Vera Bradley, Inc.

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Vera Bradley third quarter conference call. At this time, all participants are in listen-only mode. Following the presentation, we will conduct a question and answer session. Instructions will be provided at that time for you to queue up for questions. As a reminder, today's conference call is being recorded. I would now like to turn the call over to Mark DeLye, Vera Bradley's Chief Administrative Officer.

Good morning and welcome, everyone. I'd like to thank you for joining us for today's call. Some of the statements made 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 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 today's call. I will now turn the call over to Vera Bradley's outgoing CEO, Rob Wallstrom. Rob?

Thank you, Mark. Good morning, and thank you for joining us on today's call. Our new CEO, Jackie Ardrey, and John Enright, our CFO, both joined me today. Jackie joined the company in November after most recently serving as president of Grandin Road with previous experience at Harry and David and Hannah Anderson. She has jumped right in, and we are excited to have her leading the company into the future. First, let me make a few comments on the quarter. We delivered a year-over-year improvement in non-GAAP EPS, largely driven by implementation of our targeted expense reductions. Total revenues of $124 million were modestly above overall expectations, and we began to experience some stabilization in our gross margin rate as supply chain challenges moderated and strategic price increases helped offset increased raw material and freight costs. As in past quarters, we are continuing to experience bifurcation in the spending of our customer base. Vera Bradley's direct, full-price channel customers with higher household incomes remain more engaged and continue to spend more than customers with lower household incomes, especially in our Vera Bradley factory channel, where inflationary pressures impacted traffic and discretionary spending. However, our Vera Bradley indirect channel experienced its third consecutive quarter of year-over-year growth. At our Vera Bradley brand, we are continuing to fuel our innovation pipeline and build on our lifestyle merchandising focus in the core areas of travel, back to campus, every day, and collaborations. In the third quarter, we continued our powerful product collaborations with Disney and Harry Potter, launched a new rain gear collaboration with Totes, introduced our VB Cloud casual footwear collection, expanded our family sleep and loungewear collection, and made our debut in the metaverse with our NFTs to celebrate our 40th anniversary. While stores will continue to play an important part of our Vera Bradley distribution strategy going forward, we continue to rationalize our store base, closing underperforming stores as leases expire. We have closed 10 full-line Vera Bradley locations this year. PureVita's e-commerce revenues continue to be affected by social and digital media effectiveness and higher costs. This year, we have lowered PureVita's year-over-year marketing spend until we can determine the best ways to maximize the marketing effectiveness, which has had a negative impact on sales. In the third quarter, we did begin to reinvest more marketing dollars than we spent in the first and second quarters, and we saw a positive impact on e-commerce sales trends, although still negative compared to the prior year. However, at the same time, we experienced a negative trend in Pura Vida's wholesale revenues. Our number one priority is to build a more diverse, innovative, effective, and performance-based marketing program to drive Pura Vida e-commerce sales. We are in the process of implementing a comprehensive customer data platform for Pura Vida to build a single, coherent, complete view of each customer so that we can better target and personalize marketing and become less reliant on third-party marketing. This should be complete by early next year. In the meantime, we are continuing to work with our micro-influencers, expanding our TikTok presence, launching impactful ads on connected TV, optimizing SMS, and aggressively exploring other methods to effectively reach our customers. We opened our new Pura Vida full-price stores at Broadway at the Beach in Myrtle Beach, South Carolina, in August, and at the Santan Village in Metro Phoenix in September. Stores can play a key role in driving new customer acquisition as we continue to diversify our marketing platforms, and they demonstrate the power a retail presence has in driving digital sales, omnichannel loyalty, and spending. So far, all of our Pura Vida full-price retail stores are trending to exceed their first-year sales projections. On the Pura Vida product front, we continue to build customer excitement and engagement through collaborations like Disney, Harry Potter, and Hello Kitty, partnering with key influencers, and continuing innovation like expansion of our Demi Fine and stone jewelry collections and extension of our apparel offerings. Now, let me officially introduce our new CEO, Jackie Ardrey. Jackie?