Vera Bradley, Inc.

Previous wording

The following discussion summarizes the significant factors affecting the condensed consolidated operating results, financial condition, liquidity, and cash flows of the Company as of and for the thirteen weeks ended May 3, 2025 and May 4, 2024. The following discussion should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended February 1, 2025, and our unaudited condensed consolidated financial statements and the related notes included in Item 1 of this Quarterly Report. The results of operations for the thirteen weeks ended May 3, 2025, are not necessarily indicative of the results to be expected for the full fiscal year.

Current wording

The following discussion summarizes the significant factors affecting the condensed consolidated operating results, financial condition, liquidity, and cash flows of the Company as of and for the thirteen and twenty-six weeks ended August 2, 2025 and August 3, 2024. The following discussion should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended February 1, 2025, and our unaudited condensed consolidated financial statements and the related notes included in Item 1 of this Quarterly Report. The results of operations for the thirteen and twenty-six weeks ended August 2, 2025, are not necessarily indicative of the results to be expected for the full fiscal year.

Previous wording

Macroeconomic and Other Factors. We continue to closely monitor the dynamic economic landscape and are actively managing the impact of elevated tariff costs. Ongoing inflationary pressures and related macroeconomic factors have continued to affect consumer discretionary spending. As a result, our Vera Bradley outlet and full-line stores continue to experience softer performance during the first quarter of fiscal 2026. We remain focused on executing our strategic initiatives and adapting to current market conditions to position the business for long-term growth.

Current wording

Macroeconomic and Other Factors. We continue to closely monitor the dynamic economic landscape and are actively managing the impact of elevated tariff costs. Ongoing inflationary pressures and related macroeconomic factors have continued to affect consumer discretionary spending. As a result, our Vera Bradley outlet and full-line stores continue to experience softer performance through the first six months of fiscal 2026. We remain focused on executing our strategic initiatives and adapting to current market conditions to position the business for long-term growth.

Previous wording

In connection with the leadership transition, effective July 7, 2025, current Board of Director member, Ian Bickley, will assume the role of Executive Chairman, a newly established position. In this interim executive capacity, Mr. Bickley will provide leadership and strategic guidance during the CEO transition period and will also serve as Chairman of the Company’s Board of Directors. The Executive Chairman role is expected to be temporary and limited to the duration of the CEO transition.

Current wording

On June 11, 2025, the Company announced the departure of its former Chief Executive Officer, Jacqueline Ardrey, and that the Board of Directors had initiated a national search for a successor. Effective July 7, 2025, Board member, Ian Bickley, assumed the newly created role of Executive Chairman. In this interim executive capacity, Mr. Bickley will provide leadership and strategic guidance during the CEO transition period and will also serve as Chairman of the Company’s Board of Directors. The Executive Chairman role is expected to be temporary and limited to the duration of the CEO transition.

Previous wording

Additionally, the Company announced the appointment of Martin Layding as Chief Financial Officer, effective June 12, 2025. Michael Schwindle, the Company’s current CFO, has announced his resignation, effective June 30, 2025.

Current wording

Additionally, the Company announced the appointment of Martin Layding as Chief Financial Officer, effective June 12, 2025.

Previous wording

Gross profit can be impacted by changes in volume; fluctuations in sales price; inbound freight and other logistical costs; operational efficiencies, such as leveraging of fixed costs; promotional activities, including free shipping; commodity prices, such as for cotton; tariffs; and labor costs.

Current wording

Gross profit can be impacted by changes in volume; fluctuations in sales price; inbound freight and other logistical costs; outbound freight; operational efficiencies, such as leveraging of fixed costs; promotional activities, including free shipping; commodity prices, such as for cotton; tariffs; and labor costs.

Previous wording

The following tables present net revenues and operating (loss) income by operating segment, both in dollars and as a percentage of associated net revenues, and store data for the periods indicated ($ in thousands, except as otherwise indicated):

Current wording

The following tables present net revenues and operating income (loss) by operating segment, both in dollars and as a percentage of associated net revenues, and store data for the periods indicated ($ in thousands, except as otherwise indicated):

Previous wording

VB Indirect. For the thirteen weeks ended May 3, 2025, net revenues in the VB Indirect segment decreased $3.0 million, or 25.6%, to $8.6 million, from $11.5 million in the comparable prior-year period. The decrease was primarily due to a decrease in key account orders, specialty account orders, and liquidation sales.

Current wording

VB Indirect. For the thirteen weeks ended August 2, 2025, net revenues in the VB Indirect segment decreased $11.5 million, or 52.5%, to $10.3 million, from $21.8 million in the comparable prior-year period. The decrease was primarily due to a decrease in key account orders and liquidation sales.

Previous wording

For the thirteen weeks ended May 3, 2025, gross profit decreased $11.2 million, or 33.1%, to $22.8 million, from $34.0 million in the comparable prior-year period. As a percentage of net revenues, gross profit decreased to 44.1% for the thirteen weeks ended May 3, 2025, from 50.1% in the comparable prior-year period. Current year gross margin was negatively impacted by channel mix shifts from higher to lower margin channels and increased incremental shipping costs from a higher mix of digital channels.

Current wording

For the thirteen weeks ended August 2, 2025, gross profit decreased $11.2 million, or 24.0%, to $35.5 million, from $46.7 million in the comparable prior-year period. As a percentage of net revenues, gross profit increased to 50.1% for the thirteen weeks ended August 2, 2025 from 49.7% in the comparable prior-year period. Current year gross margin was positively impacted by a decrease in liquidation sales, partially offset by channel shifts that resulted in increased incremental shipping costs.

Previous wording

The effective tax rate for the thirteen weeks ended May 3, 2025, was (2.3)%, compared to 25.1% for the thirteen weeks ended May 4, 2024. The change in year-over-year effective tax rate was primarily attributable to a full valuation allowance recorded against the Company's net deferred tax assets. See Note 7 "Income Taxes" of the Notes to the Condensed Consolidated Financial Statements for additional information about the Company's interim provision for income taxes.

Current wording

The effective tax rate for the thirteen weeks ended August 2, 2025, was 0.4%, compared to (188.2)% for the thirteen weeks ended August 3, 2024. The change in year-over-year effective tax rate was primarily attributable to a full valuation allowance recorded against the Company's net deferred tax assets. See Note 7 "Income Taxes" of the Notes to the Condensed Consolidated Financial Statements for additional information about the Company's interim provision for income taxes.

Previous wording

VB Direct. For the thirteen weeks ended May 3, 2025, net revenues in the VB Direct segment decreased $13.3 million, or 23.6%, to $43.1 million, from $56.4 million in the comparable prior-year period. Vera Bradley comparable sales decreased 25.0%, which includes a 34.3% decrease in comparable store sales as well as a decrease in e-commerce sales of 11.7%. In addition, non-comparable revenue decreased $0.3 million. The decrease in comparable sales and comparable store sales was primarily due to reduced traffic, conversion, and units sold in the full-line, outlet, and e-commerce channels.

Current wording

VB Direct. For the twenty-six weeks ended August 2, 2025, net revenues in the VB Direct segment decreased $25.1 million, or 19.5%, to $103.6 million, from $128.7 million in the comparable prior-year period. Vera Bradley comparable sales decreased 20.5%, which includes a 30.2% decrease in comparable store sales as well as a decrease in e-commerce sales of 4.8%. In addition, non-comparable revenue increased $0.3 million. The decrease in comparable sales and comparable store sales was primarily due to reduced traffic, conversion, and units sold in the full-line, outlet, and e-commerce channels.

Previous wording

For the thirteen weeks ended May 3, 2025, SG&A expenses decreased $4.3 million, or 9.5%, to $40.8 million, from $45.1 million in the comparable prior-year period. As a percentage of net revenues, SG&A expenses increased to 79.0% for the thirteen weeks ended May 3, 2025, from 66.4% in the comparable prior-year period. For the thirteen weeks ended May 3, 2025, consolidated SG&A expenses decreased primarily due to a $4.0 million reduction in employee-related costs, including reduced headcount and lower variable compensation; a $1.5 million reduction in advertising costs resulting from sales decreases as described above; and $0.1 million reduction in net other expenses. These decreases were partially offset by $1.0 million of property, plant, and equipment impairment charges in the current year period.

Current wording

For the twenty-six weeks ended August 2, 2025, SG&A expenses decreased $8.3 million, or 9.3%, to $81.2 million, from $89.5 million in the comparable prior-year period. As a percentage of net revenues, SG&A expenses increased to 66.3% for the twenty-six weeks ended August 2, 2025, from 55.3% in the comparable prior-year period. For the twenty-six weeks ended August 2, 2025, consolidated SG&A expenses decreased primarily due to a $4.7 million reduction in employee-related costs, including reduced headcount and lower variable compensation; a $4.2 million reduction in advertising costs and selling expenses resulting from sales decreases as described above; and $0.4 million reduction in net other expenses. These decreases were partially offset by $1.0 million of property, plant, and equipment impairment charges in the current year period.

Previous wording

For the thirteen weeks ended May 3, 2025, net other income decreased $0.2 million to $0.2 million, from $0.4 million in the comparable prior-year period. The decrease in net other income was primarily due to a legal settlement that occurred in the prior year period.

Current wording

For the twenty-six weeks ended August 2, 2025, net other income decreased $0.1 million to $0.5 million, from $0.6 million in the comparable prior-year period. The decrease in net other income was primarily due to a legal settlement that occurred in the prior year period, partially offset by income from the TSA resulting from the sale of Creative Genius.

Previous wording

For the thirteen weeks ended May 3, 2025, operating loss from continuing operations increased $7.3 million, or 68.2%, to $(17.9) million, from $(10.6) million in the comparable prior-year period. As a percentage of net revenues, operating loss from continuing operations was (34.6)% and (15.6)% for the thirteen weeks ended May 3, 2025 and May 4, 2024, respectively. Operating loss from continuing operations increased due to the factors described in the captions above.

Current wording

For the twenty-six weeks ended August 2, 2025, operating loss from continuing operations increased $14.2 million, or 173.0%, to $(22.4) million, from $(8.2) million in the comparable prior-year period. As a percentage of net revenues, operating loss from continuing operations was (18.4)% and (5.0)% for the twenty-six weeks ended August 2, 2025 and August 3, 2024, respectively. Operating loss from continuing operations increased due to the factors described in the captions above.

Previous wording

VB Direct. For the thirteen weeks ended May 3, 2025, there was an operating loss in the VB Direct segment of $(5.5) million, a $9.5 million increase, or 238.6%, from operating income of $4.0 million in the comparable prior-year period. As a percentage of VB Direct segment net revenues, operating (loss) income in the VB Direct segment was (12.8)% and 7.1% for the thirteen weeks ended May 3, 2025 and May 4, 2024, respectively. The increase in operating (loss) income as a percentage of VB Direct segment net revenues was primarily due to a decrease in gross margin as a percentage of net revenues as described above, SG&A expense deleverage associated with decreased sales, as well as property, plant, and equipment impairment charges of $1.0 million.

Current wording

VB Direct. For the twenty-six weeks ended August 2, 2025, operating income in the VB Direct segment decreased $13.6 million, or 78.2%, to $3.8 million, from $17.4 million in the comparable prior-year period. As a percentage of VB Direct segment net revenues, operating income in the VB Direct segment was 3.7% and 13.5% for the twenty-six weeks ended August 2, 2025 and August 3, 2024, respectively. The decrease in operating income as a percentage of VB Direct segment net revenues was primarily due to a decrease in gross margin as a percentage of net revenues as described above, SG&A expense deleverage associated with decreased sales, as well as property, plant, and equipment impairment charges of $1.0 million in the current year period.

Previous wording

VB Indirect. For the thirteen weeks ended May 3, 2025, operating income in the VB Indirect segment decreased $1.8 million, or 48.2%, to $2.0 million from $3.8 million in the comparable prior-year period. As a percentage of VB Indirect segment net revenues, operating income in the VB Indirect segment was 23.1% and 33.2% for the thirteen weeks ended May 3, 2025 and May 4, 2024, respectively. The decrease in operating income as a percentage of VB Indirect segment net revenues was due to a decrease in gross margin as a percentage of net revenues as well as SG&A expense deleverage associated with decreased sales.

Current wording

VB Indirect. For the twenty-six weeks ended August 2, 2025, operating income in the VB Indirect segment decreased $4.4 million, or 51.3%, to $4.2 million from $8.6 million in the comparable prior-year period. As a percentage of VB Indirect segment net revenues, operating income in the VB Indirect segment was 22.0% and 25.7% for the twenty-six weeks ended August 2, 2025 and August 3, 2024, respectively. The decrease in operating income as a percentage of VB Indirect segment net revenues was due to a decrease in gross margin as a percentage of net revenues as well as SG&A expense deleverage associated with decreased sales.

Previous wording

Corporate Unallocated. For the thirteen weeks ended May 3, 2025, unallocated expenses decreased $4.1 million, or 22.4%, to $14.3 million from $18.4 million in the comparable prior-year period. The decrease in unallocated expenses was primarily due to a $2.0 million reduction in employee-related costs, including reduced headcount and lower variable compensation; $1.8 million reduction in advertising spend; $0.3 million reduction in net other expenses.

Current wording

Corporate Unallocated. For the twenty-six weeks ended August 2, 2025, unallocated expenses decreased $3.8 million, or 11.1%, to $30.4 million from $34.2 million in the comparable prior-year period. The decrease in unallocated expenses was primarily due to a $2.5 million reduction in employee-related costs, including reduced headcount and lower variable compensation; $2.4 million reduction in advertising spend; $0.5 million reduction in building expenses; and $0.4 million reduction in net other expenses. These expense reductions were partially offset by $2.0 million for severance charges for former CEO in the current year period.

Previous wording

For the thirteen weeks ended May 3, 2025, there was a net loss from discontinued operations of $(15.2) million, a $14.7 million increase, from $(0.5) million in the comparable prior-year period. The increase in loss from discontinued operations was primarily due to the loss on sale of business recorded in the current year period.

Current wording

For the twenty-six weeks ended August 2, 2025, there was a net loss from discontinued operations of $(15.2) million, a $12.8 million increase, from $(2.3) million in the comparable prior-year period. The increase in loss from discontinued operations was primarily due to the loss on sale of business recorded in the current year period.

Previous wording

Our primary sources of liquidity are cash on hand and cash equivalents, as well as cash flow from operations. We also have access to additional liquidity, if needed, through borrowings under our $75.0 million asset-based revolving credit agreement (the “Credit Agreement”). There was no debt outstanding as of May 3, 2025. Historically, our primary cash needs have been for merchandise inventories; payroll; store rent; capital expenditures associated with operational equipment, buildings, information technology, and opening new stores; and share repurchases. The most significant components of our working capital are cash and cash equivalents, merchandise inventories, accounts receivable, accounts payable, and other current liabilities.

Current wording

Our primary sources of liquidity are cash on hand and cash equivalents, as well as cash flow from operations. We also have access to additional liquidity, if needed, through borrowings under our $75.0 million asset-based revolving credit agreement (the “Credit Agreement”). Borrowings under the credit agreement totaled $10.0 million and $15.0 million during the thirteen and twenty-six weeks ended August 2, 2025. There was $10.0 million in debt outstanding as of August 2, 2025. Historically, our primary cash needs have been for merchandise inventories; payroll; store rent; capital expenditures associated with operational equipment, buildings, information technology, and opening new stores; and share repurchases. The most significant components of our working capital are cash and cash equivalents, merchandise inventories, accounts receivable, accounts payable, and other current liabilities.

Previous wording

Net cash used in operating activities for the thirteen weeks ended May 3, 2025 was $17.9 million compared to $14.5 million for the thirteen weeks ended May 4, 2024. The increase in cash used in operating activities was primarily related to a net loss of $(33.5) million, a $25.4 million increase, from the comparable prior-year period, partially offset by a loss on sale of business of $15.2 million, and a change in assets and liabilities of $6.1 million.

Current wording

Net cash used in operating activities for the twenty-six weeks ended August 2, 2025 was $23.3 million compared to $13.2 million for the twenty-six weeks ended August 3, 2024. The increase in cash used in operating activities was primarily related to a net loss of $(38.1) million, a $35.7 million increase, from the comparable prior-year period, partially offset by a loss on sale of business of $15.2 million, as well as the change in inventories and accounts payable primarily resulting from decreased purchasing in the current year period.

Previous wording

Net cash used in investing activities was $1.0 million for the thirteen weeks ended May 3, 2025 compared to $0.9 million for the thirteen weeks ended May 4, 2024. The decrease in cash used in investing activities was a result of a decrease in property, plant, and equipment spending of $1.0 million primarily as a result of Project Restoration initiatives in the prior-year period, partially offset by $0.9 million proceeds from the sale of Pura Vida.

Current wording

Net cash used in investing activities was $1.6 million for the twenty-six weeks ended August 2, 2025 compared to $3.6 million for the twenty-six weeks ended August 3, 2024. The decrease in cash used in investing activities was primarily due to $1.0 million proceeds from the sale of Pura Vida as well as a decrease in property, plant, and equipment spending of $1.0 million.

Previous wording

Net Cash Used in Financing Activities

Current wording

Net Cash Provided by (Used in) Financing Activities

Previous wording

Net cash used in financing activities was $0.2 million for the thirteen weeks ended May 3, 2025 compared to $6.7 million for the thirteen weeks ended May 4, 2024. The decrease in cash used in financing activities was primarily due to $6.3 million of common stock repurchases in the prior-year period compared to no common stock repurchases in the current-year period.

Current wording

Net cash provided by financing activities was $9.8 million for the twenty-six weeks ended August 2, 2025 compared to net cash used in financing activities of $16.4 million for the twenty-six weeks ended August 3, 2024. The increase in cash provided by financing activities was primarily due to $15.9 million of common stock repurchases in the prior-year period compared to no common stock repurchases in the current-year period, and net borrowings of $10.0 million from the credit facility in the current-year period.

Previous wording

On September 7, 2018, Vera Bradley Designs, Inc. (“VBD”), a wholly-owned subsidiary of the Company, entered into an asset-based revolving Credit Agreement (the “Credit Agreement”) among VBD, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders from time to time party thereto. On March 11, 2025, certain subsidiaries of the Company, JP Morgan Chase Bank, N.A., as the administrative agent, and lenders from time to time party thereto, entered into a Fourth Amendment (the “Fourth Amendment”) to the Credit Agreement. The Credit Agreement provides for certain credit facilities to VBD in an aggregate principal amount not to initially exceed the lesser of $75.0 million or the amount of borrowing availability determined in accordance with a borrowing base of certain assets. Borrowings under the credit facilities are available to finance general corporate purposes of VBD and its subsidiaries, including but not limited to Vera Bradley International, LLC, Vera Bradley Sales, LLC, and Creative Genius, LLC (collectively, the “Named Subsidiaries”). The Credit Agreement also contains an option for VBD to arrange with lenders to increase the aggregate principal amount by up to $50.0 million.

Current wording

On September 7, 2018, Vera Bradley Designs, Inc. (“VBD”), a wholly-owned subsidiary of the Company, entered into an asset-based revolving Credit Agreement (the “Credit Agreement”) among VBD, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders from time to time party thereto. On March 11, 2025, certain subsidiaries of the Company, JP Morgan Chase Bank, N.A., as the administrative agent, and lenders from time to time party thereto, entered into a Fourth Amendment (the “Fourth Amendment”) to the Credit Agreement. The Credit Agreement provides for certain credit facilities to VBD in an aggregate principal amount not to initially exceed the lesser of $75.0 million or the amount of borrowing availability determined in accordance with a borrowing base of certain assets. Borrowings under the credit facilities are available to finance general corporate purposes of VBD and its subsidiaries, including but not limited to Vera Bradley International, LLC, and Vera Bradley Sales, LLC. The Credit Agreement also contains an option for VBD to arrange with lenders to increase the aggregate principal amount by up to $50.0 million.