Vera Bradley, Inc. Q3 FY2026 earnings call

• Sharpening brand focus: Leveraging joyful brand DNA through innovative product relevance and storytelling to reconnect with loyal customers and engage new audiences, ensuring consistent messaging across touch points.
• Resetting go-to-market approach: Rationalizing SKU count, clarifying go-to-market process, implementing integrated social-first marketing, revamping inventory management, driving pricing and promotion governance, and building analytics capabilities.
• Rewiring digital ecosystem: Optimizing performance across digital touch points from social media to vb.com and outlet online presence for customer acquisition and retention.
• Outlet 2.0: Developing a more brand-enhancing and productive outlet experience with curated assortments, elevated visual merchandising, and enhanced selling experiences.
• Reimagining how we work: Shifting organizational structure and culture to build capabilities for sustainable growth, focusing on agile decision-making and aligned processes.

Vera Bradley, Inc. Direct segment revenues for the third quarter totaled $49.7 million, a 5.3% decrease from the prior year third quarter. Comparable sales declined 5.8%, marking the third consecutive quarter of sequential comparable sales improvement. Indirect segment revenues for the third quarter were $12.6 million, a 30.2% decrease from the prior year third quarter, primarily due to a decline in specialty and key account orders, partially offset by increased liquidation sales. Third quarter gross margin totaled $26 million or 41.7% of net revenues, down from $38.4 million or 54.5% in the prior year. SG&A expenses totaled $37.4 million or 60% of net revenues, a $6.2 million decrease from the prior year, primarily due to lower compensation expenses and other cost reduction initiatives, partially offset by a media credit write off. Third quarter operating loss from continuing operations was negative $11.1 million or negative 17.8% of net revenues, but excluding certain charges, it was negative $1.2 million or negative 1.9% of net revenues.

• Expecting product success in 2026, particularly in spring summer season, with bigger commitments to iconic styles, heritage-inspired prints, and cotton, which are expected to drive business improvement.
• Focusing on improving inventory turns, aiming to move inventory turns into the greater than two to three range over the next twelve to eighteen months.

• Uncertainties in executing transformation initiatives which could impact the expected progress of brand focus, go-to-market approach, digital ecosystem optimization, Outlet 2.0, and organizational reimagining.
• Market uncertainties that could affect consumer demand and the ability to reconnect with loyal customers and engage new audiences as planned.

Q: How should we think about opportunities to tap working capital with inventory reduction and the journey to reach younger customers?

A: On inventory, they see opportunity to improve turns, aiming for greater than two to three range over twelve to eighteen months. On reaching younger customers, it will take time; they're focusing on reengaging loyal customers, improving product with iconic styles and function, and shifting focus to marketing and digital commerce to target younger customers, with initial signs like the 100 bag showing twice the penetration of Gen Z customers compared to other products.