Vera Bradley Executive Insights: Changed Revenue Guidance, Outlet Sales
On Thursday, Vera Bradley, Inc. (NASDAQ:VRA) reported its first quarter earnings and discussed the following topics in its earnings conference call. Here’s what the C-suite shared.
Changed Revenue Guidance:
Neely Tamminga – Piper Jaffray & Co.: So, I want to just dig in a little bit more to the change in the revenue guidance if we can. I mean, I appreciate seeing kind of the transparency around all those, so thank you very much about that. But I am just trying to get a sense as to what’s behind that, is it the actual number of average orders goes lower for the indirect partners or would you be expecting maybe the churn to go up a little bit higher. I think historically you guys have seen like 5% to 10% churn out of those partners. I am just trying to get a sense of what’s behind the actual change? And I have a follow-up too.
Jeffrey A. Blade – EVP, Chief Financial and Administrative Officer and Secretary: So, Neely, the reason for the change in guidance does not have anything to do with any anticipation of higher churn in that channel. So, as we talked overtime typically in any given year, we’ll have 5% to 10% churn in retailers that close our doors for various reasons so that we chose to part companies with. So, we don’t see any change in that for this year. The primary reason for the change in guidance is, as we talked about last quarter and just talked about in our prepared remarks, given the weakness in the spring product assortment and the fact that that has affected some of our independent retailers as they going to put at specialty retailers as they work through some of that inventory. As we work with them FX, Q2 to some extent and may affect some into Q3. So, we wanted to guide appropriately. We are working with them very diligently and we believe that the strengthening, overall product assortment, the anticipated launch of fall, the retirement of some of the older patterns and the efforts of our sales force will address that, but we wanted to guide accordingly.
Neely Tamminga – Piper Jaffray & Co.: So, it’s not necessarily there is any less enthusiasm for the new product line obviously you guys have per se. It’s much more just kind of the reorder side, not necessarily the initial order side, it would be more on the reorder side. Just want to make sure we’re understanding the distinction.
Michael C. Ray – CEO: That’s correct. This is Mike. That’s correct.
Neely Tamminga – Piper Jaffray & Co.: Then just wondering if you guys could talk a little bit about – I don’t know if Roddy is around and wants to chime in on this, but we know – we just want to recall that the back to college strategy last year was (trusted) and incredibly successful for you guys last year. Just wondering how that looks differently this year versus last year, especially now with new categories, new SKUs, more cogency, just wondering kind of what you guys are thinking around that right around the corner?
C. Roddy Mann – EVP, Strategy and Business Development: Neely, this is Roddy. I am here. It is – we are building upon that. It was very successful and we think there are opportunities to grow that this year. We think that’s one of the reasons why we are optimistic about the back half of the year. We think there is a lot of marketing campaigns that we’re continuing build out around back-to-campus, not only the experiential aspects which were very successful last year, but some traditional elements that we’ll be incorporating as well and then we’re working hand-in-hand with each of our retail partners to help them understand all of the marketing activities that are going on and to customize a retail event specifically for their store as it makes sense.
Neely Tamminga – Piper Jaffray & Co.: So, Roddy, last year I think it was maybe all just in Texas. This year, you’re going outdoors, right? Is that kind of the idea that we’re checking this out in some more geographies or is it going to be just be around Texas again?
C. Roddy Mann – EVP, Strategy and Business Development: It will be – so, there is traditional marketing elements that are going outdoors. We do have an experiential a marketing squad that actually has been doing work in the first quarter. They are travelling across the country, but it’s not limited to just Texas.
Oliver Chen – Citi: Our first question was in relation to the operating margins on the Direct side. The two things you cited with the occupancy costs in the lower margins from outlet sales. Do you mind just sharing with us what happened on the outlet sales to contribute to that? I had a quick follow-up as well please.
Michael C. Ray – CEO: Sure. So, the primary drivers of the fact that we’ve got an earlier occupancy for some of the stores that we’re going to open in future quarters. I think overall that’s been a positive trend so far this year. We’re able to open stores a little bit ahead of their schedule and some of that is being able to get turnover events. So we’re going to open – our cadence right now is to open eight stores in Q2 and five in Q3. So getting early occupancy enables us to open a (one-time) earlier. So that impacted us because you have the costs but not the – that’s of course (indiscernible) revenue during the quarter. The second thing with outlet sales, so we run the annual outlet sales in Portland, Indiana as we stated in our prepared remarks, it’s about $11 million of that and the primary driver of that sale is the one (indiscernible) oil sands which we had – as we mentioned more than 62,000 barrels, so to use it as an opportunity to outlet. Retired inventory, and well we enjoyed good margins, our primary focus is to make sure that we move through any older inventories that we think are appropriate and from year-to-year margins will vary to some degree. Then a third contributing factor is that we also continue to dial in the right lineup in selling cadence in our outlet stores and we are a relatively new outlet store operator here, and so we continue to dial that in so that we are competitive with the overall center and we strike the right balance.
Oliver Chen – Citi: May I have this follow-up question. Is there a way you could speak kind of the cadence that you have seen on a month-to-month basis. I know April and March had a lot of these through shifts, but if there are any kind of commentary around that it would be helpful?
Michael C. Ray – CEO: Now, for us there wasn’t anything particularly dramatic about those shifts.