Supply chain delays along with freight costs increases, plus delayed renewal of the generalized system of preferences (GSP) tariff relief impacted Vera Bradley Inc.’s profitability during the year.
In a Nutshell: CEO Rob Wallstrom told Wall Street analysts during a conference call Thursday that incremental freight costs and GSP impact affected earnings per share (EPS) by 25 cents for the full year. Excluding the two items, EPS would have been in line with original guidance of 80 cents to 90 cents.
Vera Bradley and Pura Vida raised some prices to mitigate inflationary and supply chain pressures. The company gained digital know-how when it acquired Pura Vida in 2019.
“We will continue to implement our price increases throughout the first half of this year, which will drive higher AURs (average unit retails) and offset freight-related gross margin pressure,” Wallstrom said.
Chief financial officer John Enwright said the company will air freight some product, is considering shipping goods through other ports, and aims to send cargo from L.A. by rail through Chicago and down into Fort Wayne, Ind. where it’s headquartered.
Wallstrom said Congress is still working on legislation for GSP tariff relief with retrospective reinstatement expected.
Vera Bradley is planning another year of “high profile product collaborations” with brands such as Disney, Harry Potter, Peanuts and Crocs. Its cotton ReIMAGINED collection includes 50 percent recycled and 50 percent conventional cotton. The company aims to source only sustainable fabrics by 2025. In addition, it broadened its apparel offerings to include graphic tees, puffer jackets, vests, leggings and a larger selection of pajamas alongside sleepwear and robes.
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The company is prioritizing its digital-first strategy, enhancing the product innovation pipeline, building the community through marketing, and evolving its distribution channels.
Wallstrom said the company plans to open five new factory stores this year, and expand Vera Bradley’s wholesale presence in digital marketplaces such as Amazon.
Factory stores, e-commerce and e-commerce wholesale, such as Amazon will continue to be the company’s biggest channels.
For its more casual lifestyle brand Pura Vida, the first store in San Diego “continues to exceed our expectations,” Wallstrom said, adding that a second location will open in Orange County in July. An East Coast location in a high traffic tourist beach area is set to open in the summer, with one additional store in the fall.
Net Sales: For the three months ended Jan. 29, net revenues rose 5.1 percent to $149.6 million from $142.4 million.
The company said its Vera Bradley Direct segment revenues rose 12.2 percent to $104.4 million, with a comparable sales increase of 8.3 percent from year-ago figures. The company closed five full-line stores and opened six factory outlet doors in the last 12 months. Vera Bradley Indirect revenues fell 14.6 percent to $13 million due to a reduction in orders for the quarter. The Pura Vida segment posted a 5.6 percent decline in revenues to $32.2 million.
For the year, net revenues rose 15.4 percent to $540.5 million from $468.3 million.
Earnings: Net income fell 35 percent to $5.2 million, or 15 cents a diluted share, from $7.9 million, or 23 cents, in the same year-ago quarter.
For the fiscal year ending Jan. 28, 2023, the women’s fashion, home and accessories chain expects consolidated net revenues between $555 million to $575 million, up from $540.5 million in Fiscal 2022. Year-over-year Vera Bradley revenues are expected to grow in the low- to mid-single digit range, while Pura Vida is projected at flat to up by low-single digits. Consolidated diluted EPS is expected at between 57 cents to 67 cents.
For the year, Vera Bradley more than doubled its net income to $17.8 million, or 52 cents a diluted share, from $8.7 million, or 26 cents, in 2020.
CEO’s Take: “We are committed to being a purpose-driven, multi-lifestyle brand, stable-growth company, generating strong cash flow,” Wallstrom said. “Although Fiscal 2022 had its short-term challenges, and Fiscal 2023 will still be filled with inflationary challenges, we have a solid long-term vision for the future of our Company and a clear path to achieve our goals.”