Vera Bradley, Inc. (VRA) operates the Vera Bradley and Pura Vida lifestyle brands via three segments – Vera Bradley Direct, Vera Bradley Indirect, and Pura Vida. Recently, VRA reported lower-than-expected third-quarter performance on both its top-line and bottom-line fronts.
Q3 revenue increased 7.9% year-over-year to $134.7 million, but fell short of analysts’ expectations by $3.3 million. Earnings per share at $0.18 missed estimates by $0.08. Collaborations, higher product demand, and data-driven and targeted marketing helped comparable sales grow by 8% during the quarter.
Sales of the Pura Vida brand rose 11.7% during this period. The company plans to add 3 to 5 additional Pura Vida stores next year. It currently operates one Pura Vida store in San Diego. While the company experienced higher freight expenses and supply chain challenges during the quarter, it has strategically raised retail prices across both its brands to ease off these pressures.
With these developments in mind, let us take a look at the changes in VRA’s key risk factors that investors should know.
Risk Factors
According to the TipRanks Risk Factors tool, Vera Bradley’s top two risk categories are Finance & Corporate and Ability to Sell, contributing 33% and 26% to the total 42 risks identified, respectively. In its recent quarterly report, the company has changed two key risk factors.
Under the Production risk category, VRA highlighted that its results of operations could see a negative impact if the company is not able to attract and retain retail and distribution center employees. Historically, competition for talent for these positions and employee turnover have been high. These challenges have been exacerbated by the present COVID-19 pandemic.
Second, under the Ability to Sell risk category VRA noted that its operating results depend on the proper functioning of its distribution systems. Factors such as the COVID-19 pandemic, macroeconomic trends, shipping delays, and disruptions at ports could lead to higher freight costs, inventory shortages, and missed sales opportunities for the company.
Compared to a sector average of 17%, VRA’s Ability to Sell risk factor is at 26%.
Hedge Fund Activity
According to TipRanks, Wall Street’s best hedge funds have increased their holdings in Vera Bradley by 422.5 thousand shares in the last quarter. This indicates a very positive hedge fund confidence signal in the stock based on activities of 3 hedge funds in the recent quarter. Meanwhile, shares have been essentially flat over the past year with a price gain of 3.7%.
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