VRA - Earnings call transcript Q1 2019

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Operator

Good day and welcome to the Vera Bradley First Quarter Fiscal 2019 Earnings Conference Call. This call is being recorded. And now at this time I'd like to turn the conference over to Mr. Mark Dely, Chief Administrative Officer. Please go ahead, sir.

Mark Dely

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

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

Rob Wallstrom

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

make. plan improved results and and the and health expense expense to continues exceeded very realigning related expected by behind gross we a expectations clearance rate, year leverage. materially planned quarter selling are This be our our to inventory driven both our strengthen brand margin first clearance reduced than price Company force was by action to than We better and our structure higher every pleased reducing that performance. driving Vision prior primarily full XX/XX largely and –

the sales four on our are SG&A XX/XX, reminder, delivering reporting monitoring restoring customer full price and and excellent improved by reductions, in stores verabradley.com on in of first and flow over As quarter. progress selling selling, activity routinely implement sales initiatives in comparable retention made range. our XX% these and reduced key generation, two to we by cost quality on elements; Vision full-line clearance these high-single cash continue the our of we We full-price progress a against the base. in and channels digit We of increasing

compared on by management, over cash deliver $XX We to our our of diligent XX/XX implementation our and continued investment through to and balances Vision increased prior million. reductions million the first expense initiatives. $XXX We to quarter than SG&A more

good substantial is expected, progress through made The down clearance I new on about fronts talk the our are in purchasing. desirability verabradley.com marketing of reducing exceeded price the And on channel. a customer online primary the full issues well. levels traffic later through quarter in these drive goal that news our to brand percentage higher will brand and innovation, expectations stores the customer traffic the our overall is in was count in factory due combined count significantly and continued lower with full-line reflecting As and for XXXX fiscal product entering customers this call. to A as we more and

first over financial quarter I the Now, John review the John? will call turn to performance. to

John Enwright

Thanks Rob, and good morning.

a highlights few the over Let for me go quarter.

totaled quarter line million were mind in net year structures. numbers range in million. the quarter, million. $XX.X statement keep that severance quarter prior guidance million net sales previously our income of discuss year of the Prior $XX $XX.X disclosed year I with $XX first As Current exclude first sales to

share. a year diluted or net before million loss $X.XX guidance our Current was prior quarter, range we Comparable $X.X $XX.X the first a million, million than year to $X.X new by sales, totaled decrease quarter. share loss net which from $XX.X partially quarter offset growth. Last segment in the of totaled or posted X.X% $X.XX $X.XX better year per quarter first which for X.X% store of sales $X.XX loss. including Our per direct first severance million e-commerce was decreased charges,

our online our XX.X%, better-than-expected outlet at the gross activity and full-price were in better accounts stores. million increased by point due a quarter first of quarter expense from the the $XX.X expected, sale or and quarter, prior and due $XX.X sales compared flash expenses Gross decreased were selling the negatively These sales primarily $XX.X key were comparable in profit orders increased costs and than reduction approximately reflecting especially by timing verabradley.com prior expenses our freight for As changes, or and sales, was in excluding XXX lower in XX.X% million activity. million, a sales sales our of to XX.X% factory quarter, full-line severance reduction $XX to of accounts. to totaled in to both, in $XX.X savings. clearance million XX.X% full-line sale expense XX.X% first activity stores, totaled Indirect with on verabradley.com SG&A and guidance partially related a in clearance full-price channel from improvements range XX.X% in quarter and million year prior primarily of The $XX of compared impacted million margin the activity segment rate the the promotional verabradley.com management. specialty meaningfully stores. basis offset certain outlet to year product improvement, than year-over-year of slightly careful first charges. selling year to sales mix to reduction net $XX.X guidance million first on SG&A reduced or $XX.X on

XX.X% X.X% X.X% quarter charges operating the loss an million, year segment, or in of the year-over-year nice Indirect million, million prior income also By Direct of compared first net year million, and severance $X.X in sales to year; or operating percentages. or in in margins operating X.X% operating the $X.X of totaled net Our sales first was the $X.X XX.X% had operating to million, income or a in prior sales XX.X% or sales or of we loss year. of $X.X quarter. to prior excluding was current $X.X increase million, $X.X compared compared

me first for year million. end last to Cash, CapEx. turn equivalents, compared we investments quarter totaled no balance to let at end and first and to quarter outstanding. year's spending million quarter Now had in this capital still the the about of $X.X Net million the $XXX.X expect We totaled $XXX.X sheet. million spend $XX cash at debt

million $XX.X $XXX.X end million Quarter-end by XX% $XX at guidance low of the year's over reducing first We at compared by to have quarter is our end inventory well million last effectively to the of was million. working which above inventory managed our sales capital and of $XX decline.

will to year non-GAAP non-GAAP. store for let's I second previously numbers full that quarter non-GAAP legislation, Prior and all impairment, exclude tax turn our other the Now numbers the potential are mind estimates severance, any exclude year year. consulting, disclosed Keep charges. outlook in Current guidance reference that similar and reform item.

fall annual by to week beneficiary ahead. the to be year, quarter Just year apples-to-apples; a things look last the second promotional we event mind, XX/XX couple from this anniversarying XXrd the of year. in comparing year as keep the Due this last reductions. year SG&A birthday will this year will second our of shift in not the moved quarter sale by quarters, Also the to begin the of expense it's as into [ph] year factory of last of Vision quarter mention we third

we year half expected fall as second continue to prior below the to result, a performance EPS reduce sales. As

compared For of year the prior sales to the this of the year we quarter million estimate quarter $XXX.X year to of that of into move will net from $XXX approximately sales third quarter second second quarter, million shift. to million. week the $X calendar We XXrd second last related million expect $XXX

in quarter. net to digit during range We flat We sales to sales the including expected decrease mid-single our in prior segment to e-commerce up will direct in low low the the mid-single believe the indirect down be the low digit comparable range range. single-digit sales net compared a to be year including to

million gross due $XX the reflects mentioned expense this promotional to We estimate The we've million expected quarter. $XX.X of to and management second certain compared expense, the into marketing, year second year. expect year's compared $XX margin of last second rate XX.X%. be The million SG&A XX/XX slightly of quarter flat down to quarter. to second in quarter from savings SG&A range primarily into event Vision shifts expected SG&A the the the implementation may prior timing previously to slightly down to our shift or expenses, to by be offset

second in quarter. will be $X.XX to second compared quarter prior EPS expect the to year We diluted $X.XX $X.XX

to share on As EPS previously approximately of the quarter. $X.XX diluted based shifts benefit second mentioned, per event

end expect range of of million inventory quarter. year to in compared to the be end second $XX the the the quarter, $XX second $XXX.X to million We prior the million at at

a is $XXX.X compares this million. updated the As sales million been of in annual will sales by $XX and product majority annual we year have guidance of implemented to initiatives impact reflected Vision $XXX million million last reminder, these negatively and million of year-over-year believe to changes pricing to This $XX XX/XX $XXX which our year.

to The increase on offset to from in full range. net is net and XX.X% last to inventory compared clearance guidance single-digits comparable Indirect year. the the for last and mid-teen of year. in be to reduced the costs, overhead XX.X% will year-over-year lower sales expected Gross be to year by mix sales product percentage to channel percentage sales to reliance due levels. revenue XXXX segment range with to down boosted by expected to decline percentage XX.X% rate single-digit assumes range down should expected to high compared deleverage fiscal e-commerce Our direct range low-teen lower margin are low-teen partially changes by a selling including high low

management the more our while stores. most $XXX growing $XXX expense between stands reducing aggressive marketing year SG&A closing million our to operating better and million year, of on expect reductions $XXX.X to are last size million through our under-performing loyal with estimate Expense with compared focusing business, expense of the by XX/XX corporate total for coming store infrastructure and our to on We savings. costs reflecting right-sizing Vision taking align engaged and full-line efficiencies customers spend keeping

$XX from we $XXX began expense, our through spend the $XX The XXXX end fiscal XXXX charges the increased we the Based full XXXX As and SG&A XXXX in $XXX in million by of a which on expectations expense excluding of will for SG&A fiscal charges. baseline reduction million process diluted $X.XX. reminder, million quarter million by to and year XX/XX be fiscal annualized is performance, of to our guidance. of $XXX disclosed $XX SG&A $X.XX million that reflected first the implemented severance million the reduction expect to fall fiscal totaling EPS expect Vision we upto these through to

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

We to XXXX. in fiscal in continue flow million operating to million expect $XX Rob? cash $XX

Rob Wallstrom

John. Thanks,

few comments and Let me about more make products, a just stores. marketing

We to categories like [ph] signature will solids Innovation through on selling our adding key. silhouettes continue focus full driving price and colors, business of styles Top our new are XX our SKUs and and to back campus travel. and

out our nice seeing solid denim new our paint-off in growth and innovation gold are rose We to colors XX Top and travel like and backpacks. responding areas of and new of silhouettes shimmer, items, are customers

guard new look our and We assuring [indiscernible] comfortable, brand reflect affordable. assortment will opportunities for licensing like casual right then remain that for to extensions products appropriate focused and our continue also year. attributes our our introducing will and collection for rails pricing brand signature our fit the on of patterns next announced tighter categories, implementing debut around recently We

DNA our of analyzed and thoroughly isolating the the brands. have pattern most characteristics our We performance historical successful determining

going are applying analysis from more this success pattern comprehensive findings forward. the We drive to

sell-through are only Vera our to had lining during events sale with other initial the are but XX days speaks states available with clearance annual few Bradley a to our hyper products our not In these countries nearly You in in brand with our gathering customers. allow and several conjunction on with April awareness the in from in product events findings verabradley.com, our This and loyalists should is million more promotional full-line and pattern pilgrimage These strength. three up performance events shopping for increase duration area, first significantly brand reducing marketing of flash sale successful projections, clearance the fully see first digital we These August on [indiscernible] us fans. changes generating our implemented over of manner. current outlet strategy. amount with launch merchandise annual limited feature We quarter. $X in and in in the hosted all fact, more to continue our revenue and discrete to much widely verabradley.com we stores, brand to marketed full-price XX,XXX another then marketed

placements focused Our efforts on more quarter folks digital full marketing less on first emphasis much and on and sale. offerings with price and high quality clearance targeted

over up customers recognition conversion. the were our million in the year. piloted journey's best impressions of special throughout total program the are saw million $XX our nearly Our and incentives With to we XX% quarter. customer our quarter lift where XX,XXX customers given during initial test We in $XXX

continue We this are program year. refine to excited expand we'll throughout about the potential and and the

on a We initiatives charitable also continuing women children. are particular with focus and our community and

cancer we the of since cancer decades research has year. Medicine foundation's philanthropic program the establishing tools inception. from $XX Just blessings fall, our have recognition in million this announced country a Vera will foundation. Indiana at-risk The need they around successful Vera will this school Foundation the over XX,XXX breast so and from Center research Bradley Bradley the support of breast cities University they the backpack of are two for our for at in over kick-off [ph] And IU to children foundation donated the week the School

first locations. On the quarter full-line store We in XXXX. closed approximately stores front, stores we quarter fiscal with expect the close to full-line X XXX the in and XX in

the include Charleston, Jersey XX the Tinton of in York; and expired. XX quarter X Baraboo, to in stores prior ending operated Day, our Pennsylvania new which South start second laying lot opened traffic, returning the strong. heavy a New the and first XXXX, growth the expect to remain have opened period the Mississippi. summer healthier, operating to ahead and to season. lease We will Falls, By official expect We Carolina; the we we look but Operator, new and of will of business. foundation executing Each the tourist solid George, as primarily, off these and future two stores factory the will lifting locations XX/XX, we in Jersey become in start. cash Wisconsin; the for factory Gulfport, of still in Vision We locations Memorial call in high now three-year good We fiscal business the quarter the final Shore are locations our open approximately will are are that factory a we performance New flows quarter; Lake close growth. questions. during stores forward to brand improve end, is At New

Operator

hear [Operator we Instructions] Kloppenburg Janet with first, And will from JJK Research.

Janet Kloppenburg

I if there? be fiscal will be hopeful your what's in like business to the you. seems channel; stabilization? promotional learn that know, turn 'XX? sounds of And indirect about would it washed declines visibility that channel strategy starting when in It could -- Rob, are talk the promotional little out impact in the like the also, you you can more terms bit a is performance great Thank -- you're positive but wondered improving to are And [indiscernible] moderate there about. impact the change your you and in

Rob Wallstrom

all, in beginning indirect which terms hear First see of great beginning we of from beginning is step. are margins indirect to are gross partners improve are our first to that improve, business a the to our sell-through's and

what's a total see luckily, but to with and news out was on piece of was partners good closure seeing that it business. and we're retail, there is that to our begin onetime that going closely, we're stabilize. material our for Obviously, the department So not us particularly obviously watching disappointing watching store as in

beginning we really which but just watching the our is to and So encouraging. sector are store department sell-through see better specialty we're channel

this this grow continue get again. year, the we to will On would we that reduction that see to in anticipate so clearance impact. see activity side, e-commerce will throughout business e-commerce year, into our as we would begin yes, fiscal we we see next But

Janet Kloppenburg

full-price about the about are the trends And you what there? stores? comp feeling How

Rob Wallstrom

excited but trends the beginning we year relative stores traffic see that of rest verabradley.com encouraging was closely going so the definitely go to quarter single-digit, business see in in first our we obviously, that is and that are both really increased and to high is during line to a been encouraging a sign full-price We're to improving see. our monitoring And be full that of to full where our the they've to we're the is the very very again very in second sign which price stores as encouragement.

Janet Kloppenburg

And just the merchandising for the cotton assortment, in the the of thinking about of execution lastly, balancing that complete and in year? we is the content, rest terms should way product what be increase upgrades you

Rob Wallstrom

so merchandising our and a have stay represents number. us, it for the XX% think comfortable fairly is standpoint; we everything total all we think that. expect about cotton number around and half sell, towards business you will all, first business other the that probably From healthy that XX% the business our but that's we we solids is if categories our which of very other of that of the moving XX% about We business in feel have other about we that a

introduced see we We of our to are the strong as cloth in some particularly categories fabrics as introduce in leather new particularly what opposed continuing business, to performance call I solid fabrications, the that really past. we've

So to again, see in encouraging that that part.

in terms DNA line performance in the forward product the the coming half our look with is back that up we excited going year, we pattern to out of of As are work.

performance pattern some has in the positive So we pattern able watched will the we're very and year, our that of first as as with we've get that. performance the at we're seeing continue tweak changes responses expectations end, really some expecting And increase. were the to of to the line the season, to we the fall from half been

So of we confidence pattern in project ability are our building pattern -- terms performance. to

Operator

Capital will we now Edward Markets. KeyBanc with hear from And Yruma

Unidentified Analyst

for taking thanks our questions. for [ph] This Ed, is Matt on

can the stepping So back, business you the health comment of brand right now. on

So signage you assortment, perception and adding more change able a have detect far? design, and years, lot cotton; far to in I smaller past new your the you thus in been have so guess of store so limiting promotions, any effort score brand changed would so things how

Rob Wallstrom

took over always brand see. to Absolutely, points, first of all, we we saw Matt. encouraging last that the Couple year of to so brand awareness awareness about our answers was and XXX that, track our basis up

looking we is with one as going the seeing on is, full-price were the brand looking at we're well number As we we're business. full-price, brand that becoming, we're obviously at out. health, the believe the healthier more going thing what's business Obviously, to our driving full-price

traction The other reactived -- our customer continuing our within thing we beginning file, customers, strengths as we're in that are again, is as see continuing and to we're and more file; assortment. the refind customer our more are watching to look at so we're

feel So we're the we're the acquisition just to and that strength initial build is customer we then taking, to in steps the brand future. eventually looking continue more drive healthier, forward that pushout to getting

Unidentified Analyst

had that you assume of that, for about help. gross selling the the couple the row mentioned So assortment, building and talk on pretty smaller you've rest the of line year. full a in a with Can like deeper price I on you nice you quarters takes can obviously, inputs will order in and now, that certain expansion. puts margin a

I bit it like so you conservative, could just walk gave gross line? a guess you that margin little So the is me through seems guidance

Rob Wallstrom

lot first didn't and deleverage can we're single-digit, we're of the be margin, done going half in savings, didn't a product that's the guidance associated distribution to I a and the so happening margin IMU our team, and has with in reasons there in perspective. challenges some gross quarter, that and closer much in have full-price to to to design hard of from some going work from cost for team selling year we levels, we so know, the anticipate. up quarter we mean some improvement and for but what be our quarter inventory takes, did been full is up savings looking the some about year we we're all Yes, cost do sourcing of of at that the a why expect the a have gross fourth for looking the of development expectations Ultimately, has one talked year. so against puts also the good that our at you first expanding pressure perspective this. our so our team that initial in team, of the the I've that see high working I anticipated been back reduced

performance. conservative. So, would I that I our I our don't guidance -- know our updated expectation say think I is would what our first if guidance call current given quarter

Operator

will to now Company. a & Instructions] with Chen We Oliver question [Operator move Cowen from

Unidentified Analyst

about This value-driven stores terms [ph] for at capture items? you our will today, for were you online? Could questions. is of thank performance of you promotional in some saw to and versus Oliver who customer able what and Joanna you what saw you talk your you. taking outlet great, be just thank the That more terms in full-line traffic shop conversion And used of to

Rob Wallstrom

Let me that. and try answer

full bit little seen businesses in as outlet bit in business, flow. seeing channel, little have the a full First traffic stronger outlet we a line what our of of of definitely we're our from all, become in versus traffic terms in the line softening

traffic watching, we our anticipating outlet. been the has is trend that through and will to really has up there year there go of of that thing lot terms so so In one little strengthen have changes as more challenges softened and and but between been that we're calenderization we're bit, outlet on a weather a begin a little

channels that's conversion outlet improving, been On what the are. so we on our have flipside,

impact of to down the amount very changes clearance that we in out full-price down is we've due our our seeing been actually traffic business total significantly the but taken actually up conversion on converted traffic is of e-commerce always our business, the amount slightly activity, we've terms which activity. In conversion we've conversion just promotional of higher, that with to the but are we of actually the reduction due are e-commerce of pleased clearance taken seeing -- because out the

Unidentified Analyst

have seen to some exposure have cotton price increase impact from any that? given you And the you

Rob Wallstrom

sourcing team a piece high and that cotton really a done other job the From offsetting total cost has good The of of sourcing standpoint, not our no. ways is that. of finding

Operator

Instructions] remarks. no the in will any back additional your the host And closing over additional [Operator with queue or questions turn I for call to

Rob Wallstrom

closing, would amazing In Vera our like thank I to Bradley team.

We are speaking all success. quarter committed our team forward and of to our thank to joining scheduled executing tenacity we ahead X. for to be an second today, to you and Vision you exciting XX/XX, September will we call on and future key have And look collaboration, ingenuity the our us for

Operator

for We conclude With participation and you you do and that, conference this for your may today. ladies gentlemen, now disconnect. will thank your

Vera Bradley (VRA) 6 Jun 182019 Q1 Earnings call transcript