Vera Bradley, Inc. (NASDAQ: VRA) Q1 2026 Earnings Call | 06/11/2025

Leadership Transition and Strategic Direction

Mark DeLay (Chief Administrative Officer) opens the call by welcoming attendees and providing a forward-looking statement disclaimer. He then introduces Ian Bickley, the incoming Executive Chairman.

Ian Bickley (Executive Chairman) discusses significant changes at Vera Bradley. He expresses gratitude to the departing leaders, Jackie and Michael, for their contributions.

• CEO Search: Jackie will leave at the end of July, and a nationwide search for a new CEO is underway. Ian Bickley will serve as Executive Chairman in the interim, ensuring consistent leadership and driving performance.
• Strategy and Transformation Committee: A new committee has been formed, with Andrew Meslow (former Bath and Body Works CEO) joining Ian Bickley, to refine strategic direction and accelerate operational transformation, focusing on operational efficiencies and cost savings to improve profitability.
• New CFO: Marty Lading is joining as Chief Financial Officer. He brings extensive experience in driving operational transformation and scaling businesses from companies like Procter & Gamble and Coach.
• Vision: Bickley emphasizes his commitment to driving change, believing Vera Bradley is an iconic brand with strong awareness. He aims to restore its cultural relevance with new generations while simplifying the operating model for greater agility and efficiency.

Q1 Fiscal 2026 Business Review

Jackie (Chief Executive Officer) reviews the first quarter results, highlighting ongoing strategic initiatives despite her impending departure.

• Business Transformation: The company's strategic initiatives to transform its business model and brand positioning are resonating, leading to a meaningful shift in the customer file composition.
• Product Strategy: Focusing on a better balance of new and heritage products, including bringing back classic styles, launching "heritage reimagined" collections, increasing licensed products, and addressing customer feedback on product features (zippers, pockets, strap lengths).
• Channel Diversification (Wholesale): Building momentum in wholesale accounts with new partnerships.
  • First order shipped to Costco.
  • Launched on Urban Outfitters Marketplace.
  • Strong revenue increases on Target Marketplace, leading to further partnership discussions.
  • Healthy pipeline of new partnerships, including exclusive products for Anthropologie.
• Direct Channel Performance: Mixed results. Traffic and conversion declined in outlet and brand stores, but e-commerce revenues were stronger, particularly in online outlet and Target Marketplace. The annual outlet sale met sales plans.
• Indirect Segment: A bright spot, over-delivering plan by double digits as key initiatives bore fruit.
• Gross Margins: Impacted by channel mix shifts and customer pricing sensitivity, leading to higher clearance penetration. The company is testing price elasticity and plans to close 10 unprofitable full-line stores.
• New Products: Launched a new baby bag collection and luggage program in brand channels, and successful relaunches of fan favorites (e.g., Glenna satchel) in the outlet channel.
• Customer Insights: Seeing divergence in customer behavior by income level. Recently acquired customers (45% of active file) have different age and income profiles and product affinities, informing future assortments.
• Marketing: A new "Social First" marketing campaign launches in July, targeting the 18-34 demographic, emphasizing nostalgia, fun, and new product introductions.
• Upcoming Product: Return of customer favorites like the Vera Tote franchise to outlet, traditional lanyard styles to both brand and outlet, and new IP collections for back-to-school.

Financial Results

Michael (Chief Financial Officer) provides a detailed financial overview, noting that Pura Vida operations have been classified as discontinued. All numbers discussed are non-GAAP.

• Consolidated Revenues: $51.7 million in Q1 2026, down from $67.9 million in the prior year.
• Net Loss from Continuing Operations (non-GAAP): $10 million (36 cents per diluted share), compared to a $6.6 million loss (22 cents per diluted share) last year.
• Vera Bradley Direct Segment: Revenues of $43.1 million, a 23.6% decrease. Comparable sales declined 25% due to traffic and conversion drops in stores and a channel shift to online.
• Vera Bradley Indirect Segment: Revenues of $8.6 million, a 25.6% decrease, primarily due to a decline in specialty and key account orders.
• Gross Margin (non-GAAP): $24.6 million, or 47.5% of net revenues, down from 51.3% last year. Driven by channel shift to online and increased outbound freight costs.
• SG&A Expense (non-GAAP): $38.3 million, or 74.2% of net revenues, a $6.4 million decrease primarily due to cost reduction initiatives and lower variable expenses.
• Operating Loss from Continuing Operations (non-GAAP): $13.6 million, or 26.3% of net revenues.
• Balance Sheet:
  • Cash and cash equivalents: $11.3 million.
  • No borrowings on the $75 million ABL facility.
  • Inventory: $99.2 million, a 3% decrease year-over-year, due to changes in merchandising processes.
• Guidance: The company is suspending its prior year guidance and not providing any forward guidance due to executive and board leadership changes and significant consumer environment uncertainty.