Vera Bradley(VRA) - 2026 Q2 - Quarterly Report

Forward-Looking Statements This section outlines forward-looking statements concerning the Company's financial condition and future performance, subject to various risks - This report contains forward-looking statements regarding the Company's financial condition, results of operations, plans, objectives, strategies, future performance, and business, which are subject to risks and uncertainties that may cause actual results to differ materially from expectations[10][11][13] - Key risks include the inability to successfully implement strategic plans, declines in comparable sales, inability to maintain brands, failure of the multi-channel distribution model, adverse economic conditions, and supply chain disruptions[14] Part I. Financial Information This part presents the Company's unaudited condensed consolidated financial statements and management's analysis of operations Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements, including balance sheets, income statements, cash flows, and detailed notes Condensed Consolidated Balance Sheets Key Balance Sheet Data (in thousands) | Metric | August 2, 2025 | February 1, 2025 | | :-------------------------- | :------------- | :--------------- | | Cash and cash equivalents | $15,184 | $28,628 | | Accounts receivable, net | $16,983 | $13,797 | | Inventories | $96,685 | $91,430 | | Total current assets | $140,453 | $164,872 | | Total assets | $266,176 | $306,690 | | Accounts payable | $21,127 | $17,198 | | Total current liabilities | $57,724 | $57,993 | | Long-term debt | $10,000 | — | | Total liabilities | $125,690 | $127,735 | | Total shareholders' equity | $140,486 | $178,955 | - Total assets decreased by $40.5 million from February 1, 2025, to August 2, 2025, primarily due to a decrease in cash and cash equivalents and the reclassification of discontinued operations assets. Total shareholders' equity also decreased significantly by $38.5 million[16] Condensed Consolidated Statements of Operations Key Income Statement Data (in thousands, except per share data) | Metric | Thirteen Weeks Ended Aug 2, 2025 | Thirteen Weeks Ended Aug 3, 2024 | Twenty-Six Weeks Ended Aug 2, 2025 | Twenty-Six Weeks Ended Aug 3, 2024 | | :-------------------------------------- | :------------------------------- | :------------------------------- | :--------------------------------- | :------------------------------- | | Net revenues | $70,858 | $94,003 | $122,510 | $161,951 | | Gross profit | $35,497 | $46,709 | $58,264 | $80,749 | | Operating (loss) income from continuing operations | $(4,592) | $2,393 | $(22,449) | $(8,224) | | Net (loss) income | $(4,672) | $5,706 | $(38,132) | $(2,415) | | Diluted net (loss) income per share | $(0.17) | $0.19 | $(1.37) | $(0.08) | - Net revenues decreased by 24.6% for the thirteen weeks and 24.4% for the twenty-six weeks ended August 2, 2025, compared to the prior year periods[18] - The Company reported a net loss of $(4.7) million for the thirteen weeks and $(38.1) million for the twenty-six weeks ended August 2, 2025, a significant decline from net income of $5.7 million and a net loss of $(2.4) million, respectively, in the comparable prior-year periods[18] Condensed Consolidated Statements of Comprehensive (Loss) Income Comprehensive (Loss) Income (in thousands) | Metric | Thirteen Weeks Ended Aug 2, 2025 | Thirteen Weeks Ended Aug 3, 2024 | Twenty-Six Weeks Ended Aug 2, 2025 | Twenty-Six Weeks Ended Aug 3, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :--------------------------------- | :------------------------------- | | Net (loss) income | $(4,672) | $5,706 | $(38,132) | $(2,415) | | Cumulative translation adjustment | $(64) | $(8) | $(108) | — | | Comprehensive (loss) income, net of tax | $(4,736) | $5,698 | $(38,240) | $(2,415) | - Comprehensive loss significantly widened for both the thirteen and twenty-six-week periods ended August 2, 2025, primarily reflecting the increased net loss and negative cumulative translation adjustments[21] Condensed Consolidated Statements of Shareholders' Equity Shareholders' Equity Changes (in thousands) | Metric | Balance at Feb 1, 2025 | Net Loss (26 wks) | Balance at Aug 2, 2025 | | :----------------------- | :------------------- | :---------------- | :------------------- | | Total Shareholders' Equity | $178,955 | $(38,132) | $140,486 | - Total shareholders' equity decreased from $178.9 million at February 1, 2025, to $140.5 million at August 2, 2025, primarily due to the net loss incurred during the period[24] - In the prior year (twenty-six weeks ended August 3, 2024), treasury stock repurchases of $15.9 million significantly reduced shareholders' equity[26] Condensed Consolidated Statements of Cash Flows Cash Flow Summary (in thousands) | Activity | Twenty-Six Weeks Ended Aug 2, 2025 | Twenty-Six Weeks Ended Aug 3, 2024 | | :------------------------------------ | :--------------------------------- | :------------------------------- | | Net cash used in operating activities | $(23,298) | $(13,151) | | Net cash used in investing activities | $(1,576) | $(3,649) | | Net cash provided by (used in) financing activities | $9,800 | $(16,356) | | Cash and cash equivalents, end of period | $15,184 | $44,147 | - Net cash used in operating activities increased by $10.1 million, primarily due to a higher net loss in the current period[29][188] - Financing activities shifted from a net use of cash of $16.4 million in the prior year to a net provision of cash of $9.8 million in the current year, driven by $15.0 million in borrowings and no common stock repurchases[29][191] Notes to the Condensed Consolidated Financial Statements This section details the Company's accounting policies, revenue, leases, earnings per share, debt, taxes, stock compensation, and segment reporting Note 1. Description of the Company and Basis of Presentation - Vera Bradley is a leading designer of women's handbags, luggage, travel items, fashion and home accessories, and unique gifts, founded in 1982[36] - On March 31, 2025, the Company completed the sale of Creative Genius, Inc. (Pura Vida Bracelets), classifying its operations as discontinued in the consolidated financial statements[37][38][42] - The Company now operates with two reportable segments: Vera Bradley Direct (VB Direct), which includes full-line and outlet stores and e-commerce, and Vera Bradley Indirect (VB Indirect), which covers sales to specialty retailers, key accounts, and licensing royalties[38][43] Note 2. Revenue from Contracts with Customers Net Revenues by Product Category (in thousands) - Thirteen Weeks Ended | Product Category | August 2, 2025 | August 3, 2024 | Change ($) | Change (%) | | :--------------- | :------------- | :------------- | :--------- | :--------- | | Bags | $36,598 | $45,509 | $(8,911) | -19.6% | | Travel | $16,774 | $21,939 | $(5,165) | -23.5% | | Accessories | $9,372 | $14,396 | $(5,024) | -34.9% | | Home | $3,928 | $6,889 | $(2,961) | -43.0% | | Apparel/Footwear | $1,729 | $2,719 | $(990) | -36.4% | | Other | $2,457 | $2,551 | $(94) | -3.7% | | Total | $70,858 | $94,003 | $(23,145)| -24.6% | Net Revenues by Product Category (in thousands) - Twenty-Six Weeks Ended | Product Category | August 2, 2025 | August 3, 2024 | Change ($) | Change (%) | | :--------------- | :------------- | :------------- | :--------- | :--------- | | Bags | $58,262 | $75,582 | $(17,320) | -22.9% | | Travel | $31,261 | $38,007 | $(6,746) | -17.7% | | Accessories | $17,360 | $25,894 | $(8,534) | -33.0% | | Home | $7,697 | $12,538 | $(4,841) | -38.6% | | Apparel/Footwear | $3,366 | $5,498 | $(2,132) | -38.8% | | Other | $4,564 | $4,432 | $132 | +3.0% | | Total | $122,510 | $161,951 | $(39,441)| -24.4% | - Contract liabilities, primarily unredeemed gift cards, were $1.6 million as of August 2, 2025, a slight decrease from $1.7 million at February 1, 2025[58] Note 3. Leases - The weighted-average discount rate for leases increased to 5.1% as of August 2, 2025, from 4.9% as of August 3, 2024[63] Total Net Lease Cost (in thousands) - Twenty-Six Weeks Ended | Lease Cost Type | August 2, 2025 | August 3, 2024 | | :----------------- | :------------- | :------------- | | Operating lease cost | $12,576 | $12,259 | | Variable lease cost | $2,096 | $2,233 | | Short-term lease cost| $195 | $388 | | Less: Sublease income| $(208) | $(210) | | Total net lease cost | $14,659 | $14,670 | - The weighted-average remaining lease term decreased to 4.4 years as of August 2, 2025, from 4.9 years as of August 3, 2024[66] Note 4. Earnings Per Share Basic and Diluted Net (Loss) Income Per Share | Period | August 2, 2025 | August 3, 2024 | | :------------------------------- | :------------- | :------------- | | Thirteen Weeks Ended | | | | Basic net (loss) income per share| $(0.17) | $0.19 | | Diluted net (loss) income per share| $(0.17) | $0.19 | | Twenty-Six Weeks Ended | | | | Basic net (loss) income per share| $(1.37) | $(0.08) | | Diluted net (loss) income per share| $(1.37) | $(0.08) | - All potential common shares were excluded from diluted EPS calculations for the thirteen and twenty-six weeks ended August 2, 2025, and the twenty-six weeks ended August 3, 2024, because they were anti-dilutive due to net losses[70] Note 5. Fair Value of Financial Instruments - The Company recorded $1.0 million in impairment charges for store property, plant, and equipment for the twenty-six weeks ended August 2, 2025, which are included in selling, general, and administrative expenses[75] - Contingent consideration related to the sale of business was $2.552 million as of August 2, 2025, classified as a Level 3 fair value measurement due to the use of unobservable inputs[74][125] Note 6. Debt - As of August 2, 2025, the Company had $10.0 million in borrowings outstanding under its asset-based revolving Credit Agreement, with $65.0 million in remaining availability, compared to no borrowings and $75.0 million availability as of February 1, 2025[89][193] - The Credit Agreement, which matures in May 2028, was amended on March 11, 2025, to allow for the sale of Creative Genius and release it from loan documents[81][87] Note 7. Income Taxes Effective Tax Rate | Period | August 2, 2025 | August 3, 2024 | | :------------------------------- | :------------- | :------------- | | Thirteen Weeks Ended | 0.4% | (188.2)% | | Twenty-Six Weeks Ended | (1.7)% | 99.0% | - The significant year-over-year change in effective tax rates is primarily due to a full valuation allowance recorded against the Company's net deferred tax assets for the fiscal year ended February 1, 2025[91][92] - The recently enacted One Big Beautiful Bill Act (OBBBA) on July 4, 2025, does not have a material impact on the consolidated financial statements due to the Company maintaining a full valuation allowance on its U.S. deferred tax assets[93] Note 8. Stock-Based Compensation - During the thirteen weeks ended August 2, 2025, the Company granted 1,253,694 restricted stock units (time-based and performance-based) with an aggregate fair value of $2.7 million, a substantial increase from 14,612 units ($0.1 million fair value) in the prior-year period[96] - For the twenty-six weeks ended August 2, 2025, 2,757,196 restricted stock units ($5.9 million fair value) were granted, compared to 755,647 units ($5.1 million fair value) in the same period of the prior year[97] - As of August 2, 2025, total unrecognized compensation cost related to nonvested restricted stock units was $4.3 million, expected to be recognized over a weighted-average period of 2.1 years[101] Note 9. Commitments and Contingencies - In June 2025, the Company received a $4.6 million purchase price adjustment request from the buyer of Creative Genius, which the Company disputes and has filed a legal action in the Chancery Court of Delaware to declare improper[103] - Management believes that current claims and contingencies are not probable to have a material adverse effect on the Company's financial condition, results of operations, or cash flows[102] Note 10. Common Stock - The Company's board approved a new $30.0 million share repurchase plan (2024 Share Repurchase Program) in December 2024, expiring in December 2027, with no purchases made under this program as of August 2, 2025[105][106] - As of August 2, 2025, the Company held 15,834,579 shares of its common stock as treasury shares, with an aggregate carrying amount of $156.8 million[108] Note 11. Cloud Computing Arrangements - Unamortized Cloud Computing Arrangement (CCA) implementation costs totaled $0.4 million as of August 2, 2025, down from $0.6 million at February 1, 2025[109] - Amortization expense for CCA costs is recorded within selling, general, and administrative expenses[109] Note 12. Cost Savings Initiatives and Other Charges - The Company incurred $3.0 million in severance charges for the thirteen weeks ended August 2, 2025, and $3.3 million for the twenty-six weeks ended August 2, 2025, primarily related to unallocated corporate expenses[111] - The remaining liability for severance charges and cash retention payments was $2.0 million as of August 2, 2025[113] - Additional cost reduction initiatives, identified in late fiscal 2025, are expected to be fully realized in fiscal 2026, targeting efficiencies across retail stores, marketing, IT, professional services, logistics, and corporate payroll[110] Note 13. Segment Reporting - The Company operates two reportable segments: VB Direct and VB Indirect, with the Chief Operating Decision Maker (CODM) evaluating segment operating results primarily using operating income[115][119] Segment Net Revenues (in thousands) | Segment | Thirteen Weeks Ended Aug 2, 2025 | Thirteen Weeks Ended Aug 3, 2024 | Twenty-Six Weeks Ended Aug 2, 2025 | Twenty-Six Weeks Ended Aug 3, 2024 | | :---------- | :------------------------------- | :------------------------------- | :--------------------------------- | :------------------------------- | | VB Direct | $60,514 | $72,241 | $103,597 | $128,665 | | VB Indirect | $10,344 | $21,762 | $18,913 | $33,286 | | Total | $70,858 | $94,003 | $122,510 | $161,951 | Segment Operating Income (in thousands) | Segment | Thirteen Weeks Ended Aug 2, 2025 | Thirteen Weeks Ended Aug 3, 2024 | Twenty-Six Weeks Ended Aug 2, 2025 | Twenty-Six Weeks Ended Aug 3, 2024 | | :---------- | :------------------------------- | :------------------------------- | :--------------------------------- | :------------------------------- | | VB Direct | $9,335 | $13,433 | $3,799 | $17,426 | | VB Indirect | $2,190 | $4,743 | $4,170 | $8,569 | | Total | $11,525 | $18,176 | $7,969 | $25,995 | Note 14. Discontinued Operations - The Company completed the sale of Creative Genius (Pura Vida Bracelets) on March 31, 2025, for a total consideration of $3.5 million, including cash proceeds and contingent consideration with an estimated fair value of $2.5 million[124][125] - A net loss on disposal of $15.2 million was recorded for the twenty-six weeks ended August 2, 2025, presented as part of discontinued operations[127][128] Discontinued Operations Results (in thousands) | Metric | Thirteen Weeks Ended Aug 2, 2025 | Thirteen Weeks Ended Aug 3, 2024 | Twenty-Six Weeks Ended Aug 2, 2025 | Twenty-Six Weeks Ended Aug 3, 2024 | | :-------------------------------------- | :------------------------------- | :------------------------------- | :--------------------------------- | :------------------------------- | | Net revenues | — | $16,819 | $5,553 | $29,474 | | Income (loss) from discontinued operations, net of income tax | $37 | $(1,821) | $(15,163) | $(2,338) | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the Company's financial performance, liquidity, and cash flows, covering strategic progress, macroeconomic factors, and segment-level results Strategic Progress, Macroeconomic Factors, and Other Factors Impacting our Financial Condition and Results of Operations - The Company is executing a comprehensive strategy to strengthen its market position, simplify decision-making, remove organizational complexity, and focus resources on high-impact initiatives, including investing in brand, innovation, and customer experiences[134] - Key strategic initiatives include Sharpening Brand Focus, Omnichannel Strategy, Outlet 2.0, Optimizing the Operating Model, and Reimagining How We Work[135][136][137][138] - Ongoing macroeconomic factors, such as elevated tariff costs and inflationary pressures, continue to negatively impact consumer discretionary spending, leading to softer performance in Vera Bradley outlet and full-line stores[139] Management Transition - Jacqueline Ardrey, the former Chief Executive Officer, departed on June 11, 2025, and the Board of Directors has initiated a national search for a successor[140] - Ian Bickley assumed the newly created interim role of Executive Chairman, effective July 7, 2025, to provide leadership and strategic guidance during the CEO transition[140] - Martin Layding was appointed Chief Financial Officer, effective June 12, 2025[141] Recent Transactions - The Company completed the sale of Pura Vida on March 31, 2025, and its results of operations are now reflected as discontinued operations in the Consolidated Statement of Operations[142] How We Assess the Performance of Our Business - Net revenues reflect sales of merchandise and revenue from distribution and shipping/handling fees, less returns and discounts, categorized by VB Direct and VB Indirect segments[144] - Comparable sales are calculated for stores open at least 12 full fiscal months and e-commerce operations to evaluate performance, with various factors affecting them including economic trends, consumer preferences, competition, and promotional activities[145][146][148] - Gross profit is net revenues less cost of sales, influenced by volume, sales price, freight, operational efficiencies, promotional activities, commodity prices, tariffs, and labor costs[146][147] - Selling, General, and Administrative (SG&A) expenses encompass selling, advertising, marketing, product development, and administrative costs, including employee compensation, store occupancy, media costs, and corporate functions[148][149][150] Results of Operations Consolidated Results of Operations (in thousands, except percentages) | Metric | Thirteen Weeks Ended Aug 2, 2025 | Thirteen Weeks Ended Aug 3, 2024 | Change ($) | Change (%) | | :---------------------------------------- | :------------------------------- | :------------------------------- | :--------- | :--------- | | Net revenues | $70,858 | $94,003 | $(23,145) | -24.6% | | Gross profit | $35,497 | $46,709 | $(11,212) | -24.0% | | SG&A expenses | $40,442 | $44,449 | $(4,007) | -9.0% | | Operating (loss) income from continuing operations | $(4,592) | $2,393 | $(6,985) | -291.9% | | Net (loss) income from continuing operations | $(4,709) | $7,527 | $(12,236) | -162.6% | | Net (loss) income | $(4,672) | $5,706 | $(10,378) | -181.9% | Consolidated Results of Operations (in thousands, except percentages) | Metric | Twenty-Six Weeks Ended Aug 2, 2025 | Twenty-Six Weeks Ended Aug 3, 2024 | Change ($) | Change (%) | | :---------------------------------------- | :--------------------------------- | :------------------------------- | :--------- | :--------- | | Net revenues | $122,510 | $161,951 | $(39,441) | -24.4% | | Gross profit | $58,264 | $80,749 | $(22,485) | -27.8% | | SG&A expenses | $81,246 | $89,544 | $(8,298) | -9.3% | | Operating (loss) income from continuing operations | $(22,449) | $(8,224) | $(14,225) | -173.0% | | Net (loss) income from continuing operations | $(22,969) | $(77) | $(22,892) | -29730% | | Net (loss) income | $(38,132) | $(2,415) | $(35,717) | -1479.0% | - VB Direct net revenues decreased by 16.2% for the thirteen weeks and 19.5% for the twenty-six weeks, with comparable sales down 17.3% and 20.5% respectively, primarily due to reduced conversion and traffic in all channels[153][155][170] - VB Indirect net revenues decreased by 52.5% for the thirteen weeks and 43.2% for the twenty-six weeks, mainly due to a decrease in key account orders and liquidation sales[156][171] - Operating loss from continuing operations significantly worsened, increasing by $7.0 million for the thirteen weeks and $14.2 million for the twenty-six weeks, driven by decreased sales and gross profit, despite reductions in SG&A[160][175] Liquidity and Capital Resources - The Company's primary liquidity sources are cash on hand, cash equivalents, and cash flow from operations, supplemented by a $75.0 million asset-based revolving credit agreement[184] - Net cash used in operating activities increased to $23.3 million for the twenty-six weeks ended August 2, 2025, from $13.2 million in the prior-year period, primarily due to the higher net loss[188] - Net cash provided by financing activities was $9.8 million for the twenty-six weeks ended August 2, 2025, a significant shift from $16.4 million used in the prior year, mainly due to $10.0 million in net borrowings from the credit facility and no common stock repurchases[191] - As of August 2, 2025, the Company had $10.0 million in borrowings outstanding and $65.0 million in availability under the Credit Agreement[193] Critical Accounting Policies and Estimates - There were no significant changes to the Company's critical accounting policies and estimates as of August 2, 2025, compared to those described in the Annual Report on Form 10-K for the fiscal year ended February 1, 2025[197] Item 3. Quantitative and Qualitative Disclosures About Market Risk No material changes in market risks were identified as of August 2, 2025, compared to the prior fiscal year's 10-K filing - No material changes in market risks were identified as of August 2, 2025, compared to the Company's Annual Report on Form 10-K[199] Item 4. Controls and Procedures Management concluded disclosure controls and procedures were effective as of August 2, 2025, with no material changes in internal control over financial reporting - The Company's disclosure controls and procedures were effective as of August 2, 2025, based on an evaluation by management, including the CEO and CFO[200] - There has been no material change in the Company's internal control over financial reporting during the most recent fiscal quarter[201] Part II. Other Information This part covers legal proceedings, risk factors, equity sales, other information, and exhibits Item 1. Legal Proceedings The Company faces routine legal proceedings and disputes a $4.6 million purchase price adjustment request from the Creative Genius buyer - The Company is routinely involved in legal proceedings, including policing its intellectual property rights against trademark counterfeiting and infringement[202] - In June 2025, the Company received a $4.6 million purchase price adjustment request from the buyer of Creative Genius, which it disputes and has filed an action in the Chancery Court of Delaware to declare improper[203] Item 1A. Risk Factors No material changes to the risk factors previously disclosed in the Company's Annual Report on Form 10-K were reported - No material changes to the risk factors previously set forth in the Company's Annual Report on Form 10-K for the fiscal year ended February 1, 2025, were reported[204] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds A new $30.0 million share repurchase plan was approved in December 2024, with no purchases made as of August 2, 2025 - A new $30.0 million share repurchase plan (2024 Share Repurchase Program) was approved in December 2024, effective from December 14, 2024, to December 2027[205] - As of August 2, 2025, no purchases have been made under the 2024 Share Repurchase Program[206] Item 5. Other Information No directors or executive officers adopted or terminated Rule 10b5-1 trading plans during the thirteen weeks ended August 2, 2025 - None of the Company's directors or executive officers adopted or terminated any Rule 10b5-1 trading plans during the thirteen weeks ended August 2, 2025[207] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL documents - The exhibits include CEO Section 302 Certification, CFO Section 302 Certification, Section 906 Certifications, and various Inline XBRL documents (Instance, Schema, Calculation, Label, Presentation, Definition Linkbase Documents)[208]