As a part of an aggressive restructuring and reinvention of its business, Fort Wayne-based Vera Bradley embarked on a plan to cut jobs and close stores in its fiscal 2018 third quarter, which ended Oct. 28.
“We took action to right-size our corporate infrastructure to better align with the reduced size of our business,” CEO Robert Wallstrom said on a conference call that followed Vera Bradley’s Dec. 6 earnings release.
Wallstrom did not elaborate on just what that has meant in terms of its Fort Wayne operations and workforce, but the company took a $3.4 million charge for severance expenses in its third quarter.
The company also closed two full-line stores during the quarter, expects to close three or four more in the current fiscal year, and could shutter as many as 50 more full-line stores by the end of fiscal 2021, primarily as leases for those stores expire, Wallstrom said.
Vera Bradley reported third quarter net income of $400,000, or 1 cent per share, after charges totaling $7.9 million for store impairment, severance, strategic planning and inventory adjustments.
Before charges, net income was $8.3 million, or 23 cents per share for the quarter that ended Oct. 28.
Revenues of $114.1 million were in line with the company’s expectations, but fell short of the $126.7 million in revenues for the same quarter a year ago.
The unadjusted net income of 23 cents per share was well above the 13 to 15 cents the company had forecast. The handbag, luggage and accessories manufacturer and retailer was able to implement expense reductions in conjunction with its new strategic plan, Vision 20/20, more quickly than expected, Wallstrom noted in the earnings report.
The bulk of the new strategic plan will be implemented in fiscal 2019, which will begin at the end of January 2018 and is expected to reduce revenues by $30 million to $50 million in that fiscal year, Wallstrom said.
Moving into next year, the company plans to pull out of its limited wholesale business with a licensing partner in Japan. While the company does believe there is potential for its products in international markets, for the time being it is focusing on its core business, Wallstrom noted.
It also will eliminate its Northbrook full leather, fragrance and jewelry lines next spring and streamline product offerings to remove unproductive or “incongruent” product categories, Wallstrom said.
The bulk of the Vision 20/20 plan will be implemented next year.
“In addition to resetting customers’ pricing expectations and restoring our full-price business by significantly reducing the amount of clearance product available on verabradley.com and in our full-line stores, we are also focusing on streamlining our current product offerings by eliminating unproductive or incongruent categories and SKUs from our assortment,” Wallstrom said.
“In addition, we are building more discipline into our overall assortment architecture by developing strong guardrails around introducing new categories, prices, and patterns.”
Management expects to reduce annual net selling, general and administrative spending by up to $30 million from the baseline fiscal 2017 level of $236 million (excluding severance, Vision 20/20, and other disclosed charges from all periods) through its right-sizing efforts.
The largest part of that cost savings is expected to come from labor reductions at the corporate and in-store levels.
According to the most numbers available, Vera Bradley employed about 700 people in the Fort Wayne area.
For the nine-month period, net revenues totaled $322.6, compared with $351.1 million in the prior-year period. For the current nine month, the company posted a net loss of $1.5 million, or 4 cents per share, after charges of $11.2 million for severance, store impairment, strategic planning, inventory adjustments and lease terminations.