Vera Bradley Announces Third Quarter Fiscal 2021 Results

Company posts third quarter GAAP EPS of $0.26 per diluted share, compared to $0.00 per diluted share last year, and non-GAAP EPS, excluding certain items, of $0.30 per diluted share, compared to $0.20 per diluted share last yearCompany delivers gross margin rate improvement and meaningful leverage on expenses for the quarterBalance sheet remains strong, with cash, cash equivalents, and investments of $77.3 millionFORT WAYNE, Ind., Dec. 09, 2020 (GLOBE NEWSWIRE) — Vera Bradley, Inc. (Nasdaq: VRA) (the “Company”) today announced its financial results for the third quarter ended October 31, 2020.     Chief Executive Officer Rob Wallstrom noted, “Our quarterly earnings once again significantly exceeded last year’s performance as well as our expectations.   We expanded our gross margin rate primarily through sales of cotton masks and controlled promotional activity, and we diligently managed our expenses, achieving meaningful expense leverage. Our multi-brand strategy is proving to be powerful.”Wallstrom continued, “Customers are changing the way they shop, and we have responded. Our digital competencies are becoming increasingly important, especially in this quickly evolving environment. Somewhat fortuitously, last year, we acquired digitally-native Pura Vida and began working on critical Vera Bradley technology infrastructure and e-commerce site improvements necessary to position the Company for future success.“Our consolidated e-commerce business was very strong in the third quarter, reflecting growth from both Vera Bradley and Pura Vida. Even as our stores were reopened during the third quarter, our Vera Bradley digital business rose nearly 50% over last year.   And, Pura Vida’s e-commerce year-over-year sales grew over 17% for the quarter, despite supply chain disruptions. E-commerce sales comprised over a third of total Company revenues for the quarter.”“Our team demonstrated that by staying laser focused on the customer and by controlling what we can control, we can drive strong results and position ourselves to emerge a stronger and more resilient company, despite facing ongoing headwinds,” Wallstrom added. “Our results were achieved through the innovation, teamwork, and determination of our entire organization.”  Wallstrom also added, “We are so thankful for all of our Associates and are especially grateful to those that have served on the front lines, making sure our customers have safe and exceptional experiences, day-in and day-out. We were once again thrilled to award a quarterly bonus of up to $500 (based on hours worked) to each distribution center, store, and customer service Associate for their continued contributions and devotion to Vera Bradley during this extraordinary time. Over the last two quarters, we have paid over $800,000 in well-deserved bonuses to our front-line Associates.”Pura Vida Acquisition and AccountingIn the Company’s prior year second fiscal quarter (on July 16, 2019), Vera Bradley acquired a 75% interest in Creative Genius, Inc., which also operates under the name Pura Vida Bracelets (“Pura Vida”). Financial results for Pura Vida have been consolidated beginning July 17, 2019, the first full day following the acquisition.   The third quarters are comparable (with full quarters of Pura Vida performance); however, prior period nine-month numbers do not include Pura Vida results before the acquisition. Any reference to the results of “Vera Bradley” in this release is to results of the stand-alone Vera Bradley business (comprised of the Vera Bradley Direct and Indirect segments) and excludes Pura Vida. Any reference to the results of “Vera Bradley, Inc.” is to the combined results of Vera Bradley and Pura Vida.Summary of Financial Performance for the Third QuarterConsolidated net revenues totaled $124.8 million for the current year third quarter compared to $127.5 million in the prior year third quarter.   For the current year third quarter, Vera Bradley, Inc.’s consolidated net income totaled $8.9 million, or $0.26 per diluted share. These results included $1.4 million of net after tax charges related to intangible asset amortization. On a non-GAAP basis, excluding these items, Vera Bradley, Inc.’s consolidated third quarter net income totaled $10.2 million, or $0.30 per diluted share.For the prior year third quarter, Vera Bradley, Inc. consolidated net income totaled $0.1 million, or $0.00 per diluted share. These results included $6.8 million of after tax charges comprised of $6.0 million related to purchase accounting adjustments for the Pura Vida acquisition (including inventory step-up amortization, intangible asset amortization, and accretion of the earn-out liability) and $0.8 million of expenses related to the re-platforming of Vera Bradley’s information technology systems (“Project Novus”). On a non-GAAP basis, excluding these charges, Vera Bradley, Inc. consolidated third quarter net income totaled $6.9 million, or $0.20 per diluted share.Summary of Financial Performance for the Nine MonthsConsolidated net revenues totaled $325.9 million for the current year nine months ended October 31, 2020 (which included $78.4 million of net revenues from Pura Vida), compared to $338.3 million of revenues in the prior year nine-month period ended November 2, 2019 ( which included $30.4 million of revenues from Pura Vida). Excluding Pura Vida, Vera Bradley net revenues totaled $247.5 million compared to $307.9 million in the prior year nine-month period.For the current year nine months, Vera Bradley, Inc.’s consolidated net income totaled $0.8 million, or $0.02 per diluted share. These results included $10.2 million of net after tax charges, comprised of $4.1 million of intangible asset amortization, $2.7 million of impairment charges, $2.1 million of Project Novus expenses, $0.9 million of charges related to the cancellation of certain purchase orders as a result of the COVID-19 pandemic (“COVID-19” or the “pandemic”), a $0.2 million adjustment to the Pura Vida earn-out liability, and $0.2 million in certain department store exit costs resulting from COVID-19. On a non-GAAP basis, excluding these charges, Vera Bradley, Inc.’s consolidated net income for the current year nine months totaled $10.9 million, or $0.32 per diluted share. This non-GAAP performance included $0.13 of diluted earnings per share attributable to Pura Vida.For the prior year nine-month period, Vera Bradley, Inc. consolidated net income totaled $3.6 million, or $0.10 per diluted share. These results included $10.3 million of after tax charges comprised of $9.0 million related to the purchase accounting adjustments for the Pura Vida acquisition (including inventory step-up amortization, intangible asset amortization, transaction costs, and accretion of the earn-out liability) and $1.3 million of expenses related to Project Novus. On a non-GAAP basis, excluding these charges, Vera Bradley, Inc. consolidated net income for the nine months totaled $13.8 million, or $0.40 per diluted share. This performance included $0.08 attributable to Pura Vida.Non-GAAP NumbersThe current year non-GAAP third quarter income statement numbers referenced below exclude the previously outlined intangible asset amortization. The current year non-GAAP income statement numbers for the nine months referenced below exclude the previously outlined intangible asset amortization, impairment charges, Project Novus expenses, charges related to the cancellation of certain purchase orders resulting from COVID-19, an adjustment to the Pura Vida earn-out liability, and certain department store exit costs resulting from COVID-19. The prior year non-GAAP income statement numbers for the third quarter and nine months referenced below exclude the previously outlined Pura Vida acquisition-related charges and Project Novus expenses.  Third Quarter DetailsCurrent year third quarter Vera Bradley Direct segment revenues totaled $78.2 million compared to $78.4 million in the prior year third quarter. E-commerce sales growth of 48.8% offset the 19.1% decline in comparable store sales for the quarter, as store traffic continues to be negatively impacted by the pandemic. The Company closed 10 full-line stores and opened six factory outlet stores in the last twelve months.Vera Bradley Indirect segment revenues totaled $22.3 million compared to $24.1 million in the prior year third quarter, reflecting a reduction in orders primarily related to the pandemic and in the number of specialty and department store accounts.Pura Vida segment revenues totaled $24.3 million compared to $25.0 million in the prior year third quarter. A 17.2% growth in e-commerce sales nearly offset a decline in sales to wholesale accounts, which were negatively affected by the pandemic.  Third quarter consolidated gross profit totaled $73.8 million, or 59.1% of net revenues, compared to $67.9 million, or 53.2% in the prior year. On a non-GAAP basis, excluding inventory step-up amortization, gross profit totaled $74.1 million or 58.1% of net revenues in the prior year third quarter. The Company expanded its consolidated gross profit rate in the quarter primarily through sales of cotton masks and controlled promotional activity.     Third quarter consolidated SG&A expense totaled $61.7 million, or 49.4% of net revenues, compared to $69.4 million, or 54.4% of net revenues, in the prior year. On a non-GAAP basis, excluding the previously discussed intangible asset amortization, consolidated SG&A expense totaled $59.4 million, or 47.6% of net revenues for the current year third quarter. On a non-GAAP basis, excluding intangible asset amortization, accretion of the earnout liability, and Project Novus expenses, prior year SG&A expense totaled $64.0 million, or 50.2% of net revenues.   Current year SG&A expenses were lower than the prior year due to both temporary and permanent expense reductions related to the pandemic.The Company’s consolidated operating income totaled $12.2 million, or 9.7% of net revenues, compared to an operating loss of ($1.5) million, or (1.2%) of net revenues, in the prior year third quarter. On a non-GAAP basis, excluding the intangible asset amortization, current year consolidated operating income totaled $14.4 million, or 11.6%. This compares to prior year consolidated operating income of $10.1 million, or 7.9% of net revenues, on a non-GAAP basis, excluding the previously disclosed charges
related to purchase accounting adjustments for the Pura Vida acquisition (including inventory step-up amortization, intangible asset amortization, and accretion of the earn-out liability) and Project Novus expenses.By segment:Vera Bradley Direct operating income was $19.8 million, or 25.3% of Direct net revenues, for the third quarter, compared to $14.7 million, or 18.7% of Direct net revenues, in the prior year. On a non-GAAP basis, excluding a portion of the Vera Bradley Project Novus charges, prior year Direct operating income totaled $15.5 million, or 19.8% of Direct net revenues.Vera Bradley Indirect operating income was $9.3 million, or 41.8% of Indirect net revenues, for the third quarter, compared to $9.3 million, or 38.7% of Indirect net revenues, in the prior year.Pura Vida’s operating income was $0.4 million, or 1.7% of Pura Vida net revenues, in the current year, compared to an operating loss of $(4.5) million, or (17.9%) of Pura Vida net revenues, in the prior year. On a non-GAAP basis, excluding $2.3 million of intangible asset amortization, Pura Vida’s current operating income totaled $2.7 million, or 11.0% of Pura Vida net revenues, for the current year. On a non-GAAP basis, excluding the Pura Vida acquisition-related charges (inventory step-up amortization and intangible asset amortization), Pura Vida’s operating income was $4.2 million, or 16.7% of Pura Vida net revenues, for the prior year.
Details for the Nine MonthsVera Bradley Direct segment revenues for the current year nine-month period totaled $196.2 million compared to $243.9 million in the prior year. The decline primarily resulted from the Company’s stores that were temporarily closed as a result of the pandemic for approximately half of the first and second quarters, partially offset by a 59.0% increase in e-commerce sales during the nine-month period.Vera Bradley Indirect segment revenues for the nine months totaled $51.3 million compared to $64.0 million in the prior year, reflecting a reduction in orders primarily related to the pandemic and in the number of specialty and department store accounts.Pura Vida segment revenues totaled $78.4 million compared to $30.4 million in the prior year, which represented a partial period from the date of acquisition.Consolidated gross profit for the nine months totaled $187.6 million, or 57.6% of net revenues, compared to $185.7 million, or 54.9% of net revenues, in the prior year. On a non-GAAP basis, excluding charges for the cancellation of certain purchase orders resulting from COVID-19, current year gross profit totaled $189.0 million, or 58.0% of net revenues, compared to last year’s non-GAAP gross profit of $192.9 million, or 57.0 % of net revenues, which excluded inventory step-up amortization. The Company expanded its consolidated gross profit rate for the period primary through sales of cotton masks, product collaborations, careful inventory management, and tightly controlled promotional activity.For the nine months, consolidated SG&A expense totaled $183.6 million, or 56.3% of net revenues, compared to $184.5 million, or 54.5% of net revenues, in the prior year. On a non-GAAP basis, excluding the previously outlined intangible asset amortization, impairment charges, Project Novus expenses, an adjustment to the Pura Vida earn-out liability, and certain department store exit costs, current year consolidated SG&A expense totaled $169.7 million, or 52.1% of net revenues. This compared to $175.3 million, or 51.8% of net revenues, in the prior year on a non-GAAP basis, excluding the previously discussed Pura Vida acquisition-related charges (including intangible asset amortization, transaction costs and accretion of earnout liability) and Project Novus expenses. On a non-GAAP basis, Pura Vida contributed $34.9 million of SG&A expenses in the current year and $13.8 million in the prior year nine months (representing a partial period from the date of acquisition).For the nine months, the Company’s consolidated operating income totaled $4.1 million, or 1.3% of net revenues, compared to consolidated operating income of $2.2 million, or 0.7% of net revenues, in the prior year nine-month period. On a non-GAAP basis, excluding the previously disclosed charges (intangible asset amortization, impairment charges, Project Novus expenses, charges related to the cancellation of certain purchase orders, an adjustment to the Pura Vida earn-out liability, and certain department store exit costs), the Company’s consolidated operating income was $19.4 million, or 5.9% of net revenues. On a non-GAAP basis, excluding the previously disclosed charges (inventory step-up amortization, intangible asset amortization, Pura Vida transaction costs, accretion of earn-out liability, and Project Novus expenses), the Company’s consolidated operating income was $18.7 million, or 5.5% of net revenues, in the prior year.By segment:Vera Bradley Direct operating income was $31.6 million, or 16.1% of net revenues, compared to $45.2 million, or 18.5% of Direct net revenues, in the prior year. On a non-GAAP basis, excluding impairment charges, a portion of the charges for the cancellation of purchase orders, and a portion of Project Novus expenses, the current year Direct operating income was $38.5 million, or 19.6% of Direct net revenues. On a non-GAAP basis, excluding a portion of the Vera Bradley Project Novus expenses, prior year Direct operating income was $46.3 million, or 19.0% of Direct net revenues.Vera Bradley Indirect operating income was $18.6 million, or 36.2% of Indirect net revenues, compared to $24.2 million, or 37.8% of net revenues, in the prior year. On a non-GAAP basis, excluding certain department store exit costs and a portion of the charges for the cancellation of purchase orders, current year Indirect operating income totaled $19.0 million, or 37.0% of Indirect net revenues.Pura Vida’s operating income was $4.0 million, or 5.2% of Pura Vida net revenues, for the current year, compared to an operating loss of ($5.0) million, or (16.5%) of Pura Vida net revenues, in the prior year. On a non-GAAP basis, excluding the intangible asset amortization, Pura Vida’s operating income was $11.0 million, or 14.1% of Pura Vida net revenues, for the current year. On a non-GAAP basis, excluding the Pura Vida acquisition-related charges (inventory step-up amortization and intangible asset amortization), Pura Vida’s operating income was $5.1 million, or 16.7% of Pura Vida net revenues, for the prior year (representing a partial period from the date of acquisition).
Balance SheetNet capital spending for the third quarter and nine months totaled $0.9 million and $5.2 million, respectively. Capital expenditures are expected to total between $6 and $7 million for the year.Cash, cash equivalents, and investments as of October 31, 2020 totaled $77.3 million compared to $48.8 million at the end of last year’s third quarter. The Company had $30.0 million of borrowings outstanding on its $75.0 million ABL credit facility at quarter end.Quarter-end inventory was $141.6 million, compared to $134.0 million at the end of the third quarter last year. Current year third quarter inventory was higher than the prior year primarily due to receipts accelerated into the third quarter from the fourth quarter. Management expects year-over-year inventory to be relatively flat at fiscal year end.During the first quarter of this fiscal year, the Company’s board of directors temporarily suspended share repurchases due to the pandemic, so no purchases have been made since that time. At the end of the third quarter, the Company had approximately $32.9 million remaining under its $50.0 million share repurchase authorization. The Board of Directors has extended the plan authorization through December 11, 2021.Forward-Looking GuidanceThe continued uncertainties surrounding COVID-19 make fourth quarter financial performance extremely difficult to predict. As a result, the Company is not providing forward-looking guidance.Disclosure Regarding Non-GAAP MeasuresThe 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 United States (“GAAP”). Further, the non-GAAP measures utilized by the Company may be unique to the Company, as they may be different from non-GAAP measures used by other companies.The Company believes that the non-GAAP measures presented in this earnings release, including gross profit; selling, general, and administrative expenses; operating income; net income; net income attributable and available to Vera Bradley, Inc.; and diluted net income per share available to Vera Bradley, Inc. common shareholders, 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 InformationA conference call to discuss results for the third quarter is scheduled for today, Wednesday, December 9, 2020, 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) 458-4121, and enter the access code 6506855. A replay will be available shortly after the conclusion of the call and remain available through September 16, 2020. To access the recording, listeners should dial (844) 512-2921, and enter the access code 6506855.About Vera Bradley, Inc.Vera Bradley, Inc. operates two unique lifestyle brands – Vera Bradley and Pura Vida. 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, based in Fort Wayne, Indiana, is a leading designer of women’s handbags, luggage and other travel items, fashion and home accessories, and unique gifts.  Founded in 1982 by friends Barbara Bradley Baekgaard and Patricia R. Miller, the brand is known for its innovative designs, iconic patterns, and brilliant colors that inspire and connect women unlike any other brand in the global marketplace.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, and highly engaging lifestyle brand founded in 2010 by friends Paul Goodman and Griffin Thall. Pura Vida 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, the Vera Bradley online outlet site, and the Vera Bradley annual outlet sale in Fort Wayne, Indiana. The VB Indirect business consists of sales of Vera Bradley products to approximately 2,000 specialty retail locations throughout the United States, as well as select 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 consists of sales of Pura Vida products through the Pura Vida websites, www.puravidabracelets.com, www.puravidabracelets.eu, and www.puravidabracelets.ca, and through the distribution of its products to wholesale retailers.Website InformationWe 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.Investors and other interested parties may also access the Company’s most recent Corporate Responsibility and Sustainability Report outlining its ESG (Environmental, Social, and Governance) initiatives at https://www.verabradley.com/us/static/customerservice/corporateresponsibility.Vera Bradley Safe Harbor StatementCertain 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 long-term strategic plan; possible inability to successfully open new stores, close targeted stores, and/or operate current stores as planned; incremental tariffs or 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 distribution facilities; or business disruption caused by COVID-19. Risks, uncertainties, and assumptions also include the possibility that Pura Vida acquisition benefits may not materialize as expected; that Pura Vida’s business may not perform as expected; and that the Company is unable to successfully implement integration strategies related to the acquisition. 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 SEC, including the Company’s Form 10-K for the fiscal year ended February 1, 2020. We undertake no obligation to publicly update or revise any forward-looking statement. Financial schedules are attached to this release.CONTACTS:
Investors:
Julia Bentley, VP of Investor Relations and Communications
jbentley@verabradley.com
(260) 207-5116Media:           
mediacontact@verabradley.com
877-708-VERA (8372)