Vera Bradley soared on Wall Street Wednesday after revealing a surprise quarterly profit.
The lifestyle retailer — best known for its flower-patterned quilted bags — grew 10 percent in top-line revenues year-over-year, driven by the addition of jewelry brand Pura Vida for the full quarter and strong e-commerce sales at Vera Bradley. Company shares closed up 31.98 percent to $7.14 a piece as a result.
“I am extremely pleased with our second-quarter results, which significantly exceeded our expectations and last year’s performance, despite facing the headwinds of COVID-19,” Rob Wallstrom, chief executive officer of Vera Bradley, said in a statement.
“At both Vera Bradley and Pura Vida, customers responded to new product launches and marketing initiatives and cotton masks also drove meaningful revenue growth,” Wallstrom said. “Our e-commerce business [Vera Bradley and Pura Vida combined] was very strong in the quarter. We know that the pandemic will have a lasting effect on the way consumers act and shop and that our digital competencies will be even more important in this new environment. Our acquisition of digitally native Pura Vida, which resulted in e-commerce being a larger share of our total company revenues, along with our continued investments in Vera Bradley’s e-commerce site and infrastructure, has positioned us well for the future.”
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For the three-month period ending Aug. 1, total company revenues were $131 million, compared with nearly $120 million the same time last year, while profits were $8.3 million, up from $5.7 million a year earlier.
Total revenues at direct-to-consumer jewelry brand Pura Vida — which Vera Bradley purchased in June 2019 — were $32.8 million, up from $5.4 million a year earlier, which represented revenues for a partial period post-acquisition.
The $75 million cash deal to buy Pura Vida, which gave Vera Bradley a 75 percent stake in the business, effectively moved Vera Bradley into the jewelry category, selling things like string bracelets, anklets and stackable rings. It also allowed Vera Bradley, which sells sleepwear, footwear and home goods, in addition to travel accessories, the ability to tap into a greater Millennial and Gen Z customer base.
Wallstrom added on Wednesday morning’s conference call with analysts that Pura Vida introduced hair accessories during the most recent quarter, which are off to a good start.
“We are continuing to expand above-the-keyboard items, like necklaces and earrings, for our customers working from home and [who are] on never-ending Zoom calls,” Wallstrom said.
Other bright spots in the quarter included mask sales, which accounted for a little more than 10 percent of total company revenues. Although Wallstrom said this may taper off in the back half of the year, there’s an opportunity to expand distribution “in terms of the relationships with people like Target and Staples.”
Vera Bradley has 147 brick-and-mortar locations, a combination of full-time and factory stores, which began a phased reopening in May. But while the majority of stores were open for the entire month of July, store traffic was only about 70 percent of last year’s levels. Vera Bradley’s e-commerce sales, meanwhile, doubled during the quarter, year-over-year. In fact, the digital business continued to grow, even after stores began to reopen, according to Wallstrom.
The retailer has plans to open its first Pura Vida brick-and-mortar location sometime in the next year.
“We are actually out there looking at real estate, but we wanted to make sure in this new COVID-19 world that we were able to find the right location,” Wallstrom said on the call.
The company is not providing forward-looking guidance, but Wallstrom said the company expects an elongated back-to-school season as schools around the nation slowly begin to reveal reopening strategies.
“It used to be very targeted in the August period and now we really think that’s going to run out potentially for all of fall. And then we expect it to be an important part of the holiday season,” the ceo said.
Vera Bradley has about $77 million in cash and equivalents and $30 million in long-term debt. The company ended the quarter with more than $136 million in inventory, compared with about $131 million during last year’s second quarter.
“The good news is much of our inventory is not seasonal and does not have the shelf life of fashion apparel,” John Enwright, executive vice president and chief financial officer of Vera Bradley, said on the call.
Shares of Vera Bradley are down about 49 percent year-over-year.