Target Price for Vera Bradley With One Last Shot at Better Earnings
I've got a new plan for the struggling fashion designer, and then I am exiting the name win or lose.
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Regular readers may recall my misadventure in Vera Bradley VRA, the struggling designer of women's fashion, handbags, luggage, travel items and accessories.
The stock dove off of a cliff back in early December 2024 in response to its fiscal third quarter financial results. For the period ended November 2, 2024, the firm posted a contraction in revenue generation of 29.9% to $80.578 million. The firm was left with a gross profit of $43.609 million, down 30.8% on a gross margin of 54.1%, which was down from 54.8% for the year-earlier comparison.
GAAP operating income/loss printed at $-10.474 million for that quarter, down from the year-ago comp of $6.786 million. GAAP net income/loss crossed the tape at $-12.8 million, down from $5.118 million. This worked out to a fully-diluted GAAP EPS of $-0.46, which was down sharply from $0.16 for the year-earlier period.
After adjusting for impairment charges, income tax adjustments, "Project Restoration" expenses, severance and consulting fees, adjusted EPS printed at $-0.27, down from $0.19 for the year-ago period. Still terrible.
Guidance Wasn't Much Better Than Performance
For the full year, the firm projected revenue of roughly $385 million. That would be down from $470.8 million for the year-ago comp. Full year gross profit margin was predicted to land at 52.5%, which would be down from 54.5%. Full year operating income/loss was projected at $-9 million versus the $22.6 million for the fiscal year prior. Vera Bradley projected EPS for the full year of $-0.25. That would be against the $0.55 that the firm earned for the last year.
Vera Bradley Earnings
Vera Bradley is expected to report the firm's fourth quarter performance late in the second week of March. Wall Street sees GAAP EPS at $0.27 (adjusted down to $0.07) on revenue of about $108 million. Though these numbers seem positive sequentially, they would compare rather poorly to the year ago numbers of $0.11 adjusted on revenue of $133.2 million.
I know that I told readers that I was working to exit this position and that was what I set out to do. I sold half of my long position in the $3.70s on the way down. That said, I bought back that tranche in the $3.20s recently. Hence, my position in terms of shares, stands exactly where it did months ago, though I did extract some capital.
My Plan for Vera Bradley
I am going to give CEO Jackie Ardrey one more shot to get this right. Then, I am getting out of the name.
I plan to add ahead of the numbers and, win or lose, take my leave after those earnings are published. I do not believe that this company has some fantastic future ahead of it, but I do believe that it can post a better-looking quarter and provide a better outlook than it did last time around.
Readers will see that VRA has gone into a basing period of consolidation dating back to mid-December 2024 after that precipitous fall. The unfilled gap created on December 11 would need a tick at $5.37 or higher in order to fill. The stock currently trades toward the bottom of that base.
The Plan for Vera Bradley
Add: Here, around $3.20, bringing net basis down (current net basis: $3.53)
Target Price: $4.35
Pivot: 50-day SMA (currently: $3.60)
Panic: Either at target, or after earnings, regardless of outcome.
At the time of publication, Guilfoyle was long VRA equity.
