Too many Vera Bradley patterns and styles contributed to customer fatigue last year, company officials said Wednesday as they reported 15 percent lower earnings for the fiscal year ended Feb. 1.
They also warned that this will be a transition year marked by continued uncertainty for the Fort Wayne-based maker of quilted cotton handbags, luggage and accessories.
But investors must have liked the five-year strategic plan that leaders, including President and CEO Robert Wallstrom, outlined during a morning conference call with analysts.
Vera Bradley’s stock price increased by $1.95 to close at $28.20 at the end of trading Wednesday on the Nasdaq stock market.
Among other impending changes, the company is discontinuing its baby gift and clothing lines in the fall.
Vera Bradley on Wednesday recalled two baby gift styles: Bear ring rattles and bunny stuffed toys that were made in China. The pompom tail can detach from the animals, posing a choking hazard to young children.
Wallstrom, who joined Vera Bradley in November, is the former president of Saks Fifth Avenue’s OFF Fifth division, the New York-based company’s value division.
Career handbags will be a key focus for the company, which will change to more solid-colored fabrics, said Sue Fuller, Vera Bradley’s new chief merchandising officer.
The retailer will reduce by 30 percent to 40 percent the vast assortment of products it offers now, she said. The items being eliminated account for only 5 percent of sales volume, she said. Fuller also wants to shorten the turnaround time for new designs and pay closer attention to customer demand.
We need to produce what is ordered rather than trying to sell what is produced, she said.
Wallstrom announced plans to launch products that will be produced specifically for sale in the company’s outlet stores.
Analysts with Sterne Agee said results will depend on how well Vera Bradley executes the strategy. The firm has a neutral rating on Vera Bradley’s stock.
Although we believe management has a firm grasp of the issues that have plagued the business over the last 12 to 24 months, we believe there remains a fair amount of execution risk – and we would not get involved in the stock until there is greater clarity regarding progress of the turnaround, given the market appears to already be giving them credit for the turn, the firm said in a report issued Wednesday afternoon.
Vera Bradley reported fiscal 2014 annual earnings of $58.8 million, or $1.45 a per diluted share, a 15 percent decline from the $68.9 million, or $1.70 a share, for fiscal 2013.
Net revenue dipped by 1 percent to $536 million. Fiscal 2014 was Vera Bradley’s third full year as a publicly traded company.
In the fourth fiscal quarter, the company earned $19.4 million, or 48 cents per diluted share, a 23 percent decline from the $25.1 million, or 62 cents a share, for the prior year’s fourth quarter.
One-time charges for the fourth quarter and full year included a $4.8 million pre-tax inventory write-down. Also, fiscal 2013 included 53 weeks, one more than fiscal 2014.