Vera Bradley Inc (NASDAQ:VRA) This autumn 2023 Earnings Name dated Mar. 08, 2023.
Company Individuals:
Mark Dely — Chief Administrative Officer
Jacqueline Ardrey — President, Chief Government Officer and Director
John Enwright — Government Vice President and Chief Monetary Officer
Analysts:
Eric Beder — SCC Analysis — Analyst
Joe Gomes — NOBLE Capital — Analyst
Presentation:
Operator
Good morning, women and gents. Thanks for standing by. Welcome to the Vera Bradley Fourth Quarter and Fiscal Yr Finish Convention Name. [Operator Instructions]
I’d now like to show the decision over to Mark Dely, Vera Bradley’s Chief Administrative Officer. Please go forward.
Mark Dely — Chief Administrative Officer
Good morning, and welcome, everybody. We’d prefer to thanks for becoming a member of us for at the moment’s name.
A number of the statements made throughout our ready remarks and in response to your questions could represent forward-looking statements made pursuant to, and throughout the which means of the protected harbor provisions of the Non-public Securities Litigation Reform Act of 1995 as amended. Such forward-looking statements are topic to each identified, and unknown dangers, and uncertainties that might trigger precise outcomes to vary materially from people who we anticipate.
Please discuss with at the moment’s press launch within the Firm’s most up-to-date Kind 10-Ok, filed with the SEC for a dialogue of identified dangers and uncertainties. Buyers shouldn’t assume that the statements made in the course of the name will stay operative at a later time. We undertake no obligation to replace any data mentioned on at the moment’s name.
I’ll now flip the decision over to Vera Bradley’s CEO, Jackie Ardrey. Jackie?
Jacqueline Ardrey — President, Chief Government Officer and Director
Thanks, Mark, good morning and thanks for becoming a member of us on at the moment’s name.
We centered on driving revenues within the fourth quarter via focused strategic promotions on seasonal, giftable, and key gadgets. Consequently, whole Firm fourth quarter revenues outperformed our steerage. Though, gross margins remained beneath stress. Diligent expense management enabled us to ship fourth quarter non-GAAP diluted earnings per share of $0.16, which was almost flat with final yr. Within the fourth quarter, gross sales traits at each Vera Bradley and Pura Vida improved over prior quarters with Vera Bradley whole gross sales down simply 1%, and Pura Vida gross sales down lower than 5% on a year-over-year foundation. For the fourth consecutive quarter, the Vera Bradley Oblique channel skilled year-over-year income progress. Focused buyer retention efforts led to elevated Vera Bradley e-commerce revenues whereas full-line and manufacturing facility retailer revenues continued to be negatively affected by site visitors ranges, though traits improved all through the quarter.
At Pura Vida, e-commerce traits improved over earlier quarters as a consequence of strategic promotions. Nevertheless, total challenges continued to persist in our social and digital media effectiveness, coupled with rising digital media prices, and we skilled a year-over-year gross sales decline in our wholesale channel. On the plus aspect, Pura Vida full-line retail shops continued to carry out forward of our expectations, they usually drove improved e-commerce site visitors and revenues of their markets. We additionally took the chance within the fourth quarter to reset and appropriately place the Pura Vida enterprise for the long run, by recording goodwill and commerce title impairments and obligatory stock write-offs.
We ended the fiscal yr with consolidated revenues of $500 million, which exceeded our steerage. Through the yr, we started to see stabilization in our provide chain, diligently managed our bills, and punctiliously managed our money. Through the fourth quarter, we meaningfully decreased our year-end stock ranges from the third quarter. Though fiscal 2023 had its challenges, we took actions and laid the groundwork to place the Firm for the long run. In mid-2022, we collaboratively recognized $25 million in annualized price discount initiatives and effectivity processes. The expense financial savings have been derived throughout varied areas of the Firm, together with payroll reductions, retail retailer efficiencies, advertising and marketing expense, data expertise contracts and tasks to skilled providers, and logistics and operational prices. Many of those financial savings have been realized in fiscal 2023.
In January 2023, we additional streamlined our company construction by eliminating the positions of Vera Bradley Model President, Chief Inventive Officer, and Chief Income Officer, and by including the place of Chief Advertising Officer, all designed to drive annual price financial savings of roughly $2 million, add extra deal with advertising and marketing and merchandising, and place the Firm to ship regular high and backside line progress. These selections have been made with the intention to rightsize our management workforce and value construction for the scale of our enterprise, to handle the persevering with difficult macroenvironment and to finest place us to realize our long-term strategic plans.
Subsequent to the tip of fiscal 2023, in January 2023, we acquired the remaining 25% curiosity in Pura Vida from founders Griffin Thall and Paul Goodman for $10 million. We proceed to make investments in buyer information science, enterprise analytics, and pricing optimization, permitting us to gather and analyze information, and make facts-based selections to extra effectively run our enterprise.
On the Vera Bradley model, we expanded our sturdy product innovation pipeline, together with launching our Featherweight Assortment and continued one other yr of product collaborations with iconic manufacturers like Disney, Harry Potter, and Crocs, and likewise expanded our cozy, sleep, and outerwear collections.
We continued to strengthen and rationalize our retailer base. We opened 5 new manufacturing facility shops and closed 19 underperforming full-line shops and one manufacturing facility retailer, ending the fiscal yr with 51 full-line and 79 manufacturing facility places. We additionally continued to develop choices for purchasers to buy, like enhancing our presence in third-party marketplaces, together with Amazon, and including boutiques in choose high-traffic airports.
On the Pura Vida model, we entered into a number of high-profile product collaborations with manufacturers reminiscent of Hi there Kitty, Disney, and Harry Potter and expanded our product choices by launching our demi-fine assortment and increasing our assortment of engravable jewellery, all designed to carry new prospects to our model. We centered on constructing a extra various, revolutionary, efficient and performance-based advertising and marketing program to drive Pura Vida e-commerce gross sales. We started the method of implementing a complete buyer information platform, to construct a single, coherent, full view of every Pura Vida buyer, in order that we are able to higher goal and personalize advertising and marketing and develop into much less reliant on third-party advertising and marketing. This undertaking is scheduled for completion this spring.
We continued to have interaction our micro influencers, considerably expanded our TikTok presence, launched impactful advertisements on related TV, optimized SMS, and aggressively explored different strategies to successfully attain our prospects. We additionally opened three new Pura Vida full-line shops in the course of the yr, bringing our full-line retailer rely to 4, which collectively exceeded our expectations. These 4 shops are taking part in a job in driving new buyer acquisition, as we proceed to diversify our advertising and marketing platforms they usually reveal the facility of retail presence can have in driving digital gross sales, omnichannel loyalty, and spending.
Now, let me flip the decision over to John to overview the monetary outcomes. John?
John Enwright — Government Vice President and Chief Monetary Officer
Thanks, Jackie, and good morning. Let me go over a couple of highlights for the fiscal yr. The numbers I’ll talk about at the moment are all non-GAAP, and exclude the fees outlined in at the moment’s launch. For a whole element of things excluded from the non-GAAP numbers, in addition to a reconciliation of GAAP to non-GAAP numbers, please reference at the moment’s press launch.
Consolidated web revenues totaled $500 million for fiscal 2023 in comparison with $540.5 million for fiscal 2022. Consolidated web earnings totaled $7.6 million or $0.24 per diluted share in comparison with $19.7 million or $0.57 per diluted share final yr. Vera Bradley Direct section revenues totaled $328.2 million this yr, a 7.5% lower from $354.9 million within the prior yr. Comparable gross sales declined 9.5%. Vera Bradley Oblique section revenues totaled $73.3 million, up 11.1% over $66 million final yr, reflecting a rise in sure key account orders. Pura Vida section revenues totaled $98.4 million, a 17.7% lower from $119.6 million within the prior yr. Pura Vida’s e-commerce revenues have been negatively impacted by the shift in social and digital media effectiveness and rising digital media prices, in addition to a decline in gross sales to wholesale accounts. This yr’s gross revenue totaled $257.2 million or 51.4% of web revenues in comparison with $287.9 million or 53.3% of web revenues final yr. The present yr gross margin charge was negatively affected by increased inbound and outbound freight expense and elevated promotional exercise, partially offset by value will increase.
SG&A bills totaled $245.3 million or 49.1% of web revenues in comparison with $258.8 million or 47.9% of web revenues within the prior yr. Present yr bills have been decrease than prior yr, primarily as a consequence of price discount initiatives and a discount in variable associated bills as a consequence of decrease gross sales quantity. For the fiscal yr, consolidated working revenue was $12.3 million or 2.5% of web revenues in comparison with $30.1 million or 5.6% of web revenues final yr.
Now, let’s flip to the stability sheet. Yr-end money and money equivalents totaled $46.6 million in comparison with $88.4 million at prior yr fiscal yr finish. We had no borrowings on our $75 million credit score facility at fiscal year-end. Whole fiscal yr stock was $142.3 million in comparison with a $144.9 million ultimately yr — ultimately fiscal yr finish. Whole present yr stock was decrease than the prior yr, primarily as a consequence of stock changes related to extra and discounted stock, partially offset by incremental logistic prices burdening total stock. Inventories have been $36 million, decrease than the tip of the fiscal third quarter. Throughout fiscal 2023, we repurchased $18.1 million of frequent inventory, representing roughly 2.8 million shares at a median value of $6.40. We’ll proceed to take a conservative strategy to money, notably on this unstable atmosphere.
Now, let’s shift our focus to 2024 outlook. We’re offering estimates for the total yr primarily based on present macroeconomic traits and expectations. We anticipate the macroeconomic atmosphere to proceed to be unpredictable and that this yr will likely be a rebuilding yr for each of our manufacturers. Nevertheless, we anticipate to make the most of gross margin enchancment alternatives and handle our expense construction diligently. We’re not offering detailed steerage for the primary fiscal quarter of 2024, however we anticipate revenues and diluted loss per share to be roughly in step with the prior yr. The primary quarter is a rebuilding quarter as we work to stabilize the enterprise. We hope to see momentum construct because the yr progresses.
All forward-looking steerage numbers are non-GAAP. For fiscal 2024, we anticipate whole revenues of $490 million to $510 million. Revenues totaled $500 million in fiscal 2023. Each Vera Bradley and Pura Vida revenues are anticipated to be roughly flat on a year-over-year foundation. Gross margin of 52.6% to 53.6% in comparison with 51.4% in final yr. The anticipated year-over-year enhance is primarily associated to decreased inbound freight expense, partially offset by deleveraged overhead prices associated to stock purchases. SG&A expense of $241 million to $251 million in comparison with $245.3 million final yr. Yr-over-year modifications in SG&A expense primarily are pushed by restoring short-term and long-term incentive compensation to regular ranges, offset by company-wide price discount initiatives.
Consolidated working earnings of $17.3 million to $21.7 million in comparison with $12.3 million final yr. Free money move of between $25 million and $30 million in comparison with a money utilization of $21.7 million in fiscal 2023. Diluted EPS of $0.40 to $0.50 primarily based on diluted weighted shares excellent of $31 million and efficient tax charge of roughly 28%. Diluted EPS totaled $0.24 final yr. Internet capital spending of roughly $5 million in comparison with $8.2 million within the prior yr, reflecting investments related to new Vera Bradley manufacturing facility shops and expertise and logistics enhancements.
Let me flip the decision again over to Jackie to share extra about our go-forward methods. Jackie?
Jacqueline Ardrey — President, Chief Government Officer and Director
Thanks, John.
At each our Vera Bradley and Pura Vida model, we’re embarking on undertaking restoration and can deal with 4 key pillars, shopper, model, product and channel, to drive long-term high and backside line progress.
First at Vera Bradley, concerning the patron, we are going to deal with restoring model relevancy, concentrating on the informal and female 35 to 54 year-old lady who not solely worth vogue and elegance, but additionally operate. With this technique, we can even encourage and retain our loyal prospects exterior of this age group. As we take into consideration our model, we are going to strategically market our distinctive and distinctive positioning as a colourful, female, trendy model that connects with prospects on a deep emotional degree.
We’ll refocus on core product classes and gadgets we’re finest at by innovating and increasing inside our core merchandise. We’ll elevate our colourful female heritage, conserving it distinctive, however extra development related via up to date print and design. We’ll innovate into strategic adjoining way of life merchandise introductions that is smart for our prospects, and we are going to proceed to pursue collaborations and partnerships that align with our goal prospects. From a channel perspective, we are going to speed up our digital-first focus and on-line presence via a mixture of model storytelling and product messaging. We’ll construct a balanced footprint that extra clearly differentiates full line from manufacturing facility shops via differentiated sample and colour, product performance, sustainably-sourced materials and pricing, and we are going to goal new or strengthen present relationships with strategically-aligned wholesale companions.
At Pura Vida, on the patron entrance, we are going to sharpen our deal with the carefree 18 to 24 yr outdated collegiate woman, who each these youthful and older aspire to be. Our goal buyer is free spirited, a trendsetter and centered on dwelling her finest life. Pura Vida jewellery is a manner of expressing herself and suits her character. We’ll refresh our model picture with a deal with displaying what dwelling free seems and looks like, displaying actual locations, actual moments and actual faces which can be genuine, various and inclusive. We’ll recenter our model ethos on dwelling life to the fullest, in addition to Pura Vida’s hallmark of supporting charities and social accountability.
We’ll deal with delivering distinctive, enjoyable, playful product designs which can be reasonably priced and accessible. We’ll proceed to deepen our experience and innovate in our hero core class of string bracelets, in addition to different jewellery gadgets. And we are going to opportunistically discover extra close-in adjoining classes that is smart for our enterprise and our prospects. As we take a look at channel distributions, we can have a robust deal with restoring e-commerce progress, using our new, complete buyer information platform to strategically goal and personalised advertising and marketing. We’ll drive strategic progress of wholesale by pursuing bigger, extra strategic partnerships and enlargement of our bigger present accounts. As well as, we are going to refine our retailer mannequin to additional drive high and backside line progress, pausing new retailer progress this yr to find out how huge our retailer base must be and what infrastructure is required to help that base.
To help progress and growth of our two manufacturers on a company foundation, we are going to proceed to make strategic investments in the suitable expertise to assist drive the transformation and diligently handle our provide chain, gross margin, SG&A bills and money move. This yr, by specializing in stabilizing gross sales, gross margin enlargement and expense management, we consider we are able to enhance year-over-year working earnings by a minimum of 40%, and EPS by a minimum of 65%. We’re within the technique of extra totally growing our strategic plans and we’ll share with you extra particulars together with long-term monetary targets later this yr.
Operator, we are going to now open up the decision to questions.
Questions and Solutions:
Operator
Thanks a lot. [Operator Instructions] Whereas we wait, we’ll go along with our first query Eric Beder from SCC Analysis. Please go forward.
Eric Beder — SCC Analysis — Analyst
Good morning.
John Enwright — Government Vice President and Chief Monetary Officer
Hey, Eric.
Jacqueline Ardrey — President, Chief Government Officer and Director
Good morning.
Eric Beder — SCC Analysis — Analyst
Hello. Might you discuss — I assume when it comes to the discount in bills, how far alongside are you on the $25 million, and the way a lot of that ought to we incrementally see on this yr?
John Enwright — Government Vice President and Chief Monetary Officer
So, the vast majority of the preliminary $25 million, we truly noticed we pulled via in fiscal 23. As Jackie alluded to close the tip of our ready remarks, we’re form of extra alternatives. In order that’s why we gave the expense vary of the $241 million to $251 million, to offset a number of the incremental prices that have been constructed into our price range related to normalizing incentive compensation, however we expect there’s extra alternatives that we’re going after. We simply haven’t recognized them totally and execute them. That’s why we gave that vary.
Eric Beder — SCC Analysis — Analyst
Okay. While you look — I do know you talked about hold-off on Pura Vida retailer openings. What ought to we be occupied with when it comes to retailer openings and closures for the Vera Bradley chain this yr?
John Enwright — Government Vice President and Chief Monetary Officer
Yeah. So, we now have three [Phonetic] recognized manufacturing facility shops that we’re going to open and with regard to closures for full-line, we’re working in the direction of minimizing this quantity, however proper now we’re most likely near about 10 that we’re going to plan to shut. It may very well be a little bit bit extra, a little bit bit lower than that, however we’re working with landlords to see if we are able to work via some hire negotiations and proceed to maneuver these shops out from a closure perspective as we take a look at fixing a number of the product or enhancing a number of the product that we sell-through our full-price model. So, we’re actively having conversations with a few of our main landlords to cut back that quantity, however you’ll be able to most likely consider it from a mannequin perspective, Eric, of about 10.
Eric Beder — SCC Analysis — Analyst
Okay. And phrases of, I assume, the Vera Bradley product, you talked about adjacencies, you talked about attempting to form of get it to be extra centered, what ought to we be considering as as a result of the shops when it comes to what the product combine and the class must be doing?
Jacqueline Ardrey — President, Chief Government Officer and Director
So, Eric, I believe within the short-term, you gained’t see an excessive amount of change as we leverage our product growth timeline. We’re making changes primarily based on gross sales information, buyer information as shortly as we are able to, however within the short-term, you most likely gained’t see an excessive amount of. I believe it’s a little bit early proper now. We need to ensure that we now have the suitable information to drive the selections round what these product adjacencies must be, what we now have now could look a little bit bit totally different sooner or later, however we’d simply need to be sure we now have all that information to make these selections. So, it’s a little bit early to take a position on how issues could be totally different, however I believe you’ll be able to rely on seeing a extra centered outlook from our product projections and we actually need to assist folks store once they come into our shops and clarify what’s necessary for the Vera Bradley model.
Eric Beder — SCC Analysis — Analyst
Okay. What ought to we be occupied with when it comes to collaborations for each Pura Vida and Vera Bradley. I do know that you just — Harry Potter collaboration of Vera Bradley is now not there and also you had continued Disney collaborations [Indecipherable]. What’s going to be form of the standards going ahead when it comes to who you’re going to associate with and the way they will present, I assume, elevated relevance to your buyer? Thanks.
Jacqueline Ardrey — President, Chief Government Officer and Director
Yeah, that’s an excellent query, Eric. I believe proper now we’re searching for our future partnerships to essentially resonate with the shopper that we wish. So, utilizing — once more, utilizing information to outline how our prospects interacted with the previous collaborations, what the long-term worth of these prospects ended as much as be, we’re doing all that work proper now to have enter into what’s our future IP lineup.
Eric Beder — SCC Analysis — Analyst
Okay. Congrats and good luck for the remainder of the yr.
John Enwright — Government Vice President and Chief Monetary Officer
Thanks, Eric.
Jacqueline Ardrey — President, Chief Government Officer and Director
Thanks.
Operator
Thanks. And our subsequent query comes from Joe Gomes from NOBLE Capital.
Joe Gomes — NOBLE Capital — Analyst
Good morning, and thanks for taking the questions.
John Enwright — Government Vice President and Chief Monetary Officer
Thanks you, Joe.
Jacqueline Ardrey — President, Chief Government Officer and Director
Good morning.
Joe Gomes — NOBLE Capital — Analyst
So I wished to form of comply with alongside right here on the query about Vera Bradley within the retailer opening/closings. You guys have stated previously that the full-line shops are those that appeal to the upper family earnings prospects versus the manufacturing facility shops. However in case you minimize [Indecipherable] that’s 20% this yr alone on the full-line shops. I imply, are you seeing these buyer — increased family earnings prospects go to the manufacturing facility shops or how are you attracting into the manufacturing facility shops, and what are you doing to not lose that increased family earnings buyer?
Jacqueline Ardrey — President, Chief Government Officer and Director
Yeah, I believe that’s an excellent query and I believe the quick reply to that’s that we’re actually counting on e-commerce to assist fill that hole and to establish the shoppers that we wish on the demographic that’s interesting for our model. And, once more, that’s how we’ll be capable of extra successfully goal these prospects.
Joe Gomes — NOBLE Capital — Analyst
Okay. So, you talked in regards to the deal with core classes. One of many issues that you just had launched the tip — in the direction of the tip of final yr was your footwear line. Questioning, one, is that one thing you’d take a look at as a — take a look at as a core class and two, how has the footwear line been doing within the — how did they do within the fourth quarter.
Jacqueline Ardrey — President, Chief Government Officer and Director
So footwear was, and it’s a product enlargement that we have been very enthusiastic about and proceed to be enthusiastic about. Our spring footwear has began off very robust. So once more, we’re going to take a look at all of those applications in relationship, not solely to gross sales, however to essentially figuring out in a focused manner what is occurring with the shopper and the way it’s driving her worth over time. So these are — that’s the evaluation that’s taking place proper now.
Joe Gomes — NOBLE Capital — Analyst
Okay. And perhaps switching over to Pura Vida for a second. You talked about there, one of many challenges within the quarter was your wholesale account. Possibly you may simply give us a little bit extra colour or element of what’s taking place on the wholesale aspect over Pura Vida and what we’re seeking to do to see that line, that section flip again up for Pura Vida versus taking place?
Jacqueline Ardrey — President, Chief Government Officer and Director
Certain. I believe, in This autumn, we positively noticed some hesitancy in our retail companions simply because of the macroeconomic atmosphere and other people simply holding their open-to-buy {dollars} tightly. And that positively had an influence on Pura Vida far more than it did on Vera Bradley, however we did see early within the quarter that, that was the case at Vera Bradley as effectively. What we’ve seen since then is, it’s is a bit more positivity from our retail companions. So we’ve positively seen that pipeline enhance because the starting of the yr.
Joe Gomes — NOBLE Capital — Analyst
Properly, it’s excellent news. And one final one for me. Nice job on the stock ranges. Seeing what the projections are for fiscal ’24, John, are you searching for extra leverage there on the stock having the ability to cut back that much more from the place you’re or do you assume that the place we’re at the moment is, at yr finish, is an efficient degree?
John Enwright — Government Vice President and Chief Monetary Officer
No. I believe we’re going to proceed to search for alternatives to cut back that degree to enhance our churn. In order we constructed out, the money move related — the free money move related to subsequent yr’s steerage, we anticipate stock ranges to drop from the place it’s at the moment.
Joe Gomes — NOBLE Capital — Analyst
Okay. Nice. Thanks for that. I’ll get again in queue. Thanks.
Jacqueline Ardrey — President, Chief Government Officer and Director
Thanks.
John Enwright — Government Vice President and Chief Monetary Officer
Thanks, Joe.
Operator
And with that, I’d like to show the decision over to Jackie for any closing remarks.
Jacqueline Ardrey — President, Chief Government Officer and Director
Thanks. We’re dedicated to returning Vera Bradley and Pura Vida to worthwhile progress and producing robust money move as an organization, which I consider will ship worth to our shareholders over the long run. Since becoming a member of the Firm in November, I’m extra satisfied than ever that each manufacturers have monumental potential and I’m very enthusiastic about the way forward for Vera Bradley, Inc. We now have a portfolio of two iconic way of life manufacturers, multi-generational prospects with outstanding loyalty and devotion, spectacular model recognition, a stable stability sheet and a rare tradition.
We now have some heavy lifting to do in fiscal 2024, however I’m assured that we’ll emerge as stronger firm. I need to thank our associates for his or her dedication to driving change and all they do to make our firm an excellent place to work. We’re proud to as soon as once more be acknowledged by Forbes as top-of-the-line mid-size employers in America.
Thanks for becoming a member of us at the moment and we stay up for sharing our progress with you within the quarters forward.
Operator
[Operator Closing Remarks]