Vera Bradley, Inc.

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 DeLay, Chief Administrative Officer. Thank you, sir. You may begin.

Good morning and welcome, everyone. We'd like to thank you for joining today's call. Some of the statements made during our prepared remarks 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 company's most recent Form 10-K filed with the SEC for 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 incoming executive chairman, Ian Bickley. Ian?

Thanks, Mark. Good morning, everyone. It is a pleasure to speak with all of you. I wanted to join today's call to provide you with some insight on the changes that are taking place at Vera Bradley and to discuss my role in the transition going forward. But first, on behalf of the entire board of directors, I want to acknowledge both Jackie and Michael for their work and dedication in helping position Vera Bradley for its next chapter on the transformation journey. And thank both for their commitment to facilitating a smooth transition of leadership. We also wish them well in their future endeavors. As you heard from today's announcement, Jackie will be departing the company at the end of July. the board of directors has launched a nationwide search to find the next CEO. We have already seen many promising candidates and are focused on hiring the best person to drive Vera Bradley's continued transformation. In the interim, the board believes it is important to have consistent and steady leadership and asked me to assume the role of executive chairman until we have a new CEO in place and ready to lead the company again. In this role, I will be working with Jackie and the management team to ensure a smooth transition. When Jackie leaves at the end of July, I will lead the company until our new CEO is on board. Concurrent with this change, the board has announced the formation of a new strategy and transformation committee. The goal of the committee is to work with the management team and incoming leadership in refining the company's strategic direction and future growth initiatives and accelerate the company's operational transformation. Director Andrew Meslow, former CEO of Bath and Body Works, is joining me on this committee. We are delighted that Andrew is willing to serve in this important role. I am approaching this role not merely as a caretaker, but as someone committed to driving performance and needed change for the company. The board believes we must accelerate our transformation and improve our results. We will focus on refining our strategy while driving operational efficiencies and cost savings to improve profitability and performance. I bring over 30 years of relevant industry experience, including rapidly scaling businesses, as well as driving both brand and operational business transformation. I was president of Coach's international group and have served as an independent director on the Crocs board since 2015. More recently, I acted as the interim CEO at the Body Shop, where I helped stabilize the business and navigate it through a successful sales process. I am also pleased that Marty Lading will be joining the company as the chief financial officer. Marty began his career at Procter & Gamble and has extensive experience in various CFO roles and also has a strong track record of driving operational transformation and rapidly scaling businesses in both the public and private domain, having worked for brands such as Coach, Supreme, and most recently at Noodle. I have previously worked with Marty and look forward to the significant contribution he can make to improving performance and accelerating the pace of change. Notwithstanding the current results, Vera Bradley is an iconic brand with strong awareness and deep emotional connections with consumers of all generations. I am personally optimistic about the opportunity to restore the brand's cultural relevance with a new generation of consumers as well as with many of its longtime fans, while at the same time accelerating the simplification of the company's operating model to drive greater agility and efficiency. I look forward to leading and overseeing the continuation and acceleration of this important work until a new CEO has been brought on board. I am now going to turn the call over to Jackie and Michael to discuss Q1 results. Jackie?

Thank you, Ian, and thank you all for joining us. I'd like to also take a moment to thank Ian and our entire board of directors for their support and guidance since joining in 2022. I'm also grateful for the board support during this transition as I step down from my leadership position. I will begin with a review of our first quarter before turning the call over to Michael to discuss the financials in greater detail. Our first quarter results came close to plan as the resonance of our comprehensive strategic initiative to transform our business model and brand positioning continues to improve. The pivots we are making are starting to resonate, and the composition of our customer file is beginning to meaningfully shift. I'm particularly proud of how the organization is embracing new opportunities, especially in wholesale, while we react to demand and customer feedback. While we are on the path of restoring and modernizing the Vera Bradley brand through the four pillars of product, brand, customer, and channel, we recognize that we need to offer a better balance of new and heritage product, and are working to increase our penetration of classic Vera Bradley product. We've brought back heritage styles, developed new heritage reimagined collections, increased deliveries of licensed products, and returned fan favorites to the assortment. We've also addressed customer feedback about zippers, pockets, and changes in strap lengths. We remain focused on being where she shops. We have quickly built momentum behind this strategy and are successfully diversifying our wholesale accounts with new relationships. We shipped our first order to Costco in Q1, launched on Urban Outsiders Marketplace last week, continued to deliver strong revenue increases on Target Marketplace, and have a healthy pipeline of new partnerships for the rest of the year, including exclusive products for Anthropologie. These targeted partnerships are based on data insights from both our current customer and lookalike prospective customers and have guided our efforts and outreach. Our performance on Target Marketplace was a notable standout in Q1. The exceptional results have led to further discussions on how best to maximize the partnership. Our success with Target demonstrates the importance of being where she shops. Our first quarter revenues were $51.7 million with mixed direct channel performance. Traffic and conversion declines impacted the business, especially in the outlet and brand stores. E-commerce revenues are stronger, particularly in the value channels of our online outlet and target marketplace. Our annual outlet sale happened mostly in Q1, where we welcomed tens of thousands of shoppers to Fort Wayne, Indiana, and achieved our sales plan. The indirect segment was a bright spot in Q1, over-delivering plan by double digits as some of our key initiatives started to bear fruit. Channel mix and customer behavior impacted gross margins in the quarter, though, primarily driven by material channel mix shifts. In most channels, customers continued to demonstrate pricing sensitivity, evidenced by significantly higher clearance penetration despite similar inventory levels and promotional positioning. In light of this, we are testing price elasticity through promo adjustments and are proceeding with plans to close 10 unprofitable full-line store locations this year. Turning to product newness, We launched our new baby bag collection and a luggage program in the brand channels, as well as continued relaunches of past customer favorites in the outlet channel, including the extremely successful update of the cult favorite Glenna satchel bag. During Q1, we continued to see divergence in customer behavior by income level, which we believe is related to macroeconomic pressure. However, we are seeing encouraging shifts in our customer file. At the end of the quarter, recently acquired new customers comprised 45% of our active 12-month file versus 30% last year. These recently acquired customers have a different age and income profile than our existing customers and are showing slightly different product affinities, which we are leaning into to inform future assortments. To further support our progress in driving customer growth in the 18- to 34-year-old demographic, Our new Social First marketing campaign launches in July and will run through the holiday season. It will feature a return to nostalgia and fun, highlighting the long-standing emotional connection of the Vera Bradley brand, as well as offering some exciting new product introductions that will delight both new and existing customers. Looking forward, customer favorites like the Vera Tote franchise will return to the outlet channel, while traditional lanyard styles will appear soon in both brand and outlet channels, as well as some exciting new IP collections and key items for back to school. Above all, we will continue to offer heritage patterns and styling in new, reimagined, and fun ways that will appeal to both existing and new customers. Now, I will turn the call over to Michael, who will discuss our financial results in more detail.

Thanks, Jackie. Good morning, everyone, and thank you for joining us. I have a few brief comments to make about our performance for the quarter. As a reminder, We did complete the sale of Pura Vida during the first quarter. As a result, the operations of Pura Vida have been classified as discontinued operations in the consolidated financial statements. Prior period amounts have also been retrospectively adjusted to conform to the current period presentation. For the sake of clarity, all the numbers I am discussing today are non-GAAP and exclude the charges outlined in today's press release. A complete detail of items excluded from the non-GAAP numbers, as well as a reconciliation of GAAP to non-GAAP, can be found in that release. For the first quarter of 2026, our consolidated revenues totaled $51.7 million, compared to $67.9 million in the prior year first quarter. On a non-GAAP basis, net loss from continuing operations for the first quarter totaled $10 million, or 36 cents per diluted share, compared to a net loss from continuing operations of $6.6 million last year, or 22 cents per diluted share. In terms of segment performance, the Vera Bradley direct segment revenues for the current year first quarter totaled $43.1 million, a 23.6 percent decrease from $56.4 million in the prior year first quarter. Comparable sales similarly declined to 25 percent, driven by traffic and conversion declines in our full line and outlet stores, as Jackie mentioned, as we experienced overall channel shift from our stores to our online sites. Total revenues year-over-year were also impacted by ten new store openings and seven store closures since the prior year first quarter. The Vera Bradley indirect segment revenues for the first quarter totaled $8.6 million, a 25.6 percent decrease from the $11.5 million in the prior year first quarter. The decrease was related primarily to a decline in specialty and key account orders. Non-GAAP first quarter gross margin totaled $24.6 million, or 47.5 percent of net revenues, compared to $34.8 million, or 51.3 percent of net revenues in the prior year. The year-over-year margin rate decline was driven primarily by the channel shift from stores to online sites, as both Jackie and I mentioned, a moment ago, which also contributed meaningfully to increased outbound freight costs. Non-GAAP SG&A expense totaled $38.3 million, or 74.2 percent of net revenues, compared to $44.7 million, or 65.7 percent of net revenues, for the prior year first quarter. The $6.4 million decrease in expenses was primarily due to cost reduction initiatives along with lower variable expenses. As we have discussed in prior updates, we are focused on strong operating discipline and have been pleased with the progress of the organization in building this discipline to date. We continue to closely examine all areas of our organization for process and cost efficiencies. First quarter non-GAAP operating loss from continuing operations totaled $13.6 million, or 26.3% of net revenues, compared to $9.4 million loss or 13.8% of net revenues in the prior year. Now turning to the balance sheet, cash and cash equivalents at the end of the quarter totaled $11.3 million. We had no borrowings on our $75 million ABL facility at quarter end. First quarter inventory decreased year over year by approximately 3% to $99.2 million compared to $101.8 million at the end of the first quarter last year. This was driven by continued changes in our merchandising processes. We have been intensely focused on redefining how we approach inventory acquisition and management, and we continue to take strategic actions in our merchandising and sourcing processes, which will both improve product flow as well as quality of inventory. These efforts have already meaningfully impacted our ability to navigate the unique challenges of the current fiscal year and will continue to drive improvements. Now, shifting to guidance, as noted in both press releases this morning, the company has announced several executive and board leadership changes. Given these changes, as well as significant uncertainty surrounding the consumer environment, the company is suspending its prior year guidance and is currently not providing any forward guidance. In closing, the entire Vera Bradley team has worked hard on enormous business changes, as Jackie and I have discussed in numerous calls. I sincerely appreciate this effort and know it will be pivotal in the next phase of the business transformation, as well as improved performance in the future. Jackie?

In closing, I would like to thank the entire team at Vera Bradley for their hard work and dedication. I am proud of the transformational work that we have done during my time here, and while it has taken longer than I had hoped, I believe the company is on track to deliver improved performance going forward. This concludes our call today.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.