Company is vigorously defending itself and management believes that the Company has a number of meritorious legal defenses.
    
10.Common Stock
On November 29, 2018, the Company's board of directors approved a share repurchase plan (the “2018 Share Repurchase Program”) authorizing up to $50.0 million of repurchases of shares of the Company's common stock. On December 3, 2020, the 2018 Share Repurchase Program was extended through December 11, 2021. On March 20, 2020, the Company temporarily suspended the share repurchase program to conserve cash as a result of the COVID-19 pandemic. The board of directors authorized the resumption of the share repurchase program beginning on March 11, 2021.
In December 2021, the Company's board of directors approved a new share repurchase plan (the “2021 Share Repurchase Program”) which authorized Company management to utilize up to $50.0 million of available cash for repurchases of shares of the Company's common stock. The 2021 Share Repurchase Program went into effect beginning December 13, 2021 and expires in December 2024.
The Company purchased 1,423,096 shares at an average price of $7.35 per share, excluding commissions, for an aggregate amount of $10.5 million during the thirteen weeks ended April 30, 2022 under the 2021 Share Repurchase Program. There was $35.3 million remaining available to repurchase shares of the Company's common stock under the 2021 Share Repurchase Program as of April 30, 2022.
As of April 30, 2022, the Company held as treasury shares 10,681,837 shares of its common stock at an average price of $11.73 per share, excluding commissions, for an aggregate carrying amount of $125.3 million. The Company’s treasury shares may be issued under the 2010 Equity and Incentive Plan (with respect to outstanding awards under that plan), under the 2020 Equity and Incentive Plan, or for other corporate purposes.

11.Cloud Computing Arrangements
The Company capitalizes implementation costs associated with its Cloud Computing Arrangements (“CCA”) consistent with costs capitalized for internal-use software. The CCA costs are amortized over the term of the related hosting agreement, taking into consideration renewal options, if any. The renewal period is included in the amortization period if determined that the option is reasonably certain to be exercised. The amortization expense is recorded within selling, general, and administrative expenses in the Company's Condensed Consolidated Statements of Operations, which is within the same line item as the related hosting fees. The balance of the unamortized CCA implementation costs totaled $7.5 million and $8.0 million as of April 30, 2022 and January 29, 2022, respectively. Of this total, $3.0 million and $2.8 million was recorded within prepaid expenses and other current assets and $4.5 million
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Vera Bradley, Inc.
Notes to the Condensed Consolidated Financial Statements
(unaudited)
and $5.2 million was recorded within other assets on the Company's Condensed Consolidated Balance Sheets as of April 30, 2022 and January 29, 2022, respectively. The CCA implementation costs are recorded within operating activities in the Company's Condensed Consolidated Statements of Cash Flows.

12.Redeemable Noncontrolling Interest
Redeemable noncontrolling interest represents the remaining twenty-five percent (25%) interest in Pura Vida not acquired by the Company. Refer to Notes 1 and 4 herein for additional information.
Changes in redeemable noncontrolling interest for the thirteen weeks ended April 30, 2022, were as follows (in thousands):    
Balance at January 29, 2022$30,974 
Net income attributable to redeemable noncontrolling interest264 
Distributions to redeemable noncontrolling interest(146)
Balance at April 30, 2022$31,092 
Changes in redeemable noncontrolling interest for the thirteen weeks ended May 1, 2021, were as follows (in thousands):
Balance at January 30, 2021$29,809 
Net income attributable to redeemable noncontrolling interest627 
Distributions to redeemable noncontrolling interest(129)
Balance at May 1, 2021$30,307 
    
13.Intangible Assets and Goodwill
The following tables detail the carrying value of the Company's intangible assets other than goodwill related to the acquisition of a majority interest in Pura Vida.
April 30, 2022
in thousandsGross Basis
Accumulated Amortization(1)
Carrying Amount
Definite-lived intangible assets
Customer Relationships$24,208 $(17,770)$6,438 
Non-competition Agreements788 (440)348 
Total definite-lived intangible assets24,996 (18,210)6,786 
Indefinite-lived intangible asset
Pura Vida Brand36,668 — 36,668 
Total intangible assets, excluding goodwill$61,664 $(18,210)$43,454 
(1) Amortization expense is recorded within the Pura Vida segment.
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Vera Bradley, Inc.
Notes to the Condensed Consolidated Financial Statements
(unaudited)
January 29, 2022
in thousandsGross Basis
Accumulated Amortization(1)
Carrying Amount
Definite-lived intangible assets
Customer Relationships$24,208 $(17,041)$7,167 
Non-competition Agreements788 (400)388 
Total definite-lived intangible assets24,996 (17,441)7,555 
Indefinite-lived intangible asset
Pura Vida Brand36,668 — 36,668 
Total intangible assets, excluding goodwill$61,664 $(17,441)$44,223 
(1) Amortization expense is recorded within the Pura Vida segment.
Amortization expense is recorded within selling, general, and administrative expenses in the Company's Condensed Consolidated Statement of Operations. The future amortization expense for intangible assets is as follows (in thousands):
Amortization Expense
Fiscal 2023 (remaining nine months)$2,304 
Fiscal 20243,073 
Fiscal 20251,409 
Total$6,786 
The total amount of the goodwill as of April 30, 2022 and January 29, 2022, of $44.3 million was recorded within the Pura Vida segment upon acquisition. Goodwill is deductible for tax purposes, limited to the Company's 75% majority ownership interest. There were no changes to goodwill for the thirteen weeks ended April 30, 2022 and May 1, 2021.
The Company performs its annual impairment test over goodwill and the Pura Vida brand during the second quarter of each fiscal year. There was no impairment charge recorded during the second quarter of fiscal 2022. As of April 30, 2022, the Company determined that the fair values of the Pura Vida reporting unit and the Pura Vida brand exceeded their carrying values by a nominal amount and concluded that no impairment existed for the goodwill or brand assets. This assessment considered the impact of recent lower sales volumes, particularly in the Pura Vida e-commerce channel, that have been realized in the first quarter of fiscal 2023, as well as changes to other assumptions from the Company’s fiscal 2022 analysis. While we consider our assumptions to be reasonable, they are complex and highly subjective.
Adverse changes in key assumptions, even by a nominal amount, in future periods may result in a decline in the fair value estimates of goodwill, Pura Vida brand, and definite-lived intangible assets below their carrying value resulting in impairment charges, which could be material. The Company’s key assumptions may be impacted by macroeconomic conditions, including inflationary pressures and the continued disruptions caused by the COVID-19 pandemic, including but not limited to the duration and magnitude of the pandemic, as well as a sustained decline in stock price and potential changes in business strategy, which may also impact the triggering event assessment in future periods. A triggering event is an event or circumstance that indicates the fair value of an entity (or reporting unit) may be below its carrying amount. The adverse changes in key assumptions for goodwill may include, but are not limited to: a decline in the revenue growth rate; a decline in operating profit; or an increase in the discount rate. The adverse changes in key assumptions for the Pura Vida brand may include, but are not limited to: a decline in the revenue growth rate; a decline in the long-term growth rate; a decline in the royalty rate; or an increase in the discount rate. Refer to Note 5 herein for additional information regarding the fair value measurement.

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Vera Bradley, Inc.
Notes to the Condensed Consolidated Financial Statements
(unaudited)
14.Segment Reporting
The Company has three operating segments, which are also its reportable segments: Vera Bradley Direct (“VB Direct”), Vera Bradley Indirect (“VB Indirect”), and Pura Vida. These operating segments are components of the Company for which separate financial information is available and for which operating results are evaluated on a regular basis by the chief operating decision maker in deciding how to allocate resources and in assessing the performance of the segments.
The VB Direct segment includes Vera Bradley full-line and factory outlet stores; the Vera Bradley websites, verabradley.com and verabradley.ca; the Vera Bradley online outlet site; and typically the Vera Bradley annual outlet sale. Revenues generated from this segment are driven through the sale of Vera Bradley-branded products from Vera Bradley to end consumers.
The VB Indirect segment represents revenues generated through the distribution of Vera Bradley-branded products to specialty retailers representing approximately 1,800 locations, substantially all of which are located in the United States; key accounts, which include department stores, national accounts, third-party e-commerce sites, and third-party inventory liquidators; and royalties recognized through licensing agreements related to the Vera Bradley brand.
The Pura Vida segment represents revenues generated through the Pura Vida websites, www.puravidabracelets.com, www.puravidabracelets.eu, and www.puravidabracelets.ca, the Pura Vida retail store, and through the distribution of Pura Vida-branded products to wholesale retailers, substantially all of which are located in the United States.
Corporate costs represent the Company’s administrative expenses, which include, but are not limited to: human resources, legal, finance, information technology, design, product development, merchandising, corporate-level marketing and advertising, and various other corporate-level-activity-related expenses not directly attributable to a reportable segment. All intercompany-related activities are eliminated in consolidation and are excluded from the segment reporting.
Company management evaluates segment operating results based on several indicators. The primary or key performance indicators for each segment are net revenues and operating income. Net revenues and operating income information for the Company’s reportable segments during the thirteen weeks ended April 30, 2022 and May 1, 2021, respectively, consisted of the following (in thousands):
 Thirteen Weeks Ended
 April 30,
2022
May 1,
2021
Segment net revenues:
VB Direct$61,636 $66,732 
VB Indirect16,977 15,264 
Pura Vida19,846 27,098 
Total$98,459 $109,094 
Segment operating income:
VB Direct$5,503 $10,860 
VB Indirect5,479 4,461 
Pura Vida1,056 2,508 
Total$12,038 $17,829 
Reconciliation:
Segment operating income$12,038 $17,829 
Less:
Unallocated corporate expenses(20,271)(19,788)
Operating loss$(8,233)$(1,959)


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ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion summarizes the significant factors affecting the condensed consolidated operating results, financial condition, liquidity, and cash flows of the Company as of and for the thirteen weeks ended April 30, 2022 and May 1, 2021. The following discussion should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended January 29, 2022, and our unaudited condensed consolidated financial statements and the related notes included in Item 1 of this Quarterly Report. The results of operations for the thirteen weeks ended April 30, 2022, are not necessarily indicative of the results to be expected for the full fiscal year.
Macroeconomic Environment
We continue to experience challenges associated with the uncertain macroeconomic environment in which we operate our businesses. The COVID-19 pandemic caused supply chain disruptions that has resulted in continuing delivery delays and increased inbound and outbound shipping costs. We cannot predict the future impacts of the COVID-19 pandemic if cases continue to rise or new variants of the virus, or other factors, necessitate temporary closures to some, or all, of our retail stores due to guidance and mandates from governments and public health officials.
We have also been impacted by higher tariffs from previously duty-free countries, where we source products, as a result of the Generalized System of Preferences (“GSP”) duty-free status that expired at the end of calendar year 2020. We cannot guarantee if or when the GSP duty-free status will be reinstated and retro-actively applied by Congress.
In addition, the macroeconomic environment has been further challenged by rising inflation, including higher gas prices, and other related factors that has impacted consumer discretionary spending.
We began initiating strategic price increases across both of our brands to mitigate some of these inflationary and supply chain pressures in late fiscal 2022, and we will continue to implement price increases throughout fiscal 2023. We are also in the midst of a comprehensive cost-reduction and efficiency process. We expect we will complete the identification of cost reductions and begin implementation in the second quarter.
While we continue to actively monitor this rapidly evolving macroeconomic environment and are working to mitigate the situation, we cannot predict the full impact these matters could have on our liquidity, operating results, and financial condition, but they could have a material adverse effect on these metrics.
Executive Summary
Below is a summary of our strategic progress and financial results for the first quarter of fiscal 2023:
Strategic Progress
At Vera Bradley, we continued to innovate and build on our lifestyle merchandising strategy amplified by targeted marketing; focused on strategic product assortment enhancements in our back-to-campus assortment; maximized our travel category; and continued with product collaborations such as Disney. We also opened two new factory outlet locations and closed three full-line locations.
At Pura Vida, we increased our focus on innovation with the launch of our expanded backpack and apparel collections during the quarter; continued to build customer excitement and engagement through collaborations such as Disney and partnering with influencers; and continued to see success in our San Diego store performance, driving our brick-and-mortar expansion plans for Pura Vida. We also focused on cost-effective marketing campaigns in reaction to the calendar year 2021 Apple IDFA update and rising digital media costs.
Financial Summary (all comparisons are to the first quarter of fiscal 2022)
Net revenues decreased 9.7% to $98.5 million.
Vera Bradley Direct (“VB Direct”) segment sales decreased 7.6% to $61.6 million.
Vera Bradley Indirect segment (“VB Indirect”) sales increased 11.2% to $17.0 million.
Pura Vida segment sales decreased 26.8% to $19.8 million.
Gross profit was $52.5 million, or 53.3% of net revenue.
Operating loss was $(8.2) million and net loss attributable to Vera Bradley, Inc. was $(7.0) million.
Capital expenditures for the thirteen weeks totaled $1.7 million.
Cash and cash equivalents were $64.0 million at April 30, 2022.
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How We Assess the Performance of Our Business
In assessing the performance of our business, we consider a variety of performance and financial measures.
Net Revenues
Net revenues reflect sales of our merchandise and revenue from distribution and shipping and handling fees, less returns and discounts. Revenues for the VB Direct segment reflect sales through Vera Bradley full-line and factory outlet stores; the Vera Bradley websites verabradley.com and verabradley.ca; and our Vera Bradley online outlet site. There were no sales from our Vera Bradley annual outlet sale in Fort Wayne, Indiana for the past two years as it was cancelled due to the COVID-19 pandemic. Revenues for the VB Indirect segment reflect sales of Vera Bradley-branded products to specialty retail partners; department stores; national accounts; third-party e-commerce sites; third-party inventory liquidators; and royalties recognized through licensing agreements related to the Vera Bradley brand. Revenues for the Pura Vida segment reflect revenues generated through the Pura Vida websites, www.puravidabracelets.com, www.puravidabracelets.eu, and www.puravidabracelets.ca, through the distribution of Pura Vida-branded products to wholesale retailers, and through Pura Vida's first retail store opened in August 2021.
Comparable Sales
Typically, comparable sales are calculated based upon our stores that have been open for at least 12 full fiscal months and net revenues from our Vera Bradley e-commerce operations. Pura Vida e-commerce operations are included within the Company's consolidated comparable sales beginning with the fiscal 2021 third quarter. Pura Vida e-commerce operations include sales from the subscription clubs. Comparable store sales are calculated based solely upon stores that have been open for at least 12 full fiscal months. Remodeled stores are included in both comparable sales and comparable store sales unless the store was closed for more than one week of the current or comparable prior period, in which case the non-comparable temporary closure periods are not included, or the remodel resulted in a significant change in square footage. Some of our competitors and other retailers calculate comparable or “same store” sales differently than we do. As a result, data in this report regarding our comparable sales and comparable store sales may not be comparable to similar data made available by other companies. Non-comparable sales include sales from stores not included in comparable sales or comparable store sales.
As a result of the temporary closure of all Vera Bradley stores due to COVID-19 during a portion of the fiscal 2021 first quarter, the Company's comparable store sales and comparable sales calculations for the prior-year are not meaningful and therefore are not provided.
Typically, measuring the change in year-over-year comparable sales allows us and our investors to evaluate how our store base and e-commerce operations are performing. Various factors affect our comparable sales, including:
Overall economic trends;
Consumer preferences and fashion trends;
Competition;
The timing of our releases of new patterns and collections;
Changes in our product mix;
Pricing and level of promotions;
Amount of store, mall, and e-commerce traffic;
The level of customer service that we provide in stores and to our on-line customers;
Our ability to source and distribute products efficiently;
The number of stores we open and close in any period; and
The timing and success of promotional and marketing efforts.
Gross Profit
Gross profit is equal to our net revenues less our cost of sales. Cost of sales includes the direct cost of purchased merchandise, distribution center costs, operations overhead, duty, and all inbound freight costs incurred. The components of our reported cost of sales may not be comparable to those of other retail and wholesale companies.
Gross profit can be impacted by changes in volume; fluctuations in sales price; operational efficiencies, such as leveraging of fixed costs; promotional activities, including free shipping; commodity prices, such as for cotton; tariffs; and labor costs.
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Selling, General, and Administrative Expenses (“SG&A”)
SG&A expenses include selling; advertising, marketing, and product development; and administrative expenses. Selling expenses include:
VB Direct business expenses, such as store expenses, employee compensation, and store occupancy and supply costs;
VB Indirect business expenses consisting primarily of employee compensation and other expenses associated with sales to Indirect retailers; and
Pura Vida business expenses primarily related to employee compensation.
Advertising, marketing, and product development expenses include employee compensation, media costs, creative production expenses, marketing agency fees, new product design costs, public relations expenses, and market research expenses. A portion of our advertising expenses may be reimbursed by Indirect retailers, and such amount is classified as other income. Administrative expenses include employee compensation for corporate functions, corporate headquarters occupancy costs, consulting and software expenses, and charitable donations.
Other Income (Loss), Net
Other income (loss), net primarily includes certain legal settlements and sales tax credits received for timely filings.
Operating Loss
Operating loss is equal to gross profit less SG&A expenses plus other income, net. Operating loss excludes interest income, interest expense, and income taxes.
Net Loss
Net loss is equal to operating loss plus interest income less interest expense and income taxes.
Net Income Attributable to Redeemable Noncontrolling Interest
Net income attributable to redeemable noncontrolling interest represents the operating results of Pura Vida that are not attributable to Vera Bradley, Inc.
Net Loss Attributable to Vera Bradley, Inc.
Net loss attributable to Vera Bradley, Inc. is equal to net loss less net income attributable to redeemable noncontrolling interest.
Impairment Charges
Long-lived Assets
Property, plant, and equipment and lease right-of-use assets (the "asset group" for store-related assets) are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset group may not be recoverable. The reviews are conducted at the lowest identifiable level of cash flows. If the estimated undiscounted future cash flows related to the asset group are less than the carrying value, we recognize a loss equal to the difference between the carrying value and the fair value, as further defined in Note 5 to the Notes to the Condensed Consolidated Financial Statements herein. An impairment charge of $0.6 million was recognized during the thirteen weeks ended April 30, 2022, for a lease right-of-use asset and is included in SG&A expenses in the Condensed Consolidated Statements of Operations and in impairment charges in the Condensed Consolidated Statements of Cash Flows. The impairment charge is included within corporate unallocated expenses. There were no impairment charges recorded during the thirteen weeks ended May 1, 2021. We are unable to predict the extent of the impact that the inflationary environment and disruptions caused by the COVID-19 pandemic will have on our operations, the economy, or other factors; therefore, it is possible additional impairments could be identified in future periods, and such amounts could be material.
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Goodwill and Other Intangible Assets
We perform our annual impairment test over goodwill and the Pura Vida brand during the second quarter of each fiscal year. There was no impairment charge recorded during the second quarter of fiscal 2022. As of April 30, 2022, we determined that the fair values of the Pura Vida reporting unit and the Pura Vida brand exceeded their carrying values by a nominal amount and concluded that no impairment existed for the goodwill or brand assets. This assessment considered the impact of recent lower sales volumes, particularly in the Pura Vida e-commerce channel, that have been realized in the first quarter of fiscal 2023, as well as changes to other assumptions from the Company’s fiscal 2022 analysis. While we consider our assumptions to be reasonable, they are complex and highly subjective.
Adverse changes in key assumptions, even by a nominal amount, in future periods may result in a decline in the fair value estimates of goodwill, Pura Vida brand, and definite-lived intangible assets below their carrying value resulting in impairment charges, which could be material. Our key assumptions may be impacted by macroeconomic conditions, including inflationary pressures and the continued disruptions caused by the COVID-19 pandemic, including but not limited to the duration and magnitude of the pandemic, as well as a sustained decline in stock price and potential changes in business strategy, which may also impact the triggering event assessment in future periods. A triggering event is an event or circumstance that indicates the fair value of an entity (or reporting unit) may be below its carrying amount. The adverse changes in key assumptions for goodwill may include, but are not limited to: a decline in the revenue growth rate; a decline in operating profit; or an increase in the discount rate. The adverse changes in key assumptions for the Pura Vida brand may include, but are not limited to: a decline in the revenue growth rate; a decline in the long-term growth rate; a decline in the royalty rate; or an increase in the discount rate.
Results of Operations
The following tables summarize key components of our condensed consolidated results of operations for the periods indicated, both in dollars and as a percentage of our net revenues ($ in thousands):
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 Thirteen Weeks Ended
 April 30,
2022
May 1,
2021
Statement of Operations Data:
Net revenues$98,459 $109,094 
Cost of sales45,945 49,930 
Gross profit52,514 59,164 
Selling, general, and administrative expenses60,914 60,896 
Other income (loss), net167 (227)
Operating loss(8,233)(1,959)
Interest expense, net40 90 
Loss before income taxes(8,273)(2,049)
Income tax benefit(1,563)(531)
Net loss(6,710)(1,518)
Less: Net income attributable to redeemable noncontrolling interest264 627 
Net loss attributable to Vera Bradley, Inc.$(6,974)$(2,145)
Percentage of Net Revenues:
Net revenues100.0 %100.0 %
Cost of sales46.7 %45.8 %
Gross profit53.3 %54.2 %
Selling, general, and administrative expenses61.9 %55.8 %
Other income (loss), net0.2 %(0.2)%
Operating loss(8.4)%(1.8)%
Interest expense, net— %0.1 %
Loss before income taxes(8.4)%(1.9)%
Income tax benefit(1.6)%(0.5)%
Net loss(6.8)%(1.4)%
Less: Net income attributable to redeemable noncontrolling interest0.3 %0.6 %
Net loss attributable to Vera Bradley, Inc.(7.1)%(2.0)%
The following tables present net revenues and operating income by operating segment, both in dollars and as a percentage of associated net revenues, and store data for the periods indicated ($ in thousands, except as otherwise indicated):
 
 Thirteen Weeks Ended
 April 30,
2022
May 1,
2021
Net Revenues by Segment:
VB Direct$61,636 $66,732 
VB Indirect16,977 15,264 
Pura Vida19,846 27,098 
Total$98,459 $109,094 
Percentage of Net Revenues by Segment:
VB Direct62.6 %61.2 %
VB Indirect17.2 %14.0 %
Pura Vida20.2 %24.8 %
Total100.0 %100.0 %
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