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Why Vera Bradley Stock Slumped 16% on Wednesday

By Demitri Kalogeropoulos – Updated Sep 1, 2021 at 12:18PM

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Management lowered its outlook to reflect two new pressures on sales and earnings.

What happened

Shareholders of Vera Bradley (VRA) lost ground to the market on Wednesday, with the stock diving 16% by 11:45 a.m. EDT. The apparel and jewelry specialist sank after reporting its latest earnings results .

A woman shopping for a purse.

Image source: Getty Images.

So what

The fiscal second-quarter results marked a welcome return to overall sales growth for the business, with revenue rising 7% compared to the same period in 2019. But trends were weaker than expected.

Management blamed less-effective digital advertising on the Facebook platform, which has been a major source of demand for the Pura Vida brand. Vera Bradley also had trouble securing enough inventory and keeping it moving through the supply chain without incurring extra costs.

Now what

CEO Rob Wallstrom said in a press release that the supply chain pressures will keep reducing earnings over the next few quarters. The advertising challenge should lessen over time, though, as the company diversifies into other digital platforms.

But these issues will harm the short-term outlook. Sales are now expected to land between $550 million and $565 million, translating into a slight downgrade from June's prediction. The earnings forecast declined, too.

The downgrades were minor and don't threaten the long-term growth thesis. However, given Vera Bradley's soaring stock price gains through most of 2021, it's no surprise that shares pulled back in response to management's reduced fiscal-year forecast.

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Demitri Kalogeropoulos owns shares of Facebook. The Motley Fool owns shares of and recommends Facebook. The Motley Fool has a disclosure policy.

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