Why NobleCon19 Will Provide Even Greater Benefit to Presenters and Investors
In a significant announcement, the organizer of one of the investment industries leading conferences released information on an update to the annual event’s conference facility for 2023 along with format enrichments. The changes are designed to improve the overall benefit to presenting companies, corporate sponsors, and institutional and individual investors. In a press release dated March 1, 2023, Noble Capital Markets, along with Florida Atlantic University, gave details of the special location, and provided information on some of the many reasons why the 19th NobleCon investor Conference (NobleCon19), will provide even more value to the company’s presenters and attending investors.
The New Facility
NobleCon19 will take advantage of the entire 54,000-square-foot College of Business Executive Education facility at Florida Atlantic University (FAU). The new facility in Boca Raton, FL, will provide tiered seating, which will provide easier visibility for both presenters and attendees. Investors will find the three large-screen monitors in each presenting room will make it easier to see and comprehend the presenters slide deck and other materials. Seeing the screen is a problem at many conferences of this magnitude. As a newly built presentation center, there will be full webcasting capabilities that include the most current technologically advanced conference environment.
Florida Atlantic University is surrounded by beauty. It’s in Boca Raton, Fl, which allows attendees to choose to stay on the ocean or at one of the other properties where conference organizers are negotiating discounts. South Florida is a popular destination for travelers from all over the world.
Noble Capital Markets joint press release with Florida Atlantic University announcing NobleCon19
NobleCon19 Format
NobleCon19 has always led the industry in its ability to place investors and executives of small-cap companies in a position to explore and interact. This year it was announced the presentations will be followed by fire-side chats with Noble analysts, so investors can gain insight from the industry analyst and company stock expert. One-on-one meetings will also be arranged for qualified investors. Several industry panel presentations are also planned for additional discovery. NobleCon19 will also feature high-profile keynote speakers and an evening event that includes entertainment for all to unwind and meet more casually with others of similar interests.
All company presentations and panel discussions will be digitally streamed and made available exclusively on www.channelchek.com
Take Away
Noble Capital Markets, through its annual NobleCon investor conference, has always been an innovator in bringing lesser-known companies with interesting stories to investors. It attracts investors that are looking for actionable ideas that they may not have discovered through other outlets. This year’s event again takes place in Florida. This is important because, over the past couple of years, the advantages of doing business in the sunshine state have drawn many new investment firms to the area. The joint press release did not say what the overall theme will be for NobleCon19; I’ll be attending and personally hope its theme ties to all that is worthwhile in this fast-growing region.
Net sales were $1.95 billion, down 4 percent; comparable sales up 1 percent
Gained market share across multiple product categories in North America in 2022
Achieved quarterly sequential margin improvement in EMEA as pricing actions took hold
Realized double-digit sales and profit growth in the International segment
Generated $78 million of cash from operations; adjusted free cash flow of $78 million
During fourth quarter of 2022 actioned annual cost savings of $13 million from significant restructuring initiatives
Full year 2023 outlook anticipates margin expansion and profit growth
LAKE ZURICH, Ill.–(BUSINESS WIRE)– ACCO Brands Corporation (NYSE: ACCO) today announced its fourth quarter and full year results for the period ended December 31, 2022.
“We delivered 1% comparable sales growth in 2022 as we continue to execute on our strategic transformation, including expanding our product categories, broadening our geographic reach and bringing innovative new consumer-centric products to market. This enabled us to achieve market share gains with many of our brands, including Five Star®, Kensington®, Mead®, Quartet® and AT-A-GLANCE®. These successes give us confidence that our strategy of being a more consumer, brand and technology centric company and our portfolio of strong brands will position us to deliver sustainable organic growth over the long-term,” said Boris Elisman, Chairman and Chief Executive Officer of ACCO Brands.
“In 2023 our top priority is to restore our margin profile through incremental pricing actions implemented in January of 2023, the restructuring initiatives undertaken during the fourth quarter of 2022 and the additional productivity programs we will implement in 2023. We expect these actions will drive margin expansion and profit growth for the full year of 2023. With our expected continued strong cash flow in 2023, we will support our quarterly dividend, pay down debt and continue to invest in new product development and go-to-market initiatives, which we expect will better position us for future growth,” added Elisman.
Fourth Quarter Results
Net sales declined 12.4 percent to $499.4 million from $570.3 million in 2021. Adverse foreign exchange reduced sales $25.5 million, or 4.5 percent. Comparable sales fell 7.9 percent. Both reported and comparable sales declines were due to weaker sales of gaming accessories, lower inventory replenishment by our retailer customers and reduced volumes due to a deterioration in the macroeconomic environment. These more than offset global price increases.
Operating income was $35.6 million versus $63.6 million in 2021, and adjusted operating income decreased to $52.3 million from $79.1 million in the prior year. Both reported and adjusted operating income reflect the impact of lower sales volumes and higher inflation on raw materials, finished goods and transportation costs, which was partially offset by price increases, and reduced SG&A expense due to lower incentive compensation expense. Adverse foreign exchange reduced operating income by $2.2 million.
The Company reported net income of $18.8 million, or $0.20 per share, compared with prior year net income of $53.5 million, or $0.55 per share, which included $13.0 million of favorable discrete tax items. Adjusted net income was $30.5 million, or $0.32 per share, compared with $53.1 million, or $0.54 per share in 2021. The remaining declines in underlying reported net income, as well as adjusted net income were due to the items noted above in operating income.
Full Year Results
Net sales decreased 3.8 percent to $1.95 billion from $2.03 billion in 2021. The unfavorable impact of foreign exchange reduced sales by $93.9 million, or 4.6 percent. Comparable sales increased 0.8 percent. Both reported and comparable sales reflect the benefit of higher prices in all segments and strong volume growth in the International segment, partially offset by weaker sales of gaming accessories, and lower volumes in North America and EMEA due to the challenging macroeconomic environment.
Operating income was $34.8 million compared to $151.0 million in 2021, with the decline primarily due to the non-cash goodwill impairment charge of $98.7 million, partially offset by the favorable change in fair value of $28.0 million related to the PowerA contingent earnout. Adjusted operating income declined to $175.8 million from $227.9 million in 2021. The declines in both reported and adjusted operating income also reflect the impact of inflation that exceeded the benefit of price increases, and reduced volumes, partially offset by reduced SG&A expense which includes lower incentive compensation expense. Unfavorable foreign exchange reduced operating income by $6.3 million.
Net loss was $13.2 million, or ($0.14) per share, compared with net income of $101.9 million, or $1.05 per share, in 2021. The current year net loss includes $98.7 million in non-cash goodwill impairment charges, mitigated by the favorable change in fair value of the contingent earnout consideration of $20.9 million. Prior year net income also included $19.7 million of additional favorable discrete tax items, partially offset by $9.9 million of expenses related to the debt refinancing. Adjusted net income was $101.0 million, compared with $136.8 million in 2021, and adjusted earnings per share were $1.04 compared with $1.41 in 2021. The remaining declines in reported net income and adjusted net income reflect the changes noted above for adjusted operating income, partially offset by higher interest income due to higher cash balances and increased interest rates in Brazil. Interest expense was similar to the prior year.
Capital Allocation and Dividend
For the full year, the Company’s cash generated by operating activities was $77.6 million versus $159.6 million in the prior year. Adjusted free cash flow in 2022 was $77.5 million, reflecting net investing activity and excluding the operating component of the contingent earnout payment. In 2022 the Company paid $28.6 million in dividends, repurchased 2.7 million shares for $19.4 million and fully paid $27.0 million related to the 2021 PowerA contingent earnout.
ACCO Brands announced on February 17, 2023, that its board of directors declared a regular quarterly cash dividend of $0.075 per share. The dividend will be paid on April 5, 2023, to stockholders of record at the close of business on March 10, 2023.
Restructuring Actions
During the fourth quarter of 2022, the Company developed restructuring plans for both its North America and EMEA operating segments, intended to expand margins through initiatives focused on improving operating efficiency and reducing cost. In the Company’s North America segment, the plan is focused on consolidation of supply chain operations, SKU reduction, automating our sales support process, and sourcing optimization. In the Company’s EMEA segment, the focus is on reducing redundancy and enhancing productivity in its operations, SKU reduction, and sourcing initiatives. The Company anticipates these initiatives will create operating efficiencies and improve profitability, as well as provide for future growth investments. The Company has the following expectations for the restructuring plans:
Targeted annualized operating profit improvement of $13 million, with the vast majority of these savings delivered in 2023
Total profit improvements to be realized approximately 75% through lower SG&A costs and 25% through reduced cost of goods sold
Pre-tax restructuring charges of approximately $7 million were recorded in the fourth quarter, primarily comprised of severance and employee related costs
In addition, the Company has implemented plans to reduce inventory levels, increase inventory turns and improve cash flow and working capital.
Business Segment Results
ACCO Brands North America – Fourth quarter segment net sales of $225.7 million decreased 16.7 percent versus the prior year’s segment net sales of $271.0 million. Adverse foreign exchange reduced sales by 0.6 percent. Comparable sales of $227.3 million were down 16.1 percent. The decrease was primarily due to lower demand for gaming accessories and channel inventory destocking, more than offsetting price increases.
Fourth quarter operating income in North America was $8.9 million versus $34.2 million a year earlier, and adjusted operating income was $18.7 million compared to $41.9 million a year ago, with the decline in both primarily reflecting the impact of lower sales, reduced gross margin rates from negative fixed cost leverage and higher inflation on raw materials, finished goods and transportation costs. In addition, we incurred one-off items in the quarter of $7.8 million, reducing the margin rate by 340 basis points. We anticipate stabilization of product costs in select areas and improved ocean freight rates, which should benefit our margin profile in future periods.
For the full year, 2022 North America net sales of $998.0 million decreased 4.3 percent from $1,042.4 million in 2021, and comparable sales declined 3.9 percent. Higher sales and market share gains in many brands and product categories were more than offset by weaker demand for gaming accessories. Sales were stronger in the first half of 2022, driven by early demand for back-to-school products as retailers pulled their shipments to earlier in the year seeking to secure product for the selling season, while second half sales were challenged by both this pull forward, as well as inventory destocking and a slowdown in demand related to the macroeconomic environment.
In North America, the full year operating loss was $4.9 million versus operating income of $121.9 million in 2021. The loss was primarily due to the $98.7 million non-cash goodwill impairment charge. Adjusted operating income of $121.5 million decreased from $154.6 million in 2021. The decreases to reported operating loss/income and adjusted operating income reflect lower sales volumes and reduced gross margin from higher inflation on raw materials, finished goods and transportation costs.
ACCO Brands EMEA – Fourth quarter segment net sales of $156.0 million decreased 17.0 percent versus the prior year’s segment revenue of $187.9 million. Adverse foreign exchange reduced sales by 11.7 percent. Comparable sales of $177.9 million decreased 5.3 percent versus the prior-year period. Both reported and comparable sales declines were due to lower volumes which more than offset price increases. In Europe, the current energy crisis and significant inflation have created a challenging macroeconomic environment impacting sales.
Fourth quarter operating income in EMEA was $12.7 million versus $21.6 million a year earlier, and adjusted operating income was $18.4 million compared to $24.9 million a year ago. The decreases in both reported operating income and adjusted operating income were due primarily to lower sales and reduced gross margins reflecting negative fixed cost leverage and higher costs for finished goods, raw materials and freight due to significant inflation. In the fourth quarter, EMEA’s operating margin improved on a sequential basis benefiting from pricing actions and deflation in certain product and transportation costs.
Net sales for the full year in the EMEA segment of $580.3 million decreased 12.5 percent from $662.9 million in 2021. The impact of adverse foreign exchange reduced sales $78.2 million, or 11.8 percent. Comparable sales of $658.5 million decreased $4.4 million or 0.7 percent. Both reported and comparable sales declines reflect stronger sales volumes in early 2022 driven by computer accessories and business products, offset by persistent inflation and a challenging demand environment in the second half of the year, as well as the stoppage of sales to Russia.
The EMEA segment posted full-year operating income of $21.7 million compared with operating income of $61.7 million in 2021. Adjusted operating income was $37.0 million, down from $77.2 million in 2021. The declines in both reflects the impact of lower sales volumes and reduced gross margins reflecting higher costs for finished goods, raw materials and freight due to significant inflation and negative fixed cost leverage.
ACCO Brands International – Fourth quarter segment sales of $117.7 million increased 5.7 percent versus the prior year’s segment revenue of $111.4 million. Adverse foreign exchange reduced sales by 1.8 percent. Comparable sales of $119.7 million increased 7.5 percent versus the year-ago period. Both reported and comparable sales increased primarily due to price increases, more than offsetting lower volumes. Strong sales in Brazil benefited from a return to in-person education.
Fourth quarter operating income in the International segment was $22.7 million versus $20.9 million a year earlier, and adjusted operating income was $24.3 million compared to $22.9 million a year ago. The increases in both operating income and adjusted operating income were due primarily to price increases, and the strong performance in our Brazil business.
International segment sales of $369.3 million for the full year increased 15.4 percent from $320.0 million in 2021. Adverse foreign exchange reduced sales by $11.4 million. Comparable sales were $380.7 million, up 19.0 percent, due to increased volume and higher prices, primarily in Latin America from a return of in-person education and work.
Operating income of $50.5 million increased from $31.6 million in 2021. Adjusted operating income of $58.3 million increased from $40.6 million. The increases in both operating and adjusted operating income were primarily due to higher sales volumes, pricing and improved expense leverage.
Commentary and Outlook for 1Q and Full Year 2023
“Our priority in 2023 is to improve our operating profitability and free cash flow through pricing, productivity and restructuring initiatives and more efficient use of working capital. We anticipate that these actions, along with a moderating rate of inflation, will allow us to deliver margin expansion and profit and cash flow growth in 2023. We achieved comparable sales growth in 2022 and are confident in the long term sales potential of our business. Our proven business strategy, which includes geographic diversity, and our strong portfolio of brands and innovative products have us well positioned for continued long term profitable growth,” added Elisman.
“While the current economic environment remains fluid, we have an experienced management team with a proven track record of navigating periods of economic uncertainties. We are also well-capitalized, with no near-term debt maturities and generate consistent free cash flow. We remain confident in our strategic transformation and believe we have taken the right actions to drive long-term shareholder value,” Elisman concluded.
The Company is providing full year 2023 and 1Q outlook. For the full year, we expect comparable sales to be down 3 percent to flat, reflecting a challenging near-term demand environment. Foreign exchange is expected to be neutral to reported revenue. Full year adjusted EPS is expected to rise 4 percent to 8 percent, to $1.08 to $1.12, approaching low double-digit growth in adjusted operating income, partially offset by higher interest and non-cash non-operating pension expenses. 2023 free cash flow is expected to grow to at least $100 million.
Our quarterly sales and profit projection for 2023 will reflect a different cadence than last year. In 2022, the Company experienced good sales growth in the first half of the year reflecting strong demand from the post-pandemic economic recovery. In addition, North America sales benefited from the pull forward of purchases by retailers to ensure product availability for back-to-school. Concerns about the economy, the war in Ukraine and related energy crisis in EMEA challenged demand and our sales in the second half of 2022. In addition, our retail customers proactively curtailed purchases in the back half of the year to aggressively reduce their inventory levels. Against these comparisons, we are projecting our sales to be down in both the first quarter and first half of 2023, with growth anticipated in the second half of the year.
In the first quarter, we expect comparable sales to decline 10 percent to 7 percent, primarily due to the timing of back-to-school shipments and lower sales of gaming accessories in North America, partially offset by higher sales in our International segment. First quarter adjusted EPS is expected to be $0.05 to $0.07 with higher gross margins offset by sales deleveraging, higher interest and non-cash, non-operating pension expenses.
Webcast
At 8:30 a.m. ET on February 24, 2023, ACCO Brands Corporation will host a conference call to discuss the Company’s fourth quarter and full year 2022 results. The call will be broadcast live via webcast. The webcast can be accessed through the Investor Relations section of www.accobrands.com. The webcast will be in listen-only mode and will be available for replay following the event.
About ACCO Brands Corporation
ACCO Brands, the Home of Great Brands Built by Great People, designs, manufactures and markets consumer and end-user products that help people work, learn, play and thrive. Our widely recognized brands include AT-A-GLANCE®, Five Star®, Kensington®, Leitz®, Mead®, PowerA®, Swingline®, Tilibra® and many others. More information about ACCO Brands Corporation (NYSE: ACCO) can be found at www.accobrands.com.
Non-GAAP Financial Measures
In addition to financial results reported in accordance with generally accepted accounting principles (GAAP), we have provided certain non-GAAP financial information in this earnings release to aid investors in understanding the Company’s performance. Each non-GAAP financial measure is defined and reconciled to its most closely related GAAP financial measure in the “About Non-GAAP Financial Measures” section of this earnings release.
Forward-Looking Statements
Statements contained herein, other than statements of historical fact, particularly those anticipating future financial performance, business prospects, growth, strategies, business operations and similar matters, results of operations, liquidity and financial condition, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on the beliefs and assumptions of management based on information available to us at the time such statements are made. These statements, which are generally identifiable by the use of the words “will,” “believe,” “expect,” “intend,” “anticipate,” “estimate,” “forecast,” “project,” “plan,” and similar expressions, are subject to certain risks and uncertainties, are made as of the date hereof, and we undertake no duty or obligation to update them. Because actual results may differ materially from those suggested or implied by such forward-looking statements, you should not place undue reliance on them when deciding whether to buy, sell or hold the company’s securities.
Our outlook is based on certain assumptions, which we believe to be reasonable under the circumstances. These include, without limitation, assumptions regarding the impact of the COVID-19 pandemic and the war in Ukraine; the impact of inflation and global economic uncertainties, fluctuations in foreign currency exchange rates and acquisitions; and the other factors described below.
Among the factors that could cause our actual results to differ materially from our forward-looking statements are: our ability to successfully execute our restructuring plans and realize the benefits of our productivity initiatives; our ability to obtain additional price increases and realize longer-term cost reductions; the ongoing impact of the COVID-19 pandemic; a relatively limited number of large customers account for a significant percentage of our sales; issues that influence customer and consumer discretionary spending during periods of economic uncertainty or weakness; risks associated with foreign currency exchange rate fluctuations; challenges related to the highly competitive business environment in which we operate; our ability to develop and market innovative products that meet consumer demands and to expand into new and adjacent product categories that are experiencing higher growth rates; our ability to successfully expand our business in emerging markets and the exposure to greater financial, operational, regulatory, compliance and other risks in such markets; the continued decline in the use of certain of our products; risks associated with seasonality; the sufficiency of investment returns on pension assets, risks related to actuarial assumptions, changes in government regulations and changes in the unfunded liabilities of a multi-employer pension plan; any impairment of our intangible assets; our ability to secure, protect and maintain our intellectual property rights, and our ability to license rights from major gaming console makers and video game publishers to support our gaming business; continued disruptions in the global supply chain; risks associated with inflation and other changes in the cost or availability of raw materials, transportation, labor, and other necessary supplies and services and the cost of finished goods; the continued global shortage of microchips which are needed in our gaming and computer accessories businesses; risks associated with outsourcing production of certain of our products, information technology systems and other administrative functions; the failure, inadequacy or interruption of our information technology systems or its supporting infrastructure; risks associated with a cybersecurity incident or information security breach, including that related to a disclosure of personally identifiable information; our ability to grow profitably through acquisitions; our ability to successfully integrate acquisitions and achieve the financial and other results anticipated at the time of acquisition, including planned synergies; risks associated with our indebtedness, including limitations imposed by restrictive covenants, our debt service obligations, and our ability to comply with financial ratios and tests; a change in or discontinuance of our stock repurchase program or the payment of dividends; product liability claims, recalls or regulatory actions; the impact of litigation or other legal proceedings; our failure to comply with applicable laws, rules and regulations and self-regulatory requirements, the costs of compliance and the impact of changes in such laws; our ability to attract and retain qualified personnel; the volatility of our stock price; risks associated with circumstances outside our control, including those caused by public health crises, such as the occurrence of contagious diseases like COVID-19, severe weather events, war, terrorism and other geopolitical incidents; and other risks and uncertainties described in “Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021, “Part II, Item 1A Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2022 and in other reports we file with the Securities and Exchange Commission.
About Non-GAAP Financial Measures
We explain below how we calculate each of our non-GAAP financial measures and a reconciliation of our current period and historical non-GAAP financial measures to the most directly comparable GAAP financial measures follows.
We use our non-GAAP financial measures both to explain our results to stockholders and the investment community and in the internal evaluation and management of our business. We believe our non-GAAP financial measures provide management and investors with a more complete understanding of our underlying operational results and trends, facilitate meaningful period-to-period comparisons and enhance an overall understanding of our past and future financial performance.
Our non-GAAP financial measures exclude certain items that may have a material impact upon our reported financial results such as restructuring charges, transaction and integration expenses associated with material acquisitions, the impact of foreign currency exchange rate fluctuations and acquisitions, unusual tax items, goodwill impairment charges, and other non-recurring items that we consider to be outside of our core operations. These measures should not be considered in isolation or as a substitute for, or superior to, the directly comparable GAAP financial measures and should be read in connection with the Company’s financial statements presented in accordance with GAAP.
Our non-GAAP financial measures include the following:
Comparable Sales : Represents net sales excluding the impact of material acquisitions with current-period foreign operation sales translated at prior-year currency rates. We believe comparable sales are useful to investors and management because they reflect underlying sales and sales trends without the effect of acquisitions and fluctuations in foreign exchange rates and facilitate meaningful period-to-period comparisons. We sometimes refer to comparable sales as comparable net sales.
Adjusted Gross Profit : Represents gross profit excluding the effect of the amortization of the step-up in inventory from material acquisitions. We believe adjusted gross profit is useful to investors and management because it reflects underlying gross profit without the effect of inventory adjustments resulting from acquisitions that we consider to be outside our core operations and facilitates meaningful period-to-period comparisons.
Adjusted Selling, General and Administrative (SG&A) Expenses : Represents selling, general and administrative expenses excluding transaction and integration expenses related to material acquisitions. We believe adjusted SG&A expenses are useful to investors and management because they reflect underlying SG&A expenses without the effect of expenses related to acquiring and integrating acquisitions that we consider to be outside our core operations and facilitate meaningful period-to-period comparisons.
Adjusted Operating Income/Adjusted Income Before Taxes/Adjusted Net Income/Adjusted Net Income Per Diluted Share :Represents operating income, income before taxes, net income, and net income per diluted share excluding restructuring and goodwill impairment charges, the amortization of intangibles, the amortization of the step-up in value of inventory, the change in fair value of contingent consideration, transaction and integration expenses associated with material acquisitions, non-recurring items in interest expense or other income/expense such as expenses associated with debt refinancing, a bond redemption, or a pension curtailment, and other non-recurring items as well as all unusual and discrete income tax adjustments, including income tax related to the foregoing. We believe these adjusted non-GAAP financial measures are useful to investors and management because they reflect our underlying operating performance before items that we consider to be outside our core operations and facilitate meaningful period-to-period comparisons. Senior management’s incentive compensation is derived, in part, using adjusted operating income and adjusted net income per diluted share, which is derived from adjusted net income. We sometimes refer to adjusted net income per diluted share as adjusted earnings per share or adjusted EPS.
Adjusted Income Tax Expense/Rate :Represents income tax expense/rate excluding the tax effect of the items that have been excluded from adjusted income before taxes, unusual income tax items such as the impact of tax audits and changes in laws, significant reserves for cash repatriation, excess tax benefits/losses, and other discrete tax items. We believe our adjusted income tax expense/rate is useful to investors because it reflects our baseline income tax expense/rate before benefits/losses and other discrete items that we consider to be outside our core operations and facilitates meaningful period-to-period comparisons.
Adjusted EBITDA: Represents net income excluding the effects of depreciation, stock-based compensation expense, amortization of intangibles, the change in fair value of contingent consideration, interest expense, net, other (income) expense, net, and income tax expense, the amortization of the step-up in value of inventory, transaction and integration expenses associated with material acquisitions, restructuring and goodwill impairment charges, non-recurring items in interest expense or other income/expense such as expenses associated with debt refinancing, a bond redemption, or a pension curtailment and other non-recurring items. We believe adjusted EBITDA is useful to investors because it reflects our underlying cash profitability and adjusts for certain non-cash charges, and items that we consider to be outside our core operations and facilitates meaningful period-to-period comparisons.
Adjusted Free Cash Flow: Represents cash flow from operating activities, excluding cash payments made for contingent earnouts, less cash used for additions to property, plant and equipment, plus cash proceeds from the disposition of assets. We believe adjusted free cash flow is useful to investors because it measures our available cash flow for paying dividends, funding strategic material acquisitions, reducing debt, and repurchasing shares.
Consolidated Leverage Ratio: Represents balance sheet debt, plus debt origination costs and less any cash and cash equivalents divided by adjusted EBITDA. We believe that consolidated leverage ratio is useful to investors since the company has the ability to, and may decide to use a portion of its cash and cash equivalents to retire debt.
We also provide forward-looking non-GAAP comparable sales, adjusted earnings per share, adjusted free cash flow, adjusted EBITDA, and adjusted tax rate, and historical and forward-looking consolidated leverage ratio. We do not provide a reconciliation of these forward-looking and historical non-GAAP measures to GAAP because the GAAP financial measure is not currently available and management cannot reliably predict all the necessary components of such non-GAAP measures without unreasonable effort or expense due to the inherent difficulty of forecasting and quantifying certain amounts that are necessary for such a reconciliation, including adjustments that could be made for restructuring, integration and acquisition-related expenses, the variability of our tax rate and the impact of foreign currency fluctuation and material acquisitions, and other charges reflected in our historical results. The probable significance of each of these items is high and, based on historical experience, could be material.
Christopher McGinnis Investor Relations (847) 796-4320
Scion’s Michael Burry Owns Online Retailers, Tech Firms, a Mortgage Servicer, and a Detention Provider
GEO Group (GEO), the publicly held prison company organized as a REIT, again tops Michael Burry’s public market holdings as of the end of last year. This is one of nine holdings; a few are on-again, off-again favorites of the revered hedge fund manager. If there is one theme in his positions, it is that of select online retail merchants. While the overall size of the positions as of quarter-end is known, these positions may not represent all investments, just those that are public and reportable to the SEC on form 13F. Burry famous for his portrayal in the movie “The Big Short” was not short any publicly traded securities as 2022 drew to a close.
Below are the nine holdings, in size order, copied directy from the 13F-HR filing. GEO, Alibaba, and JD.com are familiar to followers of Dr. Burry’s holdings as this is not the first time they have appeared in his portfolio.
Geo Group (GEO) runs private detention systems. As shown below, at the end of the second quarter of 2022, it represented 100% of Scion Asset Management’s public market positions. The current holding is roughly half the dollar amount of what it was three months prior.
Black Knight (BKI) is making its first appearance in the Scion portfolio. The mid-cap company provides mortgage and loan servicing products.
Coherent Corporation (COHR) has not been in the hedge fund manager’s portfolio prior to the last quarter. The small-cap technology company is involved in communications networks for aerospace, automotive, life sciences, and various other electronics and systems.
Alibaba (BABA) is often described as the “Chinese Amazon.com”. The only other time Scion held this well-known online retailer was during the second quarter of 2019.
JD.com (JD) is China’s largest online retailer and largest internet company by revenue. Burry owned shares once before during the first quarter of 2019.
Wolverine Worldwide (WWW) makes active footwear and apparel. Brands include Sperry, Saucony, and Hush Puppies. The small-cap company has not been in the Scion portfolio previously.
MGM Resorts (MGM) is a mid-cap company that owns and manages hotels and casinos worldwide. This is the first time Michael Burry has owned this name.
Qurante (QRTEA), formerly Liberty Interactive Corporation, is yet another direct marketer through the internet and video. The small-cap company is headquartered in Colorado.
Skywest Inc. (SKYW) is Burry’s smallest holding but still represents 4.4%. The airline has scheduled flights, including international, and also leases equipment for non-commercial flights. This is the first time the small-cap company has made an appearance in the Scion portfolio.
Take Away
Four times each year the SEC requires asset managers above a certain size to make a public filling of its portfolio.
Scion Asset Management is not exempt, but may, in addition to transacting in public securities, be creating positions in assets that are not required to be reported here. The reputation of Michael Burry has at times caused a lot of interest around less followed stocks.
LAKE ZURICH, Ill.–(BUSINESS WIRE)– ACCO Brands Corporation (NYSE: ACCO) today announced that it will release its fourth quarter and full year 2022 earnings after the market close on February 23, 2023. The Company will host a conference call and webcast to discuss the results on February 24 at 8:30 a.m. EST. The webcast can be accessed through the Investor Relations section of www.accobrands.com and will be available for replay.
About ACCO Brands Corporation
ACCO Brands, the Home of Great Brands Built by Great People, designs, manufactures and markets consumer and end-user products that help people work, learn, play and thrive. Our widely recognized brands include AT-A-GLANCE®, Five Star®, Kensington®, Leitz®, Mead®, PowerA®, Swingline®, Tilibra® and many others. More information about ACCO Brands Corporation (NYSE: ACCO) can be found at www.accobrands.com.
Christopher McGinnis Investor Relations (847) 796-4320
The Percentage Volume of Retail Transactions Has Surpassed 2020’s Level
Retail investors were a strong market force in 2021, and after a hiatus through much of 2022, they may be setting the tone in 2023. As a whole, the investors that fall into this category are watching signs that the US Federal Reserve and other central banks may be near the end of their rate hikes. This, coupled with last year’s sell-off, was taken as a sign to selectively jump back into positions. The positions they have been putting on have been moving the needle in the “risk-on” category; this has sent many of last year’s losers up double digits.
Data from JP Morgan demonstrate retail transactions have recently surpassed the market volume peak reached in the Fall of 2020. The more volume as a percentage of trades, the more influence over price movements any investment group has.
JPMorgan Data Shows Retail’s Market Percentage Has Quickly Grown
Retail Investors as % of Investors (JPM)
What Prices Have They Impacted?
During the last week in January, retail market orders as a percent of market value reached 23%, according to JPMorgan. Comparatively, it got to 22% a few times when GameStop (GME) was confounding institutional money while surging in valuation. As with the increase in retail volume during 2020, the renewed interest in committing to trades can have an outsized impact on sector movements and those of favorite stocks.
During the pandemic lockdown period, many self-directed investors chose to follow groups such as r/WallStreetBets on Reddit and forums on other chatrooms and platforms. One strategy that worked was directed at hedge fund short positions. It involved massive buying of stocks that were heavily shorted. The goal was to force the shorts to cover, which would produce buying and a higher stock price. This was effective enough to have caused significant problems with both institutional investors and the brokerage community settling the trades.
As January came to a close Many of the same risk trades, have gotten attention. AMC Theatres (AMC) is up 70% YTD. Cathie Wood’s ARKK fund, which invests in speculative disruptive companies, has risen nearly 46%. Also in the fund category is an ETF that invests in so-called meme stocks (MEME), this is up 41%.
Bitcoin (BTC.X), which had been presumed on its deathbed toward the end of last year, is up over 42% as it continues to track technology.
Will They Again Score?
“Mark my words, it’s going to end in tears,” was a popular line amongst market pundits back in 2020-2021. The Great Unwashed, the Meme Stock Investors, the market participants Jim Kramer called Robin Hoodies don’t have a long track record. But the track record they do have is worth noting.
According to JP Morgan, as of the first week in February, Tesla (TSLA) was the most sold stock by retail investors. Others that have been sold include those categorized as green and infrastructure stocks tied to EVs and 5G broadband.
The most purchased were Amazon (AMZN) and APPLE (AAPL). The hashtag #MOASS, or Mother of All Short Squeezes, has been trending most days on Twitter. The stock tied to the posts is AMC (AMC, APE), as there has been ongoing news surrounding this classic meme stock. One meme stock that has not attracted that much attention is Bed Bath and Beyond (BBBY). The company, which is trading at $3.20 after having been at $22.80 less than a year ago, is on life support, and closing dozens of stores amongst talk of bankruptcy. For those that were able to withstand the retail short-squeeze in BBBY, they may be able to cash in.
Take Away
If the “risk-on” trend among retail investors continues, discretionary institutional money has learned to pay attention. Self-directed investors should also pay attention to new activity, and any rotation from one cooling sector to one that is heating up.
In addition to following the news on Channelchek, investors can watch the Investor Movement Index (IMX) reported on the last weekend of each month by TDAmeritrade. For additional insight, it is always fun to check in on what the message boards are buzzing about and sorting through the serious and the nonsensical on Reddit and Twitter.
Second Quarter Results Reflect Successful Holiday Performance
Generates Net Income of $82.5 million and Adjusted EBITDA1 of $131 million
Updates Fiscal 2023 Guidance
(1) Refer to “Definitions of Non-GAAP Financial Measures” and the tables attached at the end of this press release for reconciliation of non-GAAP results to applicable GAAP results.)
JERICHO, N.Y.–(BUSINESS WIRE)– 1-800-FLOWERS.COM, Inc. (NASDAQ: FLWS), a leading provider of gifts designed to help inspire customers to give more, connect more, and build more and better relationships, today reported results for its Fiscal 2023 second quarter ended January 1, 2023.
Fiscal 2023 Second Quarter Highlights
Total consolidated revenues decreased 4.8% to $897.9 million, compared with total consolidated revenues of $943.0 million in the prior year period.
Gross profit margin for the quarter was 41.0%, as compared with 40.1% in the prior year period.
Operating expenses were 28.1% of total sales, as compared with 27.9% in the prior year period.
Net income for the quarter was $82.5 million, or $1.27 per diluted share, as compared with net income of $88.5 million, or $1.34 per diluted share in the prior year period.
Adjusted EBITDA1 for the quarter was $131.4 million, as compared to Adjusted EBITDA1 of $133.1 million in the prior year period.
Expands leadership position in personalized gifting marketplace through the acquisition of the Things Remembered® brand, which occurred after the second quarter ended.
Chris McCann, CEO of 1-800-FLOWERS.COM, Inc., said, “Our second quarter results benefited from the strength of our Gourmet Foods and Gift Baskets business with improving gross margins, as well as an enterprise-wide reduction in operating expenses. As we had anticipated, consumers continued to spend for the major holidays and they reverted to their historical shopping patterns, shopping much later in the holiday period. PersonalizationMall.com® kicked off our holiday period with its biggest Cyber Monday ever, and as demand on our platform grew throughout the month of December, Harry & David® achieved record revenues for the quarter on the consumer side of its business. We did see demand soften in corporate gifting, which we attribute to macro-economic pressures and hybrid work environments, whereas a year ago there were fewer in-person holiday get-togethers.”
McCann added, “Our margins began to stabilize during the quarter, as we started to benefit from lower inbound freight costs and strategic pricing initiatives. Margins within our Gourmet Foods and Gift Baskets business also benefited from our logistics optimization and automation initiatives. We expect these favorable trends to continue and further improve our margins throughout the remainder of this fiscal year and beyond.”
“As we look to the balance of the year, we expect consumers to continue to shop and spend for the major upcoming holidays, while continuing to moderate their spend on everyday gifting occasions due to macro inflationary pressures.”
Second Quarter 2023 Financial Results
Total consolidated revenues decreased 4.8% to $897.9 million, as compared with total consolidated revenues of $943.0 million in the prior year period.
Gross profit margin for the quarter was 41.0%, increasing 90 basis points as compared with 40.1% in the prior year period. Gross profit margin improved based on strong performance within our Gourmet Foods and Gift Baskets business, primarily related to strategic pricing initiatives, lower in-bound freight costs, as well as an improvement in labor availability and automation. Operating expenses were 28.1% of total sales, as compared with 27.9% in the prior year period. On a dollar basis, operating expenses declined $10.1 million, primarily reflecting lower marketing costs, as the Company shifted its advertising investments to lower cost, higher return on investment areas of the marketing funnel.
As a result, the Company generated net income of $82.5 million, or $1.27 per diluted share, and Adjusted Net Income1 of $82.7 million, or $1.28 per share, as compared with net income of $88.5 million, or $1.34 per share, and Adjusted Net Income1 of $88.6 million, or $1.34 per share, in the prior year period. Adjusted EBITDA1 for the quarter was $131.4 million, as compared with Adjusted EBITDA1 of $133.1 million in the prior year period.
Segment Results
The Company provides selected financial results for its Gourmet Foods and Gift Baskets, Consumer Floral and Gifts, and BloomNet segments in the tables attached to this release and as follows:
Gourmet Foods and Gift Baskets: Revenues for the quarter decreased 0.4% to $588.4 million, compared with $590.9 million in the prior year period, reflecting the resiliency of our gourmet food gifting businesses. Gross profit margin was 41.0%, compared with 39.3% in the prior year period, benefiting from strategic pricing, lower inbound transportation costs, and automation initiatives. As a result, segment contribution margin1 was $123.5 million, compared with $110.5 million a year ago.
Consumer Floral and Gifts: Revenues decreased 12.1% to $277.0 million, compared with $315.1 million in the prior year period. Gross profit margin decreased to 40.5%, compared with 41.3% in the prior year period, primarily due to higher fulfillment costs and outbound transportation costs. Segment contribution margin1 was $27.9 million, compared with $38.2 million the prior year.
BloomNet: Revenues for the quarter decreased 13.4% to $32.9 million, compared with $37.9 million in the prior year period. Gross profit margin of 42.2% was flat with the prior year. Segment contribution margin1 was $9.3 million, compared with $11.9 million in the prior year period.
Company Guidance
The Company is updating its Fiscal 2023 guidance based on its second quarter performance and the current economic environment. While the highly unpredictable nature of the current macro economy makes it difficult to forecast in this environment, the Company continues to expect that after growing revenues 77% over the past three fiscal years, revenues will decline in Fiscal 2023 on cautious consumer behavior. The Company also anticipates that as a result of the investments it has made, and continues to make, in its business platform, along with strategic pricing programs and a moderation of certain cost inputs, gross margins and bottom-line results will gradually improve during the latter half of the current fiscal year.
Full Year Fiscal 2023 Guidance
Total revenues to decline in the mid-single digit range on a percentage basis as compared with the prior year;
Adjusted EBITDA1 is now expected to be in a range of $80 million to $85 million; and
Free Cash Flow1 to exceed $75 million.
Conference Call
The Company will conduct a conference call to discuss the above details and attached financial results today, Thursday, February 2, at 8:00 a.m. (ET). The conference call will be webcast from the Investors section of the Company’s website at www.1800flowersinc.com. A recording of the call will be posted on the Investors section of the Company’s website within two hours of the call’s completion. A telephonic replay of the call can be accessed beginning at 2:00 p.m. (ET) today through February 9, 2023, at: (US) 1-877-344-7529; (Canada) 855-669-9658; (International) 1-412-317-0088; enter conference ID #: 7691597. If you have any questions regarding the above information, please contact the Investor Relations office at invest@1800flowers.com.
Definitions of non-GAAP Financial Measures:
We sometimes use financial measures derived from consolidated financial information, but not presented in our financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). Certain of these are considered “non-GAAP financial measures” under the U.S. Securities and Exchange Commission rules. Non-GAAP financial measures referred to in this document are either labeled as “non-GAAP” or designated as such with a “1”. See below for definitions and the reasons why we use these non-GAAP financial measures. Where applicable, see the Selected Financial Information below for reconciliations of these non-GAAP measures to their most directly comparable GAAP financial measures. Reconciliations for forward-looking figures would require unreasonable efforts at this time because of the uncertainty and variability of the nature and amount of certain components of various necessary GAAP components, including, for example, those related to compensation, tax items, amortization or others that may arise during the year, and the Company’s management believes such reconciliations would imply a degree of precision that would be confusing or misleading to investors. For the same reasons, the Company is unable to address the probable significance of the unavailable information. The lack of such reconciling information should be considered when assessing the impact of such disclosures.
EBITDA and Adjusted EBITDA:
We define EBITDA as net income (loss) before interest, taxes, depreciation, and amortization. Adjusted EBITDA is defined as EBITDA adjusted for the impact of stock-based compensation, Non-Qualified Plan Investment appreciation/depreciation, and for certain items affecting period-to-period comparability. See Selected Financial Information for details on how EBITDA and Adjusted EBITDA were calculated for each period presented. The Company presents EBITDA and Adjusted EBITDA because it considers such information meaningful supplemental measures of its performance and believes such information is frequently used by the investment community in the evaluation of similarly situated companies. The Company uses EBITDA and Adjusted EBITDA as factors to determine the total amount of incentive compensation available to be awarded to executive officers and other employees. The Company’s credit agreement uses EBITDA and Adjusted EBITDA to determine its interest rate and to measure compliance with certain covenants. EBITDA and Adjusted EBITDA are also used by the Company to evaluate and price potential acquisition candidates. EBITDA and Adjusted EBITDA have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of the Company’s results as reported under GAAP. Some of the limitations are: (a) EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, the Company’s working capital needs; (b) EBITDA and Adjusted EBITDA do not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on the Company’s debts; and (c) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future and EBITDA does not reflect any cash requirements for such capital expenditures. EBITDA and Adjusted EBITDA should only be used on a supplemental basis combined with GAAP results when evaluating the Company’s performance.
Segment Contribution Margin:
We define Segment Contribution Margin as earnings before interest, taxes, depreciation, and amortization, before the allocation of corporate overhead expenses. See Selected Financial Information for details on how Segment Contribution Margin was calculated for each period presented. When viewed together with our GAAP results, we believe Segment Contribution Margin provides management and users of the financial statements meaningful information about the performance of our business segments. Segment Contribution Margin is used in addition to and in conjunction with results presented in accordance with GAAP and should not be relied upon to the exclusion of GAAP financial measures. The material limitation associated with the use of Segment Contribution Margin is that it is an incomplete measure of profitability as it does not include all operating expenses or non-operating income and expenses. Management compensates for these limitations when using this measure by looking at other GAAP measures, such as Operating Income and Net Income.
Adjusted Net Income (Loss) and Adjusted or Comparable Net Income (Loss) Per Common Share:
We define Adjusted Net Income (Loss) and Adjusted or Comparable Net Income (Loss) Per Common Share as Net Income (Loss) and Net Income (Loss) Per Common Share adjusted for certain items affecting period-to-period comparability. See Selected Financial Information below for details on how Adjusted Net Income (Loss) Per Common Share and Adjusted or Comparable Net Income (Loss) Per Common Share were calculated for each period presented. We believe that Adjusted Net Income (Loss) and Adjusted or Comparable Net Income (Loss) Per Common Share are meaningful measures because they increase the comparability of period-to-period results. Since these are not measures of performance calculated in accordance with GAAP, they should not be considered in isolation of, or as a substitute for, GAAP Net Income (Loss) and Net Income (Loss) Per Common share, as indicators of operating performance and they may not be comparable to similarly titled measures employed by other companies.
Free Cash Flow:
We define Free Cash Flow as net cash provided by operating activities less capital expenditures. The Company considers Free Cash Flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business after the purchases of fixed assets, which can then be used to, among other things, invest in the Company’s business, make strategic acquisitions, strengthen the balance sheet, and repurchase stock or retire debt. Free Cash Flow is a liquidity measure that is frequently used by the investment community in the evaluation of similarly situated companies. Since Free Cash Flow is not a measure of performance calculated in accordance with GAAP, it should not be considered in isolation or as a substitute for analysis of the Company’s results as reported under GAAP. A limitation of the utility of Free Cash Flow as a measure of financial performance is that it does not represent the total increase or decrease in the Company’s cash balance for the period.
About 1-800-FLOWERS.COM, Inc.
1-800-FLOWERS.COM, Inc. is a leading provider of gifts designed to help inspire customers to give more, connect more, and build more and better relationships. The Company’s e-commerce business platform features an all-star family of brands, including: 1-800-Flowers.com®, 1-800-Baskets.com®, Cheryl’s Cookies®, Harry & David®, PersonalizationMall.com®, Shari’s Berries®, FruitBouquets.com®, Things Remembered®, Moose Munch®, The Popcorn Factory®, Wolferman’s Bakery®, Vital Choice®, Stock Yards® and Simply Chocolate®. Through the Celebrations Passport® loyalty program, which provides members with free standard shipping and no service charge across our portfolio of brands, 1-800-FLOWERS.COM, Inc. strives to deepen relationships with customers. The Company also operates BloomNet®, an international floral and gift industry service provider offering a broad-range of products and services designed to help members grow their businesses profitably; Napco℠, a resource for floral gifts and seasonal décor; DesignPac Gifts, LLC, a manufacturer of gift baskets and towers; and Alice’s Table®, a lifestyle business offering fully digital livestreaming and on demand floral, culinary and other experiences to guests across the country. 1-800-FLOWERS.COM, Inc. was recognized among the top 5 on the National Retail Federation’s 2021 Hot 25 Retailers list, which ranks the nation’s fastest-growing retail companies, and was named to the Fortune 1000 list in 2022. Shares in 1-800-FLOWERS.COM, Inc. are traded on the NASDAQ Global Select Market, ticker symbol: FLWS. For more information, visit 1800flowersinc.com or follow @1800FLOWERSInc on Twitter.
FLWS–COMP
FLWS-FN
Special Note Regarding Forward Looking Statements:
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements represent the Company’s current expectations or beliefs concerning future events and can generally be identified using statements that include words such as “estimate,” “expects,” “project,” “believe,” “anticipate,” “intend,” “plan,” “foresee,” “forecast,” “likely,” “will,” “target” or similar words or phrases. These forward-looking statements are subject to risks, uncertainties, and other factors, many of which are outside of the Company’s control, which could cause actual results to differ materially from the results expressed or implied in the forward-looking statements, including, but not limited to, statements regarding the Company’s ability to achieve its guidance for the full Fiscal year; the impact of the Covid-19 pandemic on the Company; its ability to leverage its operating platform and reduce its operating expense ratio; its ability to sell through existing inventories; its ability to successfully integrate acquired businesses and assets; its ability to successfully execute its strategic initiatives; its ability to cost effectively acquire and retain customers; the outcome of contingencies, including legal proceedings in the normal course of business; its ability to compete against existing and new competitors; its ability to manage expenses associated with sales and marketing and necessary general and administrative and technology investments; its ability to reduce promotional activities and achieve more efficient marketing programs; and general consumer sentiment and industry and economic conditions that may affect levels of discretionary customer purchases of the Company’s products. The Company undertakes no obligation to publicly update any of the forward-looking statements, whether because of new information, future events or otherwise, made in this release or in any of its SEC filings. Consequently, you should not consider any such list to be a complete set of all potential risks and uncertainties. For a more detailed description of these and other risk factors, refer to the Company’s SEC filings, including the Company’s Annual Reports on Form 10-K and its Quarterly Reports on Form 10-Q.
Note: The following tables are an integral part of this press release without which the information presented in this press release should be considered incomplete.
FORT WAYNE, Ind., Feb. 01, 2023 (GLOBE NEWSWIRE) — Vera Bradley, Inc. (Nasdaq: VRA) (“Vera Bradley” or the “Company”) today announced that it plans to report results for the fourth quarter and fiscal year ended January 28, 2023 at 8:00 a.m. Eastern Time on Wednesday, March 8, 2023.
The Company will host a conference call to discuss its financial results at 9:30 a.m. Eastern Time that same day. A live webcast of the conference call will be available on the Investor Relations section of the Company’s website, www.verabradley.com. Alternatively, interested parties may dial into the call at (888) 204-4368 or (323) 994-2093 and enter the access code 3761893. A replay will be available shortly after the conclusion of the call and remain available through March 22, 2023. To access the recording, listeners should dial (844) 512-2921, and enter the access code 3761893.
ABOUT VERA BRADLEY, INC.
Vera Bradley, Inc. operates two unique lifestyle brands – Vera Bradley and Pura Vida. Vera Bradley and Pura Vida are complementary businesses, both with devoted, emotionally connected, and multi-generational female customer bases; alignment as casual, comfortable, affordable, and fun brands; positioning as “gifting” and socially-connected brands; strong, entrepreneurial cultures; a keen focus on community, charity, and social consciousness; multi-channel distribution strategies; and talented leadership teams aligned and committed to the long-term success of their brands.
Vera Bradley, based in Fort Wayne, Indiana, is a leading designer of women’s handbags, luggage and other travel items, fashion and home accessories, and unique gifts. Founded in 1982 by friends Barbara Bradley Baekgaard and Patricia R. Miller, the brand is known for its innovative designs, iconic patterns, and brilliant colors that inspire and connect women unlike any other brand in the global marketplace.
In July 2019, Vera Bradley, Inc. acquired a 75% interest in Creative Genius, Inc., which also operates under the name Pura Vida Bracelets (“Pura Vida”), and acquired the remaining 25% interest in January 2023. Pura Vida, based in La Jolla, California, is a digitally native, highly engaging lifestyle brand founded in 2010 by friends Paul Goodman and Griffin Thall. Pura Vida has a differentiated and expanding offering of bracelets, jewelry, and other lifestyle accessories.
CONTACTS: Investors: Julia Bentley, VP of Investor Relations and Communications jbentley@verabradley.com (260) 207-5116
Cannabidiol (CBD) not Covered Under any Existing FDA Regulatory Framework – Ball Now In the Hands of Congress
The U.S. Food & Drug Administration (FDA) called on Congress to set a new regulatory pathway for cannabidiol, or CBD, the non-psychoactive ingredient in cannabis plants. The FDA said it is willing to work with Congress to create one. The regulatory body said the same is true for CBD in animal products. CBD has been in a form of regulatory limbo since the passage of the 2018 Farm Bill that legalized hemp, the base ingredient to make CBD. The extract is now found in many wellness products and is widely used in all 50 states. The FDA says it is not a food or a supplement, it may now be up to Congress to define its niche.
According to an FDA press release, the use of CBD raises safety concerns, in particular regarding its long-term use. It cited the potential harm to the liver, interactions with some medications and possible harm to the male reproductive system.
The FDA’s Reasoning
A high-level FDA working group that was to decide which FDA framework CBD products fall under, and related regulatory pathways, announced that it doesn’t easily fit within a regulatory framework that exists at the agency. On January 26 the FDA announced, “that after careful review, the FDA has concluded that a new regulatory pathway for CBD is needed that balances individuals’ desire for access to CBD products with the regulatory oversight needed to manage risks.” They said the FDA is prepared to work with Congress to create a legal, workable framework.
At the same time the FDA also denied three citizen petitions that had asked the agency to conduct rulemaking to allow the marketing of CBD products as dietary supplements.
The FDA listed safety concerns surrounding CBD use. “The use of CBD raises various safety concerns, especially with long-term use. Studies have shown the potential for harm to the liver, interactions with certain medications and possible harm to the male reproductive system.” They were also concerned about children and CBD exposure, and women who are pregnant.
The reason for a new regulatory pathway, according to the FDA, is that it would “benefit consumers by providing safeguards and oversight to manage and minimize risks related to CBD products.” The FDA said these may include clear labels, prevention of contaminants, CBD content limits, and measures, such as minimum purchase age. “In addition, a new pathway could provide access and oversight for certain CBD-containing products for animals,” the FDA said.
According to the FDA, existing foods and dietary supplement authorities provide only limited tools for managing risks associated with CBD products. Under the law, any substance, including CBD, must meet specific safety standards to be lawfully marketed as a dietary supplement or food additive. The FDA said “we have not found adequate evidence to determine how much CBD can be consumed, and for how long, before causing harm. Therefore, we do not intend to pursue rulemaking allowing the use of CBD in dietary supplements or conventional foods.”
The FDA said CBD also poses risks to animals, and people could be unknowingly exposed to CBD through meat, milk and eggs from animals fed CBD. Therefore, it is not apparent how CBD products could meet the safety standard for substances in animal food. “A new regulatory pathway could provide access and oversight for certain CBD-containing products for animals,” according to the release.
The FDA said it “will remain diligent in monitoring the marketplace, identifying products that pose risks and acting within our authorities. The FDA looks forward to working with Congress to develop a cross-agency strategy for the regulation of these products to protect the public’s health and safety.”
Meme Stocks are Putting Up a Strong Offense – Is this a Positive Sign for the Broader Market?
During the first three weeks of 2023, meme stocks and crypto tokens, often viewed in the same category, have scored early. Have meme stock investors now come off the sidelines after the poor performance last year? In 2022 they completely failed to repeat their historic 2021 wins. So the current rally is a great sign.
Successful meme trading occurs when there is a mass movement by retail accounts. So far in 2023, like flipping a New Year’s switch, retail is again causing a commotion. And by looking at the trending hashtags and cashtags on Reddit and Twitter, fans are also making an increased volume of noise.
Looking at the 2023 performance chart above, the S&P 500 ($SPY) opened the year more positively than the prior year ended. While one obviously can not extrapolate out the current 1.59% return for the year, annualizing it helps bring the short period being measured into perspective. The overall market is running at a 30.50% pace this year. Wow.
The performance of GameStop ($GME), which was one of the original and among the most recognized meme stocks, is outperforming the overall market by double. While it is well off its high reached earlier this week, the above 3% return is running well ahead of the overall stock market.
The cryptocurrency in the group, the often maligned Dogecoin (DOGE.X), which is legendary as it started as a parody token, has been tracking Bitcoins (BTC.X) rise closely. DOGE is up over 18% on the year, averaging an increase near 1% per day.
AMC Entertainment ($AMC), which is off its high of almost 50% a few days ago, now has returned over 32% to those holding the stock. To put this in perspective, it has an annualized return in 2023, so far, of 628%. This likely has gotten ahead of itself, time will tell, but it is the clear MVP among the meme stocks to date.
Last year the overall market, despite being down near 20%,, trounced the meme stocks that have thus far put in a stellar showing in 2023.
Is Meme Rally a Reason for Optimism?
Retail dollars coming in off the sidelines and mounting enough of a drive to force values up so quickly indicates a mood change that may play out elsewhere in the financial markets. The average trade size of retail is so small that it indicates a large wave of willingness, if not outright optimism, that putting money in play will lead to gains. Similar forces are causing money to move into mutual funds and ETFs, which serves to put upward pressure on the overall market.
Wall Street’s so-called “fear gauge,” the Volatility Index ($VIX) dropped on average 1% a day since the start of the year. This is a spectacular trend. It now stands near its long-term average of 21; a reading above 30 is considered bearish. The $VIX was last near these levels in April of last year. The overall market stood 15% higher back then compared to today.
The Volatility Index has applications across digital assets as well. On a scale of 1-100, where 100 is overly greedy, The Crypto Fear and Greed Index stands near neutral at 52. This is also the most optimistic reading since April. It may be considered even more positive since the digital asset market is still digesting the “unprecedented” bankruptcy of crypto exchange FTX.
Meme mania has never been about macro; more about crowd behavior, commitment, and momentum. But there are fundamentals that are viewed by stock investors of all varieties that likely have fed into the burst of interest. First, economic data suggests that inflation is trending lower. This deceleration lessens the need for the Federal Reserve to put the brakes on the economy. The enthusiasm is just more pronounced among this style of retail traders that are loud and proud. They serve as cheerleaders to captivate the imagination of more traditional investors.
Take Away
The overall financial markets opened with a sigh of relief in 2023. Meme stocks and crypto opened the year with extreme optimism. The optimism isn’t without cause; a number of factors point to a much better environment than the dismal returns of last year.
Will this contagion, led by many small accounts, inspire further the larger individual and institutional investors to commit investments in the broader markets, there are many signs that suggest the year is starting that way, fear of missing out will build with each day that the markets move in a positive direction.
One Should Never feel Forced to Trade or Get Involved Because They are Bored
Most start off a New Year with great intentions. These often include saving money, starting a family, or finding a better job. A co-worker of mine is intent on skydiving before year-end – whatever. To each their own. For many involved in the markets, 2023 has become the year they want to further improve their trading. This usually begins with stepping back, reminding themselves of trading basics, then not falling into old habits weeks later. Another step is developing new understanding and new companies. It also includes not trading with the need to make back last year’s losses in a hurry.
There is one trading basic that is often ignored because it feels like it conflicts with other goals. But it doesn’t. It is knowing when being uninvolved is the best decision. Doing nothing without feeling you may be missing something takes practice for most. It may take more practice for those that have experienced the thrill of a mostly green trading account.
Trade No Stock Before its Time
Over the holidays, family members would ask, “should I buy Tesla?” or “should I be buying Apple down here?” My mom would instead ask, something that in my mind is a similar question. She’d ask, “when are you going to get married?” These are all similar because Tesla and Apple, when considering the whole universe of stocks, are probably not the best fit for the accounts of these people. Similarly, in the absence of finding a good personal fit, unless someone is holding a gun to one’s head, I believe in waiting for circumstances with a high probability of a positive outcome. Don’t get involved because you’re bored, or because you think you have to is the message.
If your win rate is over 50%, you’re doing better than average, this is as true in trading as it is in relationships. If you force either, your success rate goes down, and you’ve wasted time, money, and invited frustration. Yet so many investor/traders willy-nilly jump into something because they are bored, feel they are missing out, or are told it is what they are supposed to be doing.
Forcing trades, no matter how tempting it may be, how bored you are, or how much FOMO you’re experiencing, has a lower chance of being successful than if you wait for your perfect setup. Sitting on your hands so you can’t press the “Buy” button is preferable to being in the situation of trying to unwind a trade you spent too little time waiting to come to you. Good opportunity doesn’t always arrive on schedule, but if you have capital tied up in a mistake, you may not be able to jump at a real match for your portfolio later on.
Trading is Not Glamorous
The definition of booyah is “expressing triumphant exuberance.” If you yearn to say “booyah” or do any other kind of touchdown dance, you may find you will pull the sell trigger too early. A main key to trading is knowing what you want, then patience. Patience is one of the most important skills you can have as a trader. You need to have the control and the discipline to wait for a quality setup according to your individual strategy. It may take a while, but confidence the trades will come helps. Develop a trading strategy so you know the guidelines you will adhere to; abandoning that strategy just to be involved, over time, will cause you to be worse off.
Consistently successful traders will tell you that one of the most important things to remember with trading is that you should never let your emotions control your actions. If you can’t think rationally if you aren’t planning your trade and trading your plan, sit on your hands until you can. Really, defund your account, find another way to get your thrills. Because if you force a trade and it works out anyway, you have reinforced a bad habit. Many trading accounts of good people got fried in 2022 because they did the wrong thing in 2021, but in 2021 they were bailed out by the markets. Doing the wrong thing and succeeding is costly because you tend to repeat it.
A hail Mary pass sometimes meets the desired goal in a football game, swinging for a home run in baseball and connecting certainly can lead to exuberance and even a winning game. But most often, these are low-probability irrational plays if you actually want to win. Increase your time on base, work on your short plays, study your opponent, or whatever other kind of reference helps convey this thinking. Because saying “I do” to a stock without successful due diligence is like asking to eventually lose. If you just want excitement, then maybe you could consider skydiving.
Final Thoughts
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I don’t think I’m a very good businessman. I act too much with the heart. – Pelé
If you treat the holdings in your trading account with any attachment, your ability to sell at the right time will be hindered, and your profit potential will suffer. Ideally, an active trading account accumulates when the selling volume reaches a peak, prices are cheap, and lightens up when prices are sufficiently above the purchase price. Or when there appears to be better used for the account’s capital — including moving to cash equivalents.
The Pelé quote above reminds me of many active traders; they enjoy the rush of playing and know they can only claim a victory when on the field and in play. These traders often stay on the field too long and accumulate losing positions. The markets are not a game where the odds of winning or losing are equal on any given day. Trading the markets is better thought of as a business that, at times should increase inventory and at times scale down.
Think of Your Trading Account as a Business
I struggled this week as I had two positions in the red that, for tax reasons, I should let go of to offset gains and the taxes that go along with those gains. These positions are not acting poorly, but they are negative, and they both are taking longer than I had hoped to pay off. Each easily allows me to immediately purchase a similar position without upsetting the IRS. But I have hesitated to sell all week.
If trading is a business, one does what is believed to net the most profit – always. I’m usually pretty good at this, but these two small positions would represent my first losses of the year in my trading account (hurray for me). I was fortunate enough to spot the market’s relentless one-direction trend in 2022, this allowed me to ride the downward waves. The trend seems to be continuing, so exiting these two holdings and getting back into something with similar attributes makes solid business management sense. But it isn’t that easy, I’m a competitive person. The “sportsman” side of me did not want to take any losses after dozens of wins. Today, the last day of the year, I woke and told myself the intelligent thing is doing what should net more money – not what will net bragging rights over win percentage.
There are many other reasons people don’t sell when the probabilities indicate they should. One is not pre-determining if the trade is behaving as expected; another is falling in love with a stock and not wanting to part with it. Another is knowing you were once up and not wanting to permanently lock in something that is now red. Another may be “addiction to the game,” this burns money; a good trader should be comfortable sitting with a large cash position for weeks or months if that is what makes the most business sense.
All of these feelings that impact behavior are part of being human. There are plenty of other outlets to act on feelings outside of the markets, but investing requires you to act as though you are running a business. Don’t fall in love with your positions, and if they aren’t treating you well, get rid of them.
Image Credit: Mike W. (Flickr)
Car Lot Owner Mentality
This may not work for everyone, but I think of my trading account (not retirement savings) as a used car lot. I am the manager and every one of the cars represents something I want to sell. If you look at your account in this way, stocks are just inventory. If times are good and prices are rising on my inventory, I want to slow down the pace of my selling. When times ahead look as though people may not want the kind of inventory on my lot, I can’t sell fast enough, even if at a loss. The cash then raised serves as dry powder that stands ready to be invested in cars/inventory/stocks believed to be more in demand. Inventory that will provide more of a profit.
By thinking of my account as a car lot, I avoid 95% of the mental, “acting with the heart” trading missteps that I see others get trapped by. I still have a 5% problem that includes wanting a perfect score.
Investors buying and selling on an exchange have a huge advantage over managers of a car lot. For most exchange traded securities, finding someone to close out your position with does not require someone walking in off the street that just happens to want what is on your lot. Investors of securities have sell buttons that alert the investment community that you are unloading. Even thinly traded securities will have someone take the other side of the trade at the right price. There are no other businesses in the world where unwanted inventory is this easy to unload. Traders are like car lot owners with this unique advantage.
Don’t Coddle the HODL Model
While buy and hold may be a good long-term portfolio strategy for retirement money or other long-term assets, holding without reason other than the investment community encourages you to “HODL” forever and not to throw in the towel can get you in trouble. The HODL community encourages investors of certain assets to Hold On for Dear Life; this isn’t trading; it’s a recipe for an ulcer.
When does it make sense to close out a position? In general, there are some marketplace related reasons to unwind a position. These are reasons that are related to the company, changes in the markets, or better opportunity elsewhere. Or non-market-related outside reasons. Perhaps one wishes to use some of the profit to put in a pool, or they wish to stem possible losses while waiting for better clarity. Outsiders encouraging an entire community to hold a position to help push up its price only works until greed kicks in and those sworn to HODL realize the stock is up for unnatural reasons and they should be among the first out.
Kneejerk market reactions to news or events can cause a wave of selling or buying that then settles down and reverses somewhat. This may provide an opportunity to unwind positions into the feeding frenzy and re-enter it when the market settles in at a more level-headed price.
Broaden Investment Base
If you are a used car lot owner during a recession, you may opt to only half-fill your lot and make sure the cars in inventory are affordable to the community you serve. If the economy fires up and money is then widely available, you may want to maximize your inventory and make sure they are cars that will net the most profit. It is important to know a lot about different classes of cars. This is how you run that business, minivans and crossovers some years, even if you like British sports cars.
For trading, after the pandemic plunge in early 2020, the markets had solid trends. First up with many sectors outpacing the others. Then it trended down, with many sectors outpacing the others. Understanding the sectors and companies within the sectors allows better decisions. If you have spent all your time wondering whether you should get into Apple or Tesla at the exclusion of others, while oil companies or utilities were what had a clear trend, or in Nasdaq 100 stocks because the media always talks about them, when small-caps were making their move, you may wish to broaden your focus.
Take-Away
Internal trouble exiting positions impacts more self-directed investors than will ever admit to it on social media (or actual in-the-flesh interaction). If thought of as inventory and a tool for maximizing return, the trouble is put in a place most can handle, as a “business owner,” you are buying what you feel you can sell. That is the only reason to buy. If you don’t know if you can sell it higher tomorrow, but there is something that you believe you can, then perhaps it is time to evaluate dumping, even at a loss, to pick up something else.
Cash can often be that something else. Earning 4% annually on a short t-bill isn’t sexy, but having that liquid holding when opportunity presents itself, allows you to pounce. There is nothing worse than seeing something very clearly as a winning trade and not having the capital to load up on it.
Consolidated third quarter net revenues totaled $124.0 million
Third quarter net income totaled $5.2 million, or $0.17 per diluted share, vs. $0.17 per diluted share last year; excluding certain items, non-GAAP net income totaled $6.3 million, or $0.20 per diluted share, vs. $0.18 per diluted share last year
Balance sheet remains solid, with cash and cash equivalents of $25.2 million and no debt
Jackie Ardrey named President and CEO effective November 1, 2022, replacing retiring President and CEO Rob Wallstrom
FORT WAYNE, Ind., Dec. 07, 2022 (GLOBE NEWSWIRE) — Vera Bradley, Inc. (Nasdaq: VRA) today announced its financial results for the third quarter ended October 29, 2022.
In this release, Vera Bradley, Inc. or “the Company” refers to the entire enterprise and includes both the Vera Bradley and Pura Vida brands. Vera Bradley on a stand-alone basis refers to the Vera Bradley brand.
Third Quarter Comments
Rob Wallstrom, outgoing Chief Executive Officer of the Company, commented, “We are pleased with our year-over-year improvement in third quarter non-GAAP EPS, largely driven by implementation of our targeted expense reductions. Total Company third quarter revenues of $124.0 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 remained more engaged and continued 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.”
“We opened two additional Pura Vida Full-Price retail stores in the quarter, and they are performing ahead of our expectations,” Wallstrom continued. “As with many direct-to-consumer companies, we have seen a shift from a pure-digital-play model to an integrated multi-channel platform. Our four Full-Price retail stores are not only profitable but have driven improved ecommerce traffic and revenue in their trade areas. However, overall Pura Vida revenues continued to be negatively impacted by the shift in social and digital media effectiveness and rising digital media costs, and we experienced a decline in sales to wholesale accounts.”
Jackie Ardrey Named President and CEO
Jackie Ardrey joined the Company as President and CEO effective November 1, 2022, replacing retiring President and CEO Wallstrom. Wallstrom will continue to work closely with Ardrey through the end of December 2022 to ensure a smooth transition. Ardrey also replaced Wallstrom on the Company’s Board of Directors.
Ardrey is an accomplished, results-oriented leader with over 25 years of experience in multi-channel retail enterprises. Between 2018 and October 2022, she held the post of President at home furnishings and seasonal décor catalog and online retailer Grandin Road, part of the Qurate Retail Group. Previously, Ardrey was CEO of Trading Company Holdings and Senior Vice President of Merchandising and Supply Chain for iconic omnichannel gourmet food and gifting brand Harry and David. Prior to that, she spent 14 years at multi-channel high-end children’s retailer Hanna Andersson in various roles of increasing responsibility, including Senior Vice President of Merchandising, Design, and Wholesale.
“Although I have just been with the Company a few short weeks, I am convinced that both our Vera Bradley and Pura Vida brands have untapped potential in the marketplace,” Ardrey commented. “While I expect the macro environment to remain unpredictable, our teams are focused, and our cash position and balance sheet remain solid. I look forward to working closely with our leadership teams to develop and execute solid growth plans; leverage our many opportunities, especially in merchandising and marketing; and deliver consistent, sustainable growth and value to our stakeholders over the long term.”
Summary of Financial Performance for the Third Quarter
Consolidated net revenues totaled $124.0 million compared to $134.7 million in the prior year third quarter ended October 30, 2021.
For the current year third quarter, Vera Bradley, Inc.’s consolidated net income totaled $5.2 million, or $0.17 per diluted share. These results included $1.1 million of net after tax charges, comprised of $0.6 million of consulting and professional fees primarily associated with cost savings initiatives and the CEO search, $0.4 million for the amortization of definite-lived intangible assets, and $0.3 million of severance and stock-based retirement compensation charges, partially offset by a benefit of $0.2 million for the reversal of certain purchase order cancellation fees. On a non-GAAP basis, Vera Bradley, Inc.’s consolidated third quarter net income totaled $6.3 million, or $0.20 per diluted share.
For the prior year third quarter, Vera Bradley, Inc.’s consolidated net income totaled $5.8 million, or $0.17 per diluted share. These results included $0.4 million of net after tax charges related to intangible asset amortization. On a non-GAAP basis, Vera Bradley, Inc.’s consolidated third quarter net income totaled $6.2 million, or $0.18 per diluted share.
Summary of Financial Performance for the Nine Months
Consolidated net revenues totaled $352.9 million for the current year nine months ended October 29, 2022, compared to $390.9 million in the prior year nine month period ended October 30, 2021.
For the current year nine months, Vera Bradley, Inc.’s consolidated net loss totaled ($31.6) million, or ($1.00) per diluted share. These results included $34.2 million of net after tax charges, comprised of $18.2 million of Pura Vida goodwill and intangible asset impairment charges, $5.0 million of severance and stock-based retirement compensation retirement charges and other employee costs, $4.7 million of inventory adjustments associated with the exit of certain technology products and the write-off of excess mask inventory, $3.0 million of consulting and professional fees primarily associated with cost savings initiatives and the CEO search, $1.3 million of intangible asset amortization, $1.0 million of store and right-of-use asset impairment charges, $0.7 million of purchase order cancellation fees for spring 2023 goods, and $0.3 million of goodMRKT exit costs. On a non-GAAP basis, Vera Bradley, Inc.’s consolidated net income for the nine months totaled $2.6 million, or $0.08 per diluted share.
For the prior year nine months, Vera Bradley, Inc’s consolidated net income totaled $12.7 million, or $0.37 per diluted share. These results included $1.3 million of net after tax charges related to intangible asset amortization. On a non-GAAP basis, Vera Bradley, Inc.’s consolidated net income totaled $14.0 million, or $0.41 per diluted share, for the nine months.
Non-GAAP Numbers
The current year non-GAAP third quarter income statement numbers referenced below exclude the previously outlined consulting and professional fees primarily associated with cost savings initiatives and the CEO search, amortization of definite-lived intangible assets, severance and stock-based retirement compensation charges, and a benefit for the reversal of certain purchase order cancellation fees. The current year non-GAAP income statement numbers for the nine months referenced below exclude the previously outlined goodwill and intangible asset impairment charges, severance and stock-based retirement compensation retirement charges and other employee costs, inventory adjustments, consulting and professional fees, intangible asset amortization, store and right-of-use asset impairment charges, purchase order cancellation fees, and goodMRKT exit costs.
The prior year non-GAAP third quarter and nine-month income statement numbers referenced below exclude the previously outlined intangible asset amortization.
Third Quarter Details
Current year third quarter Vera Bradley Direct segment revenues totaled $80.1 million, a 7.6% decrease from $86.6 million in the prior year third quarter. Comparable sales decreased 9.6% in the third quarter. The Company permanently closed 12 full-line stores and opened 5 factory outlet stores in the last twelve months.
Vera Bradley Indirect segment revenues totaled $22.3 million, a 6.7% increase over $20.9 million in the prior year third quarter, reflecting an increase in certain key account orders, partially offset by a decline in specialty account orders.
Pura Vida segment revenues totaled $21.7 million, a 20.3% decrease from $27.2 million in the prior year.
Third quarter consolidated gross profit totaled $65.9 million, or 53.1% of net revenues, compared to $72.3 million, or 53.6% of net revenues, in the prior year. On a non-GAAP basis, current year gross profit totaled $65.6 million, or 52.9% of net revenues. The current year gross profit rate was negatively affected by higher inbound and outbound freight expense, deleverage of overhead costs, and channel mix changes, partially offset by price increases.
Third quarter consolidated SG&A expense totaled $60.1 million, or 48.4% of net revenues, compared to $64.5 million, or 47.8% of net revenues, in the prior year. On a non-GAAP basis, consolidated SG&A expense totaled $57.6 million, or 46.4% of net revenues for the current year third quarter, compared to $63.7 million, or 47.3% of net revenues, in the prior year. As expected, Vera Bradley’s SG&A current year expenses were lower than the prior year primarily due to cost reduction initiatives and a reduction in variable-related expenses due to the lower sales volume.
The Company’s third quarter consolidated operating income totaled $6.0 million, or 4.8% of net revenues, compared to $8.0 million, or 5.9% of net revenues, in the prior year third quarter. On a non-GAAP basis, the Company’s current year consolidated operating income totaled $8.2 million, or 6.6% of net revenues, compared to $8.7 million, or 6.5%, of net revenues, in the prior year.
By segment:
Vera Bradley Direct operating income was $17.1 million, or 21.3% of Direct net revenues, for the third quarter, compared to $17.8 million, or 20.6% of Direct net revenues, in the prior year. On a non-GAAP basis, current year Direct operating income totaled $16.8 million, or 21.0% of Direct revenues.
Vera Bradley Indirect operating income was $9.0 million, or 40.4% of Indirect net revenues, for the third quarter, compared to $7.3 million, or 35.1% of Indirect net revenues, in the prior year. On a non-GAAP basis, current year Indirect operating income totaled $9.0 million, or 40.2% of Indirect net revenues.
Pura Vida’s operating loss was ($1.4) million, or (6.2%) of Pura Vida net revenues, in the current year, compared to operating income of $1.8 million, or 6.6% of Pura Vida net revenues, in the prior year. On a non-GAAP basis, Pura Vida’s operating loss was ($0.1) million, or (0.3%) of Pura Vida net revenues, compared to operating income of $2.6 million, or 9.4% of Pura Vida net revenues, in the prior year.
Details for the Nine Months
Vera Bradley Direct segment revenues for the current year nine-month period totaled $228.7 million, an 8.7% decrease from $250.5 million in the prior year. Comparable sales declined 11.6% for the nine months.
Vera Bradley Indirect segment revenues for the nine months totaled $56.6 million, a 6.8% increase over $53.0 million in the prior year, reflecting an increase in certain key account orders, partially offset by a decline in specialty account orders.
Pura Vida segment revenues for the nine months totaled $67.5 million, a 22.7% decrease from $87.4 million in the prior year.
Consolidated gross profit for the nine months totaled $178.9 million, or 50.7% of net revenues, compared to $211.8 million, or 54.2% of net revenues, in the prior year. On a non-GAAP basis, current year gross profit totaled $185.9 million, or 52.7% of net revenues. The current year gross profit rate was negatively affected by higher inbound and outbound freight expense, deleverage of overhead costs, and channel mix changes, partially offset by price increases.
For the nine months, consolidated SG&A expense totaled $195.0 million, or 55.3% of net revenues, compared to $194.1 million, or 49.7% of net revenues, in the prior year. On a non-GAAP basis, current year consolidated SG&A expense totaled $181.0 million, or 51.3% of net revenues, compared to $191.8 million, or 49.1% of net revenues, in the prior year. As expected, Vera Bradley’s non-GAAP SG&A current year expenses were lower than the prior year primarily due to cost reduction initiatives and a reduction in variable-related expenses due to the lower sales volume.
For the nine months, the Company’s consolidated operating loss totaled ($45.1) million, or (12.8%) of net revenues, compared to consolidated operating income of $18.6 million, or 4.8% of net revenues, in the prior year nine-month period. On a non-GAAP basis, the Company’s current year consolidated operating income was $5.3 million, or 1.5% or net revenues, compared to $20.9 million, or 5.4% of net revenues, in the prior year.
By segment:
Vera Bradley Direct operating income was $32.6 million, or 14.3% of net revenues, compared to $51.9 million, or 20.7% of Direct net revenues, in the prior year. On a non-GAAP basis, current year Direct operating income was $38.6 million, or 16.9% of Direct net revenues.
Vera Bradley Indirect operating income was $18.4 million, or 32.5% of Indirect net revenues, compared to $17.4 million, or 32.8% of Indirect net revenues, in the prior year. On a non-GAAP basis, current year Indirect operating income totaled $19.4 million, or 34.2% of Indirect net revenues.
Pura Vida’s operating loss was ($28.8) million, or (42.7%) of Pura Vida net revenues, for the current year, compared to operating income of $7.5 million, or 8.6% of Pura Vida net revenues, in the prior year. On a non-GAAP basis, Pura Vida’s operating income was $4.3 million, or 6.4% of Pura Vida net revenues, for the current year, compared to $9.8 million, or 11.3% of Pura Vida net revenues, for the prior year.
Balance Sheet
Net capital spending for the third quarter and nine months totaled $2.6 million and $7.0 million, respectively.
Cash, cash equivalents, and investments as of October 29, 2022 totaled $25.2 million compared to $75.3 million at the end of last year’s third quarter. The Company had no borrowings on its $75 million ABL credit facility at quarter end.
Total quarter-end inventory was $178.3 million, compared to $148.3 million at the end of the third quarter last year. Total current year inventory was higher than the prior year primarily due to approximately $17 million in incremental logistics costs burdening overall inventory as well as incremental Vera Bradley Factory inventory related to lower than expected revenues.
During the third quarter, the Company repurchased approximately $0.8 million of its common stock (approximately 0.2 million shares at an average price of $3.56), bringing year-to-date purchases through the end of the third quarter to approximately $17.3 million (approximately 2.6 million shares at an average price of $6.56). The Company has $28.5 million of remaining availability under its $50.0 million repurchase authorization that expires in December 2024.
Forward Outlook
Ardrey noted, “We expect the fourth quarter macroeconomic environment to continue to be unpredictable; the Pura Vida business will continue to be challenging; inflationary pressures will continue to impact Vera Bradley customers with lower household incomes, particularly in the Factory Channel; and there will be continued pressure on gross margin.”
Excluding net revenues, all forward-looking guidance numbers referenced below are non-GAAP. The prior year SG&A and earnings per diluted share numbers exclude the previously disclosed net charges related to intangible asset amortization. Current year guidance excludes previously disclosed goodwill and intangible asset impairment charges, severance and stock-based retirement compensation retirement charges and other employee costs, inventory adjustments, consulting and professional fees, intangible asset amortization, store and right-of-use asset impairment charges, purchase order cancellation fees, and goodMRKT exit costs.
For the fourth quarter of Fiscal 2023, the Company’s expectations are as follows:
Consolidated net revenues of $136 to $141 million. Net revenues totaled $149.6 million in the prior year fourth quarter.
A consolidated gross profit percentage of 49.5% to 50.5% compared to 50.9% in the prior year fourth quarter. The expected decrease is primarily associated with incremental targeted promotional activity and deleverage on overhead costs, partially offset by price increases and lower year-over-year freight expense.
Consolidated SG&A expense of $61 to $63 million compared to $67.1 million in the prior year fourth quarter. The reduction in SG&A expense is being driven by cost reduction initiatives and a reduction in compensation expense, marketing, and other variable-related expenses due to the expected sales decline from the prior year.
Consolidated diluted EPS of $0.16 to $0.20 based on diluted weighted-average shares outstanding of 31.1 million and an effective tax rate of approximately 25%. Diluted EPS totaled $0.17 in last year’s fourth quarter.
For Fiscal 2023, the Company’s updated expectations are as follows:
Consolidated net revenues of $489 to $494 million. Net revenues totaled $540.5 million in Fiscal 2022. Year-over-year Vera Bradley revenues are expected to decline between 6% and 7%, and Pura Vida revenues are expected to decline between 20% and 21%.
A consolidated gross profit percentage of 51.9% to 52.1% compared to 53.3% in Fiscal 2022. The expected year-over-year decrease is primarily related to incremental inbound and outbound freight expense, incremental targeted promotional activity, and deleverage on overhead costs, partially offset by price increases.
Consolidated SG&A expense of $242 to $244 million compared to $258.8 million in Fiscal 2022. The reduction in SG&A expense is being driven by cost reduction initiatives and a reduction in compensation expense, marketing, and other variable-related expenses due to the expected sales decline from the prior year.
Consolidated operating income of $11.6 to $13.5 million compared to $30.1 million in Fiscal 2022.
Consolidated diluted EPS of $0.22 to $0.26 based on diluted weighted-average shares outstanding of 31.6 million and an effective tax rate of between 24.0 and 25.0%. Diluted EPS totaled $0.57 last year.
Net capital spending of approximately $10 million compared to $5.5 million in the prior year, reflecting investments associated with new Vera Bradley factory and Pura Vida store locations and technology and logistics enhancements.
Disclosure Regarding Non-GAAP Measures
The Company’s management does not, nor does it suggest that investors should, consider the supplemental non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). Further, the non-GAAP measures utilized by the Company may be unique to the Company, as they may be different from non-GAAP measures used by other companies.
The Company believes that the non-GAAP measures presented in this earnings release, including cost of sales; gross profit; selling, general, and administrative expenses; impairment of goodwill and intangible assets; operating income (loss); net income (loss); net (loss) income attributable and available to Vera Bradley, Inc.; and diluted net income (loss) per share available to Vera Bradley, Inc. common shareholders, along with the associated percentages of net revenues, are helpful to investors because they allow for a more direct comparison of the Company’s year-over-year performance and are consistent with management’s evaluation of business performance. A reconciliation of the non-GAAP measures to the most directly comparable GAAP measures can be found in the Company’s supplemental schedules included in this earnings release.
Call Information
A conference call to discuss results for the third quarter is scheduled for today, Wednesday, December 7, 2022, at 9:30 a.m. Eastern Time. A broadcast of the call will be available via Vera Bradley’s Investor Relations section of its website, www.verabradley.com. Alternatively, interested parties may dial into the call at (800) 437-2398, and enter the access code 6836290. A replay will be available shortly after the conclusion of the call and remain available through December 21, 2022. To access the recording, listeners should dial (844) 512-2921, and enter the access code 6836290.
About Vera Bradley, Inc.
Vera Bradley, Inc. operates two unique lifestyle brands – Vera Bradley and Pura Vida. Vera Bradley and Pura Vida are complementary businesses, both with devoted, emotionally-connected, and multi-generational female customer bases; alignment as casual, comfortable, affordable, and fun brands; positioning as “gifting” and socially-connected brands; strong, entrepreneurial cultures; a keen focus on community, charity, and social consciousness; multi-channel distribution strategies; and talented leadership teams aligned and committed to the long-term success of their brands.
Vera Bradley, based in Fort Wayne, Indiana, is a leading designer of women’s handbags, luggage and other travel items, fashion and home accessories, and unique gifts. Founded in 1982 by friends Barbara Bradley Baekgaard and Patricia R. Miller, the brand is known for its innovative designs, iconic patterns, and brilliant colors that inspire and connect women unlike any other brand in the global marketplace.
In July 2019, Vera Bradley, Inc. acquired a 75% interest in Creative Genius, Inc., which also operates under the name Pura Vida Bracelets (“Pura Vida”). Pura Vida, based in La Jolla, California, is a digitally native, highly-engaging lifestyle brand founded in 2010 by friends Paul Goodman and Griffin Thall. Pura Vida has a differentiated and expanding offering of bracelets, jewelry, and other lifestyle accessories.
The Company has three reportable segments: Vera Bradley Direct (“VB Direct”), Vera Bradley Indirect (“VB Indirect”), and Pura Vida. The VB Direct business consists of sales of Vera Bradley products through Vera Bradley full-line and factory outlet stores in the United States, verabradley.com, verabradley.ca, Vera Bradley’s online outlet site, and the Vera Bradley annual outlet sale in Fort Wayne, Indiana. The VB Indirect business consists of sales of Vera Bradley products to approximately 1,700 specialty retail locations throughout the United States, as well as select department stores, national accounts, third party e-commerce sites, and third-party inventory liquidators, and royalties recognized through licensing agreements related to the Vera Bradley brand. The Pura Vida segment consists of sales of Pura Vida products through the Pura Vida websites, www.puravidabracelets.com, www.puravidabracelets.eu, and www.puravidabracelets.ca; through the distribution of its products to wholesale retailers and department stores; and through its Pura Vida retail stores.
Website Information
We routinely post important information for investors on our website www.verabradley.com in the “Investor Relations” section. We intend to use this webpage as a means of disclosing material, non-public information and for complying with our disclosure obligations under Regulation FD. Accordingly, investors should monitor the Investor Relations section of our website, in addition to following our press releases, SEC filings, public conference calls, presentations and webcasts. The information contained on, or that may be accessed through, our webpage is not incorporated by reference into, and is not a part of, this document.
Investors and other interested parties may also access the Company’s most recent Corporate Responsibility and Sustainability Report outlining its ESG (Environmental, Social, and Governance) initiatives at https://verabradley.com/pages/corporate-responsibility.
Vera Bradley Safe Harbor Statement
Certain statements in this release are “forward-looking statements” made pursuant to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements reflect the Company’s current expectations or beliefs concerning future events and are subject to various risks and uncertainties that may cause actual results to differ materially from those that we expected, including: possible adverse changes in general economic conditions and their impact on consumer confidence and spending; possible inability to predict and respond in a timely manner to changes in consumer demand; possible loss of key management or design associates or inability to attract and retain the talent required for our business; possible inability to maintain and enhance our brands; possible inability to successfully implement the Company’s long-term strategic plan; possible inability to successfully open new stores, close targeted stores, and/or operate current stores as planned; incremental tariffs or adverse changes in the cost of raw materials and labor used to manufacture our products; possible adverse effects resulting from a significant disruption in our distribution facilities; or business disruption caused by COVID-19 or other pandemics. Risks, uncertainties, and assumptions also include the possibility that Pura Vida acquisition benefits may not materialize as expected and that Pura Vida’s business may not perform as expected. More information on potential factors that could affect the Company’s financial results is included from time to time in the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of the Company’s public reports filed with the SEC, including the Company’s Form 10-K for the fiscal year ended January 29, 2022. We undertake no obligation to publicly update or revise any forward-looking statement. Financial schedules are attached to this release.
CONTACTS: Investors: Julia Bentley, VP of Investor Relations and Communications jbentley@verabradley.com (260) 207-5116
LOS ANGELES, Nov. 23, 2022 (GLOBE NEWSWIRE) — FAT(Fresh. Authentic. Tasty.) Brands Inc. (NASDAQ: FAT), a leading global franchising company and parent company of iconic brands including Round Table Pizza, Fatburger, Johnny Rockets, Twin Peaks, Fazoli’s and 12 other restaurant concepts, today announced their participation in the Benchmark Company’s 11th Annual Discovery One-on-One Investor Conference on Thursday, December 1, 2022 at the New York Athletic Club in New York City.
FAT Brands is scheduled to participate in one-on-one meetings with institutional analysts and investors throughout the day. The conference offers emerging growth and dynamic publicly traded companies access to institutional and individual investors in a unique one-on-one format.
FAT Brands (NASDAQ: FAT) is a leading global franchising company that strategically acquires, markets, and develops fast casual, quick-service, casual dining, and polished casual dining concepts around the world. The Company currently owns 17 restaurant brands: Round Table Pizza, Fatburger, Marble Slab Creamery, Johnny Rockets, Fazoli’s, Twin Peaks, Great American Cookies, Hot Dog on a Stick, Buffalo’s Cafe & Express, Hurricane Grill & Wings, Pretzelmaker, Elevation Burger, Native Grill & Wings, Yalla Mediterranean and Ponderosa and Bonanza Steakhouses, and franchises and owns over 2,300 units worldwide. For more information on FAT Brands, please visit www.fatbrands.com.
About The Benchmark Company
The Benchmark Company is an institutionally focused, research driven, sales trading and investment banking firm. We were founded in 1988 and are headquartered in New York City. Our focus is on fostering the long-term success of our corporate clients through raising capital, providing strategic advisory services, generating insightful research and developing institutional sponsorship by leveraging the firm’s sales, trading and equity research capabilities. https://www.benchmarkcompany.com.
