After a Terrible Week, Will Vera Bradley Come Back into Vogue?

Source: Vera Bradley

The week of June 2 through June 6, 2014 was not a good time to own shares in Vera Bradley (NASDAQ: VRA  ) . After reporting earnings that exceeded expectations but revenue that fell short of the company's own forecasts, its shares tumbled 12.5% to close at $23.14.

In spite of this decline, the company's stock is still trading 34% above its 52-week low and just 23% from its 52-week high. This suggests that investors still believe in the business. Moving forward, should the Foolish investor consider taking a stake in the retailer, or would shares in Michael Kors (NYSE: KORS  ) or Coach (NYSE: COH  ) be more sensible picks?

Vera Bradley's running out of style
For the quarter, Vera Bradley reported revenue of $113.5 million. In addition to coming in lower than the $116 million to $120 million management anticipated, the company's top line was 8% below the $123 million reported the same quarter a year earlier.

According to its earnings release, the main driver behind this decline in revenue was its 9.4% drop in comparable sales. Even the business's e-commerce comparable sales took a beating, falling 3.2%. Meanwhile, comparable store sales plummeted 14.4% as lackluster traffic and underappreciated product offerings were blamed on severe winter weather.

Source: Vera Bradley

While investors were displeased with Vera Bradley's poor revenue metrics, some solace can be had if shareholders take a look at the company's earnings. For the quarter, the retailer reported earnings per share of $0.16, handily outperforming the $0.13 analysts wanted to see. However, this fell short of the $0.23 that management reported for the first quarter of the company's 2014 fiscal year.

Are Michael Kors or Coach better opportunities?
The past few years have been very kind to Vera Bradley. Between 2009 and 2013 (the company's 2010 through 2014 fiscal years), revenue rose nearly 86% from $288.9 million to $536 million.

According to its most recent annual report, the retailer has benefited from a 267% jump in store count; it went from 27 locations five years ago to 99 locations now. An 86% improvement in aggregate comparable store sales has also played a role in the business's success, but it's important to remember that this metric has fallen each year over this timeframe.

VRA Revenue (Annual) Chart

VRA Revenue (Annual) data by YCharts

Yes, Vera Bradley has done well in recent years, but the company's performance has significantly lagged larger rival Michael Kors. During the past five years, revenue at this retailer has soared 552% from $508.1 million to $3.3 billion. This was driven in part by a 282% increase in store count from 106 locations to 405. It's important to know, however, that the company also saw its revenue climb because of the aggregate comparable store sales jump of 335% it experienced over this period.

Fortunately, Vera Bradley wasn't the only player left in Michael Kors' dust. Between 2009 and 2013, Coach saw its sales climb 57% from $3.2 billion to $5.1 billion. Like Vera Bradley and Michael Kors, Coach saw its revenue rise because of a confluence of higher comparable store sales and a greater number of locations in operation. During this five-year period, the retailer increased its store count by 41% from 675 locations to 953 while its aggregate comparable store sales improved as well.

Foolish takeaway
Based on the data provided, it's understandable why Mr. Market isn't happy with Vera Bradley right now. Despite the fact that earnings came in above forecasts, the fact that the company was unable to come even close to predicting its revenue suggests that its situation might be far from pretty.

Moving forward, the Foolish investor will want to tread carefully because of these lackluster results. The fact that revenue has risen at a nice clip over time means that the retailer might make for a logical prospect, however. This is especially true when shareholders pit the company up against Coach, but an even more interesting play might be to consider investing in shares of Michael Kors.

Fashionable dividend stocks for the next decade
One way to help protect yourself against downside, like what investors in Vera Bradley saw last week, is to invest in business with big dividends.  By grabbing hold of businesses that reward their shareholders handsomely and that have what it takes to keep their yields coming for years to come, investors can not only mitigate losses, but can also manage to see hefty returns down the road.

The smartest investors know that dividend stocks simply crush their non-dividend paying counterparts over the long term. That's beyond dispute. They also know that a well-constructed dividend portfolio creates wealth steadily, while still allowing you to sleep like a baby. Knowing how valuable such a portfolio might be, our top analysts put together a report on a group of high-yielding stocks that should be in any income investor's portfolio. To see our free report on these stocks, just click here now.

Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2988513, ~/Articles/ArticleHandler.aspx, 8/30/2015 7:03:28 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Daniel Jones

Dan is a Select Freelance writer for The Motley Fool. He focuses primarily on the Consumer Goods sector but also likes to dive in on interesting topics involving energy, industrials, and macroeconomics!

Today's Market

updated 1 day ago Sponsored by:
DOW 16,643.01 -11.76 -0.07%
S&P 500 1,988.87 1.21 0.06%
NASD 4,828.33 15.62 0.32%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

8/28/2015 4:01 PM
COH $29.96 Down -0.14 -0.47%
Coach CAPS Rating: ****
KORS $43.17 Down -0.11 -0.25%
Michael Kors Holdi… CAPS Rating: ****
VRA $10.47 Up +0.26 +2.55%