What happened

Shares of Vera Bradley (NASDAQ:VRA) fell 19.3% on Wednesday, after the luggage and handbag specialist announced disappointing fiscal second-quarter results.

More specifically, Vera Bradley's quarterly revenue grew 5.4% year over year to $119.8 million -- or up 0.7% to $114.4 million if you exclude sales from its acquisition of Pura Vida in July -- translating to adjusted (non-GAAP) net income of $8.7 million, or $0.25 per share. Both the top and bottom lines arrived near the low ends of Vera Bradley's guidance, which called for earnings per share of $0.25 to $0.28 on revenue (excluding Pura Vida) ranging from $115 million to $120 million.

Yellow arrow chart with grey background showing losses.


So what

Vera Bradley's modest top-line growth came as a 2.1% increase in comparable sales -- which was in line with guidance for a low-single-digit gain -- was partly offset by the company's decision to reduce its year-over-year clearance sales by roughly $3 million. 

"Vera Bradley's comparable sales, full-price selling, and customer count were once again up in the quarter, and we successfully managed our expenses," CEO Rob Wallstrom said. "However, retail remains challenging particularly in the Indirect channel as our partners continue to feel the pressure of a difficult environment, and our total sales fell slightly below our expectations."

Wallstrom further noted that margins were pressured by higher tariffs and shipping costs.

Now what

For the current fiscal third quarter, Vera Bradley told investors to expect revenue ranging from $122 million to $129 million (including $23 million to $25 million from Pura Vida), up from $97.7 million in the same year-ago period. That should translate to earnings per share of $0.16 to $0.20, including around $0.05 per share from Pura Vida.

As such, Vera Bradley now sees full fiscal-year revenue of $490 million to $505 million (including $65 million to $70 million from Pura Vida) -- which technically marks a modest reduction based on the midpoint of its previous $425 million to $440 million range, excluding Pura Vida.  On the bottom line, that should result in earnings per share of $0.86 to $0.93, essentially a reiteration of its previous guidance before the acquisition.

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