VRA - Earnings call transcript Q3 2018

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Operator

Good day everyone and welcome to the Vera Bradley Third Quarter Fiscal 2018 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Mark Dely. Please go ahead, sir.

Mark Dely

everyone. welcome and morning Good We would Vera joining for you to third quarter thank Bradley's for earnings us like call.

differ risks constitute of to forward-looking a Some of prepared questions today's to assume the Bradley's response the our of ended discussed time. the press later materially actual to XXXX, The Harbor SEC made meaning both, call filed subject the company Private call I Form information call XX-K today's made of Securities call. and to Act discussion may and operative your uncertainties. Litigation will the within are the Company's the remain no statements the statements remarks any January cause we made Rob? that of on and Reform on to risks Rob turn forward-looking Wallstrom. pursuant statements those provisions Safe over should Investors during could for will the and from XXXX and unknown expect. known the statements update that during results to and that as not to at amended. Such obligations XX, undertakes refer the uncertainties CEO, fiscal known with Please year now Vera a release for in

Rob Wallstrom

John our is also CFO, Thank you, call. Mark. on Good morning, everyone and Enwright, us today's on thank you for call. joining the

quickly our along meaningfully conjunction management. primarily of in implement was Excluding XX/XX expense due to $X.XX expected, ability with $X.XX $X.XX Vision charges, our certain EPS with originally expense third EPS quarter This more to ahead to diligent guidance. was of than reductions

guidance our rate gross margin quarter was slightly were below. Third our revenues and within

restore quarter, driven an reducing over a and our expenses. to clearance Vision to less SG&A brand last our will company business years. three aggressive discussed meaningfully model business plan Vision by held moving is XX/XX we strategically As the next turnaround XX/XX and

price we line pricing building into product business our customers on verabradley.com full amount and focusing expectations our by significantly also and on resetting the full assortment stores, of clearance are restoring discipline reducing overall our offerings. available to addition more streamlining In in and

Of creativity innovation, product our remain online in experiences. our also both, on offerings on and marketing newness will course, and our keenly in-store providing in initiatives and and customer we and focused our customer

product we reminder, initiatives a beginning the As implement fiscal of and XXXX. in XX/XX majority Vision the will pricing

As this a year million revenues that expect result, we next $XX base. be our $XX year's negatively from by million will revenue impacted to

won't offsetting down on a As there our as a gross moderate mix will term take and deleveraging we effect channel overhead the related margin experience inventory margin, cost. levels short activity have of side long-term clearance to positive note, our gross and reducing be while pressure changes on in

quarter annual we also SG&A fourth rightsizing baseline in our XXXX upto Vision XX/XX, $XXX already the part spending align key Certain a quarter to reduced are of reflected level reduce from to As have business. size reductions costs our third million $XX by of million, net and guidance. fiscal results organization our expect by the excluding of begun our with the better and in charges

XXXX in expect fiscal the of of will the million reductions million be We of a million SG&A of end reductions completed made to total those that annualized $XX fiscal by about $XX XXXX. with $XX

and as on well our our guidance for John give with future XX/XX right for and quarter John? XX, additional conjunction our is you XXXX. course XXXX third plans year after initiatives, next for more restoring in an reviews our by our we'll on solid still brand the are We finalizing cash complete performance Vision setting current Vision year-end outlook. the March color I'll health, earnings improving continued some release results producing fiscal Vera as and update Bradley on of fourth XX/XX provide operating quarter flow. our operating

John Enwright

good Thanks, and morning. Rob

for e-commerce be current offset coupled partially decreased reduction outlined to segment key a guidance revenues year continued in Comparable line was million Net a decreased of The impacted from revenues a in number growth. reduction $XX.X go today's in accounts. segment from million $XXX to which Let release. with over of million. highlights in charges store a year, X.X%, $XX.X the decrease numbers store me and will year-over-year million of $XX.X to I million, the negatively accounts orders few X.X% million quarter $XXX.X both specialty quarter. the $XXX last Direct sales prior with accounts revenues were totaled XX.X% specialty and exclude from third our reflecting new year. sales million the $XX.X and Comparable traffic. declines by certain in prior by Indirect non-GAAP in

end to for margin XX.X% reduction year. offset mix changes, quarter decline our related below channel partially Excluding range in to gross a XX.X% the costs, all rate guidance our the was XX.X% and fall The increased which factory of stores in of charges, of activity point well promotional our gross rate our primarily product margin XX.X%. compared XX caused basis by to to last

to more to guidance $XX.X conjunction SG&A in the Excluding expense implementation XX.X% lower meaningfully than XX.X% year. of of was or of our XX.X% The than $XX due charges, quickly and XX/XX expected. to management, revenues, certain million, totaled diligent million or expenses expense Vision with rate net XX.X% last reductions compared

for $X approximately expected budgeted fourth In marketing be the the expenses to quarter of and third incurred in now are other million addition, quarter.

or the totaled the and operating to million to quarter revenues of net XX.X% to million for revenues XX.X% in million XX.X% million compared million of compared third spending respectively. operating net X.X% year. $XX operating of million net or Excluding nine $XX compared the revenues last Direct or charges, prior Net million, capital year. income months prior was XX.X% was income quarter in $XX.X of total or million in of Indirect income or third $X.X $XX.X XX.X% net revenues current year year. net revenues $XX.X revenues of and totaled or net the $X.X $XX.X

approximately or of we average $X.X $X.X shares of brings million price at XXX,XXX approximately repurchased quarter, the During $X.XX. $X.XX. nine million at of to an average This total stock price or common purchase our shares XXX,XXX an new months third

As We and the expire XXXX. end our repurchase year. of Directors debt outstanding authorization $XX November, inventory of of end end no $XXX $XXX.X the at the guidance the to program repurchase this under third of had million December we compared million through at of third million. quarter, remaining Quarter to December $XX.X XX million at of third end investments a of cash low equivalents, Quarter-end In was of Board authorized end quarter-end. expansion cash, the to scheduled million million $XXX.X XX, year's totaled approximately million quarter quarter. the to was or and last of on $XXX $XX.X last compared year's had the

our and estimates for in consulting, certain numbers certain Let's other severance the to store disclosed reserves. Keep income current at the and release year store; the impairment mind prior full the previously impairment, of in outlook shift focus exclude and severance, year our that fourth charges the quarter year. or tax charges

we to year $XXX expect quarter, million revenues $XXX.X million. of prior million revenues net compared For the of fourth $XXX to

prior on high segment the in decrease year, indirect Based will in revenues including including we to range. percentage down direct be comparable revenues flat-to-down trends, e-commerce percentage expect be a believe We a low-single net to net recent range. sales low-to-mid, single-digit digits the our compared teen

the to in from XX.X% to the prior Our to to implementation as in expected year Vision XX.X% from compared range to expense SG&A expected management for in and the quarter, to is the of of for XX/XX range margin expected XX.X% Expense to savings. gross due compared XX.X% fourth is a fourth XX.X% leverage XX.X% excluding sales percentage decline quarter revenues the despite prior is year. charges. net

$X.XX. to EPS diluted expect We of $X.XX

fourth charges, diluted last EPS in was Excluding year's $X.XX quarter.

inventory in to the $XX year's end. the million million at be to range end expect last year, to fiscal at $XX fiscal million $XXX.X compared of We

to we year, $XXX.X $XXX of net million expect year. full million, compared For revenues last to million $XXX

the segment direct XX% compared down to full net the revenue single revenues sales year digits net approximately Indirect are in be last for to digit range. with guidance revenue down low year. mid-single expected Our comparable including decline e-commerce assumes to percentage

expected in SG&A year by margin promotional activity increased expected compared to XX.X% a to is range product XX.X% taken to net offset from a relates compared Modest channel fiscal XXXX for factory to partially the decline slow-moving due fiscal XX.X% to last to is gross XXXX softer XX.X% Company's to range expected at stores, against revenue XX.X% for the expected from is last and sales. Our deleverage inventory, year. adjustment changes excluding The XX.X% mix reduction percentage charges. to of as cost.

the excluding EPS fiscal $X.XX. $X.XX to diluted expect We to charges for year full range

totaled Before $X.XX charges, diluted EPS year. last

net primarily related capital to spending continued year, our million to to store line factory total $XX openings, full full technology new $XX expect and store for renovations investments. approximately the We million

over turn back us Let business the me to update details more Rob XXXX. on Vision give and an who call on will Rob?

Rob Wallstrom

John. Thanks,

of you developments distribution about talk and Let me update couple on product more I Vision our before XX/XX.

of newly introduced our added new continue On silhouettes. remains our to and XX% about business. quilting, cotton, functionality several our the be featuring we which in most iconic innovation collection front, are product of reinvention excited Customers to responding micro updated cotton

season one and of was Opera's our are we very that the pleased happy body holiday [ph] are favorite sell-throughs. We RFID as this all-in-one with things cross selected

are pleased making We with licensing. also we are the in progress

and strategically placement layering in positive we terms continue and to reach in opportunities phone an distribution. in to both markets to customers. existing see licensing new the exceptionally cases, We new of response market from bedding are From

Our received. medical been positively very uniforms has latest into entry

this We future. and concept events use we sales event flash from us success also verabradley.com. October. site certain experience The in will other will a tested to sales-like in allow was strategically to learnings flash The segregate from clearance our execute

this and featuring and four Oaks, with store brand far full location. in end. the the our XXX line fiscal year announce productive closures base our this about current new stores opened a of We hall by to line year; additional we have line in store Boston three continued so half We or two have results and closed been our most with design California, very to in Thousand in San the traffic happy full Francisco high store expect upgrade full September stores On standards. front, pop-up updated we

bringing side, stores year are On opened this performing to factory new the and factory XX factory count our we stores well. our six

factory In believe of note we six to another presence implementation expect We the to in Vision with stores Japan. At very we strengthening a small partner. mid-XXXX about the wholesale Japan we moderate it term. over on recall, per new operations be On as might a you XX/XX. this year time focus is through domestic important our licensed will exiting core add have

to international comfortable there lifestyle. for continue from long-term, remove the focus as affordable product our particularly that and believe are clearance in We our we and opportunities excess assortment the activity expansion casual, verabradley.com on

me let Vision to turn XX/XX. Now

made a are the quarter quarter. XX/XX lot During of continuing the our third progress we we into that work and detailed plans fourth solidifying Vision

you XX/XX company Vision to driven know, for are business and and less key for reducing focus long-term significantly SG&A position clearance which Bradley areas moving Vera model brand As health. should the a the improved expenses

Of through course, and top team. product of brand my innovation marketing desirability remains product driving

product and on focus areas. we pricing will the three On front, key

clearance and full This to pricing First, full the business. of and will help available we in product our customers restore reduce price will verabradley.com expectations our on our amount reset stores. line significantly

year. begin Implementing of with change the this limited will help spring year I see this sale next throughout flash of will a event effort. You number

have or our our assortment. from products and current we incongruent categories offerings unproductive eliminating begun SKUs narrow Second, to already by

fragrance jewelry we For just and collection year. example; next bringing continuing [indiscernible] are base leather our

we begin and our inventory As reduce clearance levels year. offerings, down will come next narrow to

brand we assortment our building introducing fit reflect provide signature assuring beautiful not solutions are that affordable. around and Lastly, attributes only categories, right our guardrails patterns and our and also products the pricing; on of comfortable, but focused tighter new for casual

of you least are could of this characteristics we prints. a in should patterns the our done and comprehensive lot by DNA analysis amongst patterns work changes most we popular drive we the isolating Conversely, the these outside and year. to conjunction consultants, several with around have more see Over fall months our our and findings of commonalities next apply determined determining we have forward successful pattern the with last confident successfully

align in with front, took actions corporate size we SG&A of third better infrastructure our the quarter size right reduced On business. to to the the our

store forward, on As will reducing expenses lower and we we other operating and look corporate stands aggressive to continue go return optimized taking more on marketing for costs. spend efficiencies,

XX underperforming primarily upto In expire. the line of forecasting leases addition, full end XXXX, stores are fiscal we close by the as

prior to cost opportunities job And and that three lower as as offset incremental will and We expect will continuing and over operating we are manufacturing, next years reduce By our years. brand believe have deleverage help raw to become solid better supply we shifting savings levels the sourcing our reducing can remain will and sourcing cost healthier, questions. XXXX, focus will call product These we fiscal changes. now up overhead business of the the performance and efficiencies. cash will material and by Vision good our there XXXX distribution executing the sales channel inventory beyond. a chain in three natural occur mix on open improve flows over we Operator, and that done

Operator

Mark with will come question Robert Baird. W. first Instructions] [Operator from Your Altschwager

Mark Altschwager

asking a about this the price in versus about about comp bit trends start to you wanted just little could the outlet. talk quarter, full I

broadly trends we've other talk retailers traffic and October in heard firming more about think into late some some I November.

you're along if lines as curious seeing well? anything those Just

John Enwright

a and disclose a from comp in early our business. So from we in difference full saw traffic into between perspective, factory line into October comp improvement traffic the and perspective, saw factory full full factory. ultimately better the late line but we are in than kind [indiscernible] of both line We our some November, and don't

Mark Altschwager

ask I the And to marketing holiday wanted the also plans for period. about and

that on the more And would So going being a into think talked you up with of QX, then conceptualize those outlined in about being Just some there? release, bit. be done I conversion color is in you what's customers how activities; QX? allocated? marketing shift versus awareness brand spend on the maybe dollars are quarter just a year-over-year with -- focus last to bit core Thanks. the little more timing

John Enwright

-- a be perspective versus trying about think funnel kind consumers. to the we're going fourth some of so flat and funnel higher the is spend to convert we're more kind more transaction marketing I down-ish ultimately from focus we've to on talked fourth continuing in Mark, slightly more quarter of into spend lower quarter, to

Rob Wallstrom

spend our activities put really quarter funnel only it's to much brand lot a those specific drive that top to customer opposed working customer So targeting as mean on and more their -- -- customer spend our really about focusing think you also it's the digital in with of existing lower fourth really and side conversion marketing journeys building. of to being base, as I trying to on kind could

Operator

And next we'll hear from Oliver Chen with Cowen & Company.

Courtney Willson

consumer at or and picture e-comm. separately; the overarching bigger you market in us could and then, channel, XX/XX bag on and evolve and update indirect your on of hand just on changes you're the accessories about Thanks. Just optimize could seeing forward; considering about wondering you Vision long-term going the kind view between distribution of department thinking network how just this trend the the to large, behaviors market? balance stores your and And how sort thoughts within plan any stores

Rob Wallstrom

whether us and having store distribution really store and each pruning focused as that that work to implementation been make that channel with the clearance it. stores The on continuing promotional very we part First to the price whether Vision think and been verabradley.com, tightening for side encouraging doing seen sure in amount the reducing to and been on that that the to they clearance out our with our the of activity look of at department results. begin key We're department has who department we that they the and of really indirect be we're indirect [ph] that's believe business; door that trends so see terms partners, we've of has are channel, one about of the or is XX/XX are believe we online indirect. the brand improve our in as specialty the partners most distribution, full are it all, part indirect catalyst we've of part also oriented stronger less destabilizing of will actually to of had to in our activity some

on as forward the opportunities we continue really really us to to that for and health. kind in of brand terms so overall been thoughts in been look our handbag maybe narrow restore we've the focus I that's of to what is lot helps go the the And less happening see. of now a market And and seeing a handbag yes, think markets; negative research some on encouraging is which

NPD do do we such movement hit we handbag I at over decreases maybe out seen the erratic kind terms little beginning seen and to still look still we on we the of XX robust last we're of we the trend. we but that downs, some ways market in think We see go But of seen some negative handbag have think bottom data and to some to have performance to that month a feel month, in beginning see months have that -- and before handbags ups improvement a again. or as

Operator

Instructions] Capital, AWH [Operator From Austin Hopper.

Austin Hopper

to you maybe prepared gross XXXX kind your margins well, for XXXX; In similar alluded XXXX? comments to of in near-term I will that margins be it gross call think are or you -- you saying

John Enwright

we not the versus short-term. we've some specific mean the will XX/XX benefits expect longer I term guidance benefit have Vision Yes. but given

DC that were see So some really the of half more the be costs will FYXX. we'll deleverage on in ultimately niches the Canaveral FYXX [ph] back some reduced of into -- based working inventories and but through savings

Rob Wallstrom

year to are similar So be what to we we are margin gross expecting next today.

Operator

From Marotta. C.L. King Steve Associates, &

Steve Marotta

that would of a rough be can from that the a there? and costs breakdown to How SG&A expenses, some of and annualized other you couple buckets in million rough estimate give Is from from you from savings can $XX much headcount, $XX give it million standpoint? possible an stores,

John Enwright

savings marketing size looking of of whether think of we'll largest going well a ultimately kind associated store stores the think the that with kind you also kind accretive as and reduction, that as just discretionary we in-house either bring next between some and some And perspective, so the dollars. with of for total to kind of to about if not see we're about we'll be through that's is be efficiencies going associated Then of whether totals, corporate or ultimately, labor combined. from and the is savings spend our incremental the some down some stores consulting's. have larger marketing as broken our really going close, where on kind contract that that the we'll to T&E closures, associated bucket probably then spending we're it's refocus do, with at So

I and So give at and kind between salaries level, exact can't you corporate. is but the towards dollars weighted bucket a this very the high more of stores

Steve Marotta

from the of design I are XX to was bit could an update where think over about the lower go the and you there is related lead XX far that months? little Can a talk One how you the you part question times; initiative of delivery. believe time the to months next over last you to

Rob Wallstrom

Absolutely. supply our diversify bit. chain, different two we initiatives against a they little each to have actually Two do continue other things; as we work and working

time. division little a where we a on diversified So we've a bit more focused places of pressure in have from of our Cambodia lot fleet but Myanmar, ability that's put which Vietnam move and into little to increased as like accept and timeline the is factory we that development the really China bit and

responsive think what product really upfront have backend moving of more and cycle inventory our on of full what much to the our business, about core development that with chaseability, separating us chaseability consumer. we're if to which and on In is so the makes from call working we've what's going our we chasing really you inventory our less been we price more terms investment

we've timeframe very of still had a overall in things we but the and opportunities have cycle development the to as we're reducing Vision learn month working So the of some piece the terms in print much and so been we've rapidly, gone why energy investing it kind core XX/XX test business, in cycle cases, that's itself time and in that to development of a concept-to-market; behind takes The because do four XX-month on plus of and from prints. work. we're

Steve Marotta

months plus and design-to-delivery; XX months from for now now target targets you the XX months now? from do a XX have have for You from

Rob Wallstrom

In our now. terms now focus timeframe, it's of primary overall right

products being get prints effective, really and design right, back being Our through our we primary getting focus is as effective, around assortments that will our our getting really really works the closer.

we we're as of get the more talk that as give We versus we that next can much are finalizing long color our into of around how lead. inventory kind targets We chasing year. about

Operator

to at over additional And the any turn remarks. this Instructions] for time, I like [Operator management back would or concluding to conference

Rob Wallstrom

us March our thank to call speaking year-end and for today. look earnings you you joining Well, we XX. holidays, on Happy on to forward Wednesday,

Operator

conclude And Ladies and your We everyone may that does presentation. gentlemen, for you thank do participation. disconnect. today's now

Vera Bradley (VRA) 6 Dec 172018 Q3 Earnings call transcript