Investing in Vera Bradley

Before investing in Vera Bradley (VRA), you should know more about the company. Vera Bradley is a producer, marketer, and retailer of quilted cotton luggage, handbags, and accessories, such as cosmetic bags, scarves, and wallets. Plus, the Vera Bradley brand name is on rugs, party ware, eyewear, and other items. Vera Bradley products are available at 3300 specialty stores, as well as at approximately 49* full-price Vera Bradley stores across 25 states, online and at several outlets

Two friends, Patricia R. Miller and Barbara Bradley Baekgaard, founded this company in 1982 to market and sell their line of colorful, feminine luggage. They named the company after Barbara’s mother, who was a stylish model in the 1930s. Today, Vera Bradley has 1,427 employees, growing into a successful public company.

The results of the second quarter of the 2012 fiscal year that ended on July 30, 2011 showed that Vera Bradley had $103.8 million in net revenues, while the value of diluted earnings per share was $0.34. Compared with the same period the last fiscal year, the company had a 30% increase in net revenues and in a 48% increase in diluted earnings. C:UsersHamdaniDocumentsVRA_News_2011_8_30_General_Releases.pdf

Also, Vera Bradley had second quarter operating income of $22.9 million, which was 22% of net revenues and up from 20% of net revenues from last year. Bonuses paid and stock-based compensation expense has been deducted from the operating income figure. C:UsersHamdaniDocumentsVRA_News_2011_8_30_General_Releases.pdf

According to Michael C. Ray, Vera Bradley’s CEO, the company’s strategy has consisted of effectively handling margins and improving expense management, while offering an exemplary fall product line and continuing “expansion into underpenetrated markets.” C:UsersHamdaniDocumentsVRA_News_2011_8_30_General_Releases.pdf

Moreover, Vera Bradley has opened 12 full-price stores and four outlets since the second quarter of last year, resulting in a 17% increase in indirect net revenues and a 46% increase in direct net revenues. An increase in online sales, as well as a 10.5% increase in comparable-store sales, also contributed to the company’s success, which is evident from the 27% rise in gross profit. Gross profit was $59.6 million, while indirect net revenues and direct net revenues rose to $55.9 million and $47.9 million, respectively.

In addition, Vera Bradley has become successful by focusing on high-quality products that have unique, colorful fabrics and trims. This company also strives to provide excellent customer service, establishing customers who are loyal to its products.

However, Vera Bradley’s competitors use similar strategies, but the company may have the advantage of using washable cotton fabrics, instead of less-environmentally-friendly leather and other materials. (source:, IMC by Jackie Francis) In the luggage niche, Samsonite (SEHK) and Liz Claiborne (LIZ) are two Vera Bradley’s competitors, while the handbag division has Dior (CDI), Gucci (PP), and others as competition.

One way Vera Bradley has differentiated itself from its competition is with indirect advertising: Vera Bradley products have gotten public exposure from being featured on several television shows, such as Desperate Housewives and Modern Family. Its products have also been on more than 20 feature-length movies.

Vera Bradley, like other retailers, has seen fraudulent online sales of its products that can reduce its profits. To limit these sales, Vera Bardley has an eBay page, , that warns buyers to be wary of sellers that claim to be company retailers.

On a positive note, the company founded the Vera Bradley Foundation for Breast Cancer in 1998 and has raised $23 million until 2006. Vera Bradley is also involved in other philanthropic projects, such as donating $1.2 million annually for five years to the Indiana University School of Medicine. Being involved in the community can foster a more positive image of the company that can lead to an increase in Vera Bradley customers.

In September of this year, Vera Bradley announced plans to almost-double its Roanoke, Indiana distribution center from 420,000 square feet from the present 220,000 square feet. This construction project will create approximately 124 jobs and will begin this fall, taking one year to complete. The expansion will not only help Vera Bradley grow its business, but will also provide an economic boost to the city with much-needed jobs, thereby branding the company as people-friendly.

*Hoovers says 35 Vera Bradley stores, while the press release from the company website says 49.