Vera Bradley, Inc. (VRA) F2Q13 Earnings Call August 29, 2012 4:30 p.m. ET Executives Paul Blair - Investor Relations Michael Ray - Chief Executive Officer and Director Jeffrey Blade - Executive Vice President, Chief Financial and Administrative Officer Roddy Mann - Executive Vice President, Strategy and Business Development Analysts Neely Tamminga - Piper Jaffray Jennifer Davis - Lazard Capital Markets Erika Maschmeyer - Robert W. Baird Evren Kopelman - Wells Fargo Amy Noblin - William Blair Peter Wahlstrom - Morningstar Oliver Chen - Citigroup Steven Marotta - CL King & Associates Ike Boruchow - JPMorgan Presentation Operator
We understand that this is a busy period for reporting and intend to keep today's call to an hour in length. Therefore, during our question-and-answer session we ask that participants pose one question with one follow-up to allow as many callers as possible the opportunity to take part in today's call.I will now turn the call over to the Vera Bradley's CEO, Mike Ray. Michael Ray Thank you, Paul. Good afternoon, everyone, and thank you for joining us today. With me are Jeff Blade, our Chief Financial and Administrative Officer; and Roddy Mann, our Executive Vice President of Strategy and Business Development. Today we will focus on three main topics; the highlights of our fiscal 2013 second quarter performance, a review of our initiatives and outlook for the remainder of fiscal 2013, and an update on the progress against our long term growth strategy. Although there were many accomplishments during the quarter, we also fell short of our expectations. As we shared our during our previous call, our most significant challenge has been a product portfolio that has underperformed. While our spring and summer collections had a positive impact on the overall offering, they were not enough to overcome the weakness of prior season in the midst of a challenging consumer environment. As a result, while we met our revenue expectations, we sacrificed gross margin in the quarter. We will provide more insight on this topic throughout the call. After a challenging May and June, business improved significantly in July with the successful launch of our fall back-to-campus collection. As we begin the third quarter, we’re encouraged by our current momentum, the strong sell-in of the winter collection to our specialty retail partners, and strengthening comparable store sales. In the second quarter, consolidated net revenue grew 19% over the prior year to $123 million, in line with our guidance. Consolidated gross margin was 55.8%, a decline of 170 basis points to prior year, reflecting the impact of increased promotional activity to address lower than expected sales trends early in the quarter. As a result, net income decreased $200,000 to $13.4 million or $0.33 per share versus $13.6 million or $0.34 per share in the prior year.
In the indirect segment, revenue grew 2.6% in line with our expectations. As a result of the challenges I mentioned earlier, we experienced lower than anticipated reorders from our specialty retail partners during May and June. As we shared in our last call, we’ve been working closely with them by assisting in a variety of ways to support their in-store events and other marketing efforts to improve sell-through. The sales team also provided support to ensure that our partners had the proper merchandise assortment and marketing plans in place to capitalize on the highly anticipated fall back-to-campus launch.As a result of these efforts, we believe that our specialty retail partners are now appropriately merchandised and are experiencing strong sell-through of our fall offerings as evidenced by the positive reorder activity we’ve experienced since mid-July. Also during the second quarter we continued to expand our presence in the department store channel by opening an additional 70 Dillard’s locations and embarking on a new relationship with Von Maur opening in their 27 stores. In our direct segment, revenue grew 37%. During the quarter we opened eight new stores, achieved comparable store sales growth of 5.3% and grew our e-commerce business by 21%. In response to the challenges I mentioned previously we were increasingly promotional as the quarter progressed, primarily in outlet stores as well as on our website. The weakness in May and June was partially offset by the successful launch of the back-to-campus collection as well the continued strength of our new store openings. Read the rest of this transcript for free on seekingalpha.com