February 28, 2017

VRA - Vera Bradley Struggling at Specialty Retailers

By Patricia Newman
Vera Bradley’s sales at specialty retailers struggled during FY4Q17, hurt by competition from department stores and increased promotional activity on the company’s website.

Vera Bradley Inc.'s FY4Q17 sales fell below plan for five of six sources who commented, and all seven said sales were down yy because of excessive discounting from the company’s own website, competition from department stores and a challenging retail environment. “The online sales are a big factor. In the first two weeks of February, I counted at least 15 emails about sales on [Vera Bradley’s] website. It’s more convenient for people to buy online -- especially if there is no shipping [cost]. Besides the online sales, department stores have hurt us, too,” one said. The one source whose sales had met plan had lowered expectations.

All five sources who commented expect overall 2017 demand for Vera Bradley merchandise to decline further if the company continues to overproduce merchandise and offer deep discounts on its website. “I think we’re going to see Jesus before it turns around. Their sales are going to continue to drop because they are still making too much and everything is on sale all the time,” one said.

Most sources said their loyal Vera Bradley customers still favor the signature cotton prints and are not interested in the leather handbags and other new categories (like jewelry and fragrances) that have been added to the company’s mix. “They are coming out with a lot of new styles and patterns my customers don’t find appealing. My customers are more into the signature cotton pattern bags. The company also came out with pajamas -- which are overpriced -- and the jewelry, which I am not interested in because there is so much of it out there,” one said.

Four of five sources who still carry silhouettes from the Sycamore and Gallatin leather collections said sales fell below their targets because Vera Bradley’s leather handbag pricing competes in the same category as other “aspirational” handbag lines by Kate Spade & Co., Michael Kors Holdings Ltd. and Coach Inc. “I have both the Gallatin tote bags and saddle bags and the Sycamore leather collection. They didn’t do anything at all,” one said.

One source who is much more optimistic about Vera Bradley’s future and has devoted 80% of her store to the brand said specialty retailers have to be smart about their buys and educate their customers about the new merchandise. “Fragrance is a new category. Anyone who thinks they are going to bring it into their stores and it’s going to be instant magic is not living in the real world. Jewelry is a whole different category. It’s new for us, and they are changing it on the fly. The competition in that world is tremendous. The price point is right; it just needs time to catch fire. It’s the same thing with all the new fabrications,” the source said.

Most sources said they are being smart about their Vera Bradley buys by ordering less because the demand is not there. Orders for Vera Bradley merchandise placed during FY4Q17 decreased yy for six of seven who ordered limited quantities of the summer 2017 merchandise. “I only ordered half of what I ordered last year. The sales aren’t there, and the company is making so many big changes to styles that my customers are not interested in,” one said. The one source who increased orders yy said, “It’s really important to represent the line properly. That means you showcase the entire brand.”

Despite declining sales and lack of confidence in the company turning sales around in the near future, five of seven sources are not planning to drop the brand because it still makes money, albeit less. Four said the brand maintained its floor space during the company’s FY4Q17 because other accessories brands like R.G. Barry Corp.’s Baggallini, KD Hobo and Spartina 449 failed to replace sales lost by Vera Bradley.

Additional Quotes
“Christmas was a challenge, but it was a challenge for everybody; it wasn’t just a Vera Bradley thing. It was very difficult. You couldn’t really count on the traffic for any brand.”

“Sales were down. The patterns aren’t that great, and it’s confusing to the customers because the company continues to have retirement sales. It’s a lot of mixed messages from Vera Bradley.”

“The brand is all over the place. Since the company does retirement sales, the customers are conditioned to wait for sales. Why buy full price if something is going to be half price in six months? Those are the main struggles.”

“The independent dealers are leaving them left and right. I hear everyone say they are not going to carry the line anymore. If they lose half the independent dealers -- which they will at some point -- sooner or later, it’s going to make a dent in your sales.”

“Vera Bradley hasn’t realized they can’t compete with the big dogs. The rubber boots they came out with bombed. Now, they brought out $65 deck shoes … and they are already discounting. They have big ideas, but who is going to pay $100 for a Vera Bradley swimsuit? They lost that young customer. The model is broke, and they are not ready to fix it yet.”

“I don’t see demand for Vera Bradley increasing. They have lost their identity. It had a strong brand identity with all the quilted cotton at one point. They went into the lotions, and that hasn’t worked. Then they went into jewelry, and it’s crummy. They have leather, and that hasn’t worked. They are just throwing a dart at a board. I don’t know what they are going to do to try to bring people back to the brand.”

Contributors: Josh Miller

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