Why This Retail Stock Is Getting Crushed

Shares of Vera Bradley (Nasdaq: VRA  ) hit a new 52-week low last week and continued to trade lower yesterday -- falling to $22.59 a share at midday on Monday. Let's take a look at how the fashion house got there and whether the stock will continue to slide.

How it got here
The company designs, produces, and sells casual handbags and accessories for women under the Vera Bradley brand. Known for its colorful prints and patterns, Vera Bradley generates around $460 million in annual net sales. Unfortunately, the stock is down more than 54% over the past 12 months, despite posting respectable revenue and net income growth.

Vera Bradley sells its products through its own full-price stores, independent retailers, outlet locations, and online at Verabradley.com. Its stock currently trades at 11 times forward earnings, but let's see how it stacks up to industry rivals.

VRA Chart

VRA data by YCharts

According to these results, shares of Vera Bradley continue to lose value, while competitors like handbag designer Coach climb higher.

Company P/E Operating Margin (TTM)
Vera Bradley 16 20%
Coach (NYSE: COH  ) 20 31%
Liz Claiborne (NYSE: LIZ  ) 13 (4%)
Perry Ellis (Nasdaq: PERY  ) 10 5%

Source: Yahoo! Finance and Finviz. TTM = trailing 12 months.

Operating margin is an important metric because it gives us a better idea of the company's overall profitability -- the higher the margin the better. Considering the industry average is 7%, both Vera Bradley and Coach boast favorable operating margins at 20% and 31%, respectively.

While margins at Liz Claiborne are far from ideal, the company is expected to be profitable again this year after nearly five years of declines, according to Bloomberg. Meanwhile, Perry Ellis was a pick by my fellow Fool Ron Gross last month on the Motley Fool Money radio show.  

What the future holds
Vera Bradley's preppy, cult-like following should help carry sales forward in the quarters ahead. However, there are plenty of other retail stocks with promising upside that don't have the volatile temper that's apparent in shares of Vera Bradley. Click here to discover the Motley Fool's Top Stock for 2012 in this free report from the Fool's leading analysts.

Fool contributor Tamara Rutter does not own shares of any companies mentioned in this column. Follow her on Twitter, where she uses the handle @TamaraRutter, for more Foolish insight and investing advice. Motley Fool newsletter services have recommended buying shares of Coach and Perry Ellis International. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


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8/29/2014 3:59 PM
VRA $20.52 Up +0.18 +0.00%
VERA BRADLEY INC CAPS Rating: **
COH $36.83 Up +0.05 +0.00%
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