Although its sales for the second fiscal quarter were down 4 percent from a year ago and net income was off by half, Vera Bradley's CEO said the company is making progress in its efforts to reinvent its brand.
"We are evolving and modernizing our product assortments, expanding our reach through opening new full-line and factory outlet stores, transitioning to a 'made-for-outlet' format in our factory outlet stores, enhancing our online presence and intensifying and focusing our marketing efforts," CEO Robert Wallstrom said in a statement accompanying the Sept. 10 earnings report.
The Fort Wayne-based handbag and accessories maker reported net revenues for the quarter ending Aug. 3 were $120.1 million, compared with $125.4 million in the year-ago period. Net income was $7.6 million, or 19 cents per share, compared to $15 million, or 37 cents per share a year ago.
The company increasingly is relying on revenues from its own stores and website, which it refers to as its "direct" segment. That reflects both the opening of additional Vera Bradley-owned stores, and declines in the number of specialty retailers selling Vera Bradley's products and in the orders those retailers placed.
Revenues from the specialty retailers, referred to as the "indirect" segment, were down 18.2 percent from a year ago, dropping from $50.4 to $41.2 million. Direct segment revenues increased 5.2 percent, to $78.9 million, accounting for about 66 percent of total revenues, compared with 60 percent a year ago.
Comparable store sales, generated by locations open at least a year, were off 14.2 percent, but e-commerce sales rose 9.3 percent.
"Although we posted negative total comparable sales number for the quarter, we began to experience some improving trends in July," Wallstrom said during a conference call following the earnings release. "E-commerce began to turn around and, although store traffic remained weak, our customers began to respond to newness in our stores."
The company plans to introduce a new merchandising plan in its stores in late October, Wallstrom said.
Vera Bradley has been reducing the number of its signature cotton print patterns, while adding new products in solids, coordinating collections in stripes and small geographic patterns, faux leather and real leather.
"By the end of the fourth quarter, we expect one-third of our assortment will be new products including leather, faux leather and our collection pieces," Sue Fuller, executive vice president and chief merchandising officer, said in a conference call, according to a transcript from SeekingAlpha.
Vera Bradley also is working to reduce costs in its supply chain. Most of its products are manufactured in China, but it is looking at moving production to other vendors and other countries, Fuller said.
Although its New Haven facility accounts for only 7 percent of its production, Vera Bradley is eliminating 150 second-shift jobs there and reducing capacity by 25 percent.
For the current fiscal year, Vera Bradley expects net revenues in the range of $520 million to $530, compared with $530.9 million last year. With the strategic measures it is initiating, the company's goal is to reach $1 billion in annual sales within five years.
The company reiterated its forecast for earnings per share from continuing operations of $1 to $1.10, compared with $1.48 last year.
Vera Bradley's board also approved a share repurchase program of up to $40 million. That is a measure companies typically take to prop up a sagging stock price.
Vera Bradley's stock was trading at $23.09 at midday Thursday, just a penny more than its close the day before the repurchase program was announced. The stock's 52-week low is $17.27 and its high is $30.