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Vera Bradley posts flat Q3 revenue, lowers outlook

By Prachi Singh

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Vera Bradley net revenues totalled 126.7 million dollars for the third quarter ended October 29, 2016, which the company said were flat against 126.7 million dollars recorded in the third quarter ended October 31, 2015. Net income was 8.8 million dollars or 0.24 dollar per diluted share, for the current year third quarter, which included a benefit of 1.6 million dollars or 0.04 dollar per share, for a federal income tax adjustment. Net income was 10.3 million dollars or 0.27 dollar, in the prior year third quarter.

"The third fiscal quarter was an important one for our company with the launch of Vera Bradley's new brand positioning, supported by our comprehensive marketing initiatives and the opening of our new SoHo flagship store. However, the overall retail environment remains challenging. Third quarter diluted EPS was modestly below our guidance range, primarily due to continued weakness in the specialty channel and incremental promotional activity in our factory stores. In addition, verabradley.com sales were below expectations,” said Robert Wallstrom, Chief Executive Officer of Vera Bradley.

Third quarter and nine month result highlights

Current year third quarter direct segment revenues totalled 86.1 million dollars, a 2.3 percent increase, but comparable sales decreased 5 percent, reflecting a 5.3 percent decline in comparable store sales and a 4.4 percent decrease in e-commerce sales, which the company said was offset by new store growth. The company opened four full-line and five factory outlet stores during the past 12 months.

Indirect segment revenues decreased 4.6 percent to 40.6 million dollars from 42.5 million dollars in the prior year third quarter, primarily due to lower orders from the company's specialty retail accounts, partially offset by higher sales to certain department stores and non-department store key accounts. Gross profit was 72.9 million dollars or 57.6 percent of net revenues, compared to 73.3 million dollars or 57.9 percent of net revenues, in the prior year third quarter. Operating income totalled 11.4 million dollars or 9 percent of net revenues compared to 16.8 million dollars or 13.3 percent of net revenues, in the prior year third quarter.

For the first nine months, net revenues totalled 351.1 million dollars compared to 348.5 million dollars for the nine months ended October 31, 2015, an increase of 0.7 percent. Net income was 16.3 million dollars or 0.44 dollar per diluted share against11.8 million dollars or 0.30 dollar per diluted share, last year.

Direct segment revenues for the current year nine month period totalled 246.3 million dollars, a 3.3 percent increase over 238.3 million dollars in the same prior year period. Comparable sales decreased 5.7 percent for the period reflecting a 5.2 percent decline in comparable store sales and a 6.8 percent decrease in e-commerce sales.

Indirect segment revenues decreased 4.9 percent to 104.8 million dollars from 110.2 million dollars in the prior year. Gross profit was 201 million dollars or 57.2 percent of net revenues, compared to adjusted gross profit of 195 million dollars or 55.9 percent of net revenues, in the prior year.

Fourth quarter and fiscal year 2017 outlook

"Given the headwinds we are facing, particularly in the wholesale channel, our fourth quarter revenue expectations are below our initial thoughts, which is putting pressure on gross profit, our ability to leverage our SG&A, and diluted EPS," added Wallstrom.

For the fourth quarter, the company expects net revenues of 135 million dollars to 140 million dollars compared to prior year fourth quarter revenues of 154.1 million dollars. A gross profit percentage is expected of 55.9 percent to 56.2 percent compared to 58.2 percent in the prior year fourth quarter. The decline, the company said, primarily relates to expected increased promotional activity in the company's factory stores. Diluted earnings per share are expected to be in the range of 0.23 dollar to 0.25 dollar against 0.41 dollar in the prior year fourth quarter.

For fiscal 2017, the company expects net revenues are expected to be 486 million dollars to 491 million dollars compared to 502.6 million dollars last year and diluted earnings per share (including second and third quarter impairment charges and excluding the previously mentioned income tax benefit) of 0.62 dollar to 0.65 dollar against 0.82 dollar last year.

Picture:Facebook/Vera Bradley

Vera Bradley