Please ensure Javascript is enabled for purposes of website accessibility

Why Vera Bradley, Inc. Dropped Nearly 14% in April

By Daniel B. Kline - May 5, 2016 at 11:53AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Sometimes what looks bad on paper is not really worth getting upset about, but the market tends not to subscribe to that idea.

Vera Bradley (VRA 0.92%) released its annual report at the end of March, which sent its stock plunging downward.

What: Even though it merely confirmed what had already been reported in the company's Q4 earnings report, the release of the handbag, luggage, and accessories company's annual report clearly did not please the market. It was released on March 29, 2016, which coincided with the company's share price going in the wrong direction, though it did take a couple of days for the big plunge to happen.

The stock price stood at $20.01 at market close on March 29 and finished the month on March 31 at $20.34, at which point the market seemed to have digested the bad news. From that $20.34 March close, the stock dropped steadily in April, closing out the month at $17.54, a 13.8% drop, according to data provided by S&P Global Market Intelligence

Image source: YCharts.com.

So what: Vera Bradley is in a time of transition, and its net revenues decreased by 1.3% to $502.6 million in fiscal 2016 compared to $509 million in fiscal 2015. Those are not terrible numbers, but the company did show other signs of weakness.

While its company-owned or "direct" sales channel grew by 4.7%, that was due to adding stores. Comparable sales, which include e-commerce, actually fell by 10.6%. In addition, indirect segment sales fell by 12.7% to $151.3 million in fiscal 2016 compared to $173.4 million in fiscal 2015.

Now what: The share price fell in April for short-term thinking reasons. The company is in the midst of a multi-year repositioning of its brand, and CEO Robert Wallstrom sounded very confident that the plan was on track in the company's Q4 earnings release. He noted that the numbers for the quarter were within guidance. He also expressed strong hope for better results going forward.

"We took a very disciplined approach to enhancing gross profit in fiscal 2016, and we are especially proud of our 370 basis point gross profit percentage increase for the year," he said. 

Realistically, nothing happened during the company's fiscal 2016 to make investors think the long-term turnaround plan won't work, Wallstrom hit his numbers, and the company made strides toward changing its distribution and its brand positioning. As a shareholder, April was a bad month, but if you had faith in the multi-year plan, then you should still believe.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Vera Bradley, Inc. Stock Quote
Vera Bradley, Inc.
VRA
$4.38 (0.92%) $0.04

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
316%
 
S&P 500 Returns
112%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/03/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.