Q4 2025 Vera Bradley Inc Earnings Call
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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 will remain operative at a later time, we undertake no obligation to update any information discussed on today's call.
Speaker Change: I will now turn the call over to Vera Bradley's CEO, Jackie Ardrey Jackie.
Jackie Ardrey: Good morning, everyone and thank you for joining us today for Vera Bradley's fourth quarter and full year earnings call.
Jackie Ardrey: The fourth quarter remained challenging as we continue to navigate the early stages of project frustration a comprehensive strategic initiative to transform our business model and brand positioning while we experienced sequential improvement, particularly in our Vera Bradley direct channel, which performed overall expectations, we acknowledge that our transformation is taking longer.
Jackie Ardrey: <unk> than initially anticipated.
Jackie Ardrey: The migration of business from stores, particularly in our outlet locations to ecommerce represented an unexpected chefs, creating near term profitability challenges that we are actively addressing what's hard to get strategies.
Jackie Ardrey: While we remain confident in our strategic direction, and we continue to make refinements based on selling data and customer feedback.
Jackie Ardrey: Most of these shifts are occurring our product and pricing strategy, we will be expanding our heritage products. When do you think assortment and higher price points as well as bringing back Greg at their deliveries of licensed product and some styles our customers are asking for.
Jackie Ardrey: I'm also excited to share that we have a strong pipeline of new business development in our indirect channel that will begin to bear fruit later this year.
Jackie Ardrey: Before we dive deeper into our results I'd like to share an important development.
Jackie Ardrey: In an effort to concentrate our resources on strengthening their brothers position in the marketplace aligned with our long term transformation yesterday, we signed a purchase agreement to sell the PURA Vida business. The sale of PURA Vida. It represents a significant step in our strategic evolution, we expect to close this sale by the end of.
Jackie Ardrey: The first quarter.
Speaker Change: I'll now provide more detail on our quarterly performance and our strategic initiatives before handing it over to Michael to discuss our financial results in greater depth.
Jackie Ardrey: We registered fourth quarter revenues of $100 million.
Speaker Change: The direct channel performance was mixed.
Speaker Change: Ecommerce revenues were roughly flat to last year, a significant sequential improvement from Q3, while our branded outlet stores experienced declines in both traffic and conversion.
Speaker Change: During the quarter, we observed a significant divergence in customer behavior at that provides valuable insights for strategic tactical adjustments as we move forward.
Speaker Change: While our outlet business faced challenges due to macro economic pressures and a concentration of customers with household incomes under $75000 were seeing promising growth in higher income segments.
Speaker Change: Most notably we achieved approximately 10% growth among customers aged 18 to 34 with household income is about $100000.
Speaker Change: This just highlights both our current challenges and future opportunities as we execute our transformation strategy.
Speaker Change: We're also encouraged by accelerating new customer acquisition, a trend that has continued into this year.
Speaker Change: Early cohort analysis reveals that new customers are making higher value initial purchases compared to historical averages and spending more on repeat purchases.
Speaker Change: We remain committed to diversifying our customer base for the long term health of the Vera Bradley brand.
Speaker Change: Our Q4 gross margin was 45.7% below our expectations and down from 52.3 last year.
Speaker Change: This variance reflects the mixed shift across our store and online channels in response to our strategic decision to adjust promotional and pricing strategies to strengthen our value proposition and address market conditions.
Speaker Change: Moving forward, we're implementing a refined testing framework for both promotional cadence and pricing architecture to optimize the balance between customer engagement and margin protection across all channels.
Speaker Change: We introduced expanded price points across both branded and outlet channels, which successfully increased customer engagement.
[noise] approach delivered particularly strong results in gifting items under $50 cosmetic cases are wicked collection product line.
Speaker Change: Inventory optimization remains a cornerstone of our strategic transformation building on our previous discussions we've implemented comprehensive changes to our inventory approach across sourcing procurement and management functions.
Speaker Change: Our merchandising and planning teams have established rigorous inventory controls across all channels by focusing on three key initiatives here carrying payer assortments implementing strategic key item management enforcing more disciplined buying practices.
Speaker Change: Additionally, our enhanced material sourcing capabilities now enable us to rapidly adjust to evolving consumer preferences.
Speaker Change: These efforts have already yielded measurable results with year end inventory, 7% below prior year levels looking ahead to fiscal 'twenty 'twenty six we're targeting a further 10% reduction in overall inventory there.
Speaker Change: This disciplined approach will increase our operational agility to respond to customer trends, while accelerating our product innovation cycle to deliver greater newness to market.
Speaker Change: Looking ahead, we're steadily decreasing our business' reliance on clearance and liquidation activities and natural byproduct of our stronger inventory management practices.
Speaker Change: Over a multiyear period, we anticipate several structural changes in the business some of which have already begun and we may experience. Some reduced sales velocity. This will be partially offset by improved gross margins as clearance and liquidation become structurally smaller components within our business model.
Speaker Change: This shift will affect both our direct channel and our indirect channel, which has historically relied more heavily on high levels of discounting.
Speaker Change: Having said that in particular Q4 highlight was our performance on target marketplace, which delivered exceptional results and it's informing our new channel initiatives could be where she shops.
Speaker Change: This digital marketplace success demonstrates the importance of engaging customers in their preferred shopping environments. We are developing a clearer path forward for our business designed to diversify our distribution and strengthen our partnerships I look forward to updating you on our progress on future calls.
Speaker Change: Shifting briefly to our indirect channel in Q4, the primary headwinds we face stemmed from a reduction in specialty accounts and strategically reduced liquidation sales.
Speaker Change: Our urban Outfitters collaboration was a standout performer in Q4, as we deepened our strategic partnership with more exciting things to come there.
Speaker Change: The urban outfitter customer base aligns well with our more diverse and younger target demographic, creating mutual value for both Vera Bradley and urban outfitters.
Speaker Change: I'd like to highlight are our data driven product refinements based on sales analytics and customer insights are Q4 rollout of adjusted styles has showcased encouraging results outperforming the balance of our assortment.
Speaker Change: These targeted modifications, including longer and wider straps and zipper closures.
Speaker Change: Directly address specific customer requests we've identified through our feedback channels.
Speaker Change: This successful initial response validates our agile adaptation strategy and we're accelerating implementation throughout Q1 and Q2.
Speaker Change: This early market validation not only confirms our customer centric approach, but also demonstrates our ability to rapidly translate feedback into tangible product improvements that drive results.
Speaker Change: Partnerships and collaborations continues to be a vital component of our strategic approach. Our Wicked collection was extremely successful not only driving significant revenue, but also attracting new high value customers within our target demographic range.
Speaker Change: This success reinforces our belief that licensed properties remain an important customer acquisition tool for Vera Bradley and we have several exciting properties in our pipeline for both our outlet and brand channels. This year.
Speaker Change: Yeah.
Speaker Change: As I mentioned I'm excited about our partnership and collaboration pipeline that will begin to take shape. Later this year and next year. We are in advanced negotiations with several major retailers and expect to finalize these strategic partnerships in the near future.
Speaker Change: While we cant disclose specific names today these opportunities represent significant potential for brand heat and expansion new customer acquisition and revenue growth. We look forward to sharing more details about these exciting developments in the coming months as these partnerships are finalized.
Speaker Change: Operational improvements continues to be a core focus as we strengthen the fundamentals of our business as discussed in prior calls, we're making great progress on enhancing our operational acumen across the organization.
Speaker Change: We've sharpened our attention on cost structure through targeted improvements in store operations distribution center efficiency marketing effectiveness and overall cost management.
Speaker Change: As Michael will discuss we met our internal SG&A expectation and we anticipate further improvements. This year I'm also pleased to report that our previously our previously announced efficiency initiative for fiscal 'twenty 'twenty six remains on track and we expect to deliver cost savings at a minimum of $20 million this year.
Speaker Change: Importantly in light of the uncertain macro and consumer environment, We will continue to manage the Vera Bradley business prudently our capital spending will be down significantly in fiscal 2026, and we anticipate improved working capital and other operational efficiencies to result in a higher cash position at year end compared to last year.
Speaker Change: We enter the new fiscal year, a strong financial position with no debt $30 million in cash and liquidity of $75 million, providing flexibility to operate our business transformation, while maintaining a solid financial foundation.
Speaker Change: As we look ahead to fiscal 'twenty 'twenty six we see this as a year of stabilization requiring patients and continued optimization Vera Bradley is on a journey to long term health and the steps. We're taking today are critical to our successful path forward. This.
Speaker Change: This year, we will focus on stabilizing our customer file and beginning to grow from a healthier place with marketing spend diversification and optimization, serving as critical inputs to our success.
Speaker Change: Generating brand heat and relevancy is a key focus for fiscal 'twenty 'twenty six we recognize that when our business was at its peak placements in thousands of doors across the country drove brand awareness today. Our approach our approach has evolved to leveraged social media strategic collaborations and targeted wholesale door expansion.
Speaker Change: Yeah.
Speaker Change: Exposure in mass retailers, where people shop with modernized and relevant product will be a critical part of our brand revitalization.
Speaker Change: I want to emphasize that our leading indicators show we're on the right path.
Speaker Change: Although lagging indicators of developing more slowly than we'd like we have confidence that the adjustments, we're making are the right ones for long term health. The green shoots we've discussed today, all validate our strategic direction.
Speaker Change: <unk> committed to returning Vera Bradley to long term profitable growth and creating value for our shareholders.
Speaker Change: I want to thank our teams across the organization for their continued agility and flexibility as we marched forward on the Vera Bradley transformation journey with that I will pass it to Michael to provide a financial review of our fourth quarter results and our outlook for fiscal 'twenty five.
Speaker Change: Paul.
Speaker Change: Yeah.
Speaker Change: Thanks, Jackie and good morning, everyone and thank you for joining us I'll open this up for questions in a few minutes, but first wanted to cover the results for the quarter as well as briefly discuss our guidance for fiscal 2026.
Speaker Change: Jacob clarity all the numbers I'm discussing today are non-GAAP and exclude the charges outlined today and in today's press release, a complete detail of items excluded from the non-GAAP numbers as well as a reconciliation of GAAP to non-GAAP can be found in that release. Additionally, our prior year was a 53 week year versus a normal 52 week here.
Speaker Change: This extra week in the prior year fourth quarter and full year contributed approximately $6 million in net revenues and increased earnings diluted earnings per shares by approximately one penny.
Speaker Change: Where appropriate I'll be highlighting our performance on a 52 week basis on this call.
For the fourth quarter of fiscal 2025, our consolidated revenues totaled $100 million compared to $133 $3 million in the prior year fourth quarter, our net loss for fourth quarter totaled $8 $3 million or <unk> 30 cents per diluted share compared to a net income of $3 $5 billion last year or 11 cents.
Speaker Change: Per diluted share in terms of segment, where performance Vera Bradley direct segment revenues for the current year fourth quarter totaled $76 $5 million, 17.8% decrease from $93 million in the prior year fourth quarter on a 52 week basis. However, the fourth quarter direct revenue decreased approximately 15%.
Speaker Change: Comparable sales similarly declined 17, 5% with the largest impact in the outlet channel, which continue to experience some more challenges to prior quarters.
Speaker Change: Total revenues year over year were also impacted by eight new store openings and six store closures since the prior year fourth quarter.
Speaker Change: Vera Bradley indirect segment revenues for the fourth quarter totaled $9 $9 million or 39% decrease from $16 $1 million in the prior year fourth quarter. The decrease was related primarily to a decline in specialty and key account orders and a decrease in liquidation sales as well as into quarter third party shipping delays, which caused some.
Speaker Change: Some shipments to.
Speaker Change: To slip into the first quarter of our fiscal 2026.
Speaker Change: PURA Vida segment revenues for fourth quarter totaled $13 $6 million or 44% decrease from $24 $2 million in the prior year fourth quarter, primarily related to declines in E Commerce and wholesale revenues, partially offset by retail store growth associated with two new stores in response to rising digital marketing.
Speaker Change: Costs that began in late third quarter last year. The PURA Vida team has been focused on marketing efficiency as well as digital marketing diversification.
Speaker Change: Yes.
Speaker Change: non-GAAP fourth quarter gross margin totaled $45 $7 million or 45, 7% of net revenues compared to $69 $6 million or 52, 3% of net revenues in the prior year the year over year margin rate decrease was driven by sales channel mix, which also contributed to increased our.
Speaker Change: Round freight cost along with excess inventory reserve adjustments and the PURA Vida segment.
Speaker Change: non-GAAP SG&A expense totaled $57 $9 million or 50, 749% of net revenues compared to $65 $7 million or 49, 3% of net revenues in the prior year fourth quarter.
Speaker Change: $7.8 million decrease in expenses was primarily due to cost reduction initiatives, along with lower variable expenses.
Speaker Change: We have discussed in prior updates our focus on strong operating discipline and were pleased with the progress that the organization is built is in building. This discipline. We continue to closely examine areas of our organization or for process and cost opportunities and our teams are increasingly intelligent and attentive to cost management.
Speaker Change: Our fourth quarter non-GAAP consolidated operating loss totaled $12 million compared to operating income of $4 $1 million in the prior year.
Speaker Change: Now turning to the balance sheet, our year end cash and cash equivalents totaled $34 million. We continue to have no borrowings on our $75 million ABL facility at quarter end.
Speaker Change: Total year inventory declined 7% to $110 million compared to $118 $3 million at the prior year, that's correct Youre right.
Jackie Ardrey: We have been intensely focused on redefining how we approached inventory acquisition and management is Jacki am noted earlier and continue to take strategic actions in our merchandising and sourcing processes to improve both product flow and quality.
Jackie Ardrey: These efforts have already impacted meaningfully our ability to navigate this fiscal year and will continue to drive improvements as well as reduced inventory levels into the future.
Jackie Ardrey: During the fourth quarter, we repurchased approximately $600000 of common stock or approximately 113000 shares bringing the total repurchased for the fiscal year to approximately $21.8 million.
Jackie Ardrey: In December 2024, our board of Directors approved an additional 30 million dollar repurchase authorization, which commenced in December of fiscal 2025 and extends for three years. The company does not currently have plans to purchase under the 2024, a share repurchase agreement, but anticipates utilizing it in the future depending on the company's cash position.
Jackie Ardrey: Finally, I'd like to go through our guidance for fiscal 'twenty 'twenty six as a reminder, all forward looking guidance is on a non-GAAP basis. This guidance also excludes results for PURA Vida pursuant to our sale announcement. This morning and for all periods will exclude PURA Vida for all periods, where except where I note otherwise.
As Jackie noted in her comments, we continue to make progress in our transformation journey in light of economic trends and consumer uncertainty. However, we expect continued business headwinds for this coming year similar to what other retailers have noted in their business updates our cause our customer continues to experience wide ranging economic concerns which has caused a shift.
Across our channels that we are actively addressing where targeted strategies.
Jackie Ardrey: For the full year of fiscal 2020 six we expect consolidated net revenues of approximately $280 million.
Jackie Ardrey: This broadly reflects continued consumer challenges, especially in the first half of this year as a result, we expect to see sequential improvement as we move through the year.
Jackie Ardrey: We expect consolidated gross margin for the year of approximately 52, 5% compared to 53% in fiscal 'twenty twenty-five congrats.
Jackie Ardrey: The gross margin change was the result of product margin improvements along with lower supply chain costs from continued structural cost reductions.
Jackie Ardrey: Consolidated SG&A expense is expected to be approximately $155 million compared to $178 2 million in fiscal 'twenty to 'twenty five year over year SG&A expense reductions are the result of continued structural cost reductions across many aspects of our business along with decreased variable costs, we remain very dedicated.
Jackie Ardrey: <unk> sound business discipline and were pleased to see the financial and operational improvements that have come with organizational simplification and focus.
Jackie Ardrey: All of this is expected to result in a consolidated operating loss of approximately $6 million compared to an operating loss of $16 $9 million in fiscal 2025.
Jackie Ardrey: Consolidated diluted earnings per share expected to be approximately 15 set loss.
Jackie Ardrey: Fiscal 2025, non-GAAP diluted earnings per share totaled 64 cents on a total company basis, which does include PURA Vida.
Jackie Ardrey: In terms of capital spend we expect to approximately $4 million this year versus $10 million last year. This reflects a much tighter focus on their business in particular around technology and infrastructure investments in terms of inventory management, we continue to sharpen our focus around disciplined buying and opened by management as I mentioned earlier.
Jackie Ardrey: And there's heightened focus helped drive our improvements from last year will enable us to make further inventory reductions of approximately 10% in fiscal 2026, our third year in a row of structural inventory reductions.
Jackie Ardrey: As a result, we expect an end of year cash balance of approximately $40 million.
Jackie Ardrey: That concludes our formal remarks, Christine can you open up the line for questions.
Speaker Change: Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.
Jackie Ardrey: A confirmation tone will indicate your line is in the question queue.
Jackie Ardrey: You May press Star two if you would like to remove your question from the queue.
Jackie Ardrey: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
One moment, please while we poll for questions.
Speaker Change: Thank you. Our first question comes from the line of Eric Beer with SCC Research. Please proceed with your question.
Jackie Ardrey: Okay.
Jackie Ardrey: Oh.
Jackie Ardrey: Oh.
Jackie Ardrey: Good morning, Eric, but we can barely hear you.
Jackie Ardrey: Because.
That's better thank you.
Jackie Ardrey: That's much better so I wanted to talk a little bit about somebody unpack. Some of these green shoots here a little bit.
Jackie Ardrey: In terms of the digital marketplaces, you mentioned target is the focus here.
Jackie Ardrey: Hey to add more of those and B what are you seeing in the differences.
Jackie Ardrey: In terms of purchasing and customer base from those items.
Jackie Ardrey: So Eric it's a great question, where we're definitely seeing an on target market place that the customer doesn't look very different and what we're selling is it's pretty similar to what we're selling them I think it's again.
Jackie Ardrey: As I mentioned, it it's around being where the customer wants to wants to shop and meeting her where she is and that you know has been.
Jackie Ardrey: It's been a really great development target marketplace has has been extremely successful and that.
Jackie Ardrey: Much much better than our expectations. So it's it's again, it's it's really kind of helped us to get them into an indirect strategy that we think it's going to bear fruit later this year.
Jackie Ardrey: And in terms, okay, and so in terms of collaboration and other pieces I know last year with all the project restoration and other pieces going out was a little bit tougher to plan that might as you saw with wacky I wish it was a very strong collaboration.
Jackie Ardrey: How should we be thinking here this year in terms of the flows of those collaborations both.
Jackie Ardrey: In store and as you mentioned like with urban Outfitters.
Jackie Ardrey: Collaboration all store.
Jackie Ardrey: Yeah.
Jackie Ardrey: So.
Jackie Ardrey: The weekend.
Jackie Ardrey: As we think about it internally wicket is more kind of the what we call IP or intellectual property and so I'm a little bit more under our control in terms of just going out and negotiating with those properties and and being able to launch them on our floor.
Jackie Ardrey: We will see we did pull back a little bit enduring new day with with the IP collections, but we we obviously you're seeing that.
Jackie Ardrey: I P can bring us a new a very desirable customer and and also our existing customer loves our IP group. So so we'll definitely see a in a more robust IP assortment to come through this year and next year, but then the collaborations and partnerships.
Jackie Ardrey: Like urban for example, urban outfitters.
Jackie Ardrey: There's.
Jackie Ardrey: Those have really just come since new day. So you know again, we've got a couple of quarters of difficult difficult results.
Jackie Ardrey: But all of those things that we started with new day are actually behind the scenes really are starting to bear fruit in terms of your brands and other companies who want to collaborate with us so.
It's it's we've got it we've got a really nice pipeline even through next year now that that there will really help us bring new customers to the brand.
Jackie Ardrey: Okay and the final question here, So I know thank you.
Speaker Change: You have done changes in terms of.
Speaker Change: Kind of how you've shown the product and tweaked. It they came out in February like more straps and zippers and pocket.
Speaker Change: What it's been in response to that.
Speaker Change: How do you balance and I know this is kind of thing.
The whole point, how do you balance the old customer new customer to make kind of both of them happening. Thank you.
Speaker Change: Yeah.
So far.
Speaker Change: First I would say that we.
What's our selling.
Speaker Change: Very closely in terms of age ranges and new versus existing just to really understand her better and understand how what she's buying what each each customer is interested in and and and so we take cues from that analysis to ensure that we're go.
Speaker Change: Going forward in the right direction.
Speaker Change: But the going back to your question about the the straps and zippers, we don't even there's the product is still flowing in but we clearly.
Speaker Change: Have to own it we we made a mistake. This yeah some of the the D styling that we.
Speaker Change: That we replace it with just not something that she wanted so as we see those styles come in they're actually out selling at this point what the previous styles were so so we're really encouraged by that and as they as the different styles and colors continue.
Speaker Change: To flow in yeah. We're we're very we're very hopeful that this customer is resilient and she sees that we're listening she's definitely told us that that I see here is that hey, we yeah. They they spoke up and said we need these things and we gave them to her as quickly as we could so I'm done.
Speaker Change: Very happy about that.
Speaker Change: Okay.
Speaker Change: Good luck the rest of the year.
You bet.
Speaker Change: Thank you Eric.
Speaker Change: As a reminder, if you would like to ask a question press star one on your telephone keypad.
Speaker Change: Our next question comes from the line of Daniel Harriman with Sidoti. Please proceed with your question.
Daniel Harriman: Thank you Michael Good morning, and thank you for taking my call and questions. Just a quick one for me today.
Daniel Harriman: Obviously, I know that the company has had to pivot many times now and I know that's frustrating but.
Daniel Harriman: As we look to fiscal 2026 and beyond.
Daniel Harriman: Just curious you know how you feel about your ability to pivot again and it shouldnt something else should come up and then with the revenue guide for fiscal 2026 of 280 versus.
Daniel Harriman: What it was in fiscal 'twenty five without per Vita.
Daniel Harriman: We look at that simply as the company continuing to manage the business through a conservative lens.
Daniel Harriman: And also obviously the macroeconomic headwinds that the consumer is facing right now.
Daniel Harriman: So much and best of luck in the beginning of the year.
Daniel Harriman: Yeah. Thanks Danielle.
Speaker Change: First first I'd like to say that the the pivots that we had to make.
Daniel Harriman: I think that the.
Daniel Harriman: They are to be expected given the amount of change that that we drove in you mean, we would've expected that there were going to be things that she didn't like and things that we needed to change. So I'm, sorry, I think that pivoting is not necessarily a bad thing.
Daniel Harriman: It's definitely when you kind of shake up a big promo strategy and and shake up some styling theres going to be things that you that you have to that you'd have to go back and adjust and so we're doing that and the team is.
Daniel Harriman: Excited and embracing it.
Daniel Harriman:
Daniel Harriman: I do think though our consumer in particular or is it just fast right now and that is reflected in our guidance this year.
Daniel Harriman: We know that.
Speaker Change: Yeah, especially in our outlet channels, we have.
Speaker Change: Greater proportion of customers, who are under $75000 household income and they're they're just not coming to the outlet stores right now and so we are working on a lot of different strategies to.
Speaker Change: Improved performance within the four walls as well as <unk>.
Speaker Change: Marketing programs to drive people to the store so, but we you know we expect that this year is going to continue to be tough and we are just making all the adjustments that we need to based on customer feedback and and then our and our selling results.
Speaker Change: Okay. That's really helpful. Thank you so much.
Speaker Change: Thank you.
Speaker Change: Thank you we have reached the end of the question and answer session. Ms. Ardrey I'd like to turn the floor back over to you for closing comments.
Speaker Change: Thank you all for joining today.
We look forward to talking to you next time on that on our next call. This concludes our remarks today.
Speaker Change: Thank you.
Speaker Change: Ladies and gentlemen, this does conclude today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation and have a wonderful day.