Shares of the handbag company jumped at the start of trading by more than 10 percent to $10.07, an eight-month high, after it posted second-quarter net revenues of $112.4 million, compared to $119.2 million a year ago, on net income of $2.2 million, compared to $5.1 million.
While the results are in line with Vera Bradley’s internal expectations, and a 4.3 percent decline in comparable-store sales was offset by sales at seven new stores, chief executive officer Robert Wallstrom admitted “challenges in the retail environment” permeated the second quarter.
For the first quarter, Vera Bradley posted a net loss of $4 million and saw revenue fall to $96.1 million and announced it would be closing at least 15 stores, along with vague plans to increase its marketing effort and focus on digital sales.
Wallstrom said the efforts have showed “meaningful” changes, but “given the backdrop of a challenging retail environment, our progress has not been at the pace that we planned.”
“Consequently, we are in the process of refining our business model and strategic plan, which will involve taking a much more aggressive approach to turning around our business over the next three years,” Wallstrom said. “Our ultimate goal is to restore brand and company health by methodically moving to a less clearance-driven business model and reducing our [selling, general and administrative] expenses.”
To that end, Vera bradley is working with an outside consulting firm to review its business model and its “existing strategic plan” and the research will be used to aid what the company is calling its “Vision 20/20” plan.
Wallstrom said there will be more details to share over the coming months, but that the focus right now is on product and pricing and expense reductions.
Part of this will see Vera Bradley return more to a full-price model with a reduction in markdowns and a “streamlining” of products on offer, but the company is also aiming for cost cuts up to $30 million through a “right-sizing” of the organization in order to align with “the reduced size of the business.”
Some of the cuts are already being made, but a majority are expected to come in fiscal 2019, according to the company.
The company recently found a new chief financial officer in John Enwright, one of several retailers to make changes to the executive financial role over the last few month.
Looking ahead to the full year, Vera Bradley is still expecting sales to top out at $470 million, compared to $485 million last year, but Wallstrom is hopeful for the coming years.
“By executing Vision 20/20, we believe we are on the right course for the future,” he said.
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