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Why Vera Bradley Shares Sank

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of women's outfitter Vera Bradley (Nasdaq: VRA  ) fell as much as 11% after the company reported a disappointing quarter last night.

So what: Earnings fell slightly from the previous year to $0.33 a share, below analyst estimates of $0.35, and the company scaled back its full-year EPS guidance to $1.60-$1.63 per share from the previous $1.68-$1.71. Despite the disappointing profits, revenue actually increased by 18.5% to $123 million as a result of increased promotions. CEO Michael Ray blamed the results on an "uncertain consumer environment," and said May and June were particularly slow months, though business improved in July as its fall merchandise line was well received.

Now what: One positive note was Vera Bradley's 37.2% increase in direct revenues, driven by the addition of 21 new stores. That segment now makes up more than half of the handbag-maker's sales with $65.7 million in the last quarter. This higher-margin channel could help boost profits in the future, considering same-store sales grew by a respectable 5.3%. If the company can keep its promotions under control and still boost sales, the new stores could add significant value for investors.

Want to stay connected with Vera Bradley? Just click here to add it to your Watchlist.

Fool contributor Jeremy Bowman holds no positions in the companies in this article. The Motley Fool has a disclosure policy.

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Related Tickers

10/21/2016 4:00 PM
VRA $13.40 Down -0.31 -2.26%
Vera Bradley CAPS Rating: **