Vera Bradley, Inc.

Previous wording

•We continued another year of product collaborations with iconic brands such as Disney, Wicked, and Peanuts, which align with our target customers and expand our customer reach.

Current wording

•We continued another year of product collaborations with iconic brands such as Disney, Peanuts, Harry Potter, and Gilmore Girls which resonate with our customers.

Previous wording

•We continued to strengthen and rationalize our store base. We are continuing to look for opportunities to improve the full-line profitability of our full-line store portfolio by re-balancing our existing fleet through select closures along with identifying future market opportunities. We will continue to focus on our highest-potential stores by enhancing the customer experience. In fiscal 2025, we closed five underperforming full-line stores and one outlet store, and opened one full-line store and seven outlet stores, ending the fiscal year with 39 full-line and 87 outlet locations.

Current wording

•We continued to strengthen and rationalize our store base. We are continuing to look for opportunities to improve the full-line profitability of our full-line store portfolio by re-balancing our existing fleet through select closures along with identifying future market opportunities. In fiscal 2026, we closed twelve underperforming full-line stores and one outlet store, and opened two full-line stores, ending the fiscal year with 29 full-line and 86 outlet locations.

Previous wording

Net revenues reflect sales of our merchandise and revenue from distribution and shipping and handling fees, less returns and discounts. Revenues for the VB Direct segment reflect sales through Vera Bradley full-line and outlet stores and the Vera Bradley websites (verabradley.com, international.verabradley.com, and outlet.verabradley.com). There were no sales from our Vera Bradley annual outlet sale in Fort Wayne, Indiana for fiscal year 2023 as it was cancelled due to the COVID-19 pandemic. Revenues for the VB Indirect segment reflect sales of Vera Bradley-branded products to specialty retail partners; department stores; national accounts; third-party e-commerce sites; and third-party inventory liquidators, as well as royalties recognized through licensing agreements related to the Vera Bradley brand. Revenues for the Pura Vida segment reflect revenues generated through the Pura Vida website (www.puravidabracelets.com), through the distribution of Pura Vida-branded products to wholesale retailers, and through Pura Vida retail stores.

Current wording

Net revenues reflect sales of our merchandise and revenue from distribution and shipping and handling fees, less returns and discounts. Revenues for the VB Direct segment reflect sales through full-line and outlet stores, our websites (verabradley.com, international.verabradley.com, and outlet.verabradley.com), and direct to consumer marketplaces. Revenues for the VB Indirect segment reflect sales to specialty retail partners; department stores; national accounts; and third-party inventory liquidators, as well as royalties recognized through licensing agreements.

Previous wording

Typically, comparable sales are calculated based upon our stores that have been open for at least 12 full fiscal months and net revenues from our Vera Bradley e-commerce operations. Comparable store sales are calculated based solely upon stores that have been open for at least 12 full fiscal months. Remodeled stores are included in both comparable sales and comparable store sales unless the store was closed for more than one week of the current or comparable prior period, in which case the non-comparable temporary closure periods are not included, or the remodel resulted in a significant change in square footage. Some of our competitors and other retailers calculate comparable or “same store” sales differently than we do. As a result, data in this report regarding our comparable sales and comparable store sales may not be comparable to similar data made available by other companies. Non-comparable sales include sales from stores not included in comparable sales or comparable store sales.

Current wording

Typically, comparable sales are calculated based upon our stores that have been open for at least 12 full fiscal months and net revenues from our e-commerce operations. Comparable store sales are calculated based solely upon stores that have been open for at least 12 full fiscal months. Remodeled stores are included in both comparable sales and comparable store sales unless the store was closed for more than one week of the current or comparable prior period, in which case the non-comparable temporary closure periods are not included, or the remodel resulted in a significant change in square footage. Some of our competitors and other retailers calculate comparable or “same store” sales differently than we do. As a result, data in this report regarding our comparable sales and comparable store sales may not be comparable to similar data made available by other companies. Non-comparable sales include sales from stores not included in comparable sales or comparable store sales.

Previous wording

Gross profit is equal to our net revenues less our cost of sales. Cost of sales includes the direct cost of purchased merchandise, distribution center costs, operations overhead, duty, all inbound freight costs incurred, and inventory adjustments including adjustments described in Note 16 to the Notes to the Consolidated Financial Statements herein. The components of our reported cost of sales may not be comparable to those of other retail and wholesale companies.

Current wording

Gross profit is equal to our net revenues less our cost of sales. Cost of sales includes the direct cost of purchased merchandise, distribution center costs, operations overhead, duty, all inbound and outbound freight costs incurred, and inventory adjustments. The components of our reported cost of sales may not be comparable to those of other retail and wholesale companies.

Previous wording

During fiscal 2025, the Company continued the implementation of targeted cost reductions. Expense savings are being derived across various areas of the Company, including retail store efficiencies, marketing expenses, information technology contracts, professional services, logistics and operational costs, and corporate payroll. Refer to Note 16 to the Notes to the Consolidated Financial Statements herein for additional information regarding charges for cost savings initiatives and remaining liabilities, as well as other charges not comparable with the prior year.

Current wording

During fiscal 2026, the Company continued targeted cost reductions. Expense savings are being derived across various areas of the Company, including retail store efficiencies, marketing expenses, information technology contracts, professional services, logistics and operational costs, and corporate payroll. Refer to Note 14 to the Notes to the Consolidated Financial Statements herein for additional information regarding charges for cost savings initiatives and remaining liabilities, as well as other charges not comparable with the prior year.

Previous wording

To mitigate some of these inflationary and supply chain pressures, we implemented strategic price increases across both of our brands in late fiscal 2022 through fiscal 2024. We will continue to monitor our pricing as it relates to the current macroeconomic trends. In addition, in fiscal 2023 through fiscal 2025, we implemented targeted cost reductions across various areas of the Company, including retail store efficiencies, marketing expenses, information technology contracts, professional services, logistics and operational costs, and corporate payroll. We will continue to review our expense structure in future years for additional cost reduction opportunities.

Current wording

To mitigate some of these inflationary and supply chain pressures, we implemented strategic price increases in late fiscal 2022 through fiscal 2024, as well as in fiscal 2026. We will continue to monitor our pricing as it relates to the current macroeconomic trends. In addition, in fiscal 2023 through fiscal 2026, we implemented targeted cost reductions across various areas of the Company, including retail store efficiencies, marketing expenses, information technology contracts, professional services, logistics and operational costs, and corporate payroll. We will continue to review our expense structure in future years for additional cost reduction opportunities.

Previous wording

(1)The Company utilizes a 52-53 week fiscal year ending on the Saturday closest to January 31. Fiscal years 2025 and 2023 consisted of 52 weeks. Fiscal year 2024 consisted of 53 weeks. The extra week in fiscal 2024 contributed approximately $6.0 million in net revenues and added an estimated $0.01 to diluted net income per share in fiscal 2024. By segment, the extra week contributed net revenues of approximately $2.8 million to Direct, $2.1 million to Indirect, and $1.1 million to Pura Vida in fiscal 2024.

Current wording

(1)The Company utilizes a 52-53 week fiscal year ending on the Saturday closest to January 31. Fiscal years 2026 and 2025 consisted of 52 weeks. Fiscal year 2024 consisted of 53 weeks. The extra week in fiscal 2024 contributed approximately $4.9 million in net revenues and added an estimated $0.01 to diluted net income per share in fiscal 2024. By segment, the extra week contributed net revenues of approximately $2.8 million to Direct and $2.1 million to Indirect.

Previous wording

(2)Impairment charges, related primarily to underperforming stores, totaled$2.6 million, and $1.4 million during the fiscal years ended February 1, 2025, and January 28, 2023, respectively. There were no store impairment charges in fiscal 2024.

Current wording

(2)Impairment charges, related primarily to underperforming stores, totaled $1.0 million, and $2.4 million during the fiscal years ended January 31, 2026, and February 1, 2025, respectively. There were no store impairment charges in fiscal 2024.

Previous wording

For fiscal 2025, SG&A expenses decreased $17.7 million, or 7.3%, to $223.8 million, from $241.5 million for fiscal 2024. As a percentage of net revenues, SG&A expenses were 60.2% and 51.3% for fiscal 2025 and fiscal 2024, respectively. SG&A expenses related to Vera Bradley and corporate unallocated were $186.9 million compared to $192.1 million in the comparable prior-year period. SG&A expenses related to Pura Vida were $36.9 million compared to $49.4 million in the comparable prior-year period. The decrease in consolidated SG&A expenses for fiscal 2025 was primarily due to a decrease in employee-related expenses of $13.4 million due to a reduction in headcount and incentive compensation; a $2.6 million decrease in selling expenses due to decreased sales; decreased advertising of $2.5 million, primarily related to Pura Vida variable advertising due to decreased sales, partially offset by Vera Bradley advertising largely related to Project Restoration; a $1.6 million decrease in intangible asset amortization; and $0.2 million in other net expense reductions. These decreases were partially offset by an increase of $2.6 million for property, plant, and equipment impairment charges in the current year.

Current wording

For fiscal 2026, SG&A expenses decreased $30.4 million, or 16.1%, to $158.1 million, from $188.5 million for fiscal 2025. As a percentage of net revenues, SG&A expenses were 58.7% and 59.1% for fiscal 2026 and fiscal 2025, respectively. The decrease in consolidated SG&A expenses for fiscal 2026 was primarily due to a decrease in employee-related expenses of $13.4 million due to a reduction in headcount and incentive compensation; decreased advertising and selling expenses of $15.6 million due to decreased sales, partially offset by a $4.0 million write-off of media credits that were not expected to be fully utilized; a $1.9 million decrease building related expenses; lower impairment charges related to store assets of approximately $1.4 million compared to the prior year; $0.8 million reduction in corporate expenses; a decrease of $0.5 million for software maintenance costs; and $0.8 million in net other expense reductions.

Previous wording

For fiscal 2025, we recorded income tax expense of $21.0 million at an effective tax rate of (50.8)%, compared to income tax expense of $3.5 million at an effective tax rate of 30.8% for fiscal 2024. The effective tax rate change was primarily attributable to the full valuation allowance recorded against the Company's net deferred tax assets, as well as the relative impact of permanent and discrete items in the current-year period compared to the prior-year period which largely relates to non-deductible executive compensation.

Current wording

For fiscal 2026, we recorded income tax expense of $0.3 million at an effective tax rate of (0.9)%, compared to $5.3 million at an effective tax rate of (19.0)% for fiscal 2025. The effective tax rate change was primarily attributable to the full valuation allowance recorded in the prior year against the Company's net deferred tax assets, as well as the relative impact of permanent and discrete items in the current-year period compared to the prior-year period which largely relates to non-deductible executive compensation.

Previous wording

VB Direct. For fiscal 2025, net reve nues decreased $52.3 million, or 16.9%, to $257.6 million, from $309.9 million for fiscal 2024. Vera Bradley comparable sales decreased $49.6 million, or 16.6%, which includes a 22.2% decrease in comparable store sales as well as a 7.3% decrease in e-commerce sales. The decrease in comparable sales and comparable store sales was impacted by reduced traffic, conversion, and units sold primarily in the outlet channel as well as the full-line channel. Fiscal 2024 net revenues also include approximately $2.8 million attributed to the extra week in fiscal 2024.

Current wording

VB Direct. For fiscal 2025, net revenues decreased $52.3 million, or 16.9%, to $257.6 million, from $309.9 million for fiscal 2024. Vera Bradley comparable sales decreased $49.6 million, or 16.6%, which includes a 22.2% decrease in comparable store sales as well as a 7.3% decrease in e-commerce sales. The decrease in comparable sales and comparable store sales was impacted by reduced traffic, conversion, and units sold primarily in the outlet channel as well as the full-line channel. Fiscal 2024 net revenues also include approximately $2.8 million attributed to the extra week in fiscal 2024.

Previous wording

For fiscal 2025, gross profit decreased $69.6 million, or 27.1%, to $187.8 million, from $256.4 million for fiscal 2024. As a percentage of net revenues, gross profit decreased to 50.2% for fiscal 2025, from 54.5% for fiscal 2024. The decrease in consolidated gross profit as a percentage of net revenues for the fiscal year was driven by sales channel mix, reduced margins for indirect liquidation sales, and inventory adjustments related to excess inventory in the Pura Vida segment.

Current wording

For fiscal 2025, gross profit decreased $45.2 million, or 22.1%, to $158.8 million, from $204.0 million for fiscal 2024. As a percentage of net revenues, gross profit decreased to 49.8% for fiscal 2025, from 53.2% for fiscal 2024. The decrease in gross profit as a percentage of net revenues was driven by increased outbound freight costs, sales channel mix, and reduced margins for indirect liquidation sales.

Previous wording

For fiscal 2025, net interest income increased $0.2 million to $1.1 million from $0.9 million in fiscal 2024.

Current wording

For fiscal 2025, net other income decreased $0.1 million, or 7.5%, to $0.8 million, from $0.9 million for fiscal 2024.

Previous wording

For fiscal 2025, there was an operating loss of $(42.4) million, a $52.8 million decrease, or 505.7%, from operating income of $10.4 million for fiscal 2024. As a percentage of net revenues, operating (loss) income was (11.4)% and 2.2% for fiscal 2025 and fiscal 2024, respectively. Operating (loss) income decreased due to the factors described above.

Current wording

For fiscal 2025, there was an operating loss from continuing operations of $(28.8) million, a $40.4 million increase, or 347.8%, from operating income from continuing operations of $11.6 million for fiscal 2024. As a percentage of net revenues, operating (loss) income from continuing operations was (9.0)% and 3.0% for fiscal 2025 and fiscal 2024, respectively. Operating (loss) income from continuing operations increased due to the factors described above.

Previous wording

The following table provides additional information about our operating (loss) income (in thousands):

Current wording

The following table provides additional information about our operating (loss) income from continuing operations (in thousands):

Previous wording

Corporate Unallocated. For fiscal 2025, corporate unallocated expenses decreased $5.5 million, or 7.5% to $67.9 million from $73.4 million in the prior-year period. The decrease in corporate unallocated expenses was primarily due to a $6.2 million decrease in employee related expenses including incentive compensation and salaries resulting from headcount reductions and $0.2 million in net other expense reductions, partially offset by an increase of $0.6 million in advertising related to Project Restoration and an increase in professional fees of $0.3 million.

Current wording

Corporate Unallocated. For fiscal 2025, corporate unallocated expenses decreased $5.1 million, or 6.8% to $69.4 million from $74.5 million for fiscal 2024. The decrease in corporate unallocated expenses was primarily due to a $5.9 million decrease in employee related expenses including incentive compensation and salaries resulting from headcount reductions and $0.1 million in net other expense reductions, partially offset by an increase of $0.6 million in advertising related to prior strategic initiatives and an increase in professional fees of $0.3 million.

Previous wording

For fiscal 2025, there was a net loss of $(62.2) million, a $70.0 million decrease, from net income of $7.8 million in fiscal 2024 due to the factors described in the captions above.

Current wording

For fiscal 2025, there was a net loss of $(62.2) million, a $70.0 million increase, or 893.4%, from net income of $7.8 million in fiscal 2024 due to the factors described in the captions above.

Previous wording

Our primary sources of liquidity are cash and cash equivalents and 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 under the Credit Agreement as of February 1, 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 and cash equivalents and 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”). Availability under the Credit Agreement is driven by a borrowing base comprised primarily of eligible accounts receivable and inventory, each subject to advance rates, eligibility criteria, and applicable reserves. As a result, borrowing capacity may fluctuate based on the level and quality of receivables and the composition and valuation of inventory. There was no debt outstanding under the Credit Agreement as of January 31, 2026. The Company also owns two real estate properties that are unencumbered, which provide additional financial flexibility and may serve as a potential source of liquidity or collateral, if needed. 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) provided by operating activities consists primarily of net (loss) income adjusted for non-cash items, including depreciation, amortization, impairment charges, deferred taxes, and stock-based compensation; and the effect of changes in assets and liabilities.

Current wording

Net cash (used in) provided by operating activities consists primarily of net (loss) income adjusted for non-cash items, including depreciation, amortization, impairment charges, and stock-based compensation; and the effect of changes in assets and liabilities.

Previous wording

Net cash used in investing activities was $10.4 million in fiscal 2025, compared to $13.8 million in fiscal 2024. The decrease in cash used in investing activities was primarily a result of the purchase of the remaining 25% interest in Pura Vida for $10.0 million in the prior year, partially offset by an increase in property, plant, and equipment spending of $6.6 million primarily as a result of 8 store openings and Project Restoration initiatives in the current year, compared to 3 store openings in the prior year.

Current wording

Net cash used in investing activities was $1.5 million in fiscal 2026, compared to $10.4 million in fiscal 2025. The decrease in cash used in investing activities was primarily a result of decreased property, plant, and equipment spending of $7.1 million due to a reduction in store openings and remodels in fiscal 2026, compared to fiscal 2025, as well as $1.8 million in proceeds from the sale of Creative Genius in the current year.

Previous wording

Net cash used in financing activities was $22.5 million in fiscal 2025 compared to $3.5 million in fiscal 2024. The increase in cash used in financing activities was primarily due to an increase in repurchases of common stock of $19.6 million.

Current wording

Net cash used in financing activities was $0.2 million in fiscal 2026 compared to $22.5 million in fiscal 2025. The decrease in cash used in financing activities was primarily due to a decrease in repurchases of common stock of $21.8 million.

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 August 3, 2023, 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 Third Amendment (the “Third 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.

Previous wording

The balance of inventory adjustments was$7.7 million and $8.1 million for these matters as of the fiscal years ended February 1, 2025, and February 3, 2024, respectively.

Current wording

The balance of inventory adjustments was$6.0 million and $0.7 million for these matters as of the fiscal years ended January 31, 2026, and February 1, 2025, respectively.

Previous wording

We believe we have the ability to sell some of our retired finished goods through a number of channels, including our Vera Bradley and Pura Vida websites, the Vera Bradley online outlet site, Vera Bradley outlet stores, the Vera Bradley Annual Outlet Sale, and through third-party liquidators as needed.

Current wording

We believe we have the ability to sell some of our retired finished goods through a number of channels, including our Vera Bradley websites, the Vera Bradley online outlet site, Vera Bradley outlet stores, the Vera Bradley Annual Outlet Sale, andthrough third-party liquidators as needed.

Previous wording

Property, plant, and equipment and operating right-of-use assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. In evaluating an asset group for recoverability, we estimate the future cash flows expected to result from the use of the asset group at the store level, the lowest identifiable level of cash flow, if applicable. If the sum of the estimated undiscounted future cash flows related to the asset group is less than the carrying value, we recognize a loss equal to the difference between the carrying value and the fair value, usually determined by an estimated discounted cash flow analysis of the asset. Factors used in the valuation of long-lived assets include, but are not limited to, our plans for future operations, brand initiatives, recent operating results, and projected future cash flows. With respect to our stores, we analyze store economics, location within the shopping center, the size and shape of the space, and desirable co-tenancies in our selection process. Impairment charges are classified in SG&A expenses and were $2.6 million, and $1.4 million for the periods ended February 1, 2025, and January 28, 2023, respectively. No impairment charges were recorded in fiscal 2024.

Current wording

Property, plant, and equipment and operating right-of-use assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. In evaluating an asset group for recoverability, we estimate the future cash flows expected to result from the use of the asset group at the store level, the lowest identifiable level of cash flow, if applicable. If the sum of the estimated undiscounted future cash flows related to the asset group is less than the carrying value, we recognize a loss equal to the difference between the carrying value and the fair value, usually determined by an estimated discounted cash flow analysis of the asset. Factors used in the valuation of long-lived assets include, but are not limited to, our plans for future operations, brand initiatives, recent operating results, and projected future cash flows. With respect to our stores, we analyze store economics, location within the shopping center, the size and shape of the space, and desirable co-tenancies in our selection process. Impairment charges are classified in SG&A expenses and were $1.0 million, and $2.4 million for the periods ended January 31, 2026, and February 1, 2025, respectively. No impairment charges were recorded in fiscal 2024.