Vera Bradley Inc. Leans Into Product Innovation And Collaborations

Vera BradleVRA
y Inc., which includes its namesake brand and Pura Vida, announced its second quarter (Q2) results with revenue down 11.3% compared to last year. However, Robert Wallstrom, president and CEO of Vera Bradley, is not concerned with the brand’s future and discussed how the company has worked to drive product innovation, reduce costs and maintain a debt-free balance sheet.

On the earnings call, Wallsrom talked about how the company has seen bifurcation in the spending of its customer base. The full-price direct-to-consumer customer spend was nearly flat to last year and significantly ahead of 2020. However, the off-price factory stores have experienced a drop in shopper traffic and spending related to high gas prices. Typically, outlet stores are located outside the immediate target market area, making customers drive long distances to get to the factory stores.

The wholesale revenue has experienced a strong performance compared to the previous year. Wallstrom added that the company had faced gross margin pressures due to rising production and logistics costs which may lead to raising prices to offset raw materials and freight costs. The company is focused on continuing its strong partnerships and collaborations to keep consumer interest high.

Partnerships and travel remain strong

Wallstrom discussed how the company is focused on its core strategy by building a lifestyle merchandise brand. Vera Bradley will continue its partnerships and product collaborations, such as Disney, Harry Potter, Hello Kitty, and the World Surf League. Vera Bradley is expanding into additional product categories this fall, including footwear and home.

The company is optimistic about the rebound of the travel business, which influences purchases at Vera Bradley. Wallstrom stated, “We will continue to optimize the travel category, which is nearly back to pre-pandemic levels.”

Vera Bradley moved production to the U.S.

Earlier this year, the company announced it would produce American-made products through a unique made-to-order process. In partnership with JTB Custom, Vera Bradley offers one-of-a-kind designs on their website without having a piece of inventory in stock. Once ordered, products are made and customers can receive the made-to-order item in a two-week turnaround.

Jud Barr, founder and CEO of JTB Custom, stated, “On-demand production provides the flexibility to adjust to demand fluctuations, and brands can stock raw materials and unfinished goods that can be repurposed rather than having to deeply discount finished goods or discard them altogether.” In the past year, many retailers have been caught off-guard by unpredicted consumer demand for products creating over-stocks and excess inventories or complete stock-outs. Made-to-order combined with near-sourcing allows only products that are sold to be produced. Barr said, “For leaders that have lived and worked through the issues over the past few years, on-demand production will be an extremely attractive business strategy.”

Many retailers like Vera Bradley are exploring a hybrid model between uber customization, made-to-order and mass production. Barr discussed how the blended mass production and customization model is precisely what many of its clients do. “When a product has predictable demand and reliable manufacturing infrastructure, it can leverage its mass manufacturing capabilities to get a low unit cost. And they can improve their margins by adding embellishment or personalization of stock products for an upcharge.” Minimizing inventory by producing only items that have sold near the customer base fosters a sustainable supply chain and brings manufacturing jobs back to the U.S.for companies like Vera Bradley.

Macro environment remains unpredictable

The current macro environment remains uncertain for many retailers. Inflation, gas prices, tight labor markets and rising interest rates create anxiety for consumers, making predicting demand a challenge for retailers. Wallstrom said, “We are planning for the macro environment to remain challenging for the balance of the year and into next year.” Major environmental factors that have impacted the Vera Bradley brand directly are high logistics costs and the price of gas. Both factors seem to be settling down, which could create tailwinds for the company in the second half of the year.

In July of this year, Wallstrom announced his retirement from Vera Bradley, Inc. and the company is looking for a replacement that would take over in 2023. Wallstrom will remain President and CEO until a successor is named.