Vera Bradley(VRA) - 2021 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements (unaudited) This section presents Vera Bradley, Inc.'s unaudited condensed consolidated financial statements, including Balance Sheets, Statements of Operations, and Cash Flows, for periods ending August 1, 2020 Condensed Consolidated Balance Sheets (as of Aug 1, 2020 vs Feb 1, 2020) | (in thousands) | August 1, 2020 | February 1, 2020 | | :--- | :--- | :--- | | Total current assets | $260,979 | $218,789 | | Total assets | $542,084 | $535,061 | | Total current liabilities | $82,240 | $87,405 | | Long-term debt | $30,000 | $— | | Total liabilities | $218,656 | $201,242 | | Total shareholders' equity | $293,774 | $303,770 | Condensed Consolidated Statements of Operations (Thirteen Weeks Ended) | (in thousands, except per share data) | Thirteen Weeks Ended Aug 1, 2020 | Thirteen Weeks Ended Aug 3, 2019 | | :--- | :--- | :--- | | Net revenues | $131,770 | $119,785 | | Gross profit | $79,621 | $67,333 | | Operating income | $17,499 | $7,348 | | Net income | $8,327 | $5,718 | | Net income attributable to Vera Bradley, Inc. | $7,216 | $5,854 | | Diluted net income per share | $0.42 | $0.17 | Condensed Consolidated Statements of Operations (Twenty-Six Weeks Ended) | (in thousands, except per share data) | Twenty-Six Weeks Ended Aug 1, 2020 | Twenty-Six Weeks Ended Aug 3, 2019 | | :--- | :--- | :--- | | Net revenues | $201,054 | $210,788 | | Gross profit | $113,809 | $117,801 | | Operating (loss) income | $(8,075) | $3,703 | | Net (loss) income | $(7,210) | $3,313 | | Net (loss) income attributable to Vera Bradley, Inc. | $(8,121) | $3,449 | | Diluted net (loss) per share | $(0.24) | $0.10 | Condensed Consolidated Statements of Cash Flows (Twenty-Six Weeks Ended) | (in thousands) | Twenty-Six Weeks Ended Aug 1, 2020 | Twenty-Six Weeks Ended Aug 3, 2019 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(77) | $1,091 | | Net cash provided by (used in) investing activities | $18,901 | $(61,412) | | Net cash provided by (used in) financing activities | $6,816 | $(6,351) | | Net increase (decrease) in cash and cash equivalents | $25,651 | $(66,651) | | Cash and cash equivalents, end of period | $75,568 | $46,842 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the significant impact of the COVID-19 pandemic on operations, Q2 revenue growth driven by Pura Vida, and first-half operating loss, alongside liquidity management and strategic initiatives - The company took significant actions to mitigate the impact of COVID-19, including temporarily closing all Vera Bradley stores, furloughing ~80% of its workforce, reducing executive compensation, suspending share repurchases, and drawing $60.0 million from its credit agreement[158][162] - Strategic progress during the quarter included the launch of the Vera Bradley + Harry Potter collaboration, expansion of face mask offerings, and migration of the e-commerce site to Shopify Plus[164][165] Q2 Fiscal 2021 vs Q2 Fiscal 2020 Results | Metric | Q2 FY2021 | Q2 FY2020 | Change | | :--- | :--- | :--- | :--- | | Net Revenues | $131.8M | $119.8M | +10.0% | | Gross Profit % | 60.4% | 56.2% | +420 bps | | SG&A Expenses | $62.2M | $60.7M | +2.3% | | Operating Income | $17.5M | $7.3M | +139.7% | Q2 Fiscal 2021 Net Revenues by Segment | Segment | Q2 FY2021 (in millions) | Q2 FY2020 (in millions) | % Change | | :--- | :--- | :--- | :--- | | VB Direct | $81.2 | $94.4 | -13.9% | | VB Indirect | $17.7 | $20.0 | -11.4% | | Pura Vida | $32.8 | $5.4 | N/A (partial period in prior year) | - The company recorded $3.8 million in impairment charges for the first half of the year related to underperforming store assets, driven by the impact of the COVID-19 pandemic[183][184] Quantitative and Qualitative Disclosures About Market Risk The company reports no material changes in market risks as of August 1, 2020, compared to those disclosed in its prior Annual Report on Form 10-K - There was no material change in the Company's market risks as of August 1, 2020, compared to the risks disclosed in the Annual Report on Form 10-K for the fiscal year ended February 1, 2020[248] Controls and Procedures Management concluded the company's disclosure controls and procedures were effective as of August 1, 2020, with the Pura Vida business integrated into internal controls - The CEO and CFO concluded that the Company's disclosure controls and procedures were effective as of August 1, 2020[249] - The acquired Pura Vida business has been integrated into the company's system of internal control over financial reporting and was included in the effectiveness assessment[250][251] PART II. OTHER INFORMATION Legal Proceedings The company is involved in two legal proceedings, including a lawsuit by Vesi Incorporated seeking at least $10.0 million and a class-action lawsuit alleging California Labor Code violations - Vesi Incorporated filed a suit in August 2019 related to the Company's licensing business, seeking damages of not less than $10.0 million[252] - In April 2020, a class-action lawsuit was filed by Chidimma Igboakaeze in California, alleging various violations of the state's Labor Code regarding wages, overtime, and breaks[253] Risk Factors This section highlights updated risk factors, primarily focusing on the significant and uncertain adverse impacts of the COVID-19 pandemic on revenue, operations, and the global supply chain - A significant new risk factor is the continued disruption from the COVID-19 pandemic, which may adversely impact revenue streams, operations, and the global supply chain[256] - Despite reopening most stores, the company has experienced and may continue to experience significantly reduced traffic, demand, and sales[256] - The supply chain faces risks, particularly from China, which is expected to account for approximately 20% of production in fiscal 2021[257] Unregistered Sales of Equity Securities and Use of Proceeds The company reports on its $50.0 million share repurchase program, which was temporarily suspended to conserve cash due to the COVID-19 pandemic, with no repurchases during the thirteen weeks ended August 1, 2020 - The Company's $50.0 million share repurchase program, approved in November 2018, was temporarily suspended to conserve cash as a result of the COVID-19 pandemic[263] - There were no shares repurchased during the thirteen weeks ended August 1, 2020, with approximately $32.9 million remaining available for repurchase under the program as of this date[264][265] Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL data files - The exhibits filed with this report include CEO and CFO certifications under Sections 302 and 906 of the Sarbanes-Oxley Act, as well as various Inline XBRL documents[267]