What happened

Shares of Vera Bradley (NASDAQ:VRA) rose Wednesday following a second-quarter report that beat expectations. The stock was up about 14.4% at noon EDT.

So what

Vera Bradley reported second-quarter revenue of $113.6 million, up 1.1% year over year and about $500,000 above the average analyst estimate. A $6 million shift in direct segment revenue from the third quarter to the second quarter related to the timing of promotional events helped boost total revenue. Comparable store sales rose 1.7%, while e-commerce sales tumbled 23.1%.

A person holding a red Vera Bradley bag.

Image source: Vera Bradley.

The slump in online sales was due to a reduction in clearance activity. The upside was a 160 basis-point improvement in gross margin. Non-GAAP earnings per share came in at $0.26, up from $0.13 in the prior-year period and $0.10 higher than analysts were expecting.

"We have made tremendous headway against our initiatives over the last year and especially in the last six months," said CEO Robert Wallstrom. "So far this year, we have reduced clearance activity in our full-line stores and on verabradley.com by over 70% and increased full-price selling in these channels by over 20%."

Now what

Vera Bradley expects to produce third-quarter revenue between $98 million and $103 million, down from $114.1 million in the prior-year period due to the shift of revenues into the second quarter. Third-quarter EPS is expected between $0.14 and $0.16, down from $0.23 in the third quarter of last year.

For the full year, the company expects revenue between $410 million and $420 million, and EPS between $0.55 and $0.62. Vera Bradley produced $454.6 million of revenue and $0.60 of EPS last year. The full-year EPS guidance was significantly boosted from a prior range of $0.40 to $0.50.

Pulling back on clearance sales will hurt Vera Bradley's sales this year, but investors seem happy with that trade-off. The stock carved out a new 52-week high following the report, a sign that investor sentiment has flipped over the past year.

Timothy Green has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.