Vera Bradley’s fourth-quarter results came in ahead of management’s preannouncement issued in mid-January, driven by increased distribution and e-commerce gains. However, the first-quarter outlook was below consensus expectations and the commentary related to the firm’s fullyear guidance wasn’t terribly inspiring.

Net revenue came in at $162.5 million, up 20% year-overyear, and ahead of management’s guidance, but segment growth wasn’t consistent. Same-store sales were down 0.4% on weak traffic, as management cited a more pricecompetitive environment and weak consumer. The ecommerce and indirect channels picked up the slack though, as web-based sales rose 23% and the indirect channel (up 11%) benefited from increased distribution and pull-forward of revenue for merchandise shipped early. Operating margins were up slightly (30 basis points, at 24.6%), as channel mix and efficiency gains were partially offset by human capital and marketing expense increases. The net result was $0.62 in per-share earnings, $0.05 above the high end of management’s range.

Looking to fiscal 2014, management is making several changes which it hopes will create a consistent branding message to the consumer, and which should be a long-term positive for the brand. However, the current-year sales growth outlook (8%-9%) is expected to be half the rate of management’s long-range mid- to high-teens target, which is somewhat unsettling. Meanwhile, though there are several puts and takes, the company appears to be managing its growth trajectory well by adding more stores (23 this year), balancing long-range investments, keeping tabs on discretionary spending, and working through last quarter’s inventory issue.

As retail and e-commerce each started less than six years ago, there’s still plenty of room to grow, and the firm has arguably established a fiercely loyal customer base, which will be proudly on display next month at the annual outlet sale in Ft Wayne, IN.


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