What: Handbag and accessory designer Vera Bradley (VRA +0.26%) saw its stock jump 17% during the month of September, according to S&P Capital IQ data. Yet, while (very) recent investors are likely feeling good about the quick bounce, most shareholders remain deeply in the red on this retailing stock: It has shed over 40% in the last year and is down 55% since 2010.
So what: But the stock surged last month after Vera Bradley beat second quarter earnings expectations on the top and bottom lines. Sales rose 2%, trumping Wall Street forecasts of a 3% drop. And profit of $0.15 per share was significantly above both analyst and management targets. "We are pleased that better than expected revenue, gross margin rate performance, and disciplined expense management drove EPS above our guidance," CEO Robert Wallstrom said in a press release.
Sure, the results beat expectations. But you still couldn't call them good. Vera Bradley's comparable-store sales shrunk by 15%, and its e-commerce business slumped by 15%, too. The key silver lining in the report is that management was able to hold the line on price cuts, which resulted in a surprisingly high profit margin of 55% of sales. That's particularly good news, because it suggests the retailer is seeing at least a slight uptick in demand for its current line of purses and accessories.
Now what: Still, Wallstrom and his executive team expect a tough road ahead as they work to implement a turnaround for the company. And after this most recent double-digit sales drop, investors shouldn't count on revenue growth to return to the business anytime soon. Gains near the end of the second quarter point to a stronger third quarter for Vera Bradley. However, while profits this year won't be as dire as Wall Street had feared, there won't be a real turnaround until the company starts attracting more customers into its stores. Last month's earnings report suggests that that moment is still far away.
