Zacks Investment Research downgraded
Vera Bradley Inc
) to a Zacks Rank #5 (Strong Sell) on Sep 19. Tempered
expectations for fiscal 2014 despite decent second quarter fiscal
2014 results led to the downgrade.
Why the Downgrade?
On Sep 11, Vera Bradley, known for its colorful luxury
handbags, reported its second quarter of fiscal 2014 (ending Aug
3, 2013) results. The company struggled amid a challenging
macro-economic environment and somehow managed to deliver
better-than-expected positive earnings and in-line revenue
growth. Earnings and revenues also increased on a year-over-year
basis. However, Vera Bradley slashed its outlook for fiscal 2014.
In fact, the company cut its guidance for the second time this
Comparable store sales decreased 3.7% in the quarter due to
underperformance of the products and less traffic at the stores.
Traffic reduced owing to the difficult macroeconomic retail
environment. This also led to cautious ordering from specialty
retailers, which lowered the company's indirect revenues by
Management believes that the decline in traffic trends will
take a toll on the third quarter results and will eventually
impact fiscal 2014 results. Though the company has taken
initiatives to drive performance, these are expected to reap
benefits over the long term.
The uncertain consumer environment forced the company to lower
its outlook for fiscal 2014. Vera Bradley now expects net sales
in the range of $535 million to $540 million for fiscal 2014
lower than prior expectations of $570 million to $575 million.
The company also slashed its earnings outlook and now expects
earnings per share in the range of $1.47 to $1.52 per share
compared with the prior range of $1.74 to $1.78 per share. Vera
Bradley also expects gross margin to decline 100 to 125 basis
points from fiscal 2013 levels.
This retailer witnessed sharp downward estimate revisions
after announcing its second quarter fiscal 2014 results. Estimate
revisions witnessed a downward trend for the third quarter and
fiscal 2014. The Zacks Consensus Estimate for the third quarter
decreased 30.6% and that for fiscal 2014 went down 14.9% over the
last 30 days.
Other Stocks to Consider
Not all stocks are performing as poorly as Vera Bradley.
Retailers worth considering include
Christopher & Banks Corp
Citi Trends Inc.
Destination Maternity Corp
). While Christopher and Citi Trends hold a Zacks Rank #1 (Strong
Buy), Destination Maternity holds a Zacks Rank #2 (Buy).
CHRISTOPHER&BNK (CBK): Free Stock Analysis
CITI TRENDS INC (CTRN): Free Stock Analysis
DESTINATION MTR (DEST): Free Stock Analysis
VERA BRADLEY (VRA): Free Stock Analysis
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