Vera Bradley Q3 Profit Declines, But Tops View; Trims 2015 Outlook

(RTTNews) - Women's accessory maker and retailer Vera Bradley, Inc. (VRA) reported Wednesday a profit for the third quarter that declined from last year, reflecting significantly lower operating margins and a revenue decline.

Earnings from continuing operations topped analysts' expectations, while quarterly net revenues missed their estimates. The company also provided earnings and revenue guidance for the fourth quarter, below Street view, while trimming outlook for the full-year 2015.

"We exceeded our earnings per share guidance for the quarter. Our third quarter revenues and gross margin rate were in the mid-range of our guidance; SG&A was favorable to our expectations due to expense control and the timing of certain expenses that will be incurred in the fourth quarter," CEO Robert Wallstrom said in a statement.

The company noted that it exited its direct business in Japan during the third quarter of fiscal 2015 and is accounting for it as a discontinued operation.

The Fort Wayne, Indiana-based company posted net income of $6.94 million or $0.17 per share for the third quarter, down from $15.23 million or $0.37 per share in the prior-year quarter.

Income from continuing operations for the quarter declined to $8.72 million or $0.21 per share from $15.66 million or $0.39 per share in the year-ago quarter.

On average, eleven analysts polled by Thomson Reuters expected the company to report earnings of $0.19 per share for the quarter. Analysts' estimates typically exclude special items.

Net revenues from continuing operations for the quarter declined to $125.20 million from $128.95 million in the same quarter last year, and missed ten Wall Street analysts' consensus estimate of $127.52 million.

Direct segment revenues increased 15.1 percent to $77.9 million, with company's stores net revenues growing 10.4 percent and comparable sales (including e-commerce) increasing 0.9 percent as a 13.5 percent decline in comparable store sales was more than offset by a 22.2 percent increase in e-commerce sales.

Meanwhile, indirect segment revenues declined 22.8 percent to $47.3 million from last year. Operating margin from continuing operations contracted 830 basis points to 10.9 percent from last year's 19.2 percent as gross margin declined 270 basis points and SG&A expense as a percentage of net revenues increased 560 basis points.

Looking ahead to the fourth quarter, the company expects earnings from continuing operations in a range of $0.43 to $0.47 per share, on projected net revenues between $158 million and $163 million. Analysts expect the company to report earnings of $0.50 per share, on revenue of $168.00 million for the quarter.

For fiscal 2015, the company now anticipates earnings from continuing operations in a range of $1.00 to $1.05 per share on net revenues between $514 million and $520 million. Earlier, the company expected earnings from continuing operations in the range of $1.00 to $1.10 per share on revenues between $520 million and $530 million.

Street is currently looking for full-year 2015 earnings of $1.04 per share, on annual revenues of $527.17 million.

"We remain confident that our five-year strategic plan and the steps we are taking to evolve our merchandising, distribution and marketing are the right ones for the future of our business. We are in the early stages of our transformation, and we have made substantial progress over the last three….……," Wallstrom added.

VRA closed Tuesday's regular trading session at $21.53, down $0.11 on a volume of 0.87 million shares.