Vera Bradley, Inc.

Greetings and welcome to the Vera Bradley third quarter fiscal 2025 earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host. Mark DeLye, Chief Administrative Officer. Thank you. You may begin.

Good morning and welcome, everyone. We'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 meeting 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 filed 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 CEO, Jackie Ardrey. Jackie?

Thanks, Mark. Good morning, everyone, and thank you for joining us on today's call. The third quarter was extremely challenging as we remained in the early stages of project restoration, our strategic initiative to transform our business model and transition Vera Bradley's brand positioning. We have made meaningful adjustments to our assortment and value proposition in response to customer feedback. With the current consumer mindset focused on value, we have more work ahead of us on our repositioning journey that I will talk to you later. I am pleased to report that we're seeing steady progress with several green shoots late in the third quarter, which have continued into the fourth quarter to date. We have modestly adjusted our promotional strategy to deliver an improved value proposition and are seeing better results. but we remain committed to driving shareholder values through improved brand resonance and reduction of low margin revenue. With the launch of our holiday assortments late in the third quarter and the careful strategic promotional adjustments we executed, we experienced a steady trendline improvement across the majority of our Vera Bradley direct-to-consumer channels. We are seeing strong customer response to heritage prints, key giftable price point products, and continued success in elevated price point offerings like leather. We experienced a marked improvement in our brand awareness and equity scores in the quarter, and we continued to broaden our reach with younger and higher income household consumers. Recognizing the need to address our value proposition in November, we made the strategic decision to selectively pulse value pricing offers to drive continued shopper engagement across our branded and outlet channels. I'm pleased to report that the response has been strong with our revenue modestly exceeding forecasts over the Black Friday weekend through Cyber Monday week and at higher margins as discounting levels for each channel remained below the prior year. Product highlights over the initial holiday period included strong selling from our Wicked collection, Disney IP, and key price point items under $50 designed for gifting. I want to shift gears and spend a moment on our intended and dramatic reduction in non-go-forward clearance units from our branded channels. We had expected those clearance unit sales to successfully migrate to our outlet channels. That was not the case, and as a result, we experienced a meaningful sales impact in Q3. To be clear, these are highly discounted, low-profit units that are not reflective of our repositioning efforts. Although the clearance bucket will partially refill over the next several quarters, Our overall reduction in SKUs, coupled with a more disciplined buying practice, will enable us to drive significantly higher profitability on our clearance units while not impeding our brand repositioning journey. Bureau Bradley's gross margin expanded 80 basis points in Q3 from reduced liquidation and clearance mix. Importantly, we remain committed to driving shareholder value through brand elevation and a continued reduction of low margin revenue, which is reflected in our Q4 guidance that Michael will detail shortly. Shifting to Pura Vida, the third quarter highlight was the successful opening of our store at Disney Springs, which is off to a great start. We continue to experience outsized performance in our Pura Vida store fleet, while high e-commerce acquisition costs have remained an e-commerce channel headwind. Let me provide more detail on our progress with project restoration for Vera Bradley. I'm particularly encouraged by several key achievements in our brand metrics, including our first awareness increase since 2021, showing a 700 basis point increase in our Ipsos data. We've also made meaningful gains in brand attributes, building equity and being seen as stylish, colorful, and fun. Our customer acquisition efforts are also showing promising results. Our target demographic of 35 to 54-year-old customers has increased by 9 percentage points, and we're seeing a 7-point increase in higher income customer acquisition. This validates our strategy of appealing to a more broad and affluent customer base. Regarding our direct channel performance, we're seeing differentiated results across channels. Our e-commerce business is outperforming stores, and our online outlet is showing particularly strong performance. While we continue to face traffic and conversion challenges in our branded channels, we're encouraged by the progress in our product and pricing strategy. we're successfully implementing lower discounts across channels. Finally, for our outlet stores, we're continuing to test a number of pricing and merchandise initiatives to improve traffic and conversion. In our product assortment, we've seen strong reception in heritage prints and success in key price point gifts. We've also identified and addressed several style execution opportunities, making adjustments based on customer feedback, the majority of which will be available in early February. These include modifications to strap lengths, pocket configurations, and closure types, changes that will better serve both new and existing customers. In our transformation efforts focused on the channel pillar, we generated strong performance in Q3 with Urban Outfitters. Our partnership expanded significantly for holiday, both in stores and online, and we're seeing strong continued selling momentum. I'm most excited. about the promising discussions with many brands that we're having across categories for future partnerships, which creates an exciting opportunity to attract new customers to the new and improved Vera Bradley offering. We've also been working hard to redefine how we approach inventory sourcing, procurement, and management, an integrated process involving several teams within the organization. I'm especially pleased with the progress this team has made in a short time delivering a tighter SKU assortment, more disciplined inventory management, and material sourcing improvements that enabled our ability to react quickly to consumer feedback, as I mentioned earlier. As we look ahead to the remainder of the year, we're seeing some early positive indicators, but we remain prudent in our outlook given the broader market environment. We continue to manage the business with strong financial discipline, maintaining our debt-free position, and focusing on operational improvements. In closing, I want to acknowledge that while this is a challenging period of transformation, we remain confident that project restoration is the right path forward for the long-term health and positioning of Vera Bradley. The combination of our trendline business improvement, the upward trajectory in brand scores, our broadening consumer reach, and the new inbound interest generated for brand-right collaborations validates our strategic direction. We all remain dedicated to returning the company to long-term profitable growth and creating value for our shareholders. Finally, I want to thank our talented teams across the organization for their commitment to our brands and to each other during this transformational period and wish everyone a happy holiday. I'll now turn the call over to our CFO, Michael Schwindel, to review our financial results in detail.