Bull Of The Day: Vera Bradley

Vera Bradley (VRA – Snapshot Report) is a designer, producer, marketer and retailer of stylish and functional accessories, including handbags, and travel & 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. 

Strong Quarterly Results and Guidance

The company reported its Q3 results on December 9. Net revenues were up slightly to $126.7 million from $125.2 million in the same quarter a year ago.Net income came in at $0.27 per share, up from $0.21 per share in the same quarter of 2014 and way ahead of the Zacks Consensus Estimate of $0.20. 

According to the company, they eliminated their hyper-promotions of 60% to 70% off and also pared back their promotional days by about 50% during the quarter.

For the current quarter, the company expects revenues of $151 million to $155 million compared to $152.6 million, a year ago and a gross profit percentage of 58.3% to 58.7% compared to 52.4%. They expect EPS in the range of 40 cents to 43 cents, better than the street estimate of 39 cents. They said they will continue to pull back on promotional levels.

The company also announced a repurchase plan of up to an additional $50 million of its shares in the next two years.

Shares soared about 45% after the earnings report but have declined slightly since then as some investors booked profits after the surge.

Rising Estimates

Analysts have raised their estimates after stronger-than-expected results. Zacks Consensus Estimates for the current and next year are now $0.82 per share and $0.85 per share, up from $0.73 and $0.80 respectively, before the report.

The Bottom Line
 
The company had been struggling for the past few years as it failed to attract customers despite diversifying its product offerings from cotton quilted bags to include leather and microfiber handbags.
 
Highly promotional retail environment and declining mall traffic continue to pose headwinds for most retailers. Further, consumers are still cautious to spend, despite savings from low gas prices. But it seems that the company’s turnaround plans have started working and it may be able to reward its investors in the coming months.