Wunderlich Previews Another Tough Quarter For Vera Bradley

August 31, 2015

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Vera Bradley, Inc. (NASDAQ: VRA) shares have declined by 48 percent year-to-date, and are trading close to the low end of their 52-week range of $9.21 – $24.66.
Wunderlich analyst Eric Beder maintained a Hold rating on the company, with a price target of $15.
Although product mix shifts and opening of new stores are expected to be near-term drags, Beder mentioned that these will yield positive results over the long term.

Analyst Eric Beder expects Vera Bradley to announce disappointing fiscal 2Q16 results in view of the deceleration in the handbag segment and the “negative near-term drivers from a cleanup of the online segment compounded by the rollout of new stores.”

Beder believes that the company’s management is doing the right things to create a new business model that is not only reliable but also more fashion focused and has a diversified product mix.

“We continue to wait to become more aggressive in the name, but we believe long-term shifts will eventually be positive for VRA,” the Wunderlich report stated.

Vera Bradley’s aggressive and continued product mix shift for back-to-school to backpacks, notepads and other key items is likely to have a positive impact. Beder believes that the emphasis on fewer patterns will “help drive excitement in the stores and set up for better flows of inventory and pricing.”

Moreover, continued improvements in in-store signage and marketing displays are expected to drive traffic. Beder added that Vera Bradley’s efforts to fix the “sins of prior management” may continue to “lead to trauma” in the near term, until the company’s customers “understand the shifts and begin to vote with better traffic and sales.”