Q3 2024 Vera Bradley Inc Earnings Call

Speaker 1: Here holding for the Vera Bradley conference call we are still in many additional

You're holding for the Vera Bradley Conference call. We are still many additional participants in the call should begin shortly when do you think you for your patience and please continue to stand by.

Speaker 1: the call should begin shortly. Would you thank you for your patience and please?

Speaker 2: and bye. Jessica Marcus

[music].

Speaker 3: Please stand by.

Please standby.

Speaker 1: Good day and welcome to the Vera Bradley third quarter fiscal 2024 earnings conference call. Today's conference is being recorded. At this time I'd like to turn the conference over to Mark D. Lee, Chief Administrative Officer. Please go ahead.

Good day and welcome to the Vera Bradley third quarter fiscal 2024 earnings Conference call. Today's conference is being recorded at this time I'd like to turn the conference over to Mark D. Lai Chief administrative officer. Please go ahead Sir.

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.

Speaker 4: 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 and our response requestions may constitute forward-looking statements made pursuant to and within the meaning of the Safe Harbor provisions of the Private Security's Religation Reform Act of 1995 as amended.

Speaker 4: Such forward-looking statements are subject to both known and unknown risks and uncertainties that could cause actual results differently from those that we expect. Please refer to today's press release in the company's most recent form 10K, filed with the SEC for a discussion of known risks and uncertainties.

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 will remain opera.

Speaker 4: 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'll now turn the call over to Burr Bradley CEO , Jackie Ardry. Jackie.

At a later time, we undertake no obligation to update any information discussed on today's call I'll now turn the call over to Vera Bradley's CEO Jackie Ardrey Jackie thank.

Speaker 5: Thank you, Mark. Good morning and thank you for joining us on today's call.

Thank you Mark good morning, and thank you for joining us on today's call.

Speaker 5: Our efforts continue on project restoration as our associates across the company work together to position Vera Bradley Inc. for long-term profitable growth. We are very pleased with the meaningful progress we've made so far.

Our efforts continue on project restoration as our associates across the company work together to position Vera Bradley, Inc. For long term profitable growth.

We're very pleased with the meaningful progress we've made so far.

Speaker 5: Year over year, third quarter non-gap income was essentially flat as we delivered solid gross margin expansion and carefully managed our expenses despite sales challenges.

Year over year third quarter non-GAAP income was essentially flat as we delivered solid gross margin expansion and carefully manage our expenses despite sales challenges.

Speaker 5: Total third quarter revenues for the Vera Bradley brand decreased 5% from last year.

Total third quarter revenues for the Vera Bradley brand decreased 5% from last year.

Speaker 5: Vera Bradley direct revenue declines primarily resulted from continued weakness in the outlet store channel and the impact of store closures. Year over year Vera Bradley indirect revenues were up to last year.

They were badly direct revenue decline primarily resulted from continued weakness in the outlet store channel and the impact of store closures.

Year over year, Vera Bradley indirect revenues were up to last year.

PURA Vida year over year sales decreased 18, 3% with declines in both wholesale and ecommerce revenues as prior year sales were driven by meaningfully higher levels of marketing spend along with increased liquidation and clearance activity store sales remained strong.

Speaker 5: Pure Vida year-over-year sales decreased 18.3%, with declines in both wholesale and e-commerce revenues, as prior year sales were driven by meaningfully higher levels of marketing spend, along with increased liquidation and clearance activity. Store sales remained strong. With our diligent expense management and focus on profitability, Pure Vida year-over-year third quarter operating income improved.

With our diligent expense management and focus on profitability PURA Vida a year over year third quarter operating income improved.

Speaker 5: At both brands, customers have responded to our latest iconic product collaborations and to our new innovative and on-trend product offerings, even as they have been more careful with their discretionary spending in the current macro environment.

At both brands customers have responded to our latest iconic product collaborations and to our new innovative and on trend product offerings, even if they had been more careful with their discretionary spending in the current macro environment.

Speaker 5: We continue to diligently manage our debt-free balance sheet, adding to our year-over-year cash position while strategically lowering our inventory levels. Strength in this area is important in navigating an uncertain retail environment, as well as in supporting our project restoration initiative.

We continue to diligently manage our debt free balance sheet, adding to our year over year cash position, while strategically lowing lowering our inventory levels.

Strength in this area is important and navigating an uncertain retail environment as well as in supporting our project restoration initiatives.

Speaker 5: Presently we are taking targeted and prudent actions to stabilize revenues and we remain focused on strong financial discipline and controlling what we can control as we react both strategically and tactically to current market conditions.

Presently we are taking targeted and prudent actions to stabilize revenues and we remain focused on strong financial discipline and controlling what we can control as we react both strategically and tactically to current market conditions.

Simultaneously.

Speaker 5: We have made meaningful progress in our right on track with our long-term strategic plan, project restoration, focusing on four key pillars of the business for each brand. Consumer, brand, product, and channel.

We have made meaningful progress and are right on track with our long term strategic plan project restoration, focusing on four key pillars of the business for each brand consumer brand product and channel.

Speaker 5: We believe execution of product restoration will drive long-term profitable growth and deliver value to our shareholders.

We believe execution of product restoration will drive long term profitable growth and deliver value to our shareholders.

Speaker 5: Let me give you an update on some of the initiatives we have underway related to project restoration. We will have additional updates in conjunction with our year end earnings call with more rollout details in June .

Let me give you an update on some of the initiatives we have underway related to project restoration, we will have additional updates in conjunction with our year end earnings call with more rollout details in June.

Speaker 5: Advia Bradley, for the consumer, we are focusing on restoring brand relevancy, targeting casual and feminine 35 to 54-year-old women who place prime importance on both fashion and function.

At Vera Bradley for the consumer we are focusing on restoring brand relevancy targeting casual and feminine 35 to 54 year old women, who plays prime importance on both fashion and function.

Speaker 5: We've created a multi-year customer file growth plan with a focus on this core consumer target, along with an appropriate level of marketing investment to acquire new customers as we launch new product and our refreshed brand vision next year.

We've created a multi year customer file growth plan with a focus on this core consumer target along with an appropriate level of marketing investment to acquire new customers as we launch new product and a refreshed brand vision next year.

Speaker 5: Our consumer research focused on this target audience and we placed importance on her needs to inform product design and develop.

Our consumer research focused on its target audience, and we placed importance on her needs to inform product design and development.

Speaker 5: For the brand, we are working to strategically market our distinctive and unique position as a feminine, fashionable brand that connects with consumers on a deep emotional level. Our marketing efforts this year have increased the number of reactivated customers.

For the brand we are working to strategically market are distinctive and unique position as a feminist fashionable brand that connects with consumers on a deep emotional level.

Our marketing efforts this year have increased the number of reactivated customers.

Speaker 5: We are continuing to shift our focus from channel-specific customer acquisition to an omnichannel perspective for increased media effect.

We are continuing to shift our focus from channel specific customer acquisition to an omni channel perspective for increased media effectiveness.

Speaker 5: Our updated brand vision and marketing strategy will roll out in the middle of next year.

Our updated brand vision and marketing strategy will roll out in the middle of next year.

Speaker 5: For the product, we are refocusing on core categories and items we are best at by continually innovating and expanding within our core products like travel and back to campus.

For the product we are refocusing on core categories and items, we are best that by continually innovating and expanding within our core products like travel and back to campus.

By mid next year, you will see how we have elevated our colorful feminine heritage keeping a distinctive but more trend relevant through updated print in design and we will continue to enter into strategic adjacent lifestyle item introductions that makes sense for our customers.

Speaker 5: Our performance fabrics, featherweight, performance twill, reactive and ultra light continue to trend well, appealing to our younger core customer with a higher household income. We believe performance fabrics are a big opportunity for us.

Our performance fabrics, the other way performance twill reactive and ultra light continue to trend well appealing to our younger core customer with a higher household income. We believe performance fabrics are a big opportunity for us.

Speaker 5: Patterns will always be our signature, but coordinating solids continue to be a key opportunity for us as well.

Patterns will always be our signature, but coordinating solid continued to be a key opportunity for us as well.

Speaker 5: We have and will continue to expand our solid offering.

We have and will continue to expand our salad offerings as part of this our revamped leather collection of bags wallets and restless and other accessories debuted in September.

Speaker 5: As part of this, our ReVans leather collection of bags, wallets, and wristlets, and other accessories debuted in September . The simple clean lines, beautiful designs, and exceptional functionality have been well received by our customers, and we expect to expand our collection going forward.

The simple clean lines beautiful designs and exceptional functionality have been well received by our customers and we expect to expand our collection going forward.

Speaker 5: Customers purchasing leather spent seven times more than their full price purchasing counterparts in the third quarter.

Customers purchasing leather spent seven times more than their full price purchasing counterparts in the third quarter.

Speaker 5: Product collaborations will always be an important part of our brand expression. We continue to see strong response from Disney to Hello Kitty to Penas to our most recently launched Toy Story collection. Stay tuned for more exciting collaborations next year.

Product collaborations will always be an important part of our brand expression. We continue to see strong response from Disney to Hello, Kitty to Peanuts to our most recently launched Choi started collection stay tuned for more exciting collaborations next year.

Speaker 5: We are especially thrilled about our NFL collection introduced in August . We will expand to all NFL teams in fiscal 2025.

We are especially thrilled about our NFL collection introduced in August we will expand to all NFL teams in fiscal 2020 five.

Speaker 5: For the holidays, we have a great gift giving lineup of products featuring fan favorites and uniquely giftable items from bags to ornaments to our cozy collection, all at sharp price points.

For the holidays, we have a great gift, giving a lineup of products featuring fan favorites and uniquely giftable items from bags to ornaments to our cozy collection, all at sharp price points.

Speaker 5: Holiday gifts also incorporate items from our favorite collaborations, including Hello Kitty, Peanuts, Disney, Toy Story and Star Wars.

Holiday gift also incorporate I don't incorporate items from our favorite collaborations, including Hello, Kitty Peanuts, Disney Toy story and Star Wars.

For the channel we are accelerating our digital first focus and online presence building a more balanced store footprint and clearly differentiating the full line assortment from our outlet assortment.

Speaker 5: For the channel, we are accelerating our digital first focus and online presence, building a more balanced door footprint and clearly differentiating the full line assortment from our outlet assortment. We are also focused on improving full line store profitability and have future growth plans for this channel, including remodels for existing stores in the first half of next year, as well as the development of new formats.

We are also focused on improving full line store profitability and have future growth plans for this channel, including Remodels for existing stores in the first half of next year as well as the development of new formats.

Speaker 5: In addition, we are targeting relationships with strategically aligned wholesale partners.

In addition, we are targeting relationships with strategically aligned wholesale partners.

Speaker 5: As part of this, our recent site rebranding and navigation changes have been successful in reducing bounce rate and driving conversion and sales. We will apply what we've learned from these changes to a full site rebrand in the middle of next year.

As part of this our recent site rebranding and navigation changes had been successful in reducing bounce rate and driving conversion and sales we will apply what we've learned from these changes to our full site rebrand in the middle of next year.

We have taken steps via.

Speaker 5: be a product, marketing, and expense discipline to improve the profitability of our full-line stores. We are in the process of identifying prudent, modest store extension plans for next year and beyond.

Be it product marketing and expense discipline to improve the profitability of our full line stores. We are in the process of identifying prudent modest store expansion plans for next year and beyond.

Speaker 5: We also are taking a comprehensive approach to addressing the trends in Vera Bradley's Outlet Channel through a thorough multi-pronged approach, including targeted marketing tactics designed to drive traffic and conversion, pricing adjustments and testing and store contests.

We also are taking a comprehensive approach to addressing the trends in Vera Bradley's outlet channel through a thorough multi pronged approach, including targeted marketing tactics designed to drive traffic and conversion pricing adjustments in testing and store contest.

Now turning to PURA Vida.

Speaker 5: For the consumer, we are sharpening our focus on young women age 18 to 24, the original target audience of the brand.

For the consumer we are sharpening our focus on young women, aged 18 to 24, the original target audience of the brands.

Speaker 5: For the brand, we have re-centered our brand philosophy on living life to the fullest. We have pivoted our marketing to authentically share real moments, places and faces of our customers and enthusiasts.

For the brand we have re centered our brand philosophy on living life to the fullest, we have pivoted, our marketing to authentically share real moments places and phases of our customers and enthusiasts.

Speaker 5: We are more analytical using our newly implemented comprehensive customer data platform to more strategically target customers and potential customers with a keen focus on both customer acquisition and retention.

We are more analytical using our newly implemented.

Comprehensive customer data platform to more strategically target customers and potential customers with a keen focus on both customer acquisition and retention.

Our recent live free and college mobile tours were huge successes for customer engagement.

Speaker 5: A recent live-free and college mobile tours were huge successes for customer engagement.

Speaker 5: For the product, we are focusing on delivering unique, fun, playful designs that are affordable and accessible with a key emphasis on bracelets and jewelry, as well as other strategic adjacent categories. Innovation and newness are work.

For the product we are focusing on delivering unique fun playful designs.

That are affordable and accessible with a key emphasis on bracelets and jewelry as well as other strategic adjacent categories innovation and newness are working.

Speaker 5: Our custom bracelets from her per chance to engravable items to building your own bracelets are popular and continue to be a big growth opportunity.

Our custom bracelets from Harper charms June gray bubble items to building your own bracelets are popular and continue to be a big growth opportunity.

Speaker 5: We will continue to pursue high profile collaborations like Hello Kitty, Shark Week, and Harry Potter, which are always fan favorites and bring new customers to the brand.

We will continue to pursue high profile collaborations like Hello, Kitty Shark week, and Harry Potter, which are always fan favorites and bring new customers to the brand.

Speaker 5: We recently expanded our men's collection. This collection still targets our core customer who purchases these items for the men in her life.

We recently expanded our men's collection.

This collection is still targets, our core customer who purchases these items for the men in her life.

Speaker 5: Holiday Gifting is a huge opportunity for us, and our offerings include special holiday bracelet packs, collectible ornaments, holiday themed harpers charms, and our very popular Advent boxes.

Holiday gifting is a huge opportunity for us and our offerings include special holiday bracelet packs collectible ornaments holiday themed Harper's charms and are very popular advent boxes.

Speaker 5: Social Responsibility is important to the pure Vita customer. And we support this through our charity program, which supports a number of charities, including mental health awareness, homes for our troops, best friends, animal society, and the Trevor Project.

Social responsibility is important too to the PURA Vida customer and we support this through our charity program, which supports a number of charities, including mental health awareness homes for our troops best friends Animal Society and the Trevor project.

Speaker 5: For the channel, we have a strong focus on driving e-commerce.

For the channel we have a strong focus on driving e-commerce.

Speaker 5: growth and strategic expansion of wholesale by pursuing bigger, more strategic partnerships and expanding larger existing accounts. Also, we are beginning to refine and develop an expansion plan for our existing store model.

Growth and strategic expansion of wholesale by pursuing bigger more strategic partnerships and expanding larger existing accounts also we are beginning to refine and develop an expansion plan for our existing store model.

Speaker 5: Based on the success of our existing pure Vita stores, we are in the process of identifying a handful of new pure Vita store locations for 2024. We will have firmer plans to announce in March on our year end call.

Based on the success of our existing PURA Vida stores, we are in the process of identifying a handful of new PURA Vida store locations for 'twenty 'twenty four we will have a firmer plans to announce in March on our year end call.

Speaker 5: To gain both operational and strategic efficiency, we moved the Puravita store operations under the VR Bradley team earlier this year.

To gain both operational and strategic efficiency, we moved the PURA Vida store operations under the Vera Bradley team earlier this year.

We are taking actions to stabilize and then steadily grow PURA vida as revenues and to reverse the trends in Vera Bradley's outlet channel. Our team is focused on driving long term revenue growth improving gross margin and ensuring strong financial discipline and cost control all of which we expect will drive long term.

Speaker 5: We are taking actions to stabilize and then steadily grow pure vita's revenues and to reverse the trends in Vera Bradley's Outlet Channel. Our team is focused on driving long-term revenue growth, improving growth margin, and ensuring strong financial discipline and cost control, all of which we expect will drive long-term profitable growth.

Term profitable growth.

Speaker 6: Now, let me turn the call over to CFO , Michael Swindle to review the financial results. Michael. Thanks, Jackie, and good morning, everyone. I'm going to begin with some details about our third quarter and then go into revised guidance for the year. For the sake of clarity, the numbers I am discussing today are on a non-gap basis and exclude charges as outlined in today's press release. A complete detail of items excluded from non-gap numbers as well as that reconciliation of gap to non-gap can be found in the release.

Now, let me turn the call over to CFO, Michael Swindell to review the financial results, Michael Thanks, Jackie and good morning, everyone I'm going to begin with some details about our third quarter and then go into a revised guidance for the year for the sake of clarity the numbers I am discussing today are on a non-GAAP basis and exclude charges as outlined in today's.

Press release, a complete detail of items excluded from non-GAAP numbers as well as that reconciliation of GAAP to non-GAAP can be found in the release.

Speaker 6: For the third quarter, consolidated net revenues told 115 million compared to 124 million in the prior year third quarter. Consolidated net income told $6.1 million or 19 cents per deluded share compared to 6.3 million or 20 cents per deluded share last year.

For the third quarter, our consolidated net revenues totaled 115 million compared to 124 million in the prior year third quarter.

Holiday that net income totaled $6 $1 million or <unk> 19 cents per diluted share compared to $6 3 million or 20 cents per diluted share last year.

Speaker 6: Current year third quarter, via Bradley Direct, segment revenues, told 72.3 million, which is a 9.7% decrease from 80.1 million in the prior year third quarter. Comparable sales declined 8.2% in the third quarter, primarily driven by weakness in the Outlet channel.

Current year third quarter Vera Bradley direct segment revenues totaled $72 3 million, which was a nine 7% decrease from $80 1 million in the prior year third quarter comparable sales declined eight 2% in the third quarter, primarily driven by weakness in the outlet channel.

Speaker 6: Total revenues were also impacted by store closures over the last 12 months, including 15 full line and two outlet store closures. We also opened three outlet stores over the last 12 months.

Total revenues were also impacted by store closures over the last 12 months, including 15 full line and two outlet store closures. We also opened three outlet stores over the last 12 months.

Vera Bradley indirect segment revenues totaled $25 million, a 12% increase over $22 3 million in the prior year third quarter, reflecting a significant one time key account order that did not take place in the prior year.

Speaker 6: We are broadly indirect segment revenues totaled $25 million, a 12% increase over 22.3 million in the prior year, third quarter. Reflecting a significant one-time key account order that did not take place in the prior year.

Speaker 6: Peravita segment revenues told 17.7 million in 18.3% decreased from 21.7 million in the prior year. Reflecting the decline in sales to wholesale accounts and a decline in e-commerce sales, partially offset by a growth in retail store sales.

PURA Vida segment revenues totaled $17 7 million and 18.3% decrease from $21.7 million in the prior year, reflecting the decline in sales to wholesale accounts and a decline in e-commerce sales, partially offset by our growth in retail store sales.

Speaker 6: Third quarter gross margin totaled 63 million or 54.8% of net revenues compared to 65.6 million or 52.9% of net revenues in the prior year. The current year gross profit rate was favorably impacted by a lower year rate inbound and outbound for its expense, lower supply chain costs, and the sell-through of previously reserved inventory, partially offset by increased promotional activity.

Third quarter gross margin totaled $63 million or 54, 8% of net revenues compared to $65 6 million or 52, 9% of net revenues in the prior year. The current year gross profit rate was favorably impacted by lower year over year, inbound and outbound freight expense lower supply chain.

And the sell through of previously reserved inventory, partially offset by increased promotional activity pre.

Speaker 6: Prior year gross profit was materially impacted by high inbound and outbound freight expense, as well as due leverage of overhead costs.

Prior year gross profit was materially impacted by high inbound and outbound freight expense as well as deleverage of overhead costs.

Speaker 6: S-TNA expenses told 55.1 million or 48% of net revenues compared to 57.6 million or 46.4% of net revenues in the prior year. This reduction from the prior year reflects company-wide cross-production initiatives across various areas of the organization. The expense D leverage resulted from lower revenues.

SG&A expenses totaled $55 1 million or 48% of net revenues compared to $57 6 million or 46, 4% of net revenues in the prior year. This reduction from the prior year reflects company wide cost reduction initiatives across various areas of the organization.

Spence deleverage resulted from lower revenues.

Speaker 6: Third quarter consolidated operating income total, $8 million or 7% of net revenues compared to 8.2 million or 6.6% of net revenues last year. So now turning to the balance sheet. Quarter end cash and cash equivalence told us $52.3 million compared to $25.2 million at the end of last year's third quarter.

Third quarter consolidated operating income totaled $8 million or 7% of net revenues compared to $8 2 million or six 6% of net revenues last year.

So now turning to the balance sheet quarter end cash and cash equivalents totaled $52 $3 million compared to $25 2 million at the end of last year's third quarter.

Speaker 6: We continue to have no borrowings on our $75 million ABL facility.

We continued to have no borrowings on our $75 million ABL facility.

Speaker 6: Inventory was $129.1 million at the end of the quarter compared to $178.3 million at the end of the third quarter last year. We have taken strategic actions to reduce our inventory levels and we believe we are appropriately positioned as we enter the holiday season.

Inventory was $129 1 million at the end of the quarter compared to $178 3 million at the end of the third quarter last year, we have taken strategic actions to reduce our inventory levels and we believe we are appropriately positioned as we enter the holiday season.

Speaker 6: During the quarter, we purchased approximately 72,000 shares of common stock at an average price of $6.76 per share for an aggregate of approximately $485,000. $25.8 million remain under our $50 million share repurchase authorization, and that expires in December of 2024.

During the quarter, we purchased approximately 72000 shares of common stock at an average price of $6.76 per share for an aggregate of approximately $485000 $25 $8 million remain under our $50 million share repurchase authorization that expires in December of 2024.

[laughter].

Speaker 6: Based on the performance of the first nine months of the year, as well as our initiatives underway, and the current macroeconomic trends and expectations, we are updating certain components of our guidance for the fiscal year, and we have adjusted our range of diluted EPS as well.

Based on the performance of the first nine months of the year as well as our initiatives underway and the current macroeconomic trends and expectations. We are updating certain components of our guidance for the fiscal year and we have adjusted our range of diluted EPS as well.

Speaker 6: As a reminder, all of these numbers are on a non-gap basis. We now expect consolidated net revenues of 472 to 478 million. As a reminder, net revenues told them $500 million last year.

As a reminder, all of these numbers are on a non-GAAP basis. We now expect consolidated net revenues of $472 million to $478 million. As a reminder, net revenues totaled $500 million last year.

We also expect our consolidated gross margin percentage of 54 to 54, 5% compared to 51, 4% in the prior year. This year's gross margin rate is expected to be favorably impacted by lower year over year freight expense cost reduction initiatives and the sell through of previously reserved inventory, partially offset by increased for.

Emotional activity as I mentioned, all of which I mentioned earlier.

Speaker 6: Consolidated SGA expense is expected to be 232.5 to 235.5 million compared to 245.3 million dollars last year. The decline in SGA expense is being driven by our company-wide cost initiatives, partially offset by restoring short-term and long-term incentive compensation to normalize levels, as well as some incremental marketing investment intended to accelerate long-term customer file growth.

Consolidated SG&A expense is expected to be $232 five to $235 5 million compared to $245 $3 million last year.

Decline in SG&A expense is being driven by our company wide cost initiatives at.

Partially offset by restoring short term and long term incentive compensation to more normalized levels as well as some incremental marketing investment intended to accelerate long term customer file growth.

Speaker 6: This results in anticipated consolidated operating income of 23.3 million to 25.9 million compared to 12.3 million last year and deleted earnings per share of 56 cents to 60 cents compared to 24 cents last year.

This results in anticipated consolidated operating income of $23 3 million to $25 9 million compared to $12 3 million last year and diluted earnings per share of 56 cents to <unk> 62, compared to 24 cents last year.

Speaker 6: We also expect net capital spending to be approximately $4 million for the year versus $8.2 million last year. And this reflects investment associated with Vera Bradley Outlet stores as well as certain technology and logistics enhance.

We also expect net capital spending to be approximately $4 million for the year versus $8 $2 million last year and this reflects investments associated with Vera Bradley outlet stores as well as certain technology and logistics enhancements.

Speaker 6: And lastly, our free cash flow is anticipated to be between $40 and $43 million compared to a cash usage last year of $21.7 million for the four year.

And lastly, our free cash flow is anticipated to be between 40 and $43 million compared to a cash usage last year of $21 7 million for the four year.

Speaker 6: That concludes our formal remarks. So, Operator, we'd like to now open up the call for questions.

That concludes our formal remarks, so operator, we'd like to now open up the call for questions.

Speaker 1: Thank you. If you would like to signal with questions, please press star one.

Thank you if you would like to signal with questions. Please press star one.

Speaker 1: touchtone telephone. If you're joining us today using a speaker phone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, that is star one for questions, star one.

On your touch tone telephone.

Joining us today use a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment again that is star one for questions Star one and our <unk>.

Speaker 1: And our first question come from Joe Gomez with Noble Capital.

First question will come from Joe Gomes with noble capital.

Good morning, Thanks for taking my question.

Good morning.

So Jackie and Michael last time, when we talked.

Speaker 7: Jackie in Muggle last time when we talked and for the second quarter, the traffic had been down and you guys were taking some...

For the second quarter traffic had been down and you guys are taking some steps including some.

Hey, Walt.

Mall, takeovers et cetera to try and drive.

Additional traffic I was wondering if you could give us what the takeaways so far.

Speaker 7: kind of give us what the takeaways so far are.

Speaker 7: What else are you looking at to help drive traffic?

What are how are you.

To help drive traffic.

Yes. Thanks for your question, Joe So a couple of a couple of points on on that.

Speaker 5: Yes, thanks for your question, Joe. So a couple of points on that.

Speaker 5: So first of all, the marketing initiative that we undertook throughout Q3 were successful in driving traffic and improving trend. They unfortunately, because of the conversion metrics, they weren't as...

So first of all we the the marketing.

Initiatives that we undertook throughout Q3.

We're successful in driving traffic and improving trend.

They unfortunately, because of the conversion metrics and they weren't as.

Speaker 7: They weren't as effective in driving sales. So we had several tests going and things that we've adopted for Q4, we're continually changing up our marketing mix to find those things that are working and drive those and leverage them as best as we can. Okay, thank you for that.

They they weren't as tough.

As a effective in driving sales. So so we had we've had several tests going and things that we've adopted for Q4, we're continually changing up our marketing mix to find those things that are working and and drive those and leverage them as best as we can.

Okay. Thank you for that.

Maybe switching gears over to pure EV here, Yeah, we started out the year at a pretty positive environment there.

Sales were actually up year over year, but then.

Speaker 7: the second chord, this chord they climb to the back.

The decline in the second quarter this quarterly decline back to that nearly 20% down.

Speaker 7: You know, some of it you talked about was due to some kind of one time event. I don't think it would break out what it would be outside of those one time events or what.

Some of it you talked about was due to some kind of onetime events.

Break out what it would be outside of those one time events or what.

What do you think we can do here in the short term.

Worse that tie back to where we saw earlier in the year.

Speaker 5: Yeah, that's a great question. So for August and September , we really were comping against some promotional activity that we did not repeat this year. And...

Yes, that's a great question. So for August and September are we really we're comping against some promotional activity that we did not repeat this year.

Speaker 5: that and combined with a better focus on profitability for the brand.

And that and combined with a better focus on profitability for the brand really caused us to pull back some marketing spend in those two months. So the first two months of the quarter were definitely more challenging and then we had a better October so so we're continually evaluating what.

Speaker 5: really caused us to pull back some marketing spend in those two months. So the first two months of the quarter were definitely more challenging. And then we had a better October . So we're continually evaluating what's the right level of spend to drive customer act with it.

It's the right level of spend.

To drive customer acquisition now Conversely, our retail stores did perform well and in Q3 at PURA Vida and and they also had the the advantage of driving some more customer acquisition. So we're looking at that very carefully to inform our plans for.

Speaker 5: Now, conversely, our retail stores did perform well in Q3 at Puravita, and they also had the advantage of driving some more customer acquisitions. So we're looking at that very carefully to inform our plans for next year.

Next year.

Okay, Great one last one for me on the inventory again, great job there but.

Speaker 7: Great one, last one for me on the inventory. Again, great job there.

Speaker 7: Part of me, you know, down basically, you know, another 10 million sequentially. And just wanting to get there really more than...

Pardon me down basically.

And another $10 million.

So quite literally just wondering is there really more there.

On the inventory side are we at a level, where we're going to need this hopefully we can see.

I'll begin to grow.

Thank you.

Speaker 6: Yeah, Joe, I think there's several issues in play when we think about inventory, especially as you look to the end of the year and in beyond.

Yes, Joe I think Theres there are several issues in play when we think about inventory, especially as you look to the end of the year and then beyond.

Speaker 6: The first is we continue to expect to see inventory down 10 per to 15% year over-year by the end of the year. There may be a little bit of slip and slip. Wall call slip and slop.

The first is we continue to expect to see inventory down 10% to 15% year over year by the end of the year, there may be a little bit of slippage slip more call slipping slop.

Speaker 6: Because the Chinese New Year cutoff is right at our year end, where there's normally, there's about a week.

Because the Chinese new year cut off is right at our year end, where theres normally there's about a week.

Speaker 6: A week of lag from our year into Chinese that just affects

A week of lag from our year end to Chinese that just affects the importation of goods and the timing of that so, but regardless, we still expect to see 10% to 15% reduction from on.

Speaker 6: the importation of goods and the timing of that. So, but regardless, we still expect a C10 to 15% reduction from on a year-to-year basis.

On a year over year basis, as we look forward into next year.

Speaker 6: As we look forward to the next year, we'll provide more specific guidance for next year, but there continues to be opportunities in our inventory management. They will be a little bit masked next year just due to the change over of products as part of project restoration, which will land mid-year.

We will provide more specific guidance for next year, but there continues to be opportunities in our inventory management.

They will be a little bit masked next year, just due to the changeover of products as part of project restoration, which will land mid year. So I expect it will continue to see improvement in our operations.

Speaker 6: So I expect it will continue to see improvement in our operations with some improvement in the overall level of inventory. But we'll be more guidance to come at our next call.

With some improvement in the overall <unk>.

Level of inventory, but it will be more guidance to come at our next call.

Great. Thank you for your remarks.

Thank you Jeff.

And our next question will come from Eric better with SCC research.

Speaker 1: And our next question comes from Eric Better with SCC Research.

Yes.

Good morning, Congratulations on Q3.

Thank you Eric Eric.

Speaker 8: Let's talk about a few things here. First is the indirect sales.

Let's talk about a few things here first is the indirect sales channel.

Speaker 8: opportunities for more, I guess, indirect slash wholesale. This is the second quarter.

And the opportunities for more I guess indirect slash wholesale this is the second quarter.

Speaker 8: where this has gone up year over year after a long period of declining year. Where?

Where this has gone up year over year after a long period of falling your way.

Sure.

Speaker 8: What is driving that in terms of your, are you seeing more people want to take the pride, are you seeing to you taking more pride? What are you seeing in the indirect channel? And you brought it up for both Purveeta and for the Vera Bradley Grant. That's driving that to go forward as a positive.

What is driving that in terms of your are you seeing more people want to take the product or are you seeing to youll, taking more product. What are you seeing in the indirect channel and you brought it up for both the PURA Vida for the Vera Bradley brand.

That's driving that to go forward as a positive driver here.

Yes, Great question, Eric So I think Theres a couple of things in the indirect channel that are happening. We did have for some of our key accounts. We did have some some product that was working better and and had some reorders on on those products and <unk>.

Speaker 5: Yeah, that's a great question, Eric. So I think there's a couple of things in the indirect channel that are happening. We did have for some of our key accounts, we did have some product that was working better and had some reorders on those products.

Speaker 5: We, you know, our business with Amazon is strong. And then finally, we took advantage in third quarter to really look at our inventories and figure out where we had some opportunities for, for, for, for.

We.

Our business with Amazon is strong and then finally, we took advantage in in third quarter to really look at our inventories and figure out where we had some opportunities for them.

Board discounters or one time.

Speaker 5: Discounters or you know one time

Orders to reduce some undesirable inventory so really it was it was those three pieces so.

Speaker 5: orders to reduce some undesirable inventory. So really it was those three pieces. So we do see though that our wholesale

We do see though that our wholesale.

Speaker 8: channel is obviously very sensitive to just customer trends right now. So when our partners are seeing better traffic in sales, we're actually benefiting from that. So we did see some of that happen in the third quarter and actually in the second quarter. I mentioned leather.

Channel is obviously very sensitive to just customer trends right now so.

When when our partners are seeing better traffic and sales, we're actually benefiting from that so we did we did see some of that happened in the third quarter and actually in the second quarter.

Okay.

You mentioned leather.

It's a more expensive item.

Also with the customer who is buying it spent a lot more.

Speaker 8: work. You mentioned the performance product to site.

Before you mentioned the performance product, which is slightly more expensive too.

Speaker 8: When we think about going forward.

When we think about going forward.

Speaker 8: These are items that are probably driving and new customers, younger customers. Is there an opportunity to continue to expand those pieces and be continue to try higher pricing from them?

Our items is probably the driving of new customers younger customers is there an opportunity to <unk>.

They continue to expand those pieces and B continue to.

Higher pricing from.

Which could drive I guess that original guidance.

Speaker 5: Yeah, that's a great question to Eric and we were able to deliver this.

Yes, that's a great question to Eric and we were we were able to we were able to deliver this leather collection in it and it kind of a truncated time period compared to our normal supply chain lead times. So.

Speaker 5: leather collection in a kind of a truncated time period compared to our normal supply chain lead time. So we got this into cast and inform some of our leather expansion that we're planning to do next year and we were really pleased with the results. A lot of it sold through fairly quickly and I would say from a new customer perspective our existing customers were so excited to see this that we didn't really have as much opportunity.

We got this end to cast an informed some of our leather expansion that we're planning to do.

Next year, and we were really pleased with the results a lot of it sold through fairly quickly.

And I would say from a new customer perspective are our existing customers were so excited to see this that we didn't really have as much opportunity to drive new customer acquisition from it because a lot of it was was really.

Speaker 5: to drive new customer acquisition from it because a lot of it was really...

Speaker 5: sold through in the first three or four weeks. So we're really looking forward to learning and continuing to grow that segment of our business that used to be a very important part of our business. Okay.

Sold through in the first three or four weeks so.

So we're really looking forward to learning and continuing to grow that segment of our business. It used to be a very important part of our business.

Okay.

Last question.

Speaker 8: Is there a 50 Cakeian intellectual and real exhaustive smokers? Provenbury Tantra

Is there a CB.

Is there a 50 <unk> week in your Q4, how big is it.

Is there.

Speaker 6: There is a 53rd week in this fiscal year. It's a relatively small amount of sales overall. Okay. Right er,

There is a 50 <unk> week in this fiscal year, it's a relatively small.

Out of sales overall.

Okay.

All right guys, congratulations again and good luck into the holiday season.

Thank you thanks, Eric.

And that does conclude the question and answer session I will now turn the conference back over to you.

Speaker 1: And that does conclude the question and answer session. Now turn the conference back.

Yeah.

Speaker 5: Our entire team is dedicated to returning both Vera Bradley and Pura Vita to profitable growth and generating strong cash flow through project restoration. This should deliver value to our shareholders over the long term. We are right on track with our project restoration initiative.

Our entire team is dedicated to returning both Vera Bradley and PURA vida to profitable growth and generating strong cash flow through project frustration. This should deliver value to our shareholders over the long term we are right on track with our project restoration initiatives.

Speaker 5: This year we have been diligently focusing on stabilizing sales, expanding gross margin, and controlling expenses. We believe this focus on a minimum should nearly double year over year operating income and more than double EPS. We are excited about the opportunities for both brands.

This year, we have been diligently focusing on stabilizing sales expanding gross margin and controlling expenses. We believe this focus at a minimum should nearly double year over year operating income and more than double EPS. We are excited about the opportunities for both brands.

Speaker 5: Thank you for joining us today and we look forward to sharing our progress with you on our year end earnings call on March 13th.

Thank you for joining us today, and we look forward to sharing our progress with you on our year end earnings call on March 13th.

Thank you and that does conclude today's conference. We do thank you for your participation have an excellent day.

Speaker 1: Thank you. And that does conclude today's conference. We do. Thank you for your participation. Have an excellent.

[music].

Yeah.

Yeah.

Okay.