Vera Bradley (VRA), the retailer known for its colorful, paisley-patterned totes, is finding itself out of style with consumers and investors.
The handbag and accessories maker’s shares plummeted Thursday after the company disclosed a surprise sales miss for the fiscal first quarter, results that even Vera Bradley’s executives said came to a surprise. The problem, according to Vera Bradley, is that while its offerings continue to resonate with existing customers, its patterns aren’t luring new customers to the brand.
“Until we can make meaningful changes to our product offering and marketing initiatives, we don’t expect these sales trends to substantially improve,” said Chief Executive Robert Wallstrom. He said the company was facing a much more challenging environment than Vera Bradley had anticipated two months ago.
Sales for the quarter ended May 3 slid 7.7% to $113.5 million, falling short of the $118 million projected by analysts surveyed by Bloomberg. It was a rare miss for Vera Bradley, which generally reports results that exceed Wall Street’s expectations.
Net income for the period slid to $6.6 million, or 16 cents a share, down from $9.2 million, or 23 cents a share, a year ago. Earnings from continuing operations totaled 17 cents in the latest period, above the 13 cents projected by analysts. Gross margin slid to 53.3% from 55.6%.
The poor sales and challenges Vera Bradley is facing led the company to cut its financial targets for the year. It now sees earnings between $1 to $1.10 a share on net revenue ranging between $510 million to $530 million, new targets that signal both measures will decline from the year-ago results.