Vera Bradley will close or relocate 15 of its stores over a two-year period as the company adjusts its distribution channels in what CEO Rob Wallstrom called a “challenging” retail environment.
One store, in Atlanta, already has closed, Wallstrom said on a March 8 conference call that followed the Fort Wayne-based company’s fourth-quarter and fiscal 2017 earnings conference call.
The manufacturer of handbags, luggage and accessories has been rebranding its stores to drive more customer traffic, and also relaunched its digital platform in February. Online sales are the most important catalyst for the company’s future growth, Wallstrom said, and the new website is expected to boost full-price sales as opposed to sales of discounted merchandise.
Vera Bradley operates both full-price and factory outlet stores, and the closings will affect primarily the full-price store count, Wallstrom acknowledged. The company tries to maintain a two-to-one ratio of full-price to factory stores.
The company reported fourth-quarter net income of $3.5 million, or 9 cents per share, on net revenues of $134.8 million, down from $154.1 million a year ago. Excluding $6.6 million in impairment charges for underperforming stores, net income for the recent quarter was $10.1 million, or 28 cents per share.
For the prior year fourth quarter, net income was $15.7 million, or 41 cents per share, including after-tax store impairment charges of $1.8 million. Excluding charges, the prior-year quarter’s net income was $17.5 million, or 46 cents per share.
Vera Bradley ended the fiscal year with strong cash position (including short-term investments) of $116.5 million, no debt and a year-over-year drop in inventories of 10 percent.
“The retail environment became even more challenging in the fourth quarter. Consequently, both total revenues and our gross profit percentage were modestly below our expectations,” Wallstrom said.
The company exceeded fourth-quarter earnings per share guidance, however, due to diligent expense management and a lower-than-expected tax rate, he added.
For the fiscal year, ended Jan. 30, net revenues totaled $485.9 million, compared with $502.6 million in the prior year and slightly below the company’s forecast of $486 million to $491 million. Net income was $19.8 million, or 53 cents per share, including net after-tax adjustments of $7 million.
Direct segment revenues for the current fiscal year totaled $355.2 million, a 1.1 percent increase from $351.3 million last year. Comparable sales decreased 7 percent, reflecting a 7.1 percent decline in comparable store sales and a 6.7 percent decrease in e-commerce sales, which was more than offset by new store growth. Vera Bradley opened four full-line and six factory outlet stores during the past 12 months.
“Even though fiscal 2017 was a challenging year, we made meaningful progress against key elements of our long-term strategic plan,” Wallstrom said in the earnings report.
Specifically, the company continued to add product categories; expanded its collegiate initiative to represent more than 70 schools; and announced six licensing agreements in the areas of bedding, hosiery, swim, tech, stationery and publishing for products that will debut this year.
The company completed the remodel of its hometown store at Jefferson Pointe, refreshed 13 of its higher-traffic, higher-volume full-line stores with new branding; and rebranded the facades of its 15 newest full-line stores so that about a third now reflect its new logo and signs.
Looking ahead, Vera Bradley expects net revenues of $94 million to $99 million, compared with prior-year first-quarter revenues of $105.2 million. Gross profit percentage is expect to be 55 to 55.5 percent, compared with 56.7 percent in the first quarter of the previous year. The decline reflects an expected increased level of promotional activity as well as channel mix changes.
A loss per share of 11 cents to 14 cents is expected for the first quarter, compared with net income of $2.4 million, or 6 cents per share, in the prior-year period. For full fiscal year 2018, Vera Bradley projects revenues of $460 million to $480 million, down from $485.9 million for the prior year, and earnings per share of 40 to 50 cents.