Q3 2022 Vera Bradley Inc Earnings Call

December 8, 2021

Thank you for holding ladies and gentlemen. You're online for this Vera Bradley's third-quarter earnings release conference call. At this time, we are still gathering additional participants we will get started momentarily. We thank you for your patience and ask that you please continue to hold.

[music].

Good morning, ladies and gentlemen, thank you for standing by. Welcome to the Vera Bradley third-quarter conference call. At this time all participants are in a listen-only mode. Following the presentation. We will conduct a question and answer session and instructions will be provided at that time for you to queue for questions.

As a reminder, today's conference is being recorded. I would now like to turn the conference over to Mr. Mark Dely, Vera Bradley's Chief administrative officer. Please go ahead, sir.

I would now like to turn the conference over to Mr. Mark do you lie bear Bradleys Chief administrative officer. Please go ahead Sir.

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 1995 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 recent 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 it over to Vera Bradley's CEO, Rob Wallstrom. Rob.

<unk> 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 it over to Vera Bradley's CEO, Rob Wallstrom Rob.

Thank you, Mark. Good morning, and thank you for joining us on today's call. John Enwright, our CFO also joins me today. We posted a consolidated year over year third-quarter revenue increase of 7.9% and a 5.7% increase over the pre-pandemic levels to fiscal 2020.

Good morning, and thank you for joining us on today's call John Enwright. Our CFO also joins me today.

We posted consolidated year over year third quarter revenue increase of seven 9% and a five 7% increase over the pre pandemic levels to fiscal 2020.

Vera Bradley brand revenues have continued to gain momentum quarter after quarter as customers have responded to product innovation and collaborations supported by data-driven targeted marketing. Third-quarter Vera Bradley brand comparable sales rose nearly 8% over last year and nearly 6% over fiscal 2020. PURA Vida sales returned to double-digit growth in the quarter up 11.7% over last year. PURA Vida as e-commerce revenues were still suppressed by the Apple iOS 14.5 update put in place earlier this year that lessen the effectiveness of Facebook and Instagram advertising.

Third quarter, Vera Bradley brand comparable sales rose nearly 8% over last year and nearly 6% over fiscal 2020.

PURA Vida sales returned to double digit growth in the quarter up 11, 7% over last year PURA Vida as ecommerce revenues were still suppressed by the Apple iOS 14, five update put in place earlier this year that lessen the effectiveness of Facebook and Instagram advertising.

These two platforms have been the primary marketing vehicles to drive PURA Vida sales and shifting the marketing platform is underway. On the other hand, our PURA Vida their first store in San Diego continue to run well ahead of expectations and we expect to open three to five additional stores next year. PURA Vida's future growth will be expanded by balancing growth online and physical distribution channels.

On the other hand, our PURA Vida their first store in San Diego continue to run well ahead of expectations and we expect to open three to five additional stores next year.

PURA Vida as future growth will be expanded by balancing growth online and physical distribution channels.

Like much of the industry, we continued to experience supply chain challenges and significantly increased freight cost that put meaningful pressure on gross margins in the quarter. We estimate these incremental freight expenses, including air freighting product negatively impacted diluted EPS by approximately 5 cents for the quarter and 10 cents for the nine months.

We have begun to take strategic retail price increases across both our brands to mitigate some of these inflationary and supply chain pressures. Those price increases began in this year's fourth quarter and will continue over the next few quarters.

Those price increases began in this year's fourth quarter and will continue over the next few quarters.

In addition, more specific to Vera Bradley, the lower margin rates reflects higher tariffs from previously duty-free countries, where we source products is duty-free status under the generalized system of preferences, otherwise known as GSP. It was not renewed at the beginning of the calendar year by Congress.

It was not renewed at the beginning of the calendar year by Congress in.

In the past, Congress has retroactively reinstated the duty-free status of such tariffs to the beginning of the year. We anticipate that the GSP status will be renewed once again, but we cannot guarantee if and when this will occur. This delay in renewal of GSP negatively impacted diluted EPS by approximately 3 cents for the quarter and 6 cents for the nine months.

We anticipate that the GSP status will be renewed once again, but we cannot guarantee if and when this will occur. This delay in renewal of GSP negatively impacted diluted EPS by approximately <unk> <unk> for the quarter and <unk> <unk> for the nine months.

Even with the current supply chain in GSP challenges, on a year to date basis before certain items, non-GAAP EPS of 41 cents is ahead of last year and even ahead of where we were in fiscal 2020 pre-pandemic. We are confident that both the Vera Bradley and PURA Vida brands have meaningful long term growth opportunities well beyond their core product categories, even though headwinds and uncertainties lie ahead.

We are confident that both the Vera Bradley and PURA Vida brands have meaningful long term growth opportunities well beyond their core product categories, even though headwinds and uncertainties lie ahead.

Our four key growth drivers continue to be elevating our digital-first strategy, enhancing our product innovation pipeline collaborations and category extensions. Expanding our customer community through marketing and deepening our customers brand loyalty. And number four, evolving our distribution channels.

Expanding our customer community through marketing and deepening our customers brand loyalty.

Number four evolving our distribution channels.

We have a healthy cash position, a debt-free balance sheet and an ability to generate free cash flow that will allow us to continue to invest in both our lifestyle brands. And seek out acquisitions of other comfortable affordable purpose-driven brands over time.

Our team is driven, our brands are strong and we are positioned for long term growth. We remain focused on our vision to be a purpose-driven multi lifestyle brand high growth company. Now, let me turn the call over to John to discuss our financial information.

Now, let me turn the call over to John to discuss our financial information.

Thanks, Rob and good morning. Let me go over a few highlights for the third quarter. The numbers I will discuss today are all non-GAAP. For complete detailed items excluded from the non-GAAP numbers as well as a reconciliation of GAAP to non-GAAP numbers, please reference today's press release. Consolidated net revenues totaled $134.7 million for the current year third quarter, an increase of 7.9% over $124.8 million in the prior year and a 5.7% increase over $127.5 million in the pre-pandemic third quarter of fiscal 2020.

The numbers I will discuss today are all non-GAAP for a complete detailed items excluded from the non-GAAP numbers as well as a reconciliation of GAAP to non-GAAP numbers. Please reference today's press release.

Consolidated net revenues totaled $134 7 million for the current year third quarter, an increase of seven 9% over $124 8 million in the prior year and a five 7% increase over $127 5 million in the pre pandemic third quarter of fiscal 2020.

For the current year third quarter, total company consolidated net income was $6.2 million or 18 cents per diluted share compared to $10.2 million or 30 cents per diluted share in the prior year. Current year third quarter Vera Bradley direct segment revenues totaled $86.6 million, a 10.8% increase over $78.2 million last year. Comparable sales increased 7.8% over the prior year and 5.6% over fiscal 2020. We permanently closed nine full line stores and opened six factory outlet stores in the last 12 months.

Current year third quarter Bureau, Bradley direct segment revenues totaled $86 6 million, a 10, 8% increase over $78 2 million last year.

Comparable sales increased seven 8% over the prior year and five 6% over fiscal 2020.

We permanently closed nine full line stores and opened six factory outlet stores in the last 12 months.

Vera Bradley indirect segment revenues totaled $20.9 million, a 6.4% decrease from $22.3 million in the prior-year third quarter, reflecting a reduction in orders primarily related to a lower volume of mass sales and a reduction in sales to certain key accounts, partially offset by a rebound, especially account orders in other product categories that were negatively impacted by COVID-19 in the prior year.

other product categories that were negatively impacted by COVID-19 in the prior year.

PURA Vida segment revenues totaled $27.2 million and 11.7% increase over $24.3 million in the prior year driven by an increase in wholesale account sales. Third-quarter gross profit totaled $72.3 million or 53.6% of net revenues compared to $73.8 million or 59.1% of net revenues in the prior year.

Third quarter gross profit totaled $72 3 million or 53, 6% of net revenues compared to $73 8 million or 59, 1% of net revenues in the prior year.

Last year, we expanded our gross margin by approximately 230 basis points through sales of cotton Max which were not replicated this year. This year, the rate was also negatively impacted by higher cost for inbound and outbound freight expense by approximately 155 basis points. In addition, the lower margin rate reflects higher tariffs from previously duty-free countries, whose GSP duty-free status expired at the beginning of the year.

This year the rate was also negatively impacted by higher cost for inbound and outbound freight expense by approximately 155 basis points.

In addition, the lower margin rate reflects higher tariffs from previously duty free countries, whose GSP duty free status expired at the beginning of the year. This.

This impacted gross margin by approximately 95 basis points. Due to uncertainties surrounding Congress' future actions regarding a retroactive reinstatement of tariffs, we no longer expect any of the benefit in the fiscal year. SG&A expense totaled $63.7 million or 47.3% of net revenues for the current year third quarter compared to $59.4 million or 47.6% of net revenues in the prior year.

Due to uncertainties surrounding congresses future actions regarding a retroactive reinstatement of tariffs we no longer expect any of the benefit in the fiscal year.

SG&A expense totaled $63 7 million or <unk> 47, 3% of net revenues for the current year third quarter compared to $59 4 million or 47, 6% of net revenues in the prior year.

As expected, current year SG&A expense were higher than the prior year, primarily due to expense reductions related to COVID-19 last year, which are no longer applicable. Third-quarter consolidated operating income totaled $8.7 million or 6.5% of net revenues compared to $14.4 million or 11.6% of net revenues in the prior year.

Expense reductions related to COVID-19 last year, which are no longer applicable.

Third quarter consolidated operating income totaled $8 7 million or six 5% of net revenues compared to $14 4 million or 11, 6% of net revenues in the prior year.

Let me talk about our fourth-quarter outlook. The retail environment continues to be uncertain and future financial performance remains difficult to predict. However, we are providing estimates for the fourth quarter based on current trends and expectations and consideration of certain macro industry and economic conditions that could impact the company's sales and gross margin performance for the balance of the year.

The retail environment continues to be uncertain and future financial performance remains difficult to predict.

However, we are providing estimates for the fourth quarter based on current trends and expectations and consideration of certain macro industry and economic conditions that could impact the company's sales and gross margin performance for the balance of the year.

We are continuing to see volume and traffic increases over prior-year levels and expect to control our operating expenses. However, like many retailers, we continue to face supply chain headwinds, including manufacturing delays, extended transit times and substantial projected inbound and outbound freight expense increases. This is factored into our guidance. Keep in mind that all forward-looking guidance numbers referenced below are non-GAAP. For the fourth quarter of fiscal 2022, our updated expectations are consolidated net revenues of $155 million to $160 million.

However, like many retailers, we continue to face supply chain headwinds, including manufacturing delays extended transit times and substantial projected inbound and outbound freight expense increases this is factored into our guidance.

Keep in mind that all forward looking guidance numbers referenced below our non-GAAP.

For the fourth quarter of fiscal 2022, our updated expectations, our consolidated net revenues of $155 million to $160 million.

Net revenues totaled $142.4 million in the prior-year fourth quarter. Our consolidated gross margin of 51.6% to 52.1% compared to 54.7% in the prior-year fourth quarter. The expected rate decline relates to ongoing supply chain challenges and incremental costs for inbound and outbound freight expense.

Our consolidated gross margin of 51, 6% to 52, 1% compared to 54, 7% in the prior year fourth quarter the.

The expected rate decline relates to ongoing supply chain challenges and incremental cost for inbound and outbound freight expense.

The retroactive reinstatement of GSP is not included in the current year gross margin estimate. Keep in mind the benefit GSP was included in our previous estimates and in prior year gross margin. Consolidated SG&A expense of $68 million to $69 million compared to $63.3 million in the prior-year fourth quarter. The expected SG&A increase was primarily related to general variable increases associated with higher sales expectation. Consolidated diluted EPS of 24 to 29 cents. Compared to a diluted EPS of 31 cents last year.

Keep in mind the benefit GSV was included in our previous estimates and in prior year gross margin.

Consolidated SG&A expense of $68 million to $69 million compared to $63 3 million in the prior year fourth quarter.

The expected SG&A increase was primarily related to general variable increases associated with higher sales expectation.

Consolidated diluted EPS of <unk> 24 to 29.

Compared to a diluted EPS of <unk> 31 since last year.

Based on fourth-quarter expectations, our updated expectations for the fiscal year are consolidated net revenues of $546 million to $551 million. Net revenues totaled $468.3 million in fiscal 2021. Free cash flow of $45 million to $50 million compared to $15 million in the prior year. A consolidated gross margin of 53.5% to $53.6 compared to 57% in fiscal 2021.

Net revenues totaled $468 3 million in fiscal 2021.

Free cash flow of $45 million to $50 million compared to $15 million in the prior year.

Consolidated gross margin of 53, 5% to $53 six compared to 57% in fiscal 2021.

The retroactive restatement of GSP, which would equate to approximately $4 million to $5 million in gross profit or 70 to 90 basis points is not included in the current year gross margin estimate. Prior year gross margin was impacted by mass sales, which improved margin by approximately 200 basis points.

Prior year gross margin was impacted by mass sales, which improved margin by approximately 200 basis points.

Consolidated SG&A expense of $260 million to $261 million compared to $233 million in fiscal 2021. Consolidated operating income of $34 million to $37 million compared to $34 million last year. Consolidated diluted EPS of 65 to 70 cents. Diluted EPS totaled 63 cents last year. The retroactive reinstatement of GSP would equate to an additional income of approximately 9 to 11 cents per diluted share in the current year. Net capital spending of approximately $6 million to $8 million compared to $5.7 million in the prior year.

Consolidated operating income of $34 million to $37 million compared to $34 million last year.

Consolidated diluted EPS of <unk> 65 to 70.

Diluted EPS totaled <unk> 63 last year.

The retroactive reinstatement of GSP would equate to an additional income of approximately nine to 11 cents per.

Per diluted share in the per diluted share in the current year.

Net capital spending of approximately $6 million to $8 million compared to $5.7 million in the prior year.

Now, let me turn to the balance sheet. Cash cash equivalents and investments at quarter-end totaled $75.3 million compared to $77.3 million at the end of last year's third quarter and $65.5 million at fiscal year-end. We had no borrowings on our $75 million ABL credit facility at quarter-end.

Cash cash equivalents and investments at quarter end totaled $75 3 million compared to $77 3 million at the end of last year's third quarter and $65 5 million at fiscal year end.

We had no borrowings on our $75 million ABL credit facility at quarter end.

Total quarter-end inventory of $148.3 million compared to $141.6 million at the end of the third quarter last year. Quarter-end inventory was higher than prior year due to additional PURA Vida inventory. We expect year over year inventory should be down in the low single-digit range by fiscal year-end. During the third quarter, we resumed our stock repurchasing activity purchasing 214,000 shares for approximately $2.1 million. This month the board of directors approved a new $50 million share repurchase authorization plan that expires in December 2024. Rob.

Order and inventory was higher than prior year due to additional PURA Vida inventory.

We expect year over year inventory should be down in the low single digit range by fiscal year end.

During the third quarter, we resumed our stock repurchasing activity purchasing 214000 shares for approximately $2 1 million.

This month the board of directors approved a new $50 million share repurchase authorization plan that expires in December 2024.

Rob.

Thanks, John. Let's begin with an update on the Vera Bradley brand. Vera Bradley demonstrated solid third-quarter comp growth over fiscal 2021 and 2020. And has experienced three quarters of sequential improvement in comp sales growth despite supply chain disruptions. With domestic traveling continuing to strengthen, the travel category remain robust exceeding both last year in fiscal 2020 levels.

Let's begin with an update on the Vera Bradley brand Vera Bradley demonstrated solid third quarter comp growth over fiscal 2021 and 2020.

And has experienced three quarters of sequential improvement in comp sales growth despite supply chain disruptions.

With domestic traveling continued to strengthen the travel category remain robust exceeding both last year in fiscal 2020 levels.

As expected, the back to school season was elongated this year and lasted well into the third quarter. With the second and third quarters combined, back to school revenues were up substantially over last year. As expected and nearly flat with fiscal 2020 levels. So we were pleased with her back to school performance. Customers are responding to our continual pipeline of products and fabric innovation. We saw year over year growth in cotton performance twill and reactive and continued traction in our factory Ultra light collection.

Customers are responding to our continual pipeline of products and fabric innovation, we saw year over year growth in cotton performance twill and reactive and continued traction in our factory Ultra light collection.

We remain very optimistic about recycled cotton and look forward to offer new solid colors seasonally. We're constantly researching and innovating to bring our customers more eco-friendly options and we remain committed to updating 100% of our fabrics to more sustainable alternatives by 2025.

We're constantly researching and innovating to bring our customers more eco friendly options and we remain committed to updating a 100% of our fabrics to more sustainable alternatives by 2025.

We expanded our apparel collection, adding graphic tees, puffer jackets invest leggings and a larger selection of pajamas to our already popular cozy collection of sleepwear and robes. We had another exciting quarter for product collaborations, including Harry Potter and Disney. Our Disney [inaudible] Bell capsule was wildly successful with Beauty and the Beast fans everywhere.

We had another exciting quarter for product collaborations, including Harry Potter and Disney.

Our Disney bonds. Your Bell capsule was wildly successful with beauty and the Beast fans everywhere.

For the holidays, we are ready to go with a wide selection of giftables at all price points ranging from key change to dump holds, to robes to our popular throes. And in November we introduced our first-ever collaboration with the beloved Peanuts brand on a snoopy themed holiday collection. Featuring three limited edition patterns, including a line of cozy sleepwear for the entire family. Our customers love novelty and Peanuts has been a big hit so far this holiday season.

Featuring three limited edition patterns, including a line of Cozy sleepwear for the entire family.

Our customers love novelty and Peanuts has been a big hit so far this holiday season.

I will also note that the supply chain and delivery delays remain challenging and we do not see this abating in the near term. In the marketing area. The substantial investments we've made in data science business analytics and customer data capture continue to reap benefits and are reflected in Vera Bradley's results. We are driving more engagement on social media.

In the marketing area. The substantial investments we've made in data science business analytics and customer data capture continue to reap benefits and are reflected in Vera Bradley's results.

We are driving more engagement on social media spin.

Specifically, we are employing more user-generated content. We have grown our influencer and ambassador programs, continue to enhance our social storytelling and social selling and have expanded Facebook live in reals. We are continuing to expand our Tik Tok engagement, garnering over 2 million views and over 13,000 average engagements proposed in the third quarter.

We are continuing to expand our tick tock engagement, garnering over 2 million views and over 13000 average engagements proposed in the third quarter. These.

These tactics along with our quality media placements PR efforts and targeted TV ads continue to drive brand awareness, with year over year media impressions up nearly 40% to over $4.6 billion. Fueled by our new product launches collaborations in VB cares initiatives. We are also proud that our marketing efforts are increasingly reflective of our ongoing commitment to diversity and inclusion.

We are also proud that our marketing efforts are increasingly reflective of our ongoing commitment to diversity and inclusion.

Our customer journey centered activations and customer level, personalized messaging or retaining existing customers meaningfully engaging new customers and aiding in the reactivation of lapsed customers across our full line and factory stores at a much higher rate than in the past.

Our active customer count in the third quarter has also eclipsed the third quarter of fiscal 2020. Representing growth in the foundation of the Vera Bradley brand during the pandemic. Our customers have been progressively returning to in-store shopping and our customer base is evolving to become younger and more diversified attributable to our focus in marketing efforts and product innovation and collaborations.

Representing growth in the foundation of the Vera Bradley brand during the pandemic.

Our customers have been progressively returning to in store shopping and our customer base is evolving to become younger and more diversified attributable attributable to our focus in marketing efforts and product innovation and collaborations.

All along, we have continued to advance our VB cares mission. Of course October is particularly special for us because of breast cancer awareness month. The Vera Bradley Foundation for breast cancer conducted a series of annual fundraising events to support the groundbreaking and life-saving research of the Vera Bradley Foundation Center for breast cancer research at Indiana University School of Medicine. This year the foundation was able to contribute another $1.5 million to the center, bringing total contributions to date to 37.5.

Vera Bradley Foundation for breast cancer conducted series of annual fund raising events to support the groundbreaking and life saving research of the Vera Bradley Foundation Center for breast cancer Research at Indiana University School of Medicine.

This year the foundation was able to contribute another $1.5 million to the center, bringing total contributions to date to 37.5.

Turning to distribution. Our digital business continues to lead our growth will be supported by our store base. Our VeraBradley.com business grew by nearly 60% over fiscal 2020 levels digital has become a key driver of our revenues over time, but stores continue to support this omnichannel strategy.

Our digital business continues to lead our growth will be supported by our store base, our Vera Bradley Dotcom business grew by nearly 60% over fiscal 2020 levels digital has become a key driver of our revenues over time, but stores continue to support this omnichannel strategy.

During the third quarter, store traffic continued to improve and our comp store revenues nearly attained our pre-pandemic levels. Our goal is for our customers to have a seamless customer-led shopping experience digital sales are typically higher-end markets, where we have a retail presence and the average omnichannel customer spends over three times more than a single channel customer.

Our goal is for our customers to have a seamless customer led shopping experience digital sales are typically higher end markets, where we have a retail presence and the average omnichannel customer spends over three times more than a single channel customer.

We continue to focus on enhancing and reinventing the customer experience in our full-line stores and certain digital shopping parts that gained popularity during the pandemic have remained popular. Like appointment selling buy online pickup in-store and curbside pickup.

Appointment selling buy online pickup in store and curbside pickup.

We are continuing to improve the profitability of our full line fleet by focusing on our highest potential stores, optimizing and localizing, our assortments and rationalizing our existing portfolio through select closures as appropriate. However, this remains a fluid process. For example, at the beginning of the year, we expected to close up to 10 locations this fiscal year. But if cut that number in half due to a combination of favorable store performance and successful lease negotiations.

But if cut that number in half due to a combination of favorable store performance and successful lease negotiations.

Vera Bradley continues to expand its options for customers to shop. We opened two new factory stores in the quarter, bringing our total openings for the year to six. In addition, we opened a factory pop up test store in the Phoenix market. We ended the quarter with 72 full-line stores and 75 factory locations. We launched our Canadian website as our first international localized website experience, which is managed internally.

We launched our Canadian website as our first international localized website experience, which is managed internally.

We continue to be excited about alternative payments such as after pay allowing customers to pay for their purchases in installments, which is driving higher units per transaction and increased sales. We added Chewy.com as a new distribution partner for our lineup of pet products and opened a Vera Bradley store in the LA airport as part of our travel expansion focus.

We added <unk> dot com as a new distribution partner for our lineup of pet products and opened a Vera Bradley store in the La airport as part of our travel expansion focus.

Now, let's switch to PURA Vida. As I previously noted, we were pleased to see PURA Vida sales return to double-digit growth in the quarter up nearly 12% over last year. However, this fell short of our expectation of 15% to 20%. PURA Vida E-Commerce revenues were still suppressed by the Apple iOS update that impair the effectiveness of Facebook and Instagram advertising. PURA Vida's primary marketing vehicles to drive sales.

As I previously noted we were pleased to see PURA Vida sales returned to double digit growth in the quarter up nearly 12% over last year. However, this fell short of our expectation of 15% to 20%.

<unk> E Commerce revenues were still suppressed by the Io the Apple iOS update that impair the effectiveness of Facebook and Instagram advertising.

<unk> primary marketing vehicles to drive sales.

On the other hand, our first PURA Vida store that opened in San Diego's Westfield UTC mall in mid August continues to perform very well. Surpassing our expectations. So we are planning to open more PURA Vida stores across the country next year. We hope to have to open by summer. The San Diego stores, allowing us to showcase the PURA Vida lifestyle with a full array of existing products and new product innovations, especially as we expand into new product categories like apparel, which now makes up about 10% of the store sales volume.

Surpassing our expectations. So we are planning to open more PURA vida stores across the country next year, we hope to have to open by summer.

The San Diego stores, allowing us to showcase the PURA vida lifestyle with a full array of existing products and new product innovations, especially as we expand into new product categories like apparel, which now makes up about 10% of the store sales volume.

As we have experienced a double-digit improvement in our San Diego eCommerce business relative to the rest of the country since the store opened, demonstrating the power a retail presence has in driving digital sales, omnichannel loyalty and spending. PURA Vida's future growth will be expanded by balancing growth online and physical distribution channels. Stores will play an important role going forward in new customer acquisition as we continued to diversify our marketing platforms.

PURA Vida as future growth will be expanded by balancing growth online and physical distribution channels stores will play an important role going forward in new customer acquisition as we continued to diversify our marketing platforms.

Our wholesale growth remains strong as we continue to add new partnerships. We've added over 350 new accounts so far this year, which has exceeded our expectations. This fall, Dillard's joined Nordstrom as a PURA Vida department store distributor. We continue to significantly expand our presence in existing wholesale accounts with larger in-store presentations and are experiencing solid growth in core product categories with these retailers. Our current wholesale accounts on average have placed larger and more frequent orders than in fiscal 2020.

This fall Dillard's joined Nordstroms has a PURA Vida department store distributor.

We continue to significantly expand our presence in existing wholesale accounts with larger in store presentations and are experiencing solid.

in core product categories with these retailers. Our current wholesale accounts on average have placed larger and more frequent orders than in fiscal 2020.

As many have experienced a strong resurgence in traffic. In the product area like Vera Bradley, innovation and collaborations will continue to play a key role in PURA Vida's growth. In addition to continually adding new designs and elements to our jewelry collections. We also have diversified well beyond jewelry. We are truly building a lifestyle brand.

In the product area like Vera Bradley innovation and collaborations will continue to play a key role in PURA Vida as growth. In addition to continually adding new designs and elements to our jewelry collections. We also have diversified well beyond jewelry.

We are truly building a lifestyle brand.

A great example of the extension of the PURA Vida lifestyle with the spring launch of our apparel collection of hoodies and tees, which continues to gain momentum. So far the top styles have been the tie-dye surf graphics, and the PURA Vida live free logo. Now we're broadening our size range of styles and logos and we will be introducing bottoms next year.

So far the top styles have been the tie-dye surf graphics, and the PURA Vida live free logo now we're broadening our size range of styles and logos and we will be introducing bottoms next year.

We believe this is a meaningful revenue opportunity going forward. Apparel, not only appeals to our existing customers but drives new customers to our brand. Our Hello Kitty collaborations and collection of rings, bracelets and necklaces have been a big hit with Hello Kitty super fans. And of course, Disney's Princess enthusiasts are thrilled with our collection of jewelry featuring their favorite characters from Jasmine to Cinderella.

Apparel, not only appeals to our existing customers, but drives new customers to our brand.

Our Hello, Kitty collaborations and collection of rings bracelets necklaces have been a big hit with Hello, Kitty Super fans.

And of course, Disney's Princess enthusiasts are thrilled with our collection of jewelry featuring their favorite characters from Jasmine to Cinderella.

Both collections have brought new customers to our brand and we have been very pleased with the response to date. Additionally, our much-awaited PURA Vida plus Harry Potter collection just launched this week and is already off to a great start.

In August, we introduced our jewelry collection with outer banks Star and Influencer Madison Bailey, which is appealing to a more diverse customer. We have a few other high profile collaborations and licensing partnerships that will launch in the months ahead stay tuned for those.

We have a few other high profile collaborations and licensing partnerships that will launch in the months ahead stay tuned for those.

Now turning to marketing. Since its inception, PURA Vida has demonstrated expertise in engaging customers, building loyalty and introducing new devotees to the PURA Vida lifestyle. As I mentioned earlier, the spring Apple update impacted PURA Vida E-Commerce revenues since we have historically relied heavily on various platforms like Facebook and Instagram to reach our potential customers to drive sales.

Since its inception, PURA Vida has demonstrated expertise in engaging customers building loyalty and introducing new devoted to the PURA vida lifestyle.

As I mentioned earlier, the spring Apple update impacted PURA Vida E Commerce revenues since we have historically relied heavily on various platforms like Facebook and Instagram to reach our potential customers to drive sales.

Our team has worked diligently to dive deeper into customer analytics and build a more diverse and balanced marketing program by growing our SMS subscriber base, onboarding a new email marketing agency and spreading a portion of our marketing resources to other platforms like Tik Tok, podcast and Youtube. We know it will take time to gain traction with these other platforms.

We know it will take time to gain traction with these other platforms.

We are continually focused on looking for new ways to creatively engage our customers and drive new customers to our brands in a cost-effective manner, which is undoubtedly becoming more and more challenging and expensive for both our brands.

Since the company's 2009 acquisition of PURA Vida, PURA Vida has been instrumental in sharing its digital expertise with Vera Bradley. As Vera Bradley meaningfully enhanced social media effectiveness and brand awareness. Conversely, Vera Bradley will be able to help PURA Vida leverage more traditional channels like direct mail and Email as they continued to diversify their marketing campaign.

Their marketing campaign.

In summary, we remain focused on our four key growth drivers. One, we continue to drive our digital-first strategy. We have made strategic shifts and investments to pivot us to a digital-first company evolving into a customer-centric, data-driven, technology-enabled and digitally-focused enterprise, which allows us to effectively engage with our customers and offer a seamless shopping experience. Over one third of our consolidated revenues are now generated from e-commerce sales. And excluding our factory stores, over half of our total company sales are driven by E-Commerce.

We have made strategic shifts and investments to pivot us to a digital first company evolving into a customer centric data driven technology enabled and digitally focused enterprise, which allows us to effectively engage with our customers and offer a seamless shopping experience over one third of our consolidated revenues are now generated from E com.

And excluding our factory stores, over half of our total company sales are driven by E-Commerce.

Two, we are continuing to enhance our product innovation pipeline and collaborations and category extensions. At Vera Bradley, this is evidenced by the launch of our cotton re-imagine collection. The introduction of other alternative fabrics, our commitment to sustainability and countless product collaborations like Harry Potter Disney Crocs and peanuts.

At Vera Bradley this is evidenced by the launch of our cotton re imagine collection. The introduction of other alternative fabrics, our commitment to sustainability and countless product collaborations like Harry Potter Disney Crocs and peanuts.

PURA Vida is producing continual newness and excitement in the core jewelry category and expanding into new lifestyle categories, such as apparel and accessories as well as entering into exciting product collaborations with Disney, Hello Kitty and Harry Potter. Number three, we are building our community through marketing. Vera Bradley continues to engage diversify and grow its customer base through analytics targeted marketing and VB cares efforts.

Number three we are building our community through marketing.

Vera Bradley continues to engage diversify and grow its customer base through analytics targeted marketing and VB cares efforts.

Vera Bradley's customer count grew by nearly 20% over last year, essentially bringing us back to pre-pandemic levels in social media followers continue to grow with Facebook at nearly 2 million Instagram approaching 600,000, and Tik Tok climbing. PURA Vida has demonstrated expertise in engaging customers building loyalty and introducing new devotees to the PURA Vida lifestyle with total customer growth to double digits over our fiscal 2020 more than 2.2 million Instagram followers and over 450,000 Tik Tok followers, a little more than a year after launch.

<unk> has demonstrated expertise in engaging customers building loyalty and introducing new <unk> to the PURA vida lifestyle with total customer growth to double digits over our fiscal 2020 more than $2 2 million Instagram followers and over 450000, Tictoc followers, a little more than a year after launch.

And number four, evolving our distribution channels, we're continually looking for new ways to reach our customers and to reinvent the shopping experience from redesigning our VeraBradley.com website to partnering with after pay, to launching our Canadian website at Vera Bradle,y to opening our first-ever retail store and broadening our department store and wholesale. Our relationships with PURA Vida the future for both brands will be a powerful combination of digital and brick and mortar. Operator, we will now open the call to questions.

Our relationships with PURA Vida the future for both brands will be a powerful combination of digital and brick and mortar.

Operator, we will now open the call to questions.

Thank you. If you would like to ask a question. Please signal by pressing star one on your telephone keypad. If you are using a speakerphone. Please make sure your mute function is turned off to allow your signal to reach our equipment. Again press star one to ask a question. We'll take our first question from Mark [inaudible] at Baird. Your line is open, sir. Please go ahead.

Again press Star one to ask a question.

We'll take our first question from Mark.

Robert Baird. Your line is open Sir Please go ahead.

Good morning. Thanks for taking my question. So it looks like you are continuing to make some nice progress with marketing efforts at Vera. Can you give us just a little bit more detail on the customer file growth? I guess any learnings regarding the engagement of newer customers. I'm curious are there any particular categories or fabrications that are really outperforming with newer customers.

So it looks like you are continuing to make some nice progress with marketing efforts at Bureau can you give us just a little bit more detail on the customer file growth I guess any learnings regarding the engagement of newer customers. I'm curious are there any particular categories or fabrications that are really outperforming with newer customers.

Yes, I think in terms of our new customer count one thing that's really driving it is one all of the new collaborations we're doing the partnerships with new brands is bringing new customers in which has been exciting to see. We've also been seeing that our customers getting younger which we think is also a positive inside that customer file.

Inside that customer file.

So overall, we've been very pleased with the progress we've been making on the Vera Bradley side and the other thing I think that we mentioned earlier, but just to reiterate is not only younger but the customer is also becoming more diverse. As we've been diversifying our marketing efforts, which again is great to see and really builds towards the long term health of the customer file.

The Vera Bradley side and the other thing I think that we mentioned earlier, but just to reiterate is not only younger but the customer is also becoming more diverse as we've been diversifying our marketing efforts, which again is great to see and really builds towards the long term health of the customer file.

That's great. And then on gross margin. A lot of near term pressures and cross-currents as you outlined. As we think about next year just any perspective on why gross margin could look like into '22? I guess how you're thinking about ongoing supply chain costs versus ramping benefits from the price increases. Obviously understanding that GSP is the swing factor here, but how should we be thinking about those other crosscurrents over the next few quarters?

And then on gross margin.

A lot of near term pressures and cross currents as you outlined as we think about next year just any perspective on why gross margin could look like into 'twenty two.

<unk> 22, I guess, how youre thinking about ongoing supply chain costs versus.

Ramping benefits from the price increases obviously understanding that GSP is the swing factor here, but how should we be thinking about those other crosscurrents over the next few quarters.

Yeah. Thanks, Mark this is John. I think as we look at planning for next year were taken into consideration all the supply chain cost-sharing expecting freight to be similar to this year. In some cases, you could see some acceleration in the first half of the year compared to the first half of the year last year. And then it to normalize into call. It the back half of the year, we do believe the freight expense is going to be with us for at least another 12 months to the point of GSP that as a swing factor. If approved, obviously, that'll have a significant benefit to margin next year, but those are the reasons, we took some price increases.

I think as we look at planning for next year were taken into consideration.

All the supply chain cost sharing expecting freight to be similar to this year in some cases, you could see some acceleration in the first half of the year compared to the first half of the year last year and then it to normalize into call. It the back half of the year, we do believe the freight expense.

with us for at least another 12 months to the point of GSP that as a swing factor. If approved, obviously, that'll have a significant benefit to margin next year, but those are the reasons, we took some price increases.

Within the fourth quarter and looking for additional price increases to offset it. So we'll come out with a plan and some guidance in our March release, but ultimately we do think there's going to be continued cost pressure on the freight side. There is also we believe is going to be some inflationary cost pressure on the product side as well given some price increases that the vendors within Asia are looking for so we're working with them to ensure we're paying appropriately, but we think there will be some inflationary pressures too.

Within Asia are looking for so we're working with them to ensure we're paying appropriately, but we think there will be some inflationary pressures too.

I think that I would add on that Mark. It is as we said tried to balance out all of the inflationary pressures on price with pricing increases. As John talked about we started taking price increases. We started first with PURA Vida and they started out with some increases can begin in July as we've been monitoring that we've seen overall, good customer acceptance of that. We started doing some limited price increases in Vera Bradley and has seen similar reaction. So we have a program set out over the next few months to continue that process. That will be a key lever we need to pull to help improve the gross gross margin pressure as we move forward.

Price increases we started first with PURA Vida and.

And they started out with some increases can begin in July as we've been monitoring that we've seen.

Overall, good customer acceptance of that we started doing some limited price increases and Vera Bradley and has seen similar reaction. So we have a program set out over the next few months to continue that process.

That will be a key lever we need to pull to help improve the gross gross margin pressure as we move forward.

That's all very helpful. Thank you and best of luck over holiday. Thanks, Scott. We'll move next to Oliver Chen with Cowen. Your line is open. Please go ahead.

Thanks Scott.

We'll move next to Oliver Chen with Cowen. Your line is open. Please go ahead.

Hi. Thank you very much. Regarding pricing, what's happening now versus the strategy going forward and how are you thinking about what makes sense in the portfolio? And on the inventory front. It sounded like there was more PURA Vida inventory. How is the Vera Bradley inventory level relative to the [inaudible]? And what you're seeing with demand and also as you work through the PURA Vida inventory what are the key strategies you're undertaking to do that? Thank you. So maybe I'll address the pricing one and then I'll let John talk about the inventory one. But from a pricing standpoint, what we're trying to do within both brands is make sure that we are very thoughtful targeted at our price increases so we're going through and looking at each item. In both brands there is a high level of continue to ship products.

<unk> going forward and how are you thinking about what makes sense in the portfolio and on the inventory front. It sounded like there was more PURA vida inventory.

The Vera Bradley inventory level relative to the fresh now.

And what Youre seeing with demand and also as you work through the PURA Vida inventory what are the key.

Key strategies, you're undertaking to do that thank you.

So maybe I'll address the pricing one and then I'll, let John.

Talked about the inventory one but from a pricing standpoint, what were trying to do within both brands is make sure that we are very <unk>.

<unk> targeted at our price increases so we're going through and looking at each item in both brands. There is a high level of continue to ship product.

So it makes the price changing a little more challenging because we needed to change prices on existing and future inventory. But we basically have been rolling that out over the next six months. And again like I said, we're going to take a very focused approach to how we price those items right. It's very much by item with a lot of research behind it. So I think that's the first thing we're looking at and then we're continuing to look at how do we continue to evaluate promotional activity going into next year.

But we basically have been rolling that out over the next six months and again like I said, we're going to take a.

A very focused approach to how we price those items right. It's very much by item with a lot of research behind it. So I think thats. The first thing we're looking at and then we're continuing to look at how do we continue to evaluate promotional activity going into next year.

And I think that's the other thing that we're spending some more time on this. As many of you might remember a few years ago we took a lot of the clearance business out of Vera Bradley and really have been running a very clean business. So we didn't have as many opportunities to reduce that activity this year.

But we are beginning to look at particularly in the factory channel what are the opportunities to look at the promotional activity and improved margins. And in regards to inventory year over year, I think it's a tale of kind of two brands right. So if you think about the PURA Vida brand and we certainly are higher than we want to be right now and higher than we were last year and we are putting forth some efforts to sell some of that inventory through some of the Vera Bradley stores to give it another distribution point. To sell we're looking at opportunities with other partners from a wholesale perspective to sell some of the inventory.

And in regards to inventory year over year, I think it's a tale of kind of two brands right. So if you think about the PURA Vida brand and we certainly are higher than we want to be right now in higher than we were last year and we are putting forth some efforts.

<unk> to sell some of that inventory through some of the Vera Bradley stores to give it another distribution point to sell we're looking at opportunities with other partners from a wholesale perspective to sell some of the inventory.

And we have created certain deals during the quarter to move through some of that inventory, we will think about doing that through next year as well. But we want to make sure. We don't devalue the brand by doing that too often through the PURA Vida website. So we'll take a fairly consistent approach of how we've done it in the past with the Vera Bradley brand when we were caught a little bit older inventory. And take the time to work through it because some of the product really doesn't become obsolete so we have the ability to sell it over time. The Vera Bradley product I think we're in a position where year over year definitely not an increase in inventory. I would say over time, we'll probably call it last three months were out of stock of some stuff that we where we thought we'd be in a better place through the holiday just because containers are stuck in certain locations. So there was an anticipation. We flew in airfreight and things and that we wanted definitely here, but there was expectation for other product categories and our style is to be here that have just been hung up. We expect to get those in soon but ultimately, as the supply chain continues to be a little bit challenging things are taking a little bit longer than we initially anticipated to get product here.

Certain deals during the quarter.

Move through some of that inventory, we will think about doing that through next year as well, but we want to make sure. We don't devalue the brand by doing that too often through the PURA Vida website. So we'll take a fairly consistent approach of how we've done it in the past with the Vera Bradley brand. When we were caught a little bit older inventory and take the time to work through it because some of the product.

Really doesn't become obsolete so we have the ability to sell a overtime.

The Vera Bradley product I think we're in a position where.

year over year definitely not an increase in inventory. I would say over time, we'll probably call it last three months were out of stock of some stuff that we where we thought we'd be in a better place through

the holiday just because containers are stuck in certain locations. So there was an anticipation. We flew in airfreight and things and that we wanted definitely here, but there was expectation for other product categories and our style is to be here that have just been hung up. We expect to get those in soon but ultimately, as the

supply chain continues to be a little bit challenging things are taking a little bit longer than we initially anticipated to get product here.

Okay, that's very helpful. And on the delayed renewal of GSP was there any context you have on why that might have happened relative to your prior expectations? I know there's a lot of uncontrollable variables there. Would love any color.

Why that might have happened relative to your prior expectations I know, there's a lot of uncontrollable variables there.

Would love any color.

Right. Yes, so I think. I'm sorry, I didn't hear your last part. The relevant countries that that applied to would be helpful. Yes, so the relevant countries that are applied to from our supply chain is Cambodia, Indonesia, Myanmar, as we procured from this year. During the full year right. There is every indication that Congress is going to work on renewing this. And we're much more hopeful at the beginning of the year became a little less helpful throughout the year that it was going to get passed. But still believe everything we're hearing and I think we're still hearing that its going to get passed in some form. They are just the house has a different perspective than the Senate does on kind of what they want to put into the bill. So with everything that happens in Congress, things take a little bit longer than you anticipate so at the end of the when we released third-quarter guidance, our full-year guidance at the end of the second quarter, we still anticipate it to happen this year. Given the fact that it's December and still hasn't happened our expectations have changed.

I'm, sorry, I didn't hear your last part.

The relevant countries that that applied to would be helpful. As gotcha.

Yes, so the relevant countries that are applied to from our supply chain.

Cambodia, Indonesia, Myanmar, as we procured from this year during the full year right. There is every indication that the Congress is going to work on renewing.

Renewing this.

And we're much more hopeful at the beginning of the year became a little less helpful. Throughout the year that it was going to get passed but still believe everything we're hearing and I think we're still hearing that its going to get passed in some form. They are just the house has a different perspective than the Senate does on kind of what they want to put into the bill so with everything that happens in Congress.

things take a little bit longer than you anticipate so at the end of the when we released third-quarter guidance, our full-year guidance at the end of the second quarter, we still anticipate it to happen this year.

Given the fact that it's December and still hasn't happened our expectations have changed.

We anticipate that happening this year and we hope it will happen early part of next year, but right now we're not planning for it to happen. We're assuming it's not going to happen. So we're making decisions based on that.

Okay, and IBSA, it's been a difficult.

The situation for a lot of people across the industry.

What are your thoughts on where you are with that and the strategies you're undertaking what are the main strategies within your control and what do you see happening with the marketing spend and as well as effectiveness that we should know about.

Yes, I think I think we missed the beginning but let me make sure I have it right Oliver I think it was about the iOS update and what's going on with digital cost.

And I think in terms of our strategy against it is making sure that we really are continuing to diversify our marketing platform becomes the key word right. So if you think about some of the things that Vera Bradley has done is they've been doing things like connected TV and other avenues also looking at things like direct mail.

I think one thing that I'm seeing happened in retail and I think it's both in the marketing arena and in the distribution arena.

This mixture of digital and maybe what we would consider more traditional methods is going to be the key to success. As we go forward right. This the digital space is changing costs are going up. So you have to balance the digital spend become much more targeted to have a lot more data a lot more first party data but balance.

That was the more traditional outreach opportunities how do you get customers excited through other avenues, whether that is something like a direct mail of connected TV.

Events.

We've been very successful in.

PURA vida with doing events and stores and getting crowds and that new store and so we think all of that becomes part of the new platform as well as just using stores as a major customer acquisition opportunity.

So again more complicated more balanced need to make sure you have the data and science behind it but I think what's exciting for US is that we can kind of keep cross leveraging our skills between our brands.

Fair Bradley has a long history of more traditional and they've been building out a really strong digital platform and we can use them those lessons that Vera bradley's learn to share with PURA Vida and really strengthened that.

Good.

Okay and on the traffic front physical store traffic what are you seeing by channel outlet relative to full price and how do you think these levels will manifest versus 19 levels.

Yes, so from a traffic perspective third quarter, we saw traffic was stronger in the factory outlet channel than it was in the full line channel, which is fairly consistent with how it had been performing all year that we slightly better from a traffic perspective.

In the factory channel I think over the longer term, we still anticipate the factory channel continue to strengthen.

Into next year, and ultimately traffic to come back there at a greater extent than in the full line channel.

But I do think what's important to know Oliver as we've tracked the performance of both our full line and factory quarter after quarter both of them have continued to get stronger quarter after quarter.

Traffic continues to increase which has been great to see so there's just been a slight improvement as we've looked at traffic.

The factory versus full line. So I think both of them are really on a very similar trajectory pattern and we expect going forward, probably similar performance from a traffic standpoint out of both.

The real key continues to be increased conversion, though across both channels. So even though traffic is down a little bit over the pre pandemic levels of conversion is really strengthened which I think is encouraging to see.

Thanks, a lot best regards happy home.

Thanks, Alex.

Once again, ladies and gentlemen that with Star one if you had a question. We will go next to Eric better at SCC Research. Your line is open Sir. Please go ahead and good morning. Good morning, good morning.

Can you talk a little bit about collaborations and kind of how have they been in which is what is the better kind of which one works better.

As opposed to which one doesn't you've done that for two to three years some of them are multiple levels.

How should we be thinking about.

What is a good versus bad Collaborates, nor was it not as good collaboration.

Eric I think maybe the best way to answer that is.

Couple of things. It's one when you do your first collaboration Theres always an opportunity for kind of outsized growth.

Pent up demand. So some of our largest results have been first time collaboration the second piece that becomes very important.

Both brands is how well that licensing partner.

Collaborates with you. So for example, Hello Kitty was very successful at PURA Vida add we had.

The port from.

Rio to push out to their customer base, what we were doing so that we got some outsized performance of that and PURA Vida.

So it's just we do a lot of research in both brands, we ask customers what are their favorite licensing.

Characters and so we're continuing to look for things that are fresh.

So what you'll see is we'll have some franchise like.

Some franchises like Disney and Harry Potter that are massive franchises, but then we're going to go ahead and drop in a lot of freshness youre going to see a lot of newness and those licensee partners. So it's a combination of those two things it becomes important and again really looking at it as a way to expand the customer portfolio. It's Ben.

It's very exciting to see even like with Harry Potter, how many new customers came into Vera Bradley and moved over to Vera Bradley customers as we manage that.

So again don't only think about the licensing partners to think about other brands that we collaborate with two right, whether it's crocs and Vera Bradley or some other brands that we have done plates with PURA Vida.

The only thing I would add to that I think also what we've learned is we need to be authentic to the brands. So if you think about the PURA Vida brand.

We released some packs with Charlie the Emilia and we released some packs with Madison Bally massive Bally really has a little bit more of the ethos of the PURA Vida brand and that performed better than the charter deal Emilio Pac did for us in.

In regards to sales. So I think we have to think about that and we are thinking about that when we think about who we also collaborate with collaborate with as an influencer.

Okay.

The Canadian expansion.

How should we be thinking about that I'm, assuming you must already have had some customers in Canada and does that eventually lead itself ladies stores, there's something franchise out of the way.

I think right now what I would say Eric is that we're continuing to testing growth. We do Canada. As you would imagine is our number one international country for the Vera Bradley brand. So we thought it was really important.

To begin to learn in Canada begin to control the experience for our customer in Canada directly.

So we're getting learnings and as we build on that learnings, we will decide how big that market can be but we're going to watch that and we're going to continue to test not only at Vera Bradley, but PURA Vida PURA Vida, we do have international presence in Europe.

And we're continuing to look for international opportunities. So we think it will be.

Part of the brand expansion and we'll just see how those grow over time.

The other place we look at for international expansion to kind of begin to plant. The seeds is through travel expansion I think what you see happening in lax with Vera Bradley I think there's a unique opportunity we have been able to work with.

As we've come out of the pandemic with more minority owned businesses in terms of whether.

Whether it's female own businesses, our local businesses and.

And we think that that really provides a new way to reach out and not only connect with our current customer, but get a lot of new eyeballs on the brand and a lot of international travelers coming through someplace like <unk> that we haven't had before so we do think that the travel expansion opportunity as a unique customer acquisition opportunity.

Alright, good luck for the holiday season. Thank you.

Thanks, Eric.

We'll go next to Steve Marotta of CL King <unk> Associates. Your line is open Sir. Please go ahead good.

Rob and John I wanted to go back to the recent price increases as well as ones are expected for next year can you talk a little bit specifically about magnitude on average across the product line and also if you expect these price increases to fully offset the cost.

Costing headwinds that you are either experiencing or expecting or.

It's a best guess at the moment too.

<unk> offset them all if you could talk about how you feel about how.

About the size of the price increases and what they are expected to offset.

Yes, so the price increase obviously vary depending on the style and category, but I would say that price increases in total you could think about that in low single digit overall.

Increases low to mid single digits kind of overall increases as you think about each brand.

That's what we're anticipating pushing through over time, now whether or not that all gets pushed through throughout the full year. We're working through all those details and as we think about being able to offset the intended to try to offset as much as possible, but we're still working through the plan for next year and ultimately we are seeing continued pressure.

On rates associated with shipping.

How to contract in bids for some rate so it's.

It's really a very fluid process right not to be transparent. So were working through right. Now what is the best estimate for price increases and does that fully offset I can't I can't say with 100% certainty yet.

Yes, I do think the only thing that I would add to what John was saying is that when you look at total portfolio price increases right. So if we've targeted increases and you look at the entire portfolio John's right. That's in the kind of the low single digit numbers. When you look at an individual items.

Some cases, we are seeing price increases in items that could be 10% to 15%, but when you blend in between where we're increasing prices, where we are not increasing prices you end up more in the single digit range.

Good.

That's very helpful. Thank you.

Thanks, Dave.

We'll go next to Dana Telsey Telsey Advisory Group. Your line is open. Please go ahead.

Good morning.

Talk a little bit of that.

Hi, Thanks.

You've taken price increases in the past and what is the magnitude and the path.

And then on the indirect account.

Happening with those accounts.

Or is that more concentration in your.

Your account and then I just have a quick follow up thank you.

So I think overall from a pricing increase.

Dana I'd answer it a couple of ways. If you think about this year.

Generally our pricing increase started kind of in fourth quarter than we have.

<unk> double digit type of increases on individual items is how I would look at the magnitude. If you look at it historically going back a few years across both brands and we did have a period of few years ago, where we made price increases across Vera Bradley as we were dealing with all of the China tariff issues and that was kind of.

And the.

Single digit low single digit type of range, so not as aggressive as what we're seeing this year PURA Vida did have.

Back a few years ago. They did have a significant increase kind of double digit increase in their core product and they just took another double digit increase in their core product in November.

So we have had fairly large magnitude increases at PURA Vida over time, and we think theres opportunity there. The only thing I would add to that in the period. It was prior to our ownership that was that has happened over the last couple years.

I was talking about so from an indirect perspective.

So if you think about both brands in the PURA Vida brand is really expanding ultimately there is an expansion of doors that are happening in that brand. It continues to accelerate it has accelerated this year as compared to last year. If you think about the Vera Bradley brand, we're really diversifying our partners are while there are diverse.

<unk> kind of product off product offerings, there so thats, the thought and kind of the plan associated with it appeared that the grant.

And I think as you as we mentioned right the partners like Chewy Dot com, how do we find again so much of what we're doing at Vera Bradley known as plain target right. So how do we take our pet line put it into a dot com, which obviously has a significant amount of eyeballs and really use our wholesale opportunities.

To grab new customer eyeballs as much as just volume.

And then can you count how do you think of the <unk>.

For each of the brand.

Expansion reduction.

<unk> sales that comes from.

Dominic can you how do you think about key accounts and where you are now.

Thank you so a few different things right.

Bob.

Top items are always a key focus for us they always have been at Vera Bradley you can think about the iconic items there between our large doubtful campus backpack land all of those are.

Throw blanket the tote very much needle movers, we continue to focus on those.

We also do believe that Vera Bradley Theres, an opportunity in the core product right. The bag business to continue to tighten that assortment really focus on the best Skus make sure that we're really driving key items in the core assortment and then expand in categories on the edge, so adding more into the apparel area or the home.

Area, given the customer another reason to buy as opposed to just trading from one bag to the other really focus that bind but really add another reason to buy this one of the key strategies at Vera Bradley.

Think about PURA Vida the focus there has really been how do we maintain that great core string bracelet business expand out.

Two jewelry, which has been successful continue to monitor that SKU count, but something like jewelry newness does become very important in terms of new skus and driving new growth, but bringing something new sellout, bringing something new.

And then we're just testing into apparel, we want to make sure. We don't go too broad.

But try to have kind of a tight SKU assortment and we think that will be a great strategy for us as we move forward.

And that will conclude today's question and answer session with no other questions holding I'll turn the conference back to Mr. Rob Wallstrom for any additional or closing comments.

Thank you.

We have an.

Extraordinary culture, a dedicated team loyal customers and a clear vision to be a purpose driven multi lifestyle brand high growth company, our strong cash position debt free balance sheet and capacity to generate free cash flow will allow us to continue to invest in our two unique brands.

And seek out other acquisitions are comfortable affordable purpose driven brands over time.

Although there are near term headwinds with rising digital expenses supply chain disruptions and elevated cost and the delay in the GSP renewal, we have demonstrated an ability to manage through short term challenges while delivering on our long term strategy. We have an exciting future ahead and the opportunity to create long term value for all of our stakeholders by pursuing.

Growth within our current brands and continuing to seek nonorganic growth through new brand innovation and acquisitions over time.

Thank you for your time and interest in Vera Bradley, Inc. And we hope you can join us for our year end earnings call on March 9th.

Ladies and gentlemen that will conclude today's call. We thank you for your participation you may disconnect at this time and have a great day.

[music].

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