- Prachi Singh |
Net revenues at Vera Bradley totalled 114.1 million dollars for the third quarter ended October 28, 2017 compared to 126.7 million dollars in the prior year third quarter ended October 29, 2016, while net income was 0.4 million dollars or 0.01 dollar per diluted share compared to 8.8 million dollars or 0.24 dollar per diluted share. On a non-GAAP basis, the company’s net income totalled 8.3 million dollars or 0.23 dollar per diluted share against 7.6 million dollars or 0.21 dollar per diluted share.
Commenting on the third quarter results, Robert Wallstrom, Vera Bradley’s CEO said in a statement: “Our ability to implement certain expense reductions in conjunction with the initial implementation of our Vision 20/20 plan more quickly than originally expected, along with diligent expense management, drove third quarter EPS meaningfully ahead of our guidance.”
Third quarter result highlights
Current year third quarter direct segment revenues totalled 83.2 million dollars, a 3.4 percent and comparable sales including e-commerce decreased 7.4 percent for the quarter reflecting a 6.9 percent decline in comparable store sales and an 8.6 percent decrease in e-commerce sales, which the company said, was partially offset by new store growth. The company opened one full-line store and seven factory outlet stores during the past 12 months.
The company added that indirect segment revenues decreased 23.8 percent to 30.9 million dollars reflecting a reduction in the number of specialty accounts coupled with a reduction in orders from both specialty accounts and certain key accounts.
Gross profit for the quarter was 63.8 million dollars or 55.9 percent of net revenues, compared to 72.9 million dollars or 57.6 percent of net revenues, in the prior year third quarter. The year-over-year 80 basis point gross profit decline, the company said, was primarily related to increased promotional activity at the company’s factory outlet stores and channel mix changes, partially offset by a reduction in product cost, all of which caused the gross profit percentage to fall below the low end of the guidance range of 57.1 percent to 57.6 percent.
The company’s operating income totalled 0.5 million dollars or 0.4 percent of net revenues compared to 11.4 million dollars or 9 percent of net revenues, in the prior year third quarter. On a non-GAAP basis, the company’s operating income totalled 13 million dollars or 11.4 percent of net revenues compared to 12 million dollars or 9.5 percent of net revenues, in the prior year.
Review of the nine month results
Current year net revenues for the nine months totalled 322.6 million dollars compared to 351.1 million dollars in the prior year. Direct segment revenues were 241.3 million dollars, a 2 percent decrease from 246.3 million dollars in the prior year. Comparable sales including e-commerce decreased 7.7 percent for the period reflecting a 6.1 percent decline in comparable store sales and an 11.4 percent decrease in e-commerce sales.
Indirect segment revenues for the nine months decreased 22.4 percent to 81.3 million dollars from 104.8 million dollars. Gross profit totalled 179.8 million dollars or 55.7 percent of net revenues, compared to 201 million dollars or 57.2 percent of net revenues, in the prior year. The company’s operating loss was 0.6 million dollars or 0.2 percent of net revenues, in the current year nine month period, compared to operating income of 23.6 million dollars or 6.7 percent of net revenues, in the prior year. On a non-GAAP basis, the company’s operating income was 17.1 million dollars or 5.3 percent of net revenues, compared to 26.7 million dollars or 7.6 percent of net revenues, in the prior year.
Vera Bradley predicts Q4 and FY18 expectations
For the fourth quarter of fiscal 2018, the company expects net revenues of 127 million dollars to 132 million dollars compared to prior year fourth quarter revenues of 134.8 million dollars, a gross profit percentage of 55.4 percent to 55.8 percent compared to 55.7 percent in the prior year fourth quarter and diluted earnings per share of 0.30 dollar to 0.33 dollars. Net income totalled 3.5 million dollars or 0.09 dollar per diluted share, in the prior year fourth quarter and excluding charges, net income totalled 10.1 million dollars or 0.28 dollar per diluted share.
For fiscal 2018, the company expects net revenues of 450 million dollars to 455 million dollars compared to 485.9 million dollars last year, a gross profit percentage of 55.8 percent to 55.9 percent compared to 56.8 percent last year and diluted earnings per share of 0.57 dollar to 0.60 dollars. Diluted earnings per share totalled 0.53 dollar last year and excluding charges, diluted earnings per share were 0.72 dollar last year.
“As we discussed last quarter, we have launched Vision 20/20, an aggressive plan to turn around our business over the next three years. Vision 20/20 will restore brand and company health by moving to a less clearance-driven business model combined with a meaningful reduction in our SG&A expenses,” added Wallstrom.
The majority of the product and pricing initiatives will be implemented beginning in fiscal 2019; management expects annualized revenues will be negatively impacted by these initiatives by 30 million dollars to 50 million dollars in fiscal 2019 from fiscal 2018 levels.