Vera Bradley, Inc. (NASDAQ:VRA) Q2 2020 Earnings Conference Call Transcript

Good day, and welcome to the Vera Bradley Second Quarter Fiscal 2020 Earnings Conference Call. [Operator Instructions]

At this time, I would like to turn the conference over to Mr. Mark Dely, Chief Administrative Officer. Please go ahead, sir.

Good morning, and welcome, everyone. We'd like to thank you for joining us for Vera Bradley's second quarter call. Some of the statements made on today's call during our prepared remarks and in response to your questions may constitute forward-looking statements made pursuant to and within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 as amended.

Such forward-looking statements are subject to both known and unknown risks and uncertainties that could cause actual results to differ materially from those that we expect. Please refer to today's press release and the company's most recent Form 10-K, filed with the SEC for a discussion of known risks and uncertainties. Investors should not assume that the statements made during the call will remain operative at a later time. We undertake no obligation to update any information discussed on the call.

I'll now turn it over to Vera Bradley's CEO, Rob Wallstrom. Rob?

Thank you, Mark. Good morning, everyone, and thank you for joining us on today's call. John Enwright, our CFO also joins me today. Vera Bradley's comparable sales, full price selling and customer count were all up again in the quarter. However, the overall retail environment and the handbag market in particular remain challenging. We have been most affected in the indirect channel as our partners continue to feel the pressure of this difficult retail environment, and therefore, our total indirect sales fell slightly below our expectations. Additionally, gross margins continue to be pressured by increasing tariffs and higher international and domestic shipping costs.

As you might recall, the first stage of Vision 2020 was to restore the brand and company health and we continue to build upon the progress we have made so far. During the first half of this year, we once again improved quality of sales in our full-line stores and verabradley.com by increasing comparable full price selling in these two channels by approximately 10%. This is on top of a 20-plus percentage increase in the first-six months of last year. This is year two of our three year journey, and we are keenly focused on expanding our customer base and increasing both sales and profitability.

As a reminder, our key areas of focus for fiscal 2020 are number one growth. Our goal for the Vera Bradley brand is to return to positive sales growth this year, and we are off to a solid start in the first half, with comparable sales up 3.3%, in line with our expectations and despite a challenging North American handbag market. This improvement is being driven by compelling, innovative product supported by targeted marketing and customer engagement. Customer count is also up year-over-year.

Number two, operational excellence. We are investing in technology, strengthening business processes and addressing