Vera Bradley (NASDAQ:VRA) reported a return to year-over-year revenue growth in the first quarter of fiscal 2027, with management pointing to improving product traction, tighter inventory control and lower expenses as signs that its turnaround plan is gaining momentum.
Chairman and Chief Executive Officer Ian Bickley said the company’s first-quarter performance marked “an important inflection point” in its Project Sunshine transformation plan. Overall sales rose 7.8% from the prior-year period, which Bickley said was the company’s first quarter of overall revenue growth since the fourth quarter of fiscal 2022.
Margins Improve as Expenses Decline
Vera Bradley’s non-GAAP gross profit was $28.8 million, or 51.8% of net revenue, compared with $24.6 million, or 47.5% of net revenue, in the prior-year quarter. Layding attributed the 430-basis-point improvement to favorable sales mix and lower freight and duty costs.
SG&A expense declined to $32.7 million, or 58.8% of net revenue, from $38.3 million, or 74.2% of net revenue, in the prior-year period. Layding said the decrease reflected cost optimization initiatives that began in fiscal 2025, lower personnel costs, optimized marketing spending, and reduced lease costs from store closures and renegotiations.
First-quarter operating loss from continuing operations improved to $3.3 million, or 5.8% of net revenue, compared with a loss of $13.6 million, or 26.3% of net revenue, a year earlier.
Direct and Indirect Channels Both Show Growth
Vera Bradley’s direct segment revenue increased 4.1% to $44.9 million from $43.1 million in the prior-year first quarter. Comparable sales rose 13.4%, which Layding said represented the fourth consecutive quarter of sequential comparable sales improvement. Growth was driven by improved e-commerce conversion, higher average ticket across channels and increased traffic in outlet and full-line stores. Total revenue was affected by 14 store closures since the prior-year quarter.
The indirect segment posted stronger growth, with revenue increasing 26.6% to $10.8 million from $8.6 million. Bickley said the improvement was driven by specialty and department store accounts and shipments tied to strategic wholesale partnerships, including Target. He noted that excluding key account collaborations, indirect channel growth would have been approximately flat year over year, which he described as “meaningful stabilization.”
Bickley also cited stronger sell-through in department stores, including Dillard’s, and said Vera Bradley is seeing higher interest from existing and new wholesale accounts. The company also launched a back-to-school capsule collection in 89 Nordstrom stores and on nordstrom.com on June 1.
Product Strategy Centers on Heritage, Cotton and Collaborations
Bickley said the first pillar of Project Sunshine is sharpening Vera Bradley’s brand focus after the company had become less differentiated and too reliant on promotions. He said the company influenced nearly 80% of the spring collection, up from 20% of the assortment in the fourth quarter, and that 100% of the assortment for back-to-school and beyond will reflect the work completed over the past year.
The company said cotton material performance nearly doubled from the prior year. Bickley highlighted the Winnie the Pooh collection, which he said sold through strongly in less than two weeks, and said six of the top 10 non-IP products were new styles. He also pointed to the small beaded Roxbury bag at $150 and the original 100 Bag as products that over-indexed with Gen Z customers.
Vera Bradley also used social and collaboration-driven marketing to increase engagement. Bickley said more than 30,000 people queued online for the release of 52 Bespoke 100 bags priced from $95 to $145, which sold out in less than three minutes. He also said collaborations with Bath & Body Works and Target generated user content and brought new consumers to the company’s social channels, with approximately 80% of consumers who engaged through those collaborations being new to Vera Bradley’s social channels.
Inventory Falls to Leanest First-Quarter Level Since Fiscal 2011
Vera Bradley ended the quarter with $12.5 million in cash and cash equivalents, compared with $11.3 million at the end of the prior-year first quarter. The company had no borrowings on its ABL facility at quarter end.
Inventory declined 26% year over year to $73 million from $99.2 million. Layding said this represented the company’s leanest first-quarter inventory position since fiscal 2011. He attributed the reduction to improved assortment planning, buy management, sales performance and the $5.3 million Project Restoration inventory reserve.
During the question-and-answer session, Layding said the company continues to see opportunities to improve inventory turns while working through remaining Project Restoration inventory. He said inventory is expected to land in a range of $60 million to $75 million.
Outlook Maintained for Sales, Operating Improvement Raised
For fiscal 2027, Vera Bradley continues to expect sales in the range of $255 million to $270 million. Layding said the company remains focused on stabilizing the direct business, rebuilding wholesale under new leadership and placing less emphasis on liquidation channels.
The company raised its expected improvement in operating performance to at least 50%, up from 40%, citing expected full-year gross margin improvement and continued cost management. Layding cautioned that quarter-to-quarter improvement is expected to be uneven and noted consumer headwinds from higher inflation and fuel prices.
In response to a question about back-to-school, Bickley said the period is a critical quarter for Vera Bradley and an occasion the brand can “authentically own.” He cited stronger backpack innovation, better inventory in core backpack colors, an earlier promotional start, personalization, an expanded small-bag assortment for Gen Z customers and “teacher totes” in outlet stores.
Vera Bradley also plans to open four new outlet stores. Bickley said the larger outlet opportunity is improving productivity in existing stores rather than broad expansion, and that the company is continuing to refine its Outlet 2.0 concept through a test-and-learn approach.
About Vera Bradley (NASDAQ:VRA)
Vera Bradley, Inc (NASDAQ: VRA) is a lifestyle and accessories designer specializing in colorful, patterned handbags, luggage, travel accessories and coordinated home décor. Founded in 1982 by Barbara Bradley Baekgaard and Patricia R. Miller, the company first gained recognition for its quilted cotton bags sold at craft shows before expanding into an established fashion brand. Headquartered in Fort Wayne, Indiana, Vera Bradley has built a reputation for distinctive prints and functional design aimed primarily at women’s casual and travel needs.
The company’s product portfolio includes day bags, weekenders, backpacks, wallets, and organizational cases, as well as an expanding range of travel gear such as rolling luggage and travel pouches.
