Vera Bradley Announces Fiscal Year 2015 First Quarter Results

Vera Bradley Announces Fiscal Year 2015 First Quarter Results

                     Net revenues totaled $113.5 million

         Net income totaled $6.6 million, or $0.16 per diluted share

                    Company updates guidance for full year

FORT WAYNE, Ind., June 5, 2014 (GLOBE NEWSWIRE) -- Vera Bradley, Inc.
(Nasdaq:VRA) ("Vera Bradley" or the "Company") today announced its financial
results for the first quarter ended May 3, 2014.

Net revenues totaled $113.5 million for the current year first quarter,
compared to $123.0 million in the prior year first quarter ended May 4, 2013.
Net income totaled $6.6 million, or $0.16 per diluted share, for the current
year first quarter compared to net income of $9.2 million, or $0.23 per
diluted share, in the prior year first quarter.

Robert Wallstrom, Chief Executive Officer, noted, "While our first quarter
revenues were modestly below our expectations, we were able to post earnings
per share above our guidance due to better than expected gross margin and
expense performance."

"However, we continue to face a difficult environment, one that is proving
much more challenging than we anticipated just two short months ago,"
Wallstrom continued.

"Direct segment revenues are weaker than we expected," Wallstrom also noted.
"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. In our
Indirect segment, while orders from our major accounts are up, orders from our
specialty gift channel retailers are down significantly on a year-over-year
basis. Until we can make meaningful changes to our product offering and
marketing initiatives, we don't expect these sales trends to substantially
improve. As a result, we are lowering our revenue and earnings per share
projections for the fiscal year.

"As we have noted, this will be an important year of transition and
transformation for Vera Bradley. We believe that the product, distribution,
and marketing initiatives we previously outlined as part of our long-term
strategic plan are absolutely the right ones for the future. While the
short-term will remain challenging, I am pleased with the progress we are
making against these key elements of our five-year plan. Importantly, we have
assembled a team of talented and seasoned retail executives – both from within
the organization and new to the Company – that will help us achieve our
long-term goals."

First Quarter Details

Current year first quarter revenues of $113.5 million fell modestly below the
Company's guidance of $116 million to $120 million. The sales miss to guidance
primarily was due to lower than expected orders from the Company's Indirect
specialty retail partners, weaker than expected comparable store sales
performance in the Company's retail stores, and a shortfall at the Company's
annual outlet sale.

Current year first quarter Direct segment revenues totaled $73.4 million,
essentially flat with $73.7 million in the prior year first quarter. In the
Company's stores, first quarter year-over-year net revenues grew 5.9%,
reflecting the opening of 16 full-line and three outlet stores during the past
12 months, which was partially offset by a comparable-store sales decline.
Total company comparable store sales fell 9.4% for the quarter (which includes
a 14.4% decline in store sales and a 3.2% decline in e-commerce sales).
Comparable store revenues were negatively impacted by year-over-year declines
in traffic and underperformance of the product offering. Severe winter weather
negatively affected store traffic during the first two months of the quarter.

Indirect segment revenues decreased 18.9% to $40.0 million from $49.3 million
in the prior year first quarter, primarily due to lower orders from the
Company's specialty retail accounts.

Gross profit for the quarter totaled $60.5 million, or 53.3% of net revenues,
compared to $68.5 million, or 55.6% of net revenues, in the prior year first
quarter. The year-over-year decline in gross margin rate was primarily related
to overhead costs deleveraging and increased year-over-year promotional
activity. The first quarter gross margin rate was better than guidance of
52.0% to 52.6%, primarily due to the timing of a portion of the inventory
liquidation initially planned for the first quarter that will now occur later
in the year.

SG&A expense totaled $51.3 million, or 45.2% of net revenues, in the current
year first quarter, compared to $55.2 million, or 44.9% of net revenues, in
the prior year first quarter. In spite of lower than expected revenues, the
SG&A expense rate was favorable to guidance of 46.0% to 46.6% primarily due to
cost containment efforts as well as payroll associated with certain management
positions that were budgeted but unfilled in the first quarter.

Operating income totaled $10.8 million, or 9.5% of net revenues, in the
current year first quarter, compared to operating income of $15.2 million, or
12.3% of net revenues, in the prior year first quarter.

The effective tax rate was 38.7% for the quarter compared to 38.9% in the
prior year first quarter.

Cash flow from operations for the first quarter totaled $27.0 million,
compared to $14.9 million for last year's first quarter. The improvement was
driven primarily by a reduction in inventory levels.

Cash and cash equivalents as of May 3, 2014 totaled $81.5 million compared to
$8.2 million at the end of last year's first quarter. The Company had no debt
outstanding at May 3, 2014. Quarter-end inventory was $126.6 million, modestly
below guidance of $128 million to $133 million and compared to $138.9 million
last year. Net capital spending for the quarter totaled $7.1 million.

Recent Event

On June 4, 2014, the Company entered into a five-year agreement with
Mitsubishi Corporation and Look Inc. to import and distribute Vera Bradley
products in Japan. As a result of moving to this wholesale business model, the
Company will exit its direct business in Japan during the third quarter and
will account for this business as a discontinued operation from that point
forward. The Company expects to incur pre-tax charges related to the exit from
Japan during the third quarter of approximately $2.0 million, equating to $.03
per share, which will be reflected in discontinued operations. Approximately
$1.0 million of that amount relates to a non-cash charge for a currency
translation loss that has accumulated in equity since entering the Japan
market over three years ago. The remaining charge relates to the write off of
certain assets, employee severance, and other exit charges. The new wholesale
business in Japan is included in the Indirect segment guidance below, but
given that the new Look-operated distribution points are not expected to be
opened until late in the year, the impact to the current year sales and
earnings guidance is minimal.

Outlook

For the second quarter of fiscal 2015, the Company expects:

  *Net revenues to be in the range of $113 million to $120 million compared
    to prior year second quarter revenues of $125.4 million.
  *The gross margin rate to range from 53.5% to 54.0% compared to 57.2% in
    the prior year second quarter.
  *SG&A as a percent of sales to range from 43.0% to 44.5% compared to 38.6%
    in the prior year second quarter.
  *Diluted earnings per share to be in the range of $0.18 to $0.20, based on
    diluted weighted-average shares outstanding of 40.7 million and an
    effective tax rate of 40.0%. Diluted earnings per share totaled $.37 in
    the prior year second quarter.

The Company expects inventory to be $118 million to $128 million at the end of
the second quarter, compared to $142.9 million at the end of last year's
second quarter.

For fiscal 2015, the Company expects:

  *Net revenues to be in the range of $510 million to $530 million compared
    to $530.9 million last year.
  *The gross margin rate to range from 52.5% to 53.5% compared to 55.1% last
    year.
  *SG&A as a percent of sales to range from 40.0% to 41.5% compared to 38.4%
    last year.
  *Diluted earnings per share from continuing operations to be in the range
    of $1.00 to $1.10, based on diluted weighted-average shares outstanding of
    40.7 million and an effective tax rate of 38.4%. Diluted earnings per
    share from continuing operations totaled $1.48 last year.
  *Net capital spending of approximately $40 million.

Call Information

A conference call to discuss fiscal 2015 first quarter results is scheduled
for today, June 5, 2014, at 9:30 a.m. Eastern Time. A broadcast of the call
will be available via Vera Bradley's Investor Relations section of its
website, www.verabradley.com. Alternatively, interested parties may dial into
the call at (888) 500-6974, and enter the access code 9338959. A replay of the
call will be available shortly after the conclusion of the call and remain
available through June 19, 2014. To access the recording, listeners should
dial (877) 870-5176, and enter the access code 9338959.

About Vera Bradley, Inc.

Vera Bradley is a leading designer of women's handbags and accessories,
luggage and travel items, eyewear, stationery and gifts. Founded in 1982 by
friends Barbara Bradley Baekgaard and Patricia R. Miller, the brand's iconic
designs and versatile styles offer women of all ages a colorful way to
accessorize every look.

Vera Bradley offers a unique, multi-channel sales model as well as a focus on
service and a high level of customer engagement. The Company sells its
products through two reportable segments: Direct and Indirect. The Direct
business consists of sales of Vera Bradley products through the Company's
full-price and outlet stores in the United States; department store locations
in Japan; its websites, verabradley.com and verabradley.co.jp; and its annual
outlet sale in Fort Wayne, Indiana. The Indirect business consists of sales of
Vera Bradley products to approximately 3,000 specialty retail doors,
substantially all of which are located in the United States, as well as select
department stores, national accounts, third party e-commerce sites, and
third-party inventory liquidation.

The Company's commitment to breast cancer research continues to increase its
reach through the Vera Bradley Foundation for Breast Cancer.

For more information about Vera Bradley (Nasdaq:VRA), visit
www.verabradley.com/mediaroom.

Website Information

We routinely post important information for investors on our website
www.verabradley.com in the "Investor Relations" section. We intend to use this
webpage as a means of disclosing material, non-public information and for
complying with our disclosure obligations under Regulation FD. Accordingly,
investors should monitor the Investor Relations section of our website, in
addition to following our press releases, SEC filings, public conference
calls, presentations and webcasts. The information contained on, or that may
be accessed through, our webpage is not incorporated by reference into, and is
not a part of, this document.

Vera Bradley Safe Harbor Statement

Certain statements in this release are "forward-looking statements" made
pursuant to the safe-harbor provisions of the Private Securities Litigation
Reform Act of 1995. Such forward-looking statements reflect the Company's
current expectations or beliefs concerning future events and are subject to
various risks and uncertainties that may cause actual results to differ
materially from those that we expected, including: possible adverse changes in
general economic conditions and their impact on consumer confidence and
spending; possible inability to predict and respond in a timely manner to
changes in consumer demand; possible loss of key management or design
associates or inability to attract and retain the talent required for our
business; possible inability to maintain and enhance our brand; possible
inability to successfully implement our growth strategies or manage our
growing business; possible inability to successfully open new stores as
planned; and possible inability to sustain levels of comparable-store sales.
For a discussion of these and other risks and uncertainties that could cause
actual results to differ materially from those contained in our
forward-looking statements, please refer to "Risk Factors" in Part I, Item 1A
of our Annual Report on Form 10-K for the fiscal year ended February 1, 2014.
We undertake no obligation to publicly update or revise any forward-looking
statement. Financial schedules are attached to this release.




Vera Bradley, Inc.
Consolidated Balance Sheets
(in thousands)
(unaudited)
                                                               
                                                               
                                          May 3,     February 1, May 4,
                                           2014       2014        2013
Assets                                                          
Current assets:                                                 
Cash and cash equivalents                  $81,524  $59,215   $8,229
Accounts receivable, net                   18,557    27,718     26,758
Inventories                                126,562   136,923    138,949
Prepaid expenses and other current assets  9,417     9,952      9,211
Deferred income taxes                      13,981    13,094     11,860
Total current assets                       250,041   246,902    195,007
                                                               
Property, plant, and equipment, net        88,433    84,940     79,652
Other assets                               879       1,085      1,630
Total assets                               $339,353 $332,927  $276,289
                                                               
Liabilities and Shareholders' Equity                            
Current liabilities:                                            
Accounts payable                           $23,686  $27,745   $17,768
Accrued employment costs                   10,871    10,586     9,571
Other accrued liabilities                  22,365    20,403     18,335
Income taxes payable                       3,397     1,625      5,761
Current portion of long-term debt          --        --         42
Total current liabilities                  60,319    60,359     51,477
                                                               
Long-term debt                             --       --        5,030
Other long-term liabilities                12,645    12,778     10,134
Deferred income taxes                      4,267     4,643      6,102
Total liabilities                          77,231    77,780     72,743
                                                               
Shareholders' equity:                                           
Additional paid-in-capital                 78,551    78,153     76,032
Retained earnings                          184,569   178,002    128,379
Accumulated other comprehensive loss       (998)     (1,008)    (865)
Total shareholders' equity                 262,122   255,147    203,546
Total liabilities and shareholders' equity $339,353 $332,927  $276,289





Vera Bradley, Inc.
Consolidated Statements of Income
(in thousands, except per share amounts)
(unaudited)
                                                       
                                                       
                                             Thirteen Weeks Ended
                                             May 3,     May 4,
                                              2014       2013
                                                       
Net revenues                                  $113,461 $ 123,033
Cost of sales                                 52,936    54,567
Gross profit                                  60,525    68,466
Selling, general, and administrative expenses 51,312    55,227
Other income                                  1,577     1,951
Operating income                              10,790    15,190
Interest expense, net                         80        141
Income before income taxes                    10,710    15,049
Income tax expense                            4,143     5,860
Net income                                    $6,567   $9,189
                                                       
Basic weighted-average shares outstanding     40,639    40,580
Diluted weighted-average shares outstanding   40,725    40,624
Basic net income per share                    $0.16    $0.23
Diluted net income per share                  0.16      0.23





Vera Bradley, Inc.
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
                                                                  
                                                                  
                                                         Thirteen Weeks Ended
                                                         May 3,    May 4,
                                                          2014      2013
Cash flows from operating activities                               
Net income                                                $6,567  $9,189
Adjustments to reconcile net income to net cash provided           
by operating activities:
Depreciation and amortization of property, plant, and     3,563    3,323
equipment
Recovery of doubtful accounts                             (115)    (213)
Loss on disposal of property, plant, and equipment        --      2
Stock-based compensation                                  980      806
Deferred income taxes                                     (1,263)  (548)
Changes in assets and liabilities:                                 
Accounts receivable                                       9,276    8,266
Inventories                                               10,373   (7,567)
Other assets                                              741      1,943
Accounts payable                                          (7,075)  2,915
Income taxes payable                                      1,772    (1,333)
Accrued and other liabilities                             2,138    (1,904)
Net cash provided by operating activities                 26,957   14,879
                                                                  
Cash flows from investing activities                               
Purchases of property, plant, and equipment               (4,040)  (5,811)
Net cash used in investing activities                     (4,040)  (5,811)
                                                                  
Cash flows from financing activities                               
Payments on financial-institution debt                    --       (35,000)
Borrowings on financial-institution debt                  --       25,000
Shares surrendered for tax withholding                    (582)    (389)
Other financing activities, net                           (24)     (23)
Net cash used in financing activities                     (606)    (10,412)
Effect of exchange rate changes on cash and cash          (2)      (30)
equivalents
                                                                  
Increase (decrease) in cash and cash equivalents          $22,309 $(1,374)
Cash and cash equivalents, beginning of period            59,215   9,603
Cash and cash equivalents, end of period                  $81,524 $8,229
                                                                  
Supplemental disclosure of cash-flow information                   
Non-cash operating and investing activities                        
Property, plant, and equipment expenditures incurred but  $3,016  $--
not yet paid





Vera Bradley, Inc.
SupplementalStatement of Income First Quarter 2015^1
(in thousands, except per share amounts)
(unaudited)
                                                                         
                                                                         
                Thirteen Weeks Ended, May 3, 2014  Thirteen Weeks Ended, May 4, 2013
                As        Discontinued Continuing As        Discontinued Continuing
                 Reported  Operations   Operations Reported  Operations   Operations
Net revenues     $113,461 $1,264      $112,197  $123,033 $1,474      $121,559
Cost of sales    52,936    494          52,442     54,567    482          54,085
Gross profit     60,525    770          59,755     68,466    992          67,474
Selling,
general, and     51,312    1,079        50,233     55,227    1,149        54,078
administrative
expenses
Other income     1,577     --          1,577      1,951     --          1,951
Operating income 10,790    (309)        11,099     15,190    (157)        15,347
(loss)
Interest         80        --          80         141       --          141
expense, net
Income (loss)
before income    10,710    (309)        11,019     15,049    (157)        15,206
taxes
Income tax       4,143     (118)        4,261      5,860     --          5,860
expense
Net income       $6,567   $(191)      $6,758    $9,189   $(157)      $9,346
                                                                         
Basic
weighted-average 40,639    40,639       40,639     40,580    40,580       40,580
shares
outstanding
Diluted
weighted-average 40,725    40,725       40,725     40,624    40,624       40,624
shares
outstanding
Basic net income $0.16    $(0.01)     $0.17     $0.23    $(0.00)     $0.23
per share
Diluted net      0.16      (0.01)       0.17       0.23      (0.00)       0.23
income per share
                                                                         
^1On June 4, 2014, the Company entered into a five-year agreement with Mitsubishi
Corporation and Look Inc. to import and distribute Vera Bradley products in Japan.As a
result of moving to this wholesale business model, the Company will exit its direct retail
business in Japan in the third quarter. The supplemental schedule provided above recasts
the Company's fiscal 2014 income statement to present the Japan results as discontinued
operations.





Vera Bradley, Inc.
SupplementalStatement of Income Fiscal 2014^1
(in thousands, except per share amounts)
(unaudited)
                                                                
                Thirteen Weeks Ended                      Fifty Two Weeks Ended
                Continuing Operations                     Continuing As
                                                           Operations Reported
                 May 4,   August 3,  November   February   February   February
                2013     2013       2,         1,         1,         1,
                                     2013       2014       2014       2014
                                                                
Net revenues     $       $123,969 $128,949 $156,419 $530,896 $536,021
                 121,559
Cost of sales    54,085  53,104    57,710    73,784    238,683   240,589
Gross profit     67,474  70,865    71,239    82,635    292,213   295,432
Selling,
general, and     54,078  47,157    47,646    52,540    201,421   205,957
administrative
expenses
Other income     1,951   630       1,027     1,168     4,776     4,776
Operating income
from continuing  15,347  24,338    24,620    31,263    95,568    94,251
operations
Interest         141     82        58        101       382       382
expense, net
Income from
continuing
operations       15,206  24,256    24,562    31,162    95,186    93,869
before income
taxes
Income tax       5,860   9,034     8,905     11,258    35,057    35,057
expense
Income from
continuing       9,346   15,222    15,657    19,904    60,129    58,812
operations
Discontinued
operations, net  (157)   (271)     (431)     (458)     (1,317)   --
of income taxes
Net income       $9,189 $14,951  $15,226  $19,446  $58,812  $58,812
                                                                
Basic
weighted-average 40,580  40,603    40,605    40,606    40,599    40,599
shares
outstanding
Diluted
weighted-average 40,624  40,623    40,652    40,694    40,648    40,648
shares
outstanding
                                                                
Basic net income                                                 
per share
Continuing       $0.23  $0.38    $0.38    $0.49    $1.48    
operations
Discontinued     (0.00)  (0.01)    (0.01)    (0.01)    (0.03)    
operations
As reported                                                      1.45
                                                                
Diluted net                                                      
income per share
Continuing       0.23    0.38      0.38      0.49      1.48      
operations
Discontinued     (0.00)  (0.01)    (0.01)    (0.01)    (0.03)    
operations
As reported                                                      1.45
                                                                
^1On June 4, 2014, the Company entered into a five-year agreement with
Mitsubishi Corporation and Look Inc. to import and distribute Vera Bradley
products in Japan.As a result of moving to this wholesale business model, the
Company will exit its direct retail business in Japan in the third quarter. The
supplemental schedule provided above recasts the Company's fiscal 2014 income
statement to present the Japan results as discontinued operations.


CONTACT: Investors:
         Julia Bentley, VP of Investor Relations and Communications
         jbentley@verabradley.com
         (260) 207-5116
        
         Media:
         877-708-VERA (8372)
         Mediacontact@verabradley.com
 
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