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Vera Bradley Q3 revenues up, beat expectations

By Prachi Singh

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Vera Bradley net revenues from continuing operations totalled 126.7 million dollars for the third quarter ended October 31, 2015, compared to 125.2 million dollars for the third quarter ended November 1, 2014, an increase of 1.2 percent. The company posted income from continuing operations of 10.3 million dollars, or 0.27 dollar per diluted share.

Commenting on the performance, Robert Wallstrom, Chief Executive Officer, noted, “We are pleased that better than expected revenue and gross profit percentage performance, along with disciplined expense management, drove EPS well above our guidance, despite a rather challenging retail environment. We are most proud of our year-over-year 540 basis point gross profit percentage improvement in the quarter. Our better than planned revenues were generated despite reduced promotional activity. While our overall comparable sales fell 9.5 percent, our comparable store sales declined just 2 percent, which is a meaningful improvement in the trend from prior quarters.”

Third quarter detailed results

Current year third quarter net revenues of 126.7 million dollars exceeded the company's guidance of 120 million dollars to 123 million dollars. Direct segment revenues totalled 84.1 million dollars, a 7.9 percent increase from 77.9 million dollars in the prior year third quarter.

Comparable sales including ecommerce decreased 9.5 percent, reflecting a 2 percent decline in comparable store sales and a 19.1percent decrease in ecommerce sales, which was offset by new store growth. The company opened 17 full-line and 13 factory outlet stores during the past 12 months. Third quarter comparable sales were negatively impacted by year-over-year declines in store and ecommerce traffic, largely resulting from reduced promotional activity.

Indirect segment revenues decreased 10 percent to 42.5 million dollars from 47.3 million dollars in the prior year third quarter, primarily due to lower average order size from the company's specialty retail accounts and a modest year-over-year reduction in the total number of specialty retail accounts. Gross profit for the quarter totalled 73.3 million dollars, or 57.9 percent of net revenues, compared to 65.8 million dollars, or 52.5 percent of net revenues, in the prior year third quarter. The gross profit percentage exceeded guidance of 56.8 percent to 57.2 percent primarily due to reduced promotional activity relative to plan and better than planned sales of higher-margin MFO product in the company's factory outlet stores.

Fourth quarter and fiscal year 2016 outlook

For the fourth quarter of fiscal 2016, the company expects net revenues of 151 million dollars to 155 million dollars compared to prior year fourth quarter revenues of 152.6 million dollars. A gross profit percentage of 58.3 percentage to 58.7 percent compared to 52.4 percent in the prior year fourth quarter. Diluted earnings per share from continuing operations are expected to be 0.40 dollar to 0.43 dollar.

For fiscal 2016, the company expects net revenues of 499 million dollars to 503 million dollars compared to 509 million dollars last year. A gross profit percentage of approximately 56.7 percent compared to 52.9 percent last year. Diluted earnings per share from continuing operations are expected to be in the range of 0.80 dollar to 0.83 dollars.

Vera Bradley