Q4 2022 Vera Bradley Inc Earnings Call
[music].
Please standby were about to begin.
Good morning, ladies and gentlemen, thank you for standing by welcome to the Vera Bradley fourth quarter and fiscal year end 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 up for questions. As a reminder, today's conference is called today's conference call is being recorded.
Now I'd like to turn the call over to Mr. Mark July beer Bradleys Chief administrative officer. Please go ahead.
Good morning, and welcome everyone, we'd like to thank you for joining us for today's call. Some of the statements made during our prepared remarks 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 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.
All 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's CEO , Rob Wallstrom Rob.
Mark.
Good morning, and thank you for joining us on today's call John Enwright. Our CFO also joins me today.
At the beginning of the year, we set out to further enhance our two strong brand franchises Vera Bradley and PURA Vida.
Drive revenue and earnings growth through four key strategies.
Executing our digital first strategy enhancing our product innovation pipeline.
Further engaging our communities through marketing and continuing to evolve our distribution channels.
During the year, we made headway on these fronts for both brands generated strong cash flow delivered a consolidated year over year revenue increase of over 15% and essentially returned to pre pandemic revenue levels.
Our Vera Bradley brand had a solid year of revenue growth with year over year total sales increasing over 18% as customers responded to our product innovation and collaborations supported by data driven and targeted marketing our customer base grew year over year, and our demographics are younger and more diverse.
Our PURA Vida brand total sales grew just over 6% for the year, we saw double digit growth in pure beat our wholesale revenues in our first successful retail store opening during fiscal 2022.
However, the significant shift in social and digital media media effectiveness due to the Apple I'd FA update.
<unk> DTC companies resulted in e-commerce sales falling short of expectations.
In addition to the Apple <unk> update we faced a series of other unprecedented macro issues, including dramatic supply chain delays and freight cost increases the delayed renewal GSP tariff relief and substantial digital advertising cost increases all of which materially affected profitability during the year.
The incremental freight costs in GSP impact combined effected our EPS by approximately 25 for the full year exclude.
Excluding these two items, we would have would have put the company in line with our original guidance of 80% to 90.
Even though our earnings results were below our expectations much of what negatively affected our earnings, particularly the supply chain challenges in GSP related to those two issues.
In the fourth quarter, we began initiating strategic price increases across both of our brands to mitigate some of these inflationary and supply chain pressures and we are continuing to implement price increases throughout 2022.
In hindsight, we should have implemented price changes more quickly the price increases should more than offset continuing rising freight costs to deliver year over year gross margin improvement in fiscal 2023.
GSP, our general generalized system of preferences is more specific to the Vera Bradley brand the lower gross margin rate throughout the year reflected higher tariffs from previously duty free countries, where we source products, whose GSP our duty free status expired at the beginning of 2021.
Our expectation was that Congress would pass the GSP legislation early in 2021, but they are still working on the legislation as we head into 2022 and.
In the past Congress has retroactively reinstated the duty free status of such tariffs to the beginning of the year.
Though industry and government sources are still expecting it to be retroactive, we are not certain when or if this will happen.
We continue to diligently manage our expenses and we ended the fiscal year with a solid balance sheet with ample cash of over $88 million and no debt.
Even facing the macro challenges in the last year, we generated $34 million of free cash flow.
Slightly above our 10 year average and returned $7 $7 million to shareholders through stock repurchases.
We remain in a strong position to continue to invest in our two lifestyle brands take advantage of additional growth opportunities over time and return capital to shareholders through continued share repurchases our future dividends.
Our organization remains focused on the long term and achieve key strategic wins, while navigating through the dramatically rising inflationary environment. Our extraordinary culture has allowed us to not only persevere through these challenges, but it has made us stronger and is even more critical during this tight labor market.
Last month, we were extremely honored to receive the number one ranking on the Forbes list of America's Best midsize employers for 2022 or.
Our culture is one of our key competitive advantages.
As I noted in fiscal 2022, we were keenly focused on for strategies to strengthen our brands and propel the business forward first we continue to drive our digital first strategy, we made strategic organizational shifts and investments to pivot us to a digital first company evolving into a customer centric.
<unk> 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 ecommerce sales and excluding our factory stores over half of our total company sales are driven by E Commerce.
We further enhanced our product innovation pipeline collaborations and category extensions, we continue to build our Vera Bradley and PURA Vida PURA Vida lifestyle brands to attract new customers and increase share of wallet with existing customers.
Third we continue to build our community through marketing both brands are working to engage diversify and grow their customer bases through analytics and targeted marketing and ESG efforts, we consistently rank at the top of the industry for our net promoter and customer satisfaction scores for both brands.
And fourth we further evolved our distribution channels, we are continually looking for new ways to reach our customers and to reinvent the shopping experience in the ever changing retail environment.
The future of both brands will be a powerful combination of digital and brick and mortar.
At both of our brands, we accomplished a lot during the year a more complete list as outlined in this morning's release, but allow me to mention just a few at Bureau Bradley. We continued another year of high profile product collaborations with several iconic brands, including Disney Harry Potter and Peanuts accelerated our robot.
Fabric innovation process and launched our cotton re imagine collections.
<unk> expanded our apparel collection continued to strengthened and rationalize our store base continued to expand options for customers to shop, including launching our Canadian website, and adding distribution on <unk> Dot com.
<unk> continued to engage diversify and grow our customer base through analytics and targeted marketing in VB cares efforts, our customer count grew by nearly 15% 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 600000 tech top climbing.
At PURA Vida, we entered into several high profile product collaborations, including Hello, Kitty Disney and Harry Potter, bringing new customers to our brand.
We continue to strengthen our position as a lifestyle brand by expanding into new product categories, including apparel.
Launched our first jewelry collection with outer banks, Dara and Influencer Madison Bailey, which is appealing to a more diverse customer.
And our first retail store in San Diego's Westfield UTC mall in August , which is performing well ahead of expectations.
Added over 400, new wholesale partnerships and Nordstrom as a department store distributor.
<unk> added PURA Vida shop in shops to 'twenty three full line Vera Bradley stores and completed PURA Vida as ERP integration. So that our entire enterprise is now on a unified technology platform.
We also reinforced our commitment to be a purpose in ESG ESG driven organization.
<unk> completed its B Corp impact assessment and just last month was awarded its B Corp certification.
We amplified our companywide diversity inclusion initiative project to continue to enhance diversity equality and inclusion focusing on three key areas. The associate experience the customer experience and the community experience.
We further strengthened and diversified our board of directors with the addition of Nancy <unk> founder and CEO of <unk> hair care, bringing our female board representation to 60%, making us one of only 8% of the Russell 3000 index companies with a gender balanced board and we continue to strengthen our community support and <unk>.
<unk> efforts under the umbrella of VB cares and through our PURA Vida charity bracelet program.
Now, let me turn the call over to John to review the financial results John Thanks.
Thanks, Rob and good morning, Let me go over a few highlights for the fiscal year.
The numbers I will discuss today are all non-GAAP for a complete detailed items excluded from our non-GAAP numbers as well as a reconciliation of GAAP to non-GAAP numbers. Please refer to today's press release.
Consolidated net revenues totaled $545 million for the year, an increase of 15.
4% over $468 3 million in the prior year.
Consolidated net income of $19 7 million or <unk> 57 per diluted share compared to $21 4 million or <unk> 63.
Per diluted share in the prior year.
Vera Bradley direct segment revenues for the current fiscal year totaled $354 9 million.
22, 7% increase over $289 3 million in the prior year.
Vera Bradley indirect segment revenues for the fiscal year totaled $66 million essentially flat with $66 5 million in the prior year.
PURA Vida segment revenues totaled $119 6 million.
A six 3% increase over $112 5 million in the prior year, primarily reflecting a rebound in wholesale account orders from the prior year that were negatively impacted by COVID-19, partially offset by a decline in e-commerce revenues.
Gross profit for the current fiscal year totaled $287 9 million or 53, 3% of net revenues compared to $266 8 million or <unk>, 57% of net revenues.
In the prior year, we significantly expanded our gross margin by approximately 200 basis points through sale of cotton mass, which was not replicated this year.
The current year margin was negatively affected by approximately 145 basis points for higher freight costs and approximately 70 basis points for the GSP issue.
For the fiscal year SG&A expense totaled $258 8 million or 47, 9% of net revenues in the current year compared to $233 million or <unk> 49, 7% of net revenues in the prior year.
As expected current year expenses were higher than the prior year, primarily due to expense reductions related to COVID-19 last year that are no longer applicable.
Year over year expense leverage was achieved on higher revenues.
For the fiscal year, our operating income was.
$30 1 million or five 6% of net revenues in the current year compared to $34 million or seven 3% of net revenues in the prior year.
Now, let's turn to the balance sheet.
Net capital spending for the fiscal year totaled $5 5 million compared to $5 7 million in the prior year.
Cash and cash equivalents as of year end totaled $88 4 million compared to $65 5 million at prior year end we.
We had no borrowings on our $75 million ABL credit facility at year end.
Total fiscal year inventory was $149 2 million compared to $141 4 million at last fiscal year end.
During the fourth quarter, we repurchased approximately $5 $6 million of our common stock at an average price of $8 63.
Bringing our year to date purchases to $7 7 million.
In 2021, our board approved a new $50 million share repurchase authorization, which expires in December 2024.
We anticipate we will repurchase the entire $50 million well before the expiration date.
Over the last seven years, we repurchased nearly $115 million of the company's stock equating to $9 3 million shares.
Now let's shift.
Shift to our outlook for fiscal 2023.
We are providing estimates for fiscal 2023 based on current trends and expectations taking into consideration certain industry economic headwinds such as continued freight and digital marketing increases.
All forward looking guidance numbers that I will discuss our non-GAAP .
For fiscal 2023, our expectations are as follows.
Consolidated net revenues of $555 million to $575 million.
Net revenues totaled $545 million in fiscal 2022.
Year over year Vera Bradley revenues are expected to grow in the low to mid single digit range and PURA Vida revenues are expected to be flat to up by low single digits.
Free cash flow between 35% and $45 million compared to $34 4 million in the prior year.
Consolidated gross margin of 54, 5% to 55% compared to 53, 3% last year.
The year over year increase was primarily related to retail price increases, partially offset by incremental inbound and outbound freight costs. No GSP benefit is included in gross margin guidance.
Consolidated SG&A expense of $273 million to $281 million compared to $258 8 million in the prior year.
The expected SG&A increase was primarily related to inflationary increases in payroll and marketing as well as general variable increase associated with higher sales expectation.
Consolidated operating income of 29, 5% to $35 5 million compared to $30 1 million in fiscal 2022.
Consolidated diluted EPS of <unk>, 57% to 67.
Based on a diluted weighted average shares outstanding of $33 3 million.
Diluted EPS totaled <unk> 57 last year.
Net capital spending of approximately $10 million to $12 million compared to $5 5 million in the prior year, reflecting investments associated with new beer broadly factory stores, new PURA Vida stores, and technology and logistics enhancements Rob.
Rob.
Thanks, John .
As we look to fiscal 2023 and beyond we remain focused on four key strategies.
Diving, our digital first strategy enhancing our product innovation pipeline.
Building, our community through marketing and evolving our distribution channels by executing against these strategies, we will not only continue to strengthen our two core brands, but we will deliver stable revenue and earnings growth and continue to generate meaningful cash flow to further invest in the business pursue growth opportunities and return capital to shareholders.
Let's talk about our two brands.
Let's begin with an update on the Vera Bradley brand Vera Bradley demonstrated solid fourth quarter comp growth over fiscal 2021 and has experienced four quarters of solid sales growth despite supply chain disruptions for.
For fiscal 2023, we will continue to lean into what is working in product marketing and distribution.
And also continue to innovate in each of these areas to expand our customer base and market share.
Going forward, we expect Vera Bradley to be a low to mid single digit growth brand generated the majority of the company's annual cash flow.
On the product front, our focus continues to be on building on our dominance in our three core franchise areas of everyday travel and using campus.
Customers are responding to our continual pipeline of customer centric product and fabric innovation, we're constantly innovating to bring our customers more eco friendly options with a target of updating 100% of our fabrics to more sustainable alternatives by 2025.
We're planning on adding another exciting year of product collaborations with some new ones thrown into the mix. This year. In addition to the continuation of our fan favorites like Harry Potter Disney Peanuts and Crocs.
We will continue to implement our price increases throughout the first half of this year, which will drive higher AUR and offset freight related gross margin pressure.
Additionally, if GSP legislation eventually passes this will be an incremental benefit to gross margin.
Turning to marketing.
Our investments in customer data science and business analytics have continued to position us well, allowing us to collect and analyze data and respond to customer changes and adjust marketing spend on a real time basis and in an agile way.
We are continually focused on looking for new ways to creatively engage our customers grow brand awareness and introduce new customers to our brand in a cost effective manner.
But that is becoming more challenging and expensive for both of our brands.
Since the company's 2019 acquisition of PURA Vida PURA Vida shared its digital expertise with Vera Bradley in health care broadly enhances digital effectiveness Vera Bradley's marketing platform will continue to be a blend of digital and more traditional channels like direct mail E mail quality media placements PR and targeted TV ads.
And now PURA Vida will be able to leverage Vera Bradley's traditional marketing capabilities to help re platform their marketing mix going forward.
On the distribution front.
Over the long term, we have prioritized digital as the primary revenue growth driver for Vera Bradley, making major strategic shifts in investments to pivot us to a digital first company.
But we are enabling her to shop in a seamless manner and want her to shop, where and how she wants to shop stores continue to be an integral part of this omnichannel strategy.
Digital sales are typically higher in markets, where we have a retail presence and the average omnichannel customer spends over three times more than the single channel customer.
We are continuing to improve the profitability of our <unk> fleet by focusing on our highest potential stores and rationalizing our existing portfolio through select store closures as appropriate which remains a fluid process.
We also expect to open five new factory stores this year.
On the wholesale side of the business, we will continue to expand our digital marketplaces like Amazon.
Meeting customers, where they are shopping.
Now, let's switch to PURA Vida.
As I previously mentioned at PURA Vida, we generated double digit wholesale revenue growth and a successful retail store opening in fiscal 2022.
But marketing challenges resulted in underperformance in ecommerce, causing total PURA vida sales to grow by just 6%, we're putting resources against addressing that issue in fiscal 2023 for.
For next year, we expect PURA Vida as normalized revenue growth to be in the low to mid single range.
In the product area, increasing <unk> innovation and collaborations will continue to play a key role in PURA Vida as long term growth, we are continually adding new designs and elements to our jewelry collections and we will continue to build our apparel collection of hoodies and tease by introducing bottoms. Later this year, we are building a lifestyle brand.
As I noted, we began increasing pricing on PURA vida products in the fourth quarter, which should boost <unk> and more than offset margin pressure caused by continuing freight increases in fiscal 2023.
Now turning to marketing.
Addressing our marketing issues is a key priority for the company.
We are in the process of strengthening our internal marketing and data analytics talent and platform at PURA Vida.
Like we did three years ago at Vera Bradley.
Our teams continue to work diligently to dive deeper into customer analytics and build a more diverse and balanced marketing program like growing our SMS subscriber base on boarding a new email marketing agency and spreading a portion of our marketing resources to other platforms like Tictoc podcast and Youtube.
We know it will take time to gain traction with these other platforms as digital marketing becomes more costly.
Vera Bradley will be able to help PURA vida leverage more traditional channels like direct mail and email as they continue to diversify their marketing program.
In addition to the marketing changes, we will focus on opening stores to further engage our existing customer and to attract new customers to the brands.
Our San Diego store is 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. The store continues to exceed our expectations and we continue to experience double digit improvement in our San Diego E Commerce 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. So we are very excited about additional store growth.
Our second PURA Vida store will open in Irvine spectrum in Orange County in July of this year, we expect to open another store in the east coast in a high traffic tourist beach location. This summer and one additional store in fall and we look forward to even more store growth in the future.
PURA Vida as future growth will be a balance of online growth and growth in physical distribution channels importantly 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 and we expect to continue to add new partnerships. This year.
Operator, we will now open the call to questions.
Thanks.
Thank you if you'd like to ask a question. Please signal by pressing star one on your telephone keypad.
Speaker phone. Please make sure your mute function is turned off.
No.
Once again Chris.
To ask a question, we'll pause for just a moment to allow everyone an opportunity to signal for questions.
We'll go first to Oliver Chen with Cowen.
Hi, Thanks, everybody good morning on the <unk> priority guidance.
The Vera Bradley guidance, what are your thoughts on.
Relative to channel in terms of what's incorporated in the low to mid single and then on the topics you gave a lot of great details on both supply chain and privacy.
Whats ahead for risk factors for both.
As conditions stabilize.
What's incorporated in your guidance in terms of those issues, they're both pretty different.
Would love your thoughts thank you.
Yeah. Thank you Oliver in terms of guidance as we think about revenue growth at Vera Bradley and price increases.
We do expect that the price increase overall for the entire <unk>.
<unk> will be close to the overall revenue growth. So another way of thinking about that as the primary driver.
The growth will be through price increasing.
We believe that those price increases should cover off what we anticipate to be the incremental freight cost.
We are expecting incremental freight costs. This year as that continues to kind of work through.
The product assortment.
And then in terms of the marketing with privacy.
We know that there is continued to be digital pricing increases.
But we believe that the changes in the algorithms.
We're hopeful we're through the worst part of it but there is still more work to be done at PURA Vida. The way, we're really talking about pure <unk> platform is they were very very focused on the social media kind of larger Facebook platform for marketing and now we're really working on bringing in talent, bringing in analytics.
We did it for probably a couple years ago to really balance out that marketing platform to make sure that we're leveraging out influencers more traditional avenues like looking at and evaluating direct mail campaigns and other ways to be more focused on first party marketing as opposed to being so reliant upon third party marketing.
So we have a lot of developments that are under workover, there and will be.
Bringing more detail this year.
The only thing I would add to the question in regards to logistics ultimately we've seen it gets slightly better and only slightly better we still expect this year to be a very challenging year as you know with everything thats going on in the Porsche everything that's going on in the macro environment, we anticipate and we have built into our guidance. What we believe is the appropriate amount of kind of cost for our.
Our logistics network, but just to give you a sense of.
Scale of the increase if you think about pre pandemic are now a container a contract container cost is about four X what used to be.
In previous years and historical previous years pre pandemic. So it's obviously a significant amount that number could range up depending on things, if we're going to buy things on spot, but right now we anticipate and we've guided towards we believe everything is built into our numbers.
Okay, and you mentioned on pricing.
Oliver just one more thing.
<unk> to mention I, just want to make sure. We did mentioned is that the way. We have done guidance is we're not building in any relief on GSP.
GSP award to get.
That could be an incremental benefit.
Okay, that's very helpful.
In your remarks, you had mentioned you were.
Issuance increased prices earlier, it's not very easy necessary for you to change prices given your distribution channels.
How will you approach price increases across the portfolio.
Surgically and measure elasticity.
What do you think the market appetite is for that.
That's great question, and you're right Oliver they changed the prices.
Definitely is not easy for us just based upon how we deliver the diversity of our supply chain and the fact that most of our product is continuation in style. So.
It was one of the reasons, we were not quick and we didn't want to respond to quickly because of that challenge.
It was a decision that we made last year, we started to work through deliveries to make sure that we can change prices as they come in we have been working on being more fluid and rapid and our price change in ability as we go forward to shorten that timeline.
So we think that Thats really.
Ah Kee.
And then what we're doing is we are monitoring as we begin to change prices. We have started to change prices a few of our factory items. We did at the end of the year and Vera Bradley. We also started taking price changes and PURA Vida.
So far we have not seen any negative reaction from the consumer.
So we're hoping that we see that continue as we continue to raise prices, but throughout the first half of this year.
Okay, Rob on the channel strategy at Vera Bradley.
Channel do you see the most opportunity as you think about.
Outlet relative to your retail and wholesale partners.
And then last question you have a really strong position in terms of capitalization.
I know you mentioned potential dividend, but what's on your mind regarding returning capital to shareholders as well as <unk>.
<unk> a bigger platform.
Thanks, Oliver I think in terms of distribution, what I would say is a few different things that we have going on one we do think that the factory division our E Commerce business.
And even e-commerce wholesale so places like Amazon, probably provide the more outsized growth.
But we do believe that full line still plays a critical role for us and particularly as everybody begins to travel we think that full line is an area that we're looking at but I would say the other three are there are the bigger growth areas. As you think about capital you are right. We do have a very strong balance sheet very good cash flow. It gives us a lot of ability.
<unk>.
As we've said we always wanted to make sure. We're funding our growth first is our first priority in terms of capital allocation, but second we do continue to evaluate what's out of the marketplace. As we know valuations were higher last year. So you didn't see us do anything last year, but we continue to evaluate the.
The market, but we want to make sure we remain a highly highly disciplined from a valuation standpoint, but we also do believe that returning capital to shareholders can be an important part of our story, we have seen that last year with our share repurchase to $50 million share repurchase plan that we announced and we think thats important.
And we are having conversations with the board of exploring all the other opportunities, including something Michael future dividend. So.
I'm sure there'll be more that we'll talk about that in the future.
Okay. Thanks, very much best regards.
Thanks Oliver.
We'll go next to Eric better with SCC research.
Good morning.
Good morning, Eric.
Good morning could you talk a little bit about.
Sure.
Logistics is going to remain an issue what are your steps that you're taking to ensure kind of that.
The stores have new flow of product.
Is there and the depth that it can be.
It's a great question.
So Eric where we're looking at opportunities as you know to airfreight, some product and as we look at.
In stock levels and stock was challenged in the fourth quarter. So we've been looking at airfreight additional airfreight above and beyond what we spent last year to get to a better position. We're also looking at utilizing different ports and bringing our product in through different ports and having the ability to truck things in a little bit more seamlessly versus taking things through la and then.
Taking it through kind of the train through Chicago down into Fort Wayne. So we're looking at kind of all of our options in regards to making sure we get to a better place from an in stock level I think the other big one though to Eric is that what we did last year, where we were starting to having the delays that we actually started placing.
Orders earlier, extending the time between the ex factory date, and the date that we should be.
Receiving the goods and.
And we should begin to see some of that benefit begin to flow through as we close out the first quarter and move into the second quarter.
So.
Thats one action that we took last year. It just takes a while to ripple through the supply chain.
Great.
Look at the collaborations I know that you ramp those up.
Peter.
I guess some extent.
Vera Bradley.
<unk>.
How do you look at keeping those fresh making sure that they are relevant.
And if they continue to bring in kind of the customers you wanted to.
Great question Eric.
In terms of collaborations and keeping it fresh part of it is making sure that we're looking at.
These partnerships in a lot of them have a very broad access in terms of IP licensing.
So as you think about the different franchises, whether it's Disney as you think about the world of Disney There are a lot of different franchises inside of it. So we're exploring that and how we continue to bring freshness because to your point, we do believe that freshness really becomes a key aspect of it.
So even as we talked about some of these partnerships that we're continuing as you see these collaborations come out. This next year I think youll see a lot of really new exciting.
Franchises that will be collaborating with.
Great and last question over the last three or four years, you've kind of changed pretty much all the fabrications.
Bradley.
What should we be thinking you've talked about innovation noticed you've done that.
Talking about the next round here.
As you kind of lever kind of basically creating a hole.
Different set of fabrications here for the Vera Bradley.
So in terms of Youre right that from a fabric innovation standpoint, we have done a tremendous amount of work over the last couple of years with introducing reactive cotton re imagine performance twill and when we feel it gives us a really good base from a fabric innovation standpoint.
And we will continue.
Do some minor adjustment there, but we think we have a very good fabric base I think as we think about how are we going to move forward with innovation. One is what we talk about category extensions. So youre seeing us continuing to extend out we've had success as we've been bringing home products into market home decorative type.
For products in the market expanding in apparel, particularly around things around the cozy categories kind of our flip flops slipper and kind of what's happening on the footwear part of the business I think you'll see a lot of innovation coming out of those three areas will be really important to us as we move forward I think the third area that youre going to.
See it's continue to bring innovation and it's just how we think about fabrics and patterns and how they interrelate and how to bring more novelty and kind of.
New ways of looking at our patterns and mixing our patterns as we go forward to just bring some more freshness.
There's a lot of exciting things in the innovation channels told at Vera Bradley.
Alright.
Thank you and good luck for the rest of the year.
Thanks, guys. Thanks, Eric.
And just as a reminder to ask a question that is star one on your telephone keypad.
We will go next to Steve Marotta with CLK <unk> associates.
Good morning, Rob John and Julia.
John as far as <unk> goes could you describe the magnitude of that on the headwinds. If you had said in the prepared remarks I missed it in other words, there was a magic wand tomorrow.
Past, what would be the tailwind to gross margin.
Near term.
Yes about a full point of margin to the company. If it gets past obviously, if it's retroactive all the way back to the duty paid last year, we would pull that out but it could be about two points worth of benefit.
That's really helpful and also if you provided any quarterly or.
Partial year guidance I missed it could you go over how you think the.
Sales and earnings will be weighted through the year.
Yes, so we did not provide any quarterly guidance given some of the volatility in the world right now so ultimately we're sticking with an annual guidance number.
Would you like to take the opportunity to give us a little thoughts on yes.
Okay.
Yes.
Not at this time.
Okay Fair.
Fair enough lastly, Rob you mentioned in the prepared remarks about the shrinking in the marketing teams I believe at both.
Caribbean and Vera Bradley can you talk a little bit about is there anything else that you can do I know, it's a little like pushing on a string given the fact that.
One big marketing door is closed but are there others that are being tested that could be levered that might be opportunities.
Little bit of upside from a direct to consumer standpoint.
Thanks.
Thanks, Steve So first of all the clarify with Vera Bradley over the last couple of years, we have been building up the marketing team not only the team, but the tools the processes the analytics and we've continued to see really nice results from that now what our plan really is to do is help to take a lot of those learnings and best pre.
<unk> says at Vera Bradley and to let PURA Vida leverage those so how do we go ahead and enhance the talent that we have there that was really focused on social media advertising and get a broader look at how we leverage marketing in totality, how we bring in the additional tools, what I would call really the first party marketing.
Tools.
And so we're going to be kind of building more strength into the PURA Vida marketing team as we go into this year really taken the lessons that we learned at Vera Bradley and leveraging.
A lot of the assets that we currently have at Vera Bradley both from a talent standpoint, as well as a process standpoint.
In terms of other ways of driving business at PURA Vida due to the challenges we have right now as we work through this marketing one of the things that we believe will be critical as <unk> seen in a lot of DTC companies is the importance of stores.
We're very encouraged by what we've seen with the first store in San Diego, We've had very very strong results there and whats been exciting is not only very strong four wall results, but seen those results lift the e-commerce business and really help the customer acquisition and growth of the customer and the San Diego marketplace.
And if we see that continue as we opened up three more stores. This year, we think that we have the ability to ramp up that growth and store growth for PURA Vida, which could become a very important part of not only the growth story, but also the marketing customer acquisition story as we move forward. So that's definitely one of the prime areas. We're looking at.
To drive additional customer acquisition and focus for the brand.
Terrific very helpful. Thank you.
Thanks, Steve Thanks, Steve.
At this time Theres no further questions I will turn the call back to Robert Wallstrom for any additional or closing remarks.
Thank you we are committed to being a purpose driven multi lifestyle brand stable growth company generating strong cash flow.
Our solid cash position debt free balance sheet and ability to generate free cash flow has positioned us to continue to invest in our two lifestyle brands.
Seek out accretive acquisitions of other cash generating purpose driven brands over time, and returning capital to shareholders through continued share repurchase or future dividends. Although fiscal 2022 had its challenges in fiscal 2023 will still be filled with inflationary challenges we have a solid long term vision.
For the future of our company and a clear path to achieve our goals. Our team has focused our balance sheet is solid our brands are strong and we are positioned for long term stable growth. We remain excited about the opportunities for Vera Bradley Inc. Thank you and we look forward to speaking with you on June <unk> on our first quarter.
Third quarter earnings call.
This concludes today's call. Thank you for your participation you may now disconnect.
Yeah.
Yeah.
Yeah.
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