Q1 2022 Vera Bradley Inc Earnings Call
We're holding for the Vera Bradley conference at this time of are still of many additional participants in the coffers should begin shortly we do thank you for your patience. Please continue to standby.
[music].
Please standby.
Good morning, ladies and gentlemen, thank you for standing by.
Welcome to the Vera Bradley first quarter conference call at this time, all participants are in a listen only.
Following the presentation, we will conduct a question and answer session and instructions will be provided at that time for you queue up for questions.
As a reminder, today's conference call is being recorded.
I would now like to turn the call over to Mark Day Lie Vera Bradley Chief administrative officer.
Please go ahead.
Good morning, and welcome everyone, we'd like to thank you for joining us for Vera Bradley's earnings call. Some of the statements made during our prepared remarks and in response to your questions may constitute forward looking statements made pursuant to and within the meaning of the safe Harbor provisions of the private Securities Litigation Reform Act of 19.
95 as amended such forward looking statements are subject to both known and unknown risks and uncertainties that could cause actual results to differ materially from those that we expect.
Please refer to today's press release and the company's most recently filed form 10-K filed with the SEC for a discussion of known risks and uncertainties.
Investors should not assume that the statements made during the call will remain operative at a later time, we undertake no obligation to update any information discussed on today's call I will now turn the call over to Vera Bradley CEO, Rob Wallstrom Rob.
Thank you Mark good morning, everyone and thank you for joining us on today's call.
John Enwright, our CFO also joins me today.
We are pleased with their first quarter performance, we outperformed our revenue and earnings expectations consumer.
Consumer confidence traffic and spending grew as vaccines became more widely available government stimulus funds were distributed at customers began returning to work.
Social events and travel.
E Commerce showed continued strength, even with our stores fully reopened.
We experienced solid revenue performance on both a 1 year end 2 year comparison.
Our first quarter consolidated net revenues increased 57% over prior year on a 2 year comparison.
<unk> revenues grew over 40% versus the first quarter of fiscal 2020.
And Vera Bradley comp sales were flat with fiscal 2021st quarter results. As a reminder of PURA Vida as first quarter revenue from fiscal 2020 was not in our consolidated revenue for.
For that time period.
We reduced our promotional levels expanded our consolidated gross margin rate and prudently managed our expenses our balance sheet remains strong with ample cash and no debt.
Fiscal 2022 is off to a solid start as we enter the next stage of our company's growth journey.
Both of our lifestyle brands.
Vera Bradley and PURA Vida have growth opportunities ahead, well beyond their core product categories, driven by our focus on digital first innovation and customer engagement.
Before I turn the call over to John to discuss the financial results I would like to highlight the appointment of Nancy <unk> founder and CEO of <unk>.
<unk> hair care to the Vera Bradley, Inc Board of directors.
In 2014, Nancy departure at her position as VP of gold Goldman Sachs to officially launch <unk> a diverse line of carefully crafted clean hair care products to day, <unk> retails and over 3000 prestige beauty stores globally.
Is 1 of the fastest growing hair care brands at Sephora and is 1 of the largest independent Blackstone prestige beauty brands in the U S.
Nancy's appointment of along with last year's appointments of Christina Cashman and Carrie brings.
<unk> of our female board representation to 60% we are 1 of the elite 6% of public companies listed on the Russell 3000 <unk>.
At a gender balanced board as well as 1 of just a few public companies with a female majority of board.
Nancy's entrepreneurial and retail experience and insight along with their strong financial expertise millennial perspective, and diverse background will bring will be invaluable as we continue to execute.
<unk> with our enterprise vision of expanding our purpose driven multi lifestyle brand high growth company, we look forward to nancy's contributions and counsel.
John.
Thanks, Rob and good morning, let.
Let me go over a few highlights for the first quarter.
The numbers I will discuss today are all non-GAAP for a complete detailed.
Items excluded from the non-GAAP numbers I will discuss in a complete reconciliation of GAAP to non-GAAP numbers. Please reference today's press release.
Consolidated net revenues totaled $109.1 million for the current year first quarter, an increase of 57, 5% over $69.3 million in the prior year first quarter.
<unk>.
Prior year revenues were adversely affected by COVID-19.
Excluding charges on a non-GAAP basis, our consolidated first quarter net loss totaled $1.7 million or <unk> <unk> per diluted share compared to a net loss of $10.2 million or 31 per diluted share last year.
Current year first quarter Vera Bradley direct segment revenues totaled $66.7 million and 81, 2% increase over $36.8 million in the prior year.
Since our stores were temporarily closed for approximately half of the prior year first quarter of <unk>.
Parable store sales calculation related to the prior year is not.
For a better apples to apples comparison comparable store sales were flat to the first quarter of fiscal 2020.
Bureau of Bradley indirect segment revenues totaled $15.3 million at 35, 9% increase over $11.2 million in the prior year first quarter.
PURA Vida segment revenue.
Relative to $27.1 million, a 27, 7% increase over $21.2 million in the prior year first quarter.
First quarter consolidated gross profit totaled $59.2 million.
Or if the 4.2% of net revenues compared to $35.5 million or <unk> 51 to.
Total net revenues last year on a non-GAAP basis.
The year over year improvement was driven by a shift in channel mix and more full price selling.
On a non-GAAP basis consolidated SG&A expense totaled $60.1 million or <unk> 55, 1% of net revenues for the current quarter compared to $51.6.
$6 million or <unk> 74, 5% of net revenues for the first for the prior year first quarter.
Prior year SG&A expenses.
Leverage were materially affected by COVID-19.
And of non-GAAP basis, our first quarter consolidated operating loss totaled $1.2 million or 1.1% of net revenues.
Compared to $16.1 million or 23, 2% of net revenues in the prior year.
Let me talk about our outlook for the fiscal year.
Based on our first quarter performance, we are raising our revenue and EPS estimates for the full year from our guidance provided in March all forward looking guidance numbers are non-GAAP.
We.
A combination of tailwind and headwinds for the balance of the year on.
On the plus side, we expect store traffic and revenue to increase particularly in the second half of fiscal 2022, as we anticipate continued improvement in our important back to school and travel businesses.
Customers are demonstrating a jury of pent up demand.
Negative.
Our face include industrywide port congestion, causing product delivery delays substantial increases in inbound and outbound freight costs and of tightening of the labor market.
In addition, we generate meaningful revenues from mask in fiscal 2021, which as expected will not be repeated in fiscal 2022.
For example.
<unk> they are not providing guidance for the second quarter cotton mass represented over 10% of Bureau, Bradley brand revenues and added nearly 300 basis points of consult of <unk>.
Holidayed at gross margin for the second quarter of fiscal 2021.
For fiscal 2022, we expect consolidated net revenue to total between 5.
While we at <unk> 5 million to $575 million.
Compared to net revenues of $468.3 million in the in fiscal 2021 year over year PURA Vida revenues are expected to grow between 20% and 30% and Vera Bradley revenues are expected to grow between 15% and 20%.
Free cash flow between 50% to 55 million.
Compared to $15 million last year.
Consolidated gross margin of 56% to 57% compared to 57% in fiscal 2021.
The potential rate decline relates to an abatement of mass penetration this year, coupled with incremental costs for freight expense.
Solidago SG&A expense.
<unk> hundred <unk> of $265 million to $275 million compared to $233 million last year the.
The expected increase is primarily related to beer Bradley stores being opened for the full year non comparable compensation in cares Act savings in fiscal 2021, and general variable increases associated.
With higher sales expectations.
Consolidated operating income of $46 million to $53 million compared to $34 million in fiscal 2021.
Consolidated consolidated diluted EPS of <unk> 85 to $1.85 to $1 diluted EPS totaled <unk> 63 last year.
Net.
<unk> spending of approximately $8 million to $10 million compared to $5.7 million in the prior year, reflecting new factory locations in technology and logistics enhancements.
Now, let me turn to the balance sheet.
Cash cash equivalents and investments at quarter end totaled $52.7 million compared to $85.1 million at at the end of last.
Capital this quarter, which included $60 million drawn on our $75 million ABL credit facility.
It has since been repaid leaving no borrowings on the facility.
Total quarter end inventory at was $150.3 million compared to $132.9 million at the end of the first quarter last year quarter.
Quarter end inventory was.
Last year's for end of prior year, primarily due to an additional period.
Due to additional PURA vida inventory related to category expansion and product intensification.
We expect year over year inventory should be down by approximately 5% by fiscal year end.
Rob.
Thanks, John.
As a reminder for.
For fiscal 2022 to 4 key growth drivers for our company are 1 driving our digital first strategy by evolving the digital distribution of our products and further refining and utilizing digital experiences to serve our customers.
This will be supported by continuously refining our technology developing business.
Higher debt and technology platforms to improve agility, databased decision, making customer centricity and speed to market number 2 enhancing our product innovation pipeline collaborations and category expansions.
To attract new customers and increase the share of wallet with existing customers number.
Number 3 building our community through.
Through marketing and by creating an impactful positive brand movement that not only changes lives, but deepens our customers brand loyalty.
Number 4 evolving our distribution channels by focusing on future growth opportunities and addressing the drastically changing retail environment.
And the consumer marketplace.
Let me start with our PURA Vida business, we're off to a good start with total PURA Vida of first quarter revenues up 28% over last year end up 44% of our fiscal 2020.
We look forward to a healthy summer and back to school season this year.
In order to drive <unk> growth, we are continuing.
Expand our lifestyle offerings and to strengthen our infrastructure.
We are in the midst of our project Novus ERP integration at PURA Vida, which is scheduled for completion this fall at.
At that point, our entire enterprise will be on of unifying technology platform and this will allow for enhanced capabilities in sourcing customer service CRM.
<unk> and data analytics among other areas we.
We have also strength in key merchandising inventory planning and customer analytic functions at PURA Vida.
PURA Vida continues to innovate on the product front at a rapid pace, we are constantly adding new designs and elements to our jewelry collections and we have diversified.
Well beyond our core traditional spring bracelets.
Now of about 50% of our E. Commerce business is made up of non string jewelry categories, which really underscores our brands broad lifestyle appeal.
Further underscoring the brand's appeal is our ability to expand into non jewelry categories. In April we launched our PURA Vida.
Apparel collection of shirts, and hoodies a per.
Perfect extension of the PURA Vida lifestyle, while we started with a limited collection. We believe this is a significant revenue opportunity going forward. Several sizes sold out quickly all of the products are fair trade certified and key styles have cause related tie end similar to our popular charity.
<unk> of the program.
Just last month, we introduced our fund affordable Backpack collection, you might recall PURA Vida and Vera Bradley previously collaborated on a special backpack and at sold out at just a few hours. So we know there is a lot of interest in a backpack with of PURA Vida twist at <unk>.
Marilyn backpack, not only appeal to our existing.
Tumors, but are driving new customers to the PURA Vida brand.
And just a couple of months, we will begin announcing some exciting product collaborations and licensing partnerships stay tuned.
In the marketing area of PURA Vida has demonstrated expertise in engaging customers building loyalty and introducing new devote ts.
Into the PURA Vida lifestyle.
We are continually focused on looking for new ways to creatively engage our customers drive new customers to our brand design more inclusive of marketing and generate more efficiency in paid advertising.
On the distribution front, we are targeting strong e-commerce and wholesale growth at pure.
<unk> of this year, particularly as we have strengthened our supply chain infrastructure as.
As the World has returned to more normalcy, our first quarter wholesale revenues doubled over last year and grew by approximately 50% of our fiscal 2020 levels.
We are continuing to add new wholesale partners and we have significantly expanded our presence in existing <unk>.
Retailers with larger in store presentations, and we are experiencing tremendous growth in core product categories within our wholesalers.
We remain excited about opening at our first PURA Vida lab store in San Diego's Westfield UTC mall by August this will allow us to showcase existing products as well as new product innovations.
At <unk> and valuable customer feedback and allow us to host Influencer events, we will evaluate the stores performance for possible future expansion.
We will continue to look for additional shop in shop opportunities to showcase a full array of PURA Vida products and Vera Bradley stores, we successfully rolled out our Vera Bradley PURA Vida charity bracelets.
Recent and all Vera Bradley full line stores. This spring and have been very pleased with the results thus far.
So our core product growth, coupled with new product categories and expanded distribution are expected to drive meaningful top and bottomline growth this year of PURA Vida.
Now, let's shift to Vera Bradley.
We have a robust cash.
Progress of exciting product launches and marketing initiatives for the year and as John noted, we especially look forward to the continuing recovery of our campus and travel segments of the business <unk>.
Our research indicates that nearly 3 quarters of Americans plan to travel to summer alone.
On the product front, we have ramped up our.
<unk> pipeline to continually develop new fabric offerings and to build on our platform of sustainable fabrics. This pipeline is important to not only increase share of wallet with our existing customers, but to attract new customers to Vera Bradley.
Our newest commitment starts at our core just last month, we partnered with actor and fashion Influencer.
There are lot of Condor to launch our new recycled cotton collection.
Consciously crafted from 50% recycled and 50% conventional cotton for.
For the first time available in solid colors.
Of the collection has a lighter impact on the environment, but at the same soft handfield in real World performance.
<unk>.
As our iconic cotton that are customers of love for nearly 40 years.
Our cotton <unk> collection is lightweight and washable and also features several brand new utility silhouettes, bringing that functionality to the bags exteriors with lots of pockets and handy clips the utility collection includes.
<unk> of limited edition, Lana utility backpack with special custom details dreamed up by lawn of herself.
Available now online and in our stores.
By using recycled cotton, we are giving discarded materials, new life and using fewer environmental resources. In fact, we estimate that the use of recycled.
Cotton will improve our water scarcity impact by 43% and reduce our global warming impact by 13%.
We are also continuing to grow our popular reactive collection made from recycled water bottles, we're constantly researching and innovating to bring our customers more eco friendly options and where.
We are committed to updating 100% of our fabrics to more sustainable alternatives by 2025.
Also last month, we launched a reuse program with threat up offering cleanout kits in our stores and online to help customers give new life to their old Vera Bradley favorites and other high quality of used items from many brand in.
Their closets.
Customers, who participated in the program will earn gift cards to purchase new Vera Bradley styles.
Switching gears.
Our collaborate our collaborations and strategic alliances remain a key element of our strategy. This quarter, we continued our high profile product collaborations with.
New launches of Harry Potter Crocs and Disney.
And just this week, we announced a new exciting collaboration with classic accessories for an outdoor collection of furniture covers seats and lounge cushions accent pillows umbrellas rugs and more.
In addition to being available on Vera Bradley Dot.
Classic accessories dot com and in select Vera Bradley stores. This collection can also be purchased online through leading retailers such as way fair Amazon Lowe's and home depot.
These partnerships partnerships excite and engage existing and new customers increased brand awareness generating credit.
<unk> media attention and provide opportunities for Vera Bradley to strategically test and ultimately enter new product categories.
We are continually approach by outside partners about potential new collaborations, which speaks to the power and wide appeal of our brand.
On the marketing front, we are continuing to capitalize.
Calm and build upon the investments we've made in data science business analytics and customer data over the last couple of years.
Quality media placements continue to drive brand awareness with year over year media impressions.
Up over 200% fueled by our collaborations and VB care efforts at.
As expected.
<unk> customer count is up dramatically over last year, and our customer journey centered activations and customer level of personalized messaging are meaningfully aiding in the reactivation of lapsed customers across our full line and factory stores.
We are driving more engagement in social media, specifically, we are utilizing more.
At our generated content has expanded our influencer program continue to enhance our storytelling and have expanded social selling.
We have revamped our brand ambassador program pattern after peer viewed as highly successful 1 we are proud debt.
We are proud debt all of our.
More using efforts, including our ambassador program are reflective of our commitment to diversity and inclusion we continue to amplify our VB cares mission. We just introduced our pride collection in honor of Pride month, with the charity component component going to free hugs and as always this back to school season, we will once again support.
Mark lessons in a backpack and their commitment to end childhood hunger across America.
On the distribution front over the last 18 months, we have prioritized digital at the primary revenue growth driver for Vera Bradley.
Making major strategic shifts of investments to pivot us to a digital first company.
We are enabling her to shop in a seamless manner. We will continue to expand the capabilities introduced by project Novus further enabling revenue growth through the expansion of the digital channels and enhancing the customer experience across all channels through customer analytics.
Although our digital business is becoming.
At Port larger portion of our revenues stores continue to be an important supporting part of our omni channel strategy.
More and more customers are comfortable shopping in stores. There is a degree of pent up demand for in person interaction and many of our seeking shared experiences we continue to focus on enhancing and reinventing the customer experience.
<unk> in our full line stores digital sales are typically higher end markets, where we have a retail presence and the average omni channel customer spends over 3 times more than the single channel customer.
We are continuing to improve the profitability of our full line fleet by focusing on our highest potential stores of.
Optimizing and localizing.
In our Assortments and rationalizing our existing portfolio through select closures.
We have closed 2 full line stores. So far this year and expect to close up to 8 more of this fiscal year, which would bring our total full line closings to 49 since the beginning of fiscal 2018.
This year, we will continue to maximize our factory performance.
Performance by adding 6 new locations and renovating 3 high performing locations.
At Vera Bradley, we will continue to drive growth through product innovation and collaborations targeted marketing and enhanced distribution.
Operator, we will now open up the call to questions.
Well thank you.
If you would like to signal with questions. Please press star 1 on your Touchtone telephone.
Joining us today use a speaker phone. Please make sure your mute function is turned off to allow your signal to reach our equipment once at.
Again that is star 1 if you would like to signal with questions. Thank you.
That is.
Star.
John.
And our first question today will come from Mark <unk> with Baird.
Okay. Thank you Robert Good morning. This is Sarah Goldberg on for Mark Thanks for taking our questions at Sao.
I think theres a lot of exciting initiatives underway here.
Strong start to the year with regards to the revenue outlook can you talk a little bit more about how you were thinking about the shape of the year end than the first quarter came in nicely ahead of expectations and we're just trying to frame that within the magnitude of the guidance raise.
Yeah. So thanks, Sarah at the so.
Do you think about the.
Definitely revenue as we look out for the remainder of year, it's going to be fairly consistent to our store historical averages when you think about that.
The balance of the summer months, and then the winter months being consistent with what we've done in the past, but we think we have an opportunity as I said as I spoke to in regards to our back to school season.
Which kind of crosses over between Q2 and Q3, we think there might be some pent up demand there as well as the travel season, we think theres some opportunity there.
I think we have as we look into kind of the holiday season, we think ultimately there could be some benefit there as everyone gets back out and shopped in the stores.
Great.
And secondly, you mentioned.
John talked about M&A opportunities and I was just hoping you could give us an update on what the acquisition pipeline looks like today.
Absolutely in terms of real specific conversations on M&A, obviously, we don't comment too detailed but we are actively.
And that in the market.
Talking to people and looking at different opportunities, but we want to make sure that we are very prudent and really fine day.
Appropriate 1 over time so.
That's probably the best update I can give you right now.
Perfect. Thanks, so much.
Our next question will come from Eric better with SCC research.
Good morning, congratulations on a good start to the year.
Thank you thanks, Eric.
Last year you had.
Pure.
And at some production issues and other pieces.
Is that right now and do you have the flexibility now with share of either to be moving more aggressive in terms of some of the products in terms of the production flows.
Yes, so last year. So currently right I mean currently we don't have any production issues associated with.
Reviewed at the PURA Vida organization, so last year at really impacted our second or third quarter. So we have the flexibility now that we're able to go to.
Kind of different sources for the free basic manufacturing that we if we need to we can go to those different sources. So definitely in a better place this year than we were last year.
Great.
With the Vera Bradley stores.
Last year, you rolled out reactive.
This year Youre rolling out from recycled cotton.
The push seems to be a little bit to a little bit younger cluster.
Customer and obviously back to school flows into that also.
How do you.
And then to me are you seeing the younger customer coming to Vera for a wider selection and issue.
That he was seeing attractive year by the environmentally friendly products.
Absolutely as we've been moving down the sustainability channel, we definitely have seen a younger customer.
These are.
We're being attracted by that as well as all of the other activities that we kind of do true VB cares we have seen our core customers age in terms of kind of the fastest growing group kind of the 1 we're targeting is really in that 25% to 35 year range, which is a significant change from the past and I think at really under.
Between all of the collaborations the sustainability of the new approach to marketing focused on social media advertising Influencers. All of that has made us more relevant at with that kind of millennial group.
Let me just squeeze 1 last question of performance Twill.
What are.
<unk> that is there any thoughts maybe to changing the cadence in rolling that out a little bit more than you rollout now.
In terms of performance Twill overall has definitely been of nice solid performer for us it's definitely 1 of the categories that we see growing in the years ahead.
And we really think of it fits of unique.
Do you see of our customers' lifestyle right. It gives them the opportunity to wear Vera Bradley.
In new areas right, it's a little bit cleaner.
Cleaner at a little bit dressier than what our normal product is so we're getting a lot of good response from people being able to bring that more into the work environment more out to dinner and I think it expands our brands.
Part of that 2 of new customers can we think there's real opportunity there.
Great. Good luck for the rest of the year.
Thanks, Eric.
Thank you. Our next question will come from Oliver Chen with Cowen.
Thank you very much on your comments on traffic in stores.
More traffic.
Are you seeing in full price.
Malls relative to outlet and how do you see that evolving relative to 2019 expected of a fair degree of volatility or for at <unk>.
Continue to improve over time.
Yes, so traffic is still down at a greater.
Brand and kind of mall traffic versus outlet traffic and we do anticipate this year, it's going to be of volatile, but we would hope as we kind of aspects of continuing rollout as people get out and get more comfortable out going to malls that we would hope to see kind of an improvement in kind of the.
Factory traffic first and then ultimately kind of of the mall traffic.
At our expectation on your comments on port congestion as well as the labor market.
Within your control and what risk factors might there be as you.
Plenty of inventory in this dynamic environment.
Yes, so what's within our control is really looking at kind of our future launches and making a determination on what we may need.
Air freight and at versus kind of shipping.
As you know with many other retailers ultimately there is a lot of congestion of the ports Theres a lot of container shortages. So we're looking at kind of our future launches in determining what is the appropriate level to air end and versus what it is the appropriate low level to allow us to just ship and look through.
To that basis.
I think the other thing to that.
All of our the only thing that was kind of say to is that in addition to kind of managing the best we can we've really tried to look at the whole design process kind of start to finish and when orders are getting place because part of what's happened.
And is that we do not think that the port congestion is only for a few months it feels like it's going to be here for a while so we're really trying to look at the complete supply chain from design, all the way through and give ourselves a little bit more space because things are just going to take more time in this environment and be less.
Reliable.
Rob on that topic regarding pricing and inflation at a major.
Industry and sector driver right now how do you see your.
Steel pricing leverage end or average unit retails and the Vera Bradley brand.
Evolving whether that be mix of like for like.
Yes, I think thats something that we definitely are evaluating and looking at.
In terms of we want to be careful because we think debt we have an important positioning from a pricing standpoint, so there might be some opportunity and pricing, but we want to make sure that we don't raise price is too fast, but we definitely are watching the environment.
I think at PURA Vida, we're also taking a look at the price environment and what the opportunities might be on that side of the business, but we definitely are kind of watching these inflationary pressures for sure.
Okay and on the digital roadmap you gave a lot of great innovation factors, what would you say.
We're hanging fruit end or will.
It will impact the financial modeling most substantial most substantially in the priority list.
I think on the digital side Theres, probably a couple of key pieces 1.
The data analytics and targeted marketing customer journey.
Germany, reactivation really owning our customer data, particularly at the Vera Bradley brand kind of having first party data I think becomes supercritical not only today, but as we're moving through the iOS updates the pending Google updates and we think that will be really critical to continuing to grow our direct owned digital and now.
Now, we're working with PURA vida to move them quicker along that paradigm because they haven't been as focused on first party data.
So that's part of the.
Marketing push right now.
Final 2 questions on PURA Vida.
If you had a view.
Of like the non jewelry revenue percentage over time or any way to dimensionalize, what could happen to that over time, given that it's a powerful lifestyle brand and if you could elaborate on threat of why that partnership made sense.
Bye now.
What are some of the key synergies you expect from that deal. Thank you.
With PURA Vida right with the launch of apparel and backpacks and we're seeing some really nice early results. Obviously those collections are limited.
But we're learning a lot about the customer what she is responding to sizing and we definitely think that really building out PURA.
<unk> of lifestyle brand over multi years, just provide some real significant opportunity because I think that PURA vida can become much more balanced instead of just so heavy on the jewelry category.
So I think theres significant opportunity long term as we build out those those categories.
In terms of thread up on.
There are really a few reasons why we did this write up of partnership.
1 is really continuing as a customer continues to be more more focused on environmental right. It gives us an opportunity for total.
Lead into this upcycle environment.
2 of the ability for customers to kind of clean.
At their closet, because we definitely know a lot of our loyal lift have a lot of Vera Bradley product. So hopefully that can open up some space kind of use those gift cards to repurchase again.
And by into the newer Vera Vera Bradley product, we think that provides another opportunity for stimulation of future revenue.
It's a new program for us we just.
Just launched at we've been pleased with the early results and we will just see how it scales over time.
Thanks, Robin on the sustainability front.
What should investors focus on and what will you measure.
As important than from another angle, what do you think customers care about the most as you think about a new generation of.
Customers that care about this topic and mission and purpose of lot.
Yes, I think of couple of different ways to answer that right..1 is just under the environmental side.
We we started down.
Environmental path really by focusing on what we felt we could have the biggest impact which was fabricate.
Expense.
And we felt 1 that that could have the biggest impact short term on the environment being a good corporate citizen, but second of all at was a way to really position Vera Bradley more in the forefront of what's going on out there addressing the environmental needs and we're seeing a younger customer respond to that end. So I would encourage everybody.
Fabricate watches we continue to move more fabrications to the sustainable platform becomes really important but we're not stopping there we have a.
Team focused on how do we continue to address environmental issues water scarce today supply chain zero emission so expect more details coming out over.
Over the next year as we continue to lay out our plans there.
But simultaneously I think as important if maybe not even more important to our customer base.
Is the social impact as we're looking at how important the charity bracelet program is to PURA Vida the impact of the charity on the apparel business at <unk>.
Ada everything at Vera Bradley has done over the years from the foundation of lessons in the backpack.
Really think that this younger customer really expects.
And that they wouldn't be part of the brands part of the community to have a very strong social as well as environmental positioning.
So that's how we're looking.
But our our whole purpose ESG program is critically important to us and we're going to continue to invest time and resources to build that out at really become an industry leader in this category of purpose.
Thank you and best regards.
Thanks Oliver.
Thank you once again, if you would like to signal with questions. Please press star 1 on your Touchtone telephone again that is star 1.
1 if you would like to ask questions.
And our next question will come from Steve Marotta with C. L King.
At this year.
Good morning, Robin John I have a follow up on 2 topics that we've already touched on the first is from.
Sourcing standpoint can you remind us where you are geographically maybe.
As a percentage of the total end zone.
Follow up there is other opportunities maybe to shift some.
So deduction to net.
Non port related geographies, like Mexico or Central America.
So the majority of our product is out of southeast Asia from the Vera Bradley brand.
Call. It 15% is out of China at the remainder is out of whether it's mean, Mark Cambodia, Indonesia.
Of that the main countries that were out of and right now we're looking for opportunities of <unk>.
Other opportunities, where we could of source of our product, but in the near term it will likely be out of southeast Asia.
And the PURA Vida is the opposite.
The majority of it is in Central America. So we don't have the same port issues with.
Those of you that were having trial with Vera Bradley and also with PURA Vida, even stuff that's coming out of other parts of the world since a lot of it is jewelry product.
It's easier to air and kind of get around the port issue.
Great that's very helpful and as far as acquisitions go I mean can you talk a little bit about the.
The availability currently versus say 2 years ago.
There are.
More or fewer and maybe also comment on multiples being asked higher or lower I guess, either maybe being higher given.
There are 2 years away from saying 19, but on the other hand, maybe lower because they might have.
Ben a little of financially distressed coming out of the pandemic, obviously not looking for.
But if you could maybe just talk about availability and current valuations.
Yes.
What I would say is obviously valuations of tricky right every company is different the environment is very different based upon each individual.
1 so that's hard to comment because there's a pretty wide range out there what I would say, though that we've seen is maybe more interest and direct to consumer companies coming out earlier than in the past. So there's more companies that are at an earlier stage.
Stages.
That are kind of coming to market that maybe we saw 2 years ago. That's probably the biggest difference that I would see right now but in terms of there is still definitely.
Opportunities that are sitting out there, it's just really making sure. They are kind of the right fit for our company.
I would only add debt.
I think versus 2 years ago. When we were looking for our first acquisition I think there is more activity or more inbound activity.
With us now that we've completed our first acquisition. So I think if youre, just looking apples to apples for Vera Bradley Theres, probably a little bit more activity of our deal flow.
That's super helpful. Thank you.
Thanks, Steve Thank you.
And our next question will come from Dana Telsey with Telsey Advisory group.
Hi, good morning, everyone.
Last year of mass, we're an important part of revenue and you mentioned that in the second quarter. It contribute at over 10% of Vera Bradley sales at around 300 basis points in gross margin.
What how do you frame it for the rest of the year or was the second quarter. The most impactful.
Yes, so as you think about last year. The second quarter was the most impactful and we're still impactful for the third quarter and then it kind of went down into the fourth quarter, but definitely from a percentage of total in percentage of gross margin of definitely was.
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Impactful quarter.
Got it and then of stores of reopening what are you seeing happening to your online sales and from the customers that you picked up from online how you're keeping them within the net price.
Yeah.
Well I think a couple of things I think 1.
What we're seeing is the stores have opened at the early read on E. Commerce was a lot of holding of that E Commerce volume, which was great to see as we as we're looking at our business, whether it's about mass whether it's about E. Commerce. We are definitely very focused on kind of the 2 year stack.
Because obviously.
A lot of peaks and valleys as you look at last year end what happened.
But we're really kind of looking at at a 2 year stack basis, and we expect to have really strong e-commerce growth in our customer engagement is still strong across all of the channels, but it is exciting to begin to see some movement back to stores, because we do think that.
There is of having that omni channel environment kind of that holistic ecosystem is really important long term for just brand loyalty.
So it can be it can be fun to watch the summer months of cut.
Customers continue to travel and back to school I think from what we saw industry wide in first quarter rate was really strong.
Pop in.
At that Hell, right as everybody Guy and got out of their house and got prepared in the head end, but spring closed last year.
A nice pop in apparel were hoping as we get into the summer months debt, we could see travel even begin to accelerate more of them back to school accelerate those will kind of be key key times for not only the Vera Bradley brand, but also the period of Brent.
Per on it and then just as you think about the operating margins at the direct business and the indirect business. How do you what do you see of the cadence of indirect or direct in the factors behind it for each of the each of the operating profits of those channels.
As I think about some of the headwinds.
It's really going to be associated with this.
The logistics side of the business and making sure we have the appropriate product to sell.
There'll be some headwinds associated with just getting product here that we may not have had in years past, but as you think about at I think we have opportunity in the second quarter as Ralph just kind of indicated in regards.
As to kind of the hope associated with that.
The travel and the back to school season, as we kind of come up on those months, we think theres opportunity there to drive sales, which will we will get leverage and drive operating performance. There from a period of proudly perspective, but also in of PURA Vida period. It is a nice business from a back to school from a customized at bracelet perspective, So we think.
We have community there.
Thank you.
Thank you thanks, John Thank you.
And that does conclude the question and answer session I will now turn the conference back over to Rob Wallstrom for closing remarks.
Thank you.
There is a forward looking strategy has to be a purpose driven multi lifestyle brand high growth company, we have an extraordinary culture and exceptional team loyal customers and a vision for the future our strong cash position debt free balance sheet and ability to generate free cash flow will allow us to continue to invest in our 2.
Powerful brands and to seek out appropriate acquisitions of other comfortable of affordable purpose, driven digitally native brands similar to our successful PURA Vida acquisition over time we.
We have an exciting future ahead, and we look forward to creating value for all of our stakeholders in fiscal 2022, we expect to deliver double digit revenue.
And operating income growth over both fiscal 2021 and fiscal 2020 performance.
Thank you for your time and interest in Vera Bradley, Inc. We hope you can join us for our second quarter call on September 1.
Thank you that does conclude today's conference we do thank you for your participation have an.
Excellent day.