Vera Bradley: Zacks’ Bear of the Day Play

Vera Bradley (VRA – Snapshot Report) is a designer, producer, marketer and retailer of stylish and functional accessories, including handbags,travel and leisure items for women. It is well known for its stylish designs with distinctive and colorful fabrics and trims.

Founded over 30 years ago by Patricia R. Miller and Barbara Bradley, the company is now headquartered in Fort Wayne, Indiana. It started trading publicly on October 21, 2010. The company sells its products directly as well as through independent retailers and third party e-commerce sites.

Disappointing Quarterly Results and Guidance

On June 5, Vera Bradley announced its financial results for its fiscal first quarter ended May 3, 2014. Net revenues for the quarter were $113.5 million down from $123.0 million in the prior year quarter. Net income came in at $6.6 million, or $0.16 per share, compared to net income of $9.2 million, or $0.23 per share, year ago quarter.

According to the management “we continue to face a difficult environment, one that is proving much more challenging than we anticipated just two short months ago”.

“Direct segment revenues are weaker than we expected,” and “sales from existing customers have been relatively stable, but our traditional patterns and products simply are not attracting enough new customers to our brand, and overall traffic is down substantially”.

“Until we can make meaningful changes to our product offering and marketing initiatives, we don’t expect these sales trends to substantially improve”.

The company also lowered the guidance for the current quarter and the year. For the second quarter of fiscal 2015, they expect net revenues to be in the range of $113 million to $120 million compared to prior year second quarter revenues of $125.4 million. They expect gross margin rate to range from 53.5% to 54.0% down from 57.2%.

Downward Revisions

Quarterly and annual estimates have been revised sharply downwards in the past few weeks.

Zacks consensus estimate for the current fiscal year and the next fiscal year now stand at $1.10 per share and $1.31 per share down from $1.26 per share and $1.54 per share. Sliding estimates sent VRA to Zacks Rank # 5 (Strong Sell).

The Bottom Line
Challenging consumer environment continues to pose headwinds for retailers. “Retail—Apparel/Shoes” industry is currently ranked 186 out of 265 Zacks industries. Investors looking for exposure to this industry could consider Christopher & Banks (CBK)—a Zacks Rank #1 (Strong Buy).

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