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What changed in Vera Bradley, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Vera Bradley, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+361 added−409 removedSource: 10-K (2023-03-28) vs 10-K (2022-03-29)

Top changes in Vera Bradley, Inc.'s 2023 10-K

361 paragraphs added · 409 removed · 251 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

96 edited+36 added−70 removed42 unchanged
Biggest changeSeasonality Because Vera Bradley and Pura Vida products are frequently given as gifts, we have historically realized, and expect to continue to realize, higher sales and operating income in the fourth quarter of our fiscal year, which includes the holiday months of November and December. In addition, our products are popular during back-to-school periods of August and September.
Biggest changeTo reach our existing customers in person, to acquire new customers, and to expose customers to the experiential aspect of our brand, we have hosted several successful events at our retail stores, including for store openings and seasonal-based events such as for Valentine's Day. 9 Seasonality Because Vera Bradley and Pura Vida products are frequently given as gifts, we have historically realized, and expect to continue to realize, higher sales and operating income in the fourth quarter of our fiscal year, which includes the holiday months of November and December.
Bags. Bags are a core part of our product offerings and are the primary component of every seasonal assortment. The category consists of classic and new styles developed by our product development team. Our bag product category includes items such as totes, crossbodies, satchels, clutches, backpacks, baby bags, and lunch bags.
Bags. Bags are a core part of our product offerings and are the primary component of every seasonal assortment. The category consists of classic and new styles developed by our product development team. Our bag product category includes items such as backpacks, totes, crossbodies, lunch bags, satchels, clutches, and baby bags.
Pura Vida Pura Vida products are sourced primarily from El Salvador, as well as China, Guatemala, Cambodia, Indonesia, and India. We have continued an active supply chain diversification process to ensure a focus on maintaining flexibility and to help mitigate the risk of concentrated production, similar to the Vera Bradley supply chain.
Pura Vida Pura Vida products are sourced primarily from El Salvador, as well as China, India, Guatemala, Cambodia, and Indonesia. We have continued an active supply chain diversification process to ensure a focus on maintaining flexibility and to help mitigate the risk of concentrated production, similar to the Vera Bradley supply chain.
In April 2016, we opened an office in Hong Kong to lead the global supply chain in As ia, including the oversight of sourcing and procurement. The majority of our Vera Bradley finished goods, not sourced through licenses or strategic partners, are manufactured by a variety of global manufacturers located primarily in Cambodia, Vietnam, Indonesia, and China.
In April 2016, we opened an office in Hong Kong to lead the global supply chain in As ia, including the oversight of sourcing and procurement. The majority of our Vera Bradley finished goods, not sourced through licenses or strategic partners, are manufactured by a variety of global manufacturers located primarily in Cambodia, Vietnam, Indonesia, China, and the Philippines.
For financial information about our reportable segments, refer to Note 17 of the Notes to Consolidated Financial Statements set forth in Part II, “Item 8. Financial Statements and Supplementary Data,” of this report. Our Brands Vera Bradley Vera Bradley is a leading designer of women’s handbags, luggage and other travel items, fashion and home accessories, and unique gifts.
For financial information about our reportable segments, refer to Note 17 of the Notes to Consolidated Financial Statements set forth in Part II, “Item 8. Financial Statements and Supplementary Data,” of this report. Our Brands Vera Bradley Vera Bradley is a leading designer of women’s handbags, luggage and travel items, fashion and home accessories, and unique gifts.
Our History When they were traveling together, Fort Wayne, Indiana friends Barbara Bradley Baekgaard and Patricia Miller realized there was a lack of stylish travel accessories in the market. Within weeks, the friends created Vera Bradley, named after Ms. Bradley Baekgaard’s mother, and began manufacturing and marketing their distinctive products.
Our History When they were traveling together in 1982, Fort Wayne, Indiana friends Barbara Bradley Baekgaard and Patricia Miller realized there was a lack of stylish travel accessories in the market. Within weeks, the friends created Vera Bradley, named after Ms. Bradley Baekgaard’s mother, and began manufacturing and marketing their distinctive products.
Baekgaard retired from Vera Bradley operations in 2017 but continues to serve on the Board of Directors and as a brand ambassador. Ms. Miller retired in October 2012 as our National Spokesperson and in August 2019 from the Board of Directors. In July 2019, Vera Bradley, Inc. acquired a majority interest in Pura Vida.
Baekgaard retired from Vera Bradley operations in 2017 but continues to serve 4 on the Board of Directors and as a brand ambassador. Ms. Miller retired in October 2012 as our National Spokesperson and in August 2019 from the Board of Directors. In July 2019, Vera Bradley, Inc. acquired a majority interest in Pura Vida.
In fiscal 2021 at Vera Bradley, we migrated our ERP, POS, Business Intelligence, and Order Management systems to cloud-based platforms streamlining and simplifying our work and providing for additional capabilities such as mobile POS and multi-company operations on the same platform.
In fiscal 2021 at Vera Bradley, we 12 migrated our ERP, POS, Business Intelligence, and Order Management systems to cloud-based platforms streamlining and simplifying our work and providing for additional capabilities such as mobile POS and multi-company operations on the same platform.
We discontinued manufacturing in Myanmar in mid-2021. With the oversight of our office in Hong Kong and our independent contractors, we believe these financial benefits have been realized without sacrificing the level of quality inherent in our products or service to our customers.
We discontinued manufacturing in Myanmar in mid-2021. With the oversight of our office in Hong Kong and our independent contractors, we believe financial benefits have been realized without sacrificing the level of quality inherent in our products or service to our customers.
In fiscal 2021, we launched our Company-wide diversity and inclusion initiative, Project Quilt, to continue to enhance diversity, equality, and inclusion, focusing on three key areas – the Associate Experience, the Customer Experience, and the Community Experience. Engagement .
In fiscal 2021, we launched our Company-wide diversity and inclusion initiative, Project Quilt, to continue to enhance diversity, equality, and inclusion, focusing on three key areas – the Associate Experience, the Customer Experience, and the Community Experience. 13 Engagement .
We believe Vera Bradley and Pura Vida are complementary businesses, both with devoted, emotionally-connected, and multi-generational female customer bases; alignment as causal, 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.
We believe 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.
The VB Indirect business consists of sales of Vera Bradley products to approximately 1,800 specialty retail locations, substantially all of which are located in the United States; sales to 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 VB Indirect business consists of sales of Vera Bradley products to approximately 1,700 specialty retail locations, substantially all of which are located in the United States; sales to 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.
During fiscal 2022, under the umbrella of VB Cares, we reinforced our position as a total stakeholder-focused and socially-conscious organization and continued to strengthen our community support and charitable initiatives that are meaningful to our customers and that make a significant impact on those in need, particularly women and children.
During fiscal 2023, under the umbrella of VB Cares, we reinforced our position as a total stakeholder-focused and socially-conscious organization and continued to strengthen our community support and charitable initiatives that are meaningful to our customers and that make a significant impact on those in need, particularly women and children.
Product Development Vera Bradley. We have implemented a fully integrated and cross-functional product development process that aligns design, trend and market research, merchandising, planning, sales, marketing, and sourcing. We believe product development is a core capability that makes our products unique and that our designs and aesthetics set our products apart and drive customer loyalty.
We have implemented a fully integrated and cross-functional product development process that aligns design, trend and market research, merchandising, planning, sales, marketing, and sourcing. We believe product development is a core capability that makes our products unique and that our designs and aesthetics set our products apart and drive customer loyalty.
Marketing We believe that the growth of our brands and our business is influenced by our ability to introduce and sell our merchandise in a way that clearly conveys the Vera Bradley and Pura Vida brand personalities. We use marketing as a critical tool in our efforts to promote our brands. Vera Bradley Retention Advertising.
Marketing We believe that the growth of our brands and our business is influenced by our ability to introduce and sell our merchandise in a way that clearly conveys the Vera Bradley and Pura Vida brand personalities. We use marketing as a critical tool in our efforts to promote our brands.
Pura Vida Pura Vida, based in La Jolla, California, is a digitally native lifestyle brand that we believe deeply resonates with its loyal consumer following. The Pura Vida brand has a differentiated and expanding offering of bracelets, jewelry, and other lifestyle accessories.
Pura Vida Pura Vida, based in La Jolla, California, is a digitally native lifestyle brand that we believe resonates with its loyal consumer following. The Pura Vida brand has a differentiated and expanding offering of bracelets, jewelry, apparel, and other lifestyle accessories.
We are continually focused on looking for new ways to creatively engage our customers, grow brand awareness, and introduce new customers to our brands in a cost-effective manner, but that is becoming more challenging and expensive for both of our brands.
We are continually looking for new ways to creatively engage our customers, grow brand awareness, and introduce new customers to our brands in a cost-effective manner, but that is becoming more challenging and expensive for both of our brands.
Copyrights and Trademarks For Vera Bradley, the development of new patterns includes the design of primary and secondary prints. Once developed, we generally copyright our patterns as appropriate. We currently have approximately 1,200 copyrights related to the Vera Bradley business.
Copyrights and Trademarks For Vera Bradley, the development of new patterns includes the design of primary and secondary prints. Once developed, we generally copyright our patterns as appropriate. We currently have over 1,200 copyrights related to the Vera Bradley business.
All of our suppliers must comply with our quality standards, and we use only a limited number of pre-approved suppliers who have demonstrated a commitment to delivering the highest quality products. We are continually updating our factory audit process and building a bett er compliance program to ensure our vendor code of conduct is met.
All of our suppliers must comply with our quality standards, and we use only a limited number of pre-approved suppliers who have demonstrated a commitment to delivering the highest quality products. We are continually updating our factory audit process and building a better compliance program to ensure our vendor code of conduct is met.
In fact, in fiscal 2022 we moved from internal factory audits to partnering with BetterWork to conduct the audits. BetterWork brings diverse groups together (governments, global brands, factory owners, unions, and workers) to improve working conditions in the garment industry and make the sector more competitive. These audits encompass both the Vera Bradley and Pura Vida brands.
In fact, in fiscal 2022 we moved from internal factory audits to partnering with BetterWork to conduct the audits. BetterWork brings diverse groups toge ther (governments, global brands, factory owners, unions, and workers) to improve working conditions in the garment industry and make the sector more competitive. These audits encompass both the Vera Bradley and Pura Vida brands.
We communicate with our established customers consistently throughout the year with regular e-mails, social media, and notifications, as well as seasonal direct mail related to the Vera Bradley brand.
Vera Bradley Retention Advertising. We communicate with our established customers consistently throughout the year with regular e-mails, social media, and notifications, as well as seasonal direct mail related to the Vera Bradley brand.
Collectively, the Company's success is based upon the unique value of each person's contributions. Our long term success depends on talented and engaged associates. 14 Table of Contents Every year, we conduct an associate engagement survey in order to better understand our associates’ insights into our Company’s strengths and opportunities.
Collectively, the Company's success is based upon the unique value of each person's contributions. Our long-term success depends on talented and engaged associates. Every year, we conduct an associate engagement survey in order to better understand our associates’ insights into our Company’s strengths and opportunities.
Our global sourcing team works with select suppliers enabling us to optimize the mix of cost, lead time, quality, and reliability 12 Table of Contents within our global supply network. We actively mitigate raw materials price increases through purchasing at advantageous times and periods.
Our global sourcing team works with select suppliers enabling us to optimize the mix of cost, lead time, quality, and reliability within our global supply network. We actively mitigate raw materials price increases through purchasing at advantageous times and periods.
The first Vera Bradley product offering included duffel bags, which have consistently been strong performers. We believe their popularity, as well as the appeal of our other travel items, results from our vibrant designs, functional styles, and lightweight fabrications. Apparel/Footwear .
The first Vera Bradley product offering included duffel bags, which have consistently been strong performers. We believe their popularity, as well as the appeal of our other travel items, results from our vibrant designs, functional styles, and lightweight fabrications. Accessories.
The development of each new pattern includes the design of a primary print and sometimes a secondary coordinating print. All print development is managed by our internal print design team. Once developed, we generally copyright 8 Table of Contents our patterns as appropriate.
The development of each new pattern includes the design of a primary print and sometimes a secondary coordinating print. All print development is managed by our internal print design team. Once developed, we generally copyright our patterns as appropriate.
The objective of verabradley.com is to provide both a mechanism for marketing directly to consumers and a storefront where consumers can find the entire full-line Vera Bradley collection. During fiscal 2021, we re-platformed our website to become more streamlined, nimble, and efficient in our technology platform and business processes.
The objective of these websites is to provide both a mechanism for marketing directly to consumers and a storefront where consumers can find the entire full-line Vera Bradley collection. During fiscal 2021, we re-platformed our websites to become more streamlined, nimble, and efficient in our technology platform and business processes.
We also pursue brand extensions through licensing agreements and we have partnered with Shark Week, Warner Brothers Consumer Products, Disney Consumer Products, Sanrio, and other companies that are consistent with our brand.
We also pursue brand extensions through licensing agreements and we have partnered with Discovery, Warner Brothers Consumer Products, Disney Consumer Products, Sanrio, and other companies that are consistent with our brand.
These collections typically include classic styles, updates to existing designs, and new product introductions. 7 Table of Contents To keep our assortment current and fresh, and to focus our inventory investments on our best performers, we discontinue prints and fabrications as necessary.
These collections typically include classic styles, updates to existing designs, and new product introductions. To keep our assortment current and fresh, and to focus our inventory investments on our best performers, we discontinue prints and fabrications as necessary.
Charity Collaborations . W e actively partner with charities to donate to causes that are important to our customers. To date, we have donated over $4.0 million to var ious charities around the world. Events Marketing .
Charity Collaborations . W e actively partner with charities to donate to causes that are important to our customers. To date, we have donated nearly $5.0 million to var ious charities around the world. Events Marketing .
Approximately half of Vera Bradley product sales are cotton-based. Our other fabrics include primarily fleece, polyester, and microfiber. We source our raw materials from various suppliers in Asia, with the majority coming from China and South Korea.
Approximately half of Vera Bradley product sales are cotton-based. Our other fabrics include primarily fleece, polyester, and microfiber. We source our raw materials from various suppliers in Asia, with the majority of non-cotton based products coming from China and South Korea. Our cotton-based products are sourced from areas outside of China.
As of January 29, 2022, our in-house sales team consisted of approximate ly 25 f ull-time sales consultants. In addition to acquiring new and growing existing accounts, our sales consultants serve as a support center for our Indirect customers by assisting and educating them in areas such as merchandising and visual presentation, marketing the brand, product selection, and inventory management.
As of January 28, 2023, our in-house sales team consisted of approximate ly 25 full-time sales consultants. In addition to acquiring new and growing existing accounts, our sales consultants serve as a support center for our Indirect customers by assisting and educating them in areas such as merchandising and visual presentation, marketing the brand, product selection, and inventory management.
If we violate any laws or regulations, however, it could have a material adverse effect on our business or financial performance. Information About Our Executive Officers The following table sets forth certain information concerning each of our executive officers: Name Age Position(s) Robert Wallstrom 56 Chief Executive Officer, President and Director, Vera Bradley, Inc.
If we violate any laws or regulations, however, it could have a material adverse effect on our business or financial performance. 14 Information About Our Executive Officers The following table sets forth certain information concerning each of our executive officers: Name Age Position(s) Jacqueline Ardrey 53 Chief Executive Officer, President and Director, Vera Bradley, Inc.
This information provides us with deeper insight into the products and categories that are of the highest interest to our customers, and allows us to better target our customers with appropriate messages. As of January 29, 2022, we had approximately 2.0 million Facebook fans and approximately 70,000 Twitter followers.
This information provides us with deeper insight into the products and categories that are of the highest interest to our customers, and allows us to better target our customers with appropriate messages. As of January 28, 2023, we had approximately 2.0 million Facebook fans and approximately 72,000 Twitter followers.
Fiscal Year Ended January 29, 2022 January 30, 2021 February 1, 2020 Accessories 34.5 % 35.1 % 31.3 % Bags 32.0 % 28.2 % 35.9 % Travel 17.5 % 15.3 % 21.9 % Home 8.6 % 7.3 % 7.2 % Apparel/Footwear 4.7 % 11.1 % 1.2 % Other (1) 2.7 % 3.0 % 2.5 % Total 100.0 % 100.0 % 100.0 % (1) Includes primarily stationery, licensing, freight, merchandising, and gift card breakage revenue.
Fiscal Year Ended January 28, 2023 January 29, 2022 January 30, 2021 Bags 34.3 % 32.0 % 28.2 % Travel 18.8 % 17.5 % 15.3 % Accessories 32.0 % 34.5 % 35.1 % Home 8.5 % 8.6 % 7.3 % Apparel/Footwear 3.7 % 4.7 % 11.1 % Other (1) 2.7 % 2.7 % 3.0 % Total 100.0 % 100.0 % 100.0 % (1) Includes primarily stationery, licensing, freight, merchandising, and gift card breakage revenue.
No information contained on our website is intended to be included as part of, or incorporated by reference into, this Annual Report on Form 10-K. 17 Table of Contents
No information contained on our website is intended to be included as part of, or incorporated by reference into, this Annual Report on Form 10-K. 15
The Pura Vida segment represents revenues generated through the Pura Vida websites, www.puravidabracelets.com, www.puravidabracelets.eu, and www.puravidabracelets.ca and through the distribution of Pura Vida-branded products to wholesale retailers and department stores, substantially all of which are located in the United States, as well as through its first retail store which opened in August 2021.
The Pura Vida segment represents revenues generated through the Pura Vida websites, www.puravidabracelets.com, www.puravidabracelets.eu, and www.puravidabracelets.ca and through the distribution of Pura Vida-branded products to wholesale retailers and department stores, substantially all of which are located in the United States, as well as through its five retail stores.
Vera Bradley Indirect Segment As of January 29, 2022, we sold our products in approximately 1,800 specialty retail locations, as well as department stores, national accounts, third-party e-commerce sites, and third-party inventory liquidators, as well as through licensing agreements. In fiscal 2012, we launched our products in the department store channel.
Vera Bradley Indirect Segment As of January 28, 2023, we sold our products in approximately 1,700 specialty retail locations, as well as department stores, national accounts, third-party e-commerce sites, and third-party inventory liquidators, as well as through licensing agreements. 10 In fiscal 2012, we launched our products in the department store channel.
Our factory outlet stores average approximately 3,400 square feet per store and we expect to invest approximately $0.5 million per new store, consisting of inventory, pre-opening costs, and build-out costs, less tenant-improvement allowances. As of January 29, 2022, we operated 75 factory outlet stores, all located in the United States. Store Location Selection Strategy.
Our factory outlet stores average approximately 3,500 square feet per store and we expect to invest approximately $0.5 million per new store, consisting of inventory, pre-opening costs, and build-out costs, less tenant-improvement allowances. As of January 28, 2023, we operated 79 factory outlet stores, all located in the United States. Store Location Selection Strategy.
Our competitors include not only established companies that are expanding their production and marketing of handbags and accessories, but also frequent new entrants to the market. We directly compete with wholesalers and direct sellers of branded handbags and accessories.
The market for handbags and accessories, in particular, is highly competitive. Our competitors include not only established companies that are expanding their production and marketing of handbags and accessories, but also frequent new entrants to the market. We directly compete with wholesalers and direct sellers of branded handbags and accessories.
In 2021, we once again had outstanding participation, with approximately 80% of our associates sharing their candid feedback. Our 2021 overall engagement score was once again above average in all categories compared to peer companies with some categories in the upper quartile compared to peer companies.
In calendar year 2022, we once again had outstanding participation, with over 80% of our associates sharing their candid feedback. Our calendar year 2022 overall engagement score was once again above average in all categories compared to peer companies with some categories in the upper quartile compared to peer companies.
Pura Vida remains one of the most highly-engaged brands in the accessories space, surp assing the 2.0 million m ark of followers on Instagram and is consistently listed as one of the most engaged jewelry brands on Instagram. Pura Vida continued to rank among the top of the industry for our Net Promoter and Customer Satisfaction Scores.
Pura Vida remains one of the most highly-engaged brands in the accessories space, surpassing the 2.2 million mark of followers on Instagram and is consistently listed as one of the most engaged jewelry brands on Instagram. Pura Vida continued to rank among the top of the industry for our Net Promoter and Customer Satisfaction Scores.
Pura Vida continues to develop new styles and re-invent existing styles. We have a cross-functional team that aligns product development with merchandising to strategically manage the design process. Our cross-functional team attends trade shows and performs market research to develop what we believe will be on-trend products that communicate and emulate the “pura vida” lifestyle.
We have a cross-functional team that aligns product development with merchandising to strategically manage the design process. Our cross-functional team attends trade shows and performs market research to develop what we believe will be on-trend products that communicate and emulate the “pura vida” lifestyle.
The founders, together with past and present members of the executive management team, have been instrumental in our growth and success. 4 Table of Contents The passion for design and customer service established by our founders has driven our Compan y for nearly 40 years and remains the cornerstone of Vera Bradley, Inc. today. Ms.
The founders, together with past and present members of the executive management team, have been instrumental in our growth and success. The passion for design and customer service established by our founders has driven our Company for over 40 years and remains the cornerstone of Vera Bradley, Inc. today. Ms.
Consequently, an essential requirement for the success of our stores is our ability to attract, train, and retain talented, highly motivated district managers, store managers, and sales associates. E-Commerce. In 2006, we began selling our products through the verabradley.com website.
Consequently, an essential requirement for the success of our stores is our ability to attract, train, and retain talented, highly motivated district managers, store managers, and sales associates. E-Commerce. We sell our products through the verabradley.com and verabradley.ca websites.
Pura Vida products for the U.S. e-commerce site and wholesale accounts are distributed primarily through a third-party provider in Tijuana, Mexico. Pura Vida also distributes product through a third-party provider in the Netherlands and Canada, which supports European and Canadian e-commerce operations, respectively. To support international e-commerce sales, we are exploring a potential provider in Asia in the future.
Pura Vida products for the U.S. e-commerce site and wholesale accounts are distributed primarily through a third-party provider in Tijuana, Mexico. Pura Vida also distributes product through a third-party provider in the Netherlands and Canada, which supports European e-commerce and Canadian wholesale operations, respectively.
We put this standard into practice through our hiring, training, and an annual affirmative action program. As of January 29, 2022, we had approximately 2,490 employees.
We put this standard into practice through our hiring, training, and an annual affirmative action program. As of January 28, 2023, we had approximately 2,180 employees.
The Company offers competitive pay packages that include market-competitive base and hourly compensation, healthcare, a 401(k) savings plan that typically includes a Company contribution match, paid time off (including for volunteer work), paid family leave, matching gifts program, and an Employee Assistance Program. Leadership Programs . Our associates are our biggest asset and when they win, we all win.
Pay and Benefits . The Company offers competitive pay packages that include market-competitive base and hourly compensation, healthcare, a 401(k) savings plan that typically includes a Company contribution match, paid time off (including for volunteer work), paid family leave, matching gifts program, and an Employee Assistance Program. Leadership Programs .
The majority of our Indirect retailers have been customers for over five years. 11 Table of Contents Indirect Sales Force We believe that having a combination of an in-house field sales force and a third-party agency, covering certain geographies, results in a more consistent brand presentation and messaging, enhanced support for our Indirect customers, and a more predictable, scalable, and cost-efficient business model.
Indirect Sales Force We believe that having a combination of an in-house field sales force and a third-party agency, covering certain geographies, results in a more consistent brand presentation and messaging, enhanced support for our Indirect customers, and a more predictable, scalable, and cost-efficient business model.
We have developed a retail presence through our full-line stores, all located in the United States, which provides us with a format to showcase our brand and the full array of Vera Bradley products. As of January 29, 2022, we operated 70 full-line stores averaging approximately 1,900 square feet per store.
Vera Bradley Direct Segment Full-Line Stores. We have developed a retail presence through our full-line stores, all located in the United States, which provides us with a format to showcase our brand and the full array of Vera Bradley products. As of January 28, 2023, we operated 51 full-line stores averaging approximately 2,000 square feet per store.
Our visual merchandising program provides our sales consultants with a framework to guide our Indirect customers regarding optimal product placement and display that is intended to reinforce the message that our brand is distinctive. Pura Vida Segment E-Commerce.
Our visual merchandising program provides our sales consultants with a framework to guide our Indirect customers regarding optimal product placement and display that is intended to reinforce the message that our brand is distinctive. Pura Vida Segment E-Commerce. Pura Vida products are available on our websites, www.puravidabracelets.com, www.puravidabracelets.eu, and www.puravidabracelets.ca.
We recognize everyone in the Company has the ability to lead by example and influence others in a positive way that ultimately provides meaningful value and will make us stronger.
Our associates are our biggest asset and when they win, we all win. We recognize everyone in the Company has the ability to lead by example and influence others in a positive way that ultimately provides meaningful value and will make us stronger.
The annual outlet sale is an important tradition for Vera Bradley, has many loyal followers, and is an opportunity for us to sell our retired merchandise at discounted prices in a brand-right fashion. We will be assessing the feasibility of future annual outlet sales in calendar 2023 and beyond.
The annual outlet sale is an important tradition for Vera Bradley, has many loyal followers, and is an opportunity for us to sell our retired merchandise at discounted prices in a brand-right fashion.
Factory outlet stores are an integral part of our distribution strategy, as this format provides an additional channel of distribution for our products and enables us to better target value-oriented customers.
Typically, approximately 95% of the merchandise found in our factory outlet stores consists of factory exclusive styles. Factory outlet stores are an integral part of our distribution strategy, as this format provides an additional channel of distribution for our products and enables us to better target value-oriented customers.
Of the total, approximately 1,775 were engaged in Vera Bradley retail selling positions; approximately 325 were engaged in Vera Bradley distribution, sourcing and quality functions; approximately 60 were engaged in Vera Bradley product design; approximately 50 were involved in the Pura Vida business; and approximately 280 were engaged in corporate support and administrative functions.
Of the total, approximately 1,475 were engaged in Vera Bradley retail selling positions; approximately 315 were engaged in Vera Bradley distribution, sourcing and quality functions; approximately 50 were engaged in Vera Bradley product design; approximately 90 were involved in the Pura Vida business, including the Pura Vida retail stores; and approximately 250 were engaged in corporate support and administrative functions.
We have a combination of in-house and external sales personnel who work with our wholesale retailers regarding order fulfillment and compilation. Retail. Pura Vida has one retail store location in San Diego, California, which opened in fiscal 2022. The Company expects to open approximately three additional retail store locations in fiscal 2023.
We have a combination of in-house and external sales personnel who work with our wholesale retailers regarding order fulfillment and compilation. Retail. Pura Vida has five retail store locations. Four of the locations opened in fiscal 2023 and one location opened in fiscal 2022.
As of January 29, 2022, the Company operated 70 full-line stores and 75 factory outlet stores. The annual outlet sale was cancelled in 2020, 2021, and 2022 as a result of the COVID-19 pandemic. VB Indirect .
As of January 28, 2023, the Company operated 51 full-line stores and 79 factory outlet stores. The annual outlet sale was cancelled in 2020, 2021, and 2022 as a result of the COVID-19 pandemic but will resume in calendar 2023. VB Indirect .
Vera Bradley can be found on Facebook, Instagram, TikTok, Twitter, Pinterest, and YouTube. For Vera Bradley, we have captured approximately 6.5 million active customer e-mail addresses in our online customer file, with many of these customers providing age, occupation, and location data.
For Vera Bradley, we have captured approximately 7.5 million active customer e-mail addresses in our online customer file, with many of these customers providing age, occupation, and location data.
The Pura Vida wholesale channel is comprised primarily of specialty stores including Tilly’s, The Buckle, The Paper Store, Ron Jon Surf Shops, Hallmark stores, Nordstrom, and Dillards, among others. Pura Vida also has a presence on Amazon through a third-party wholesaler.
The subscription club is a mechanism to continue to build brand loyalty and stimulate higher retention. Wholesale. The Pura Vida wholesale channel is comprised primarily of specialty stores including Tilly’s, The Paper Store, Ron Jon Surf Shops, and Hallmark stores, among others. Pura Vida also has a presence on Amazon through a third-party wholesaler.
At this time, we do not believe all geographical markets have been fully penetrated by our distribution channels, although we have temporarily suspended full-line store growth and forecast that we will close additional full-line stores. We believe that long-term expansion of our store base will increase brand awareness and reinforce our brand image by contributing to our omni-channel retail strategy.
While we have temporarily suspended full-line store growth and forecast that we will close additional full-line stores, we believe that long-term expansion of our store base is necessary to increase brand awareness and reinforce our brand image by contributing to our omni-channel retail strategy.
We are currently in approxima tely 300 d epartment store locations. The to p 25% of our specialty retailers account for approximately 80% of total specialty retail er revenue.
We are currently in approxima t ely 300 department store locations. The to p 25% of our specialty retailers account for approximately 80% of total specialt y retailer revenue.
Customs duties have not comprised a material portion of the total cost of a majority of our products. In addition, we are subject to foreign governmental regulation and trade restrictions, including U.S. retaliation against prohibited foreign practices, with respect to our product sourcing and international sales operations.
In addition, we are subject to foreign governmental regulation and trade restrictions, including U.S. retaliation against prohibited foreign practices, with respect to our product sourcing and international sales operations.
Since 2018, we have also operated an online outlet site to reduce clearance sales from verabradley.com. We had approximately 52 million visits to verabradley.com and our online outlet site during fiscal 2022. Annual Outlet Sale. We have not held our annual outlet sale for the past two years as a result of the COVID-19 pandemic.
Since 2018, we have also operated an online outlet site to reduce clearance sales from verabradley.com. We had approximately 52 million visits to verabradley.com and our online outlet site during fiscal 2023. Annual Outlet Sale.
Upon returning to San Diego, Thall and Goodman placed the bracelets in a bowl at a local boutique. Within days, the bracelets sold out and customers were asking for more. Thall and Goodman quickly recognized the significance of these simple string bracelets. They were more than just ordinary locally-crafted bracelets; they symbolized a movement valuing the simple things in life.
Thall and Goodman asked the artisans to make 400 bracelets to take home with them. Upon returning to San Diego, Thall and Goodman placed the bracelets in a bowl at a local boutique. Within days, the bracelets sold out and customers were asking for more. Thall and Goodman quickly recognized the significance of these simple string bracelets.
Policies are routinely communicated and training is provided to associates as appropriate. Government Regulation Many of our imported products are subject to existing or potential duties or tariffs that may limit the quantity of products that we may import into the United States and other countries or impact the cost of such products.
Government Regulation Many of our imported products are subject to existing or potential duties or tariffs that may limit the quantity of products that we may import into the United States and other countries or impact the cost of such products. Customs duties have not comprised a material portion of the total cost of a majority of our products.
Pura Vida is a digitally native brand and the e-commerce storefront continues to be the primary source of revenues for the Pura Vida business. The e-commerce site also includes a monthly bracelet and jewelry subscription club. The subscription club is a mechanism to continue to build brand loyalty and stimulate higher retention. Wholesale.
Pura Vida’s website immerses visitors in the brand, its products, and its social mission. Pura Vida is a digitally native brand, and the e-commerce storefront continues to be the primary source of revenues for the Pura Vida business. The e-commerce site also includes a monthly bracelet and jewelry subscription club.
We release curated product assortments multiple times per season that each embody a trend that we believe resonates with our customer base. Each product launch collection typically consists of 50 to 100 SKUs. We offer a mix of seasonally inspired designs and next generation designs of core bestsellers.
We release curated product assortments multiple times per season that each embody a trend that we believe resonates with our customer base. Each product launch collection typically consists of 20 to 30 customer choices.
Similar to the Vera Bradley brand, Pura Vida was founded by two friends, Griffin Thall and Paul Goodman. Thall and Goodman, from Southern California, where traveling through Costa Rica in 2010 and crossed paths with two bracelet artisans. Thall and Goodman asked the artisans to make 400 bracelets to take home with them.
On January 30, 2023, subsequent to the end of fiscal 2023, the Company acquired the remaining interest in Pura Vida. Similar to the Vera Bradley brand, Pura Vida was founded by two friends, Griffin Thall and Paul Goodman. Thall and Goodman, from Southern California, were traveling through Costa Rica in 2010 and crossed paths with two bracelet artisans.
Our Products The following chart presents net revenues generated by each of the Company’s product categories and other revenues as a percentage of our total net revenues for fiscals 2022, 2021, and 2020.
We offer a mix of seasonally inspired designs and next generation designs of core bestsellers. 6 Our Products The following chart presents net revenues generated by each of the Company’s product categories and other revenues as a percentage of our total net revenues for fiscal years 2023, 2022, and 2021.
Our product development team works closely with our marketing and merchandising teams to gather consumer insights through a variety of methodologies, including seasonal market research, in-store testing, scheduled interviews, and online and in-person surveys conducted by our internal team. Our work is also informed in part by market data analysis provided through our membership in industry services and organizations.
Our team monitors fashion trends and customer needs by typically attending trend and industry shows, subscribing to trend monitoring services, and engaging in comparison shopping. 7 Our product development team works closely with our marketing and merchandising teams to gather consumer insights through a variety of methodologies, including seasonal market research, in-store testing, scheduled interviews, and online and in-person surveys conducted by our internal team.
We believe that all of our products are in similar competitive positions with respect to the number of competitors they face and the level of competition within each product line. Due to the number of different products we offer, it is not practicable for us to quantify the number of competitors we face.
Competition For both Vera Bradley and Pura Vida, we face strong competition in each of the product lines and markets in which we compete. We believe that all of our products are in similar competitive positions with respect to the number of competitors they face and the level of competition within each product line.
Our marketing efforts are increasingly reflective of our ongoing commitment to diversity and inclusion. We will continue to drive social media engagement by employing more user-generated content, growing our influencer and ambassador programs, further enhancing social storytelling and social selling, expanding Facebook Live and Reels, and growing TikTok engagement.
The goal of our 360 brand marketing program is to drive brand awareness and desirability, as well as connect with consumers where they are. We will continue to drive social media engagement by employing more user-generated content, growing our influencer and ambassador programs, further enhancing social storytelling and social selling, expanding Facebook Live and Reels, and growing TikTok engagement.
Our products compete with other branded products within their product categories and with private label products sold by retailers. Moreover, the general availability of contract manufacturing allows new entrants to relatively easily access the markets in which we compete, which may increase the number of competitors and adversely affect our competitive position and our business.
Moreover, the general availability of contract manufacturing allows new entrants to relatively easily access the markets in which we compete, which may increase the number of competitors and adversely affect our competitive position and our business. We compete against other independent retailers, department stores, catalog retailers, gift retailers, and Internet businesses that engage in the retail sale of similar products.
Our sourcing team also focuses on achieving the right balance of production sites and countries of origin to mitigate the risk of concentrated production, including potential incremental tariffs. To continue to assist in this risk mitigation, our sourcing team reduced our Vera Bradley production in China from over 50% in fiscal 2019 to approximately 15% in fiscal 2022.
Our sourcing team also focuses on achieving the right balance of production sites and countries of origin to mitigate the risk of concentrated production, including potential incremental tariffs.
No single Indirect retailer represented more than 10% of consolidated net revenues in fiscal 2022, with the top ten Indirect retailers, representing in the aggregate approxim atel y 55% of total Indirect segment net revenues.
No single Indirect retailer represented more than 10% of consolidated net revenues in fiscal 2023, with the top ten Indirect retailers, representing in the aggregate approximately 60% of total Indirect segment net revenues. The majority of our Indirect retailers have been customers for over five years.
Our Product Release Strategy Vera Bradley . We typically introduce new collections monthly. Each launch typically consists of one to three signature cotton-quilted prints, as well as other fabrications including Performance Twill, Re-Active, and microfiber, some of which are also available in solid colors.
Each launch typically consists of one to three signature cotton-quilted prints, as well as other fabrications including Performance Twill, Re-Active, microfiber, and nylon some of which are also available in solid colors. These collections of prints and solids are incorporated into the designs of a wide range of products, including bags, accessories, and travel items.
Our apparel and footwear category includes sleepwear, footwear, cotton face masks, outerwear, socks, scarves, and Pura Vida tees and hoodies. Cotton face mask sales began during fiscal 2021 at both Vera Bradley and Pura Vida. Home. Our home category includes textiles, including throw blankets, beach towels, and comforters, as well as items such as mugs and tumblers.
Our apparel and footwear category includes sleepwear, footwear, outerwear, cotton face masks, socks, Vera Bradley tops, and Pura Vida tees and hoodies. Cotton face mask sales began, and were most significant, during fiscal 2021 at both Vera Bradley and Pura Vida. Product Development Vera Bradley.
This multi-channel distribution model is designed to enable operational flexibility and maximizes the methods by which we can access potential customers. Vera Bradley Direct Segment Full-Line Stores.
Channels of Distribution We distribute our Vera Bradley products through our VB Direct (including e-commerce and retail stores) and VB Indirect segments and Pura Vida products primarily through e-commerce, wholesale retailers, and retail stores. This multi-channel distribution model is designed to enable operational flexibility and maximizes the methods by which we can access potential customers.
We have also been impacted by higher tariffs from previously duty-free countries, where we source products, as a result of the Generalized System of Preferences (“GSP”) duty-free status expiring at the end of calendar year 2020. We cannot guarantee if or when the GSP duty-free status will be reinstated or, if reinstated, retro-actively applied by Congress.
Manufacturing and Supply Chain Model During fiscal 2023, we continued to be impacted by higher tariffs from previously duty-free countries, where we source products, as a result of the Generalized System of Preferences (“GSP”) duty-free status expiring at the end of calendar year 2020.
We believe our accessories are attractively priced and allow the consumer to include some color in her wardrobe. Our product development teams consistently update the accessories assortment based on consumer demand and fashion trends. Travel. Our travel product category includes rolling luggage, cosmetics, travel and packing accessories, and travel bags which includes our iconic duffel and weekend bags.
We believe our accessories are attractively priced and allow the consumer to include some color in her wardrobe. Our product development teams consistently update the accessories assortment based on consumer demand and fashion trends. Home. Our home category includes textiles, including throw blankets, beach towels, and bedding, as well as items such as mugs and tumblers. Apparel/Footwear .
We strive to maintain the appropriate balance of inventory to enable us to provide a high level of service to our customers, including prompt and accurate delivery of our products at a reasonable cost.
To continue to assist in this risk m itigation, our sourcing team reduced our Vera Bradley production in China from over 50% in fiscal 2019 to approximately 15% in fiscal 2023. 11 We strive to maintain the appropriate balance of inventory to enable us to provide a high level of service to our customers, including prompt and accurate delivery of our products at a reasonable cost.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changePossible promotional pricing or discounting by wholesale retailers in response to softening retail demand could have a negative effect on our brand image and prestige, which might be difficult to counteract. 21 Table of Contents Bankruptcies or other operational or financial difficulties of our wholesale retailers could adversely impact our business.
Biggest changeAlthough we recommend retail sale prices for our products to our wholesale retailers, we typically do not provide dealer allowances or other economic incentives to support those prices. Possible promotional pricing or discounting by wholesale retailers in response to softening retail demand could have a negative effect on our brand image and prestige, which might be difficult to counteract.
Risks Related to the COVID-19 Pandemic The outbreak of the novel coronavirus (COVID-19), or events related thereto, may continue to cause significant disruptions in our revenue streams, operations, global supply chain and other facets of our business, which may continue to adversely impact our results of operations, financial condition, and share price.
Risks Related to the COVID-19 Pandemic The outbreak of the novel coronavirus (COVID-19), or events related thereto, may cause significant disruptions in our revenue streams, operations, global supply chain and other facets of our business, which may continue to adversely impact our results of operations, financial condition, and share price.
Factors beyond our control impact mall traffic, including public health pandemics such as COVID-19, general economic conditions, and consumer spending levels. Consumer spending and mall traffic have been depressed in recent years. As a result, mall operators have faced increasing operational and financial difficulties.
Factors beyond our control impact mall traffic, including general economic conditions, consumer spending levels, and public health pandemics such as COVID-19. Consumer spending and mall traffic have been depressed in recent years. As a result, mall operators have faced increasing operational and financial difficulties.
We have recorded asset impairment charges in the past and we may record material asset impairment charges in the future. Quarterly, we assess whether events or changes in circumstances have occurred that indicate the carrying value of long-lived asset groups may not be recoverable.
We have recorded long-lived asset impairment charges in the past and we may record material long-lived asset impairment charges in the future. Quarterly, we assess whether events or changes in circumstances have occurred that indicate the carrying value of long-lived asset groups may not be recoverable.
Risks Related to Legal Matters There are claims made against us from time to time that can result in litigation or regulatory proceedings, which could distract management from our business activities and result in significant liability or damage to the images associated with our brands. We increasingly face the risk of litigation and other claims against us.
Risks Related to Legal and Regulatory Matters There are claims made against us from time to time that can result in litigation or regulatory proceedings, which could distract management from our business activities and result in significant liability or damage to the images associated with our brands. We increasingly face the risk of litigation and other claims against us.
The market price of our common stock may fluctuate significantly in response to a number of factors, most of which we cannot control, including: • the continued outbreak of COVID-19 and its adverse impact on the capital markets; • actions by other shopping mall or lifestyle center tenants; • weather conditions, particularly during the holiday shopping period; • unexpected departures of key executives; • financial projections that we may choose to provide to the public, any changes in these projections or our failure for any reason to meet these projections; • the public’s response to press releases or other public announcements by us or others, including our filings with the SEC and announcements relating to litigation and other matters; • speculation about our business in the press or the investment community; • future sales of our common stock by our significant shareholders, officers, and directors; • our entry into new markets; • the impact of wars, hostilities, riots, social unrest or acts of terrorism on trading markets; • changes in laws or regulations that impact the retail industry; • strategic actions by us or our competitors, such as acquisitions or restructurings; and • changes in accounting principles.
The market price of our common stock may fluctuate significantly in response to a number of factors, most of which we cannot control, including: • actions by other shopping mall or lifestyle center tenants; • weather conditions, particularly during the holiday shopping period; • unexpected departures of key executives; • financial projections that we may choose to provide to the public, any changes in these projections or our failure for any reason to meet these projections; • the public’s response to press releases or other public announcements by us or others, including our filings with the SEC and announcements relating to litigation and other matters; • speculation about our business in the press or the investment community; • future sales of our common stock by our significant shareholders, officers, and directors; • our entry into new markets; • the impact of wars, hostilities, riots, social unrest or acts of terrorism on trading markets; • changes in laws or regulations that impact the retail industry; • strategic actions by us or our competitors, such as acquisitions or restructurings; • the continued outbreak of COVID-19 and its adverse impact on the capital markets; and • changes in accounting principles.
We currently sell our Vera Bradley-branded products into two segments: Direct to consumers through Vera Bradley full-line and factory outlet stores in the United States, verabradley.com and verabradley.ca, the Vera Bradley online outlet site, and typically the Vera Bradley annual outlet sale in Fort Wayne, Indiana; and through our Vera Bradley Indirect wholesale business which consists of sales to specialty retail locations, department stores, national accounts, third-party e-commerce sites, third-party inventory liquidators, as well as royalties recognized through licensing agreements related to the Vera Bradley brand.
We currently sell our Vera Bradley-branded products into two segments: Direct to consumers through Vera Bradley full-line and factory outlet stores in the United States, verabradley.com and verabradley.ca, the Vera Bradley online outlet site, and typically the Vera Bradley annual outlet sale in Fort Wayne, Indiana; and through our Vera Bradley Indirect wholesale business 16 which consists of sales to specialty retail locations, department stores, national accounts, third-party e-commerce sites, third-party inventory liquidators, as well as royalties recognized through licensing agreements related to the Vera Bradley brand.
Any delay, interruption, or increased cost in the manufactured products that might occur for any reason, such as the lack of long-term contracts or regulatory requirements and the loss of certifications, power interruptions, fires, hurricanes, war, health pandemics such as COVID-19, or threats of terrorism, could affect our ability to meet customer demand for our products, adversely affect our net revenues, increase our cost of sales, and hurt our results of operations.
Any delay, interruption, or increased cost in the manufactured products that might occur for any reason, such as the lack of long-term contracts or regulatory requirements and the loss of certifications, power interruptions, fires, hurricanes, war, public health pandemics such as COVID-19, or threats of terrorism, could affect our ability to meet customer demand for our products, adversely affect our net revenues, increase our cost of sales, and hurt our results of operations.
The increasing inability of mall “anchor” tenants and other area attractions to generate consumer traffic around our stores, the increasing inability of mall operators to attract “anchor” tenants and maintain viable operations, and the increasing departures of existing “anchor” and other mall tenants due to declines in the sales volume and in the popularity of certain malls as shopping destinations, have reduced and may continue to reduce our sales volume and, consequently, adversely affect our financial condition, results of operations, and cash flows.
The increasing inability of mall “anchor” tenants and other area attractions to generate consumer traffic around our 17 stores, the increasing inability of mall operators to attract “anchor” tenants and maintain viable operations, and the increasing departures of existing “anchor” and other mall tenants due to declines in the sales volume and in the popularity of certain malls as shopping destinations, have reduced and may continue to reduce our sales volume and, consequently, adversely affect our financial condition, results of operations, and cash flows.
Our products must appeal to a broad range of consumers whose preferences cannot be predicted with certainty and are subject to rapid change. We cannot assure you that we will be able to develop appealing patterns, styles, and collections or meet changing consumer demands in the future.
Our products must appeal to a broad range of consumers whose preferences cannot be predicted with certainty and are subject to rapid change. We cannot assure that we will be able to develop appealing patterns, styles, and collections or meet changing consumer demands in the future.
In the past, stockholders have instituted securities class action litigation following periods of market volatility. If we were involved in securities litigation, we could incur substantial costs and our resources and the attention of management could be diverted from our business. Our business could be negatively affected as a result of the actions of activist shareholders.
In the past, stockholders have instituted securities class action litigation following periods of market volatility. If we were involved in 24 securities litigation, we could incur substantial costs and our resources and the attention of management could be diverted from our business. Our business could be negatively affected as a result of the actions of activist shareholders.
Although we have not been inhibited from selling our products in connection with intellectual property disputes, intellectual property-related obstacles may arise as we expand our product lines and extend our brands as well as the geographic scope of our sales and marketing.
Although we have not been inhibited from selling our products in connection with intellectual property disputes, intellectual property-related obstacles may arise as we expand our product lines and extend our 23 brands as well as the geographic scope of our sales and marketing.
In our Vera Bradley Direct business and Pura Vida e-commerce business, we compete against other gift and specialty retailers, department stores, catalog retailers, and Internet businesses that engage in the retail sale of similar products.
In our Vera Bradley Direct business and Pura Vida e-commerce and retail store business, we compete against other gift and specialty retailers, department stores, catalog retailers, and Internet businesses that engage in the retail sale of similar products.
The pandemic has also and may continue to reduce consumers' willingness and ability to travel to major cities and vacation destinations in which some of our stores are located.
The pandemic has also and may reduce consumers' willingness and ability to travel to major cities and vacation destinations in which some of our stores are located.
We generally do not enter into long-term formal written agreements with our manufacturers and instead transact business with each of them on an order-by-order basis. In the event of a disruption in our contract manufacturers’ systems, we may be unable to locate alternative manufacturers of comparable quality at an acceptable price, or at all.
We generally do not enter into long-term formal written agreements with our manufacturers and instead transact business with each of them on an order-by-order basis. In the event of a disruption in our contract manufacturers’ systems, we may be unable to locate alternative manufacturers of comparable quality at an acceptable price or in a timely manner, or at all.
Litigation and other claims may arise in the ordinary course of our business and include employee claims, custom and duty claims, commercial disputes, intellectual property issues, product-oriented allegations, and slip and fall claims. Often these cases raise complex factual and legal issues, which are subject to risks and uncertainties and which could require significant management time.
Litigation and other claims may arise in the ordinary course of our business and include employee claims, custom and duty claims, commercial disputes, intellectual property issues, marketing and solicitation claims, product-oriented allegations, and slip and fall claims. Often these cases raise complex factual and legal issues, which are subject to risks and uncertainties and which could require significant management time.
Our utilization of these delivery services, or those of any other shipping companies that we may elect to use, is subject to risks, including increases in fuel prices, which would increase our shipping costs, employee strikes and inclement weather, which may impact the shipping company’s ability to provide delivery services sufficient to meet our shipping needs.
Our utilization of these delivery services, or those of any other shipping companies that we may elect to use, is subject to risks, including increases in fuel prices, which would increase our shipping costs, employee strikes, labor shortages, and inclement weather, which may impact the shipping company’s ability to provide delivery services sufficient to meet our shipping needs.
As a result, any such claim, or the combination of multiple claims, could have a material adverse effect on our operating results. If we are required to stop using any of our registered or nonregistered trademarks, our sales could decline and, consequently, our business and results of operations could be adversely affected.
As a result, any such claim, or the combination of multiple claims, could have a material adverse effect on our operating results. If we are required to stop using any of our registered or nonregistered trademarks, our brands could be negatively affected, our sales could decline and, consequently, our business and results of operations could be adversely affected.
Inability to collect on accounts receivable from our wholesale retailers would adversely impact our results of operations. Risks Related to Global Sourcing and Distribution We rely on various contract manufacturers to produce all of our products and generally do not have long-term contracts with our manufacturers. Our various contract manufacturers produce all of our products.
Inability to collect on accounts receivable from our wholesale retailers would adversely impact our results of operations and financial position. Risks Related to Global Sourcing and Distribution We rely on various contract manufacturers to produce all of our products and generally do not have long-term contracts with our manufacturers. Our various contract manufacturers produce all of our products.
Our substantial operating lease obligations could have significant negative consequences, including: 20 Table of Contents • requiring that a substantial portion of our available cash be applied to pay our rental obligations, thus reducing cash available for other purposes; • increasing our vulnerability to general adverse economic and industry conditions; • limiting our flexibility in planning for or reacting to changes in our business or industry; and • limiting our ability to obtain additional financing.
Our substantial operating lease obligations could have significant negative consequences, including: • requiring that a substantial portion of our available cash be applied to pay our rental obligations, thus reducing cash available for other purposes; • increasing our vulnerability to general adverse economic and industry conditions; • limiting our flexibility in planning for or reacting to changes in our business or industry; and • limiting our ability to obtain additional financing.
Over the last few years, proxy contests and other forms of shareholder activism have been directed against numerous public companies in retail businesses. We could become engaged in a consent solicitation, or proxy contest, or experience other 28 Table of Contents shareholder activism, in the future. Activist shareholders may advocate for certain governance and strategic changes at our company.
Over the last few years, proxy contests and other forms of shareholder activism have been directed against numerous public companies in retail businesses. We could become engaged in a consent solicitation, or proxy contest, or experience other shareholder activism, in the future. Activist shareholders may advocate for certain governance and strategic changes at our company.
For example, our assessments during fiscal years 2022 and 2021 indicated that operating losses or insufficient operating income existed at certain retail stores, with a projection that the operating losses or insufficient operating income for those locations would continue.
For example, our assessments during fiscal years 2023 and 2022 indicated that operating losses or insufficient operating income existed at certain retail stores, with a projection that the operating losses or insufficient operating income for those locations would continue.
In addition, if the terms of the collective bargaining agreement were significantly more favorable to union workers than our current pay-and-benefits arrangements, our costs would increase and our results of operations would suffer. 27 Table of Contents We may suffer negative publicity and our business may be harmed if we need to recall any products we sell.
In addition, if the terms of the collective bargaining agreement were significantly more favorable to union workers than our current pay-and-benefits arrangements, our costs would increase and our results of operations would suffer. We may suffer negative publicity and our business may be harmed if we need to recall any products we sell.
There may also be events that are beyond our 23 Table of Contents control that could cause delays in these functions, including but not limited to, public health pandemics such as COVID-19 and other catastrophic events, changing macroeconomic trends, and general disruptions or delays in shipping and receiving.
There may also be events that are beyond our control that could cause delays in these functions, including but not limited to, changing macroeconomic trends, public health pandemics such as COVID-19 and other catastrophic events, and general disruptions or delays in shipping and receiving.
The extent of the pandemic’s continued impact on our results of operations, financial condition, and share price will likely depend on future developments including, but not limited to, the duration of the spread of the outbreak, including the potential for spikes in the number of COVID-19 cases in future periods, including as may be related to the spread of new virus variants; mitigation activities undertaken by governments and the general public; the overall economic impacts of quarantines and business closures; and current, and potentially long-term, changes in consumer behavior.
The extent of the pandemic’s impact on our results of operations, financial condition, and share price will likely depend on future developments including the potential for spikes in the number of COVID-19 cases in future periods, including as may be related to the spread of new virus variants; mitigation activities undertaken by governments and the general public; the overall economic impacts of quarantines and business closures; and current, and potentially long-term, changes in consumer behavior.
If we are unable to successfully execute our brand strategies, our results of operations could be adversely impacted. Closing stores could result in significant costs to us. We have closed a total of 44 underperforming full-line stores and one underperforming factory outlet store since the beginning of fiscal 2018 and forecast that we will close additional full-line stores.
If we are unable to successfully execute our brand strategies, our results of operations could be adversely impacted. Closing stores could result in significant costs to us. We have closed a total of 63 underperforming full-line stores and two underperforming factory outlet stores since the beginning of fiscal 2018 and forecast that we will close additional full-line stores.
As a result of the aforementioned restrictions, or other related factors, we have experienced and may continue to experience delayed shipments and increased shipping costs for some of our fiscal 2023 merchandise. We may also be adversely impacted should the pandemic compromise operations at our corporate headquarters and distribution center located in Roanoke, Indiana.
As a result of the aforementioned restrictions, or other related factors, we have experienced and may experience in the future delayed shipments and increased shipping costs for some of our merchandise. We may also be adversely impacted should the pandemic compromise operations at our corporate headquarters and distribution center located in Roanoke, Indiana.
Risks Related to Our Business Operations and Industry If we are unable to successfully implement our long-term strategic plans and growth strategies, our future operating results could suffer.
Risks Related to Our Business Operations and Industry If we are unable to successfully implement our long-term strategic plans and growth strategies, including Project Restoration, our future operating results could suffer.
We are subject to the risks inherent in global sourcing and manufacturing, including, but not limited to: • exchange rate fluctuations and trends; • availability of raw materials; • compliance with labor laws and other foreign governmental regulations; • compliance with U.S. import and export laws and regulations; • disruption or delays in shipments; • loss or impairment of key manufacturing sites; • product quality issues; • political unrest; • natural disasters, acts of war and terrorism, changing macroeconomic trends, public health emergencies (such as COVID-19), and other external factors over which we have no control; and • quotas, duties, tariffs, or other trade restrictions or regulations.
We are subject to the risks inherent in global sourcing and manufacturing, including, but not limited to: • exchange rate fluctuations and trends; • availability of raw materials; • c ompliance with labor laws and other foreign governmental regulations; • compliance with U.S. import and export laws and regulations including the Uyghur Forced Labor Prevention Act (“UFLPA”) as described below ; • disruption or delays in shipments; • loss or impairment of key manufacturing sites; • product quality issues; • political unrest; • natural disasters, acts of war and terrorism, changing macroeconomic trends, public health emergencies (such as COVID-19), and other external factors over which we have no control; and • quotas, duties, tariffs, or other trade restrictions or regulations.
As such, we recorded non-cash charges of $0.1 million and $7.4 million during fiscal years 2022 and 2021, respectively, within selling, general, and administrative expenses in the consolidated statements of operations to write down the carrying values of these stores' long-lived asset groups to their estimated fair values.
As such, we recorded non-cash charges of $0.8 million and $0.1 million during fiscal years 2023 and 2022, respectively, within selling, general, and administrative expenses in the consolidated statements of operations to write down the carrying values of these stores' long-lived asset groups to their estimated fair values.
Numerous factors influence comparable sales, including fashion trends, competition, national and regional economic conditions, the COVID-19 pandemic, pricing, inflation, the timing of the release of new merchandise and promotional events, changes in our merchandise mix, marketing programs, changes in consumer shopping trends, site selection strategy, and weather conditions.
Numerous factors influence comparable sales, including fashion trends, competition, national and regional economic conditions, pricing, inflation, the timing of the release of new merchandise and promotional events, changes in our merchandise mix, marketing programs, changes in consumer shopping trends, site selection strategy, public health matters, and weather conditions.
These provisions include: 29 Table of Contents • authorizing our board of directors to issue preferred stock and additional shares of our common stock without shareholder approval; • prohibiting shareholder action by written consent; • prohibiting our shareholders from calling a special meeting of shareholders; • prohibiting our shareholders from amending our amended and restated bylaws; and • requiring advance notice for raising business matters or nominating directors at shareholders’ meetings.
These provisions include: • authorizing our board of directors to issue preferred stock and additional shares of our common stock without shareholder approval; • prohibiting shareholder action by written consent; • prohibiting our shareholders from calling a special meeting of shareholders; and • requiring advance notice for raising business matters or nominating directors at shareholders’ meetings.
Internet operations involve risks which may be beyond our control that could have a direct material adverse effect on our operating results, including: (i) price competition involving the items we intend to sell; (ii) the entry of our vendors into the Internet business in direct competition with us; (iii) the level of merchandise returns experienced by us; (iv) governmental regulation; (v) e-commerce security breaches involving unauthorized access to our systems and/or customer information; (vi) credit card fraud; and (vii) competition and general economic conditions specific to the Internet, e-commerce, and the accessories industry.
Internet operations involve risks which may be beyond our control that could have a direct material adverse effect on our operating results, including: (i) price competition involving the items we intend to sell; (ii) the level of merchandise returns we experience; (iii) governmental regulation; (iv) e-commerce security breaches involving unauthorized access to our systems and/or customer information; (v) credit card fraud; and (vi) competition and general economic conditions specific to the Internet, e-commerce, and the accessories industry.
Consequently, the rate at which we have opened new stores has slowed and we do not currently plan to open any new full-line stores during fiscal 2023. We have closed a total of 44 underperforming full-line stores and one underperforming factory outlet store since the beginning of fiscal 2018 and forecast that we will close additional full-line stores.
Consequently, the rate at which we have opened new stores has slowed and we do not currently plan to open any new full-line stores during fiscal 2024. We have closed a total of 63 underperforming full-line stores and two underperforming factory outlet stores since the beginning of fiscal 2018 and forecast that we will close additional full-line stores.
We currently sell our Pura Vida-branded products direct to consumers through our e-commerce websites, puravidabracelets.com, puravidabracelets.eu, and puravidabracelets.ca, through wholesale retailers, and through our first retail store opened in August 2021. These channels are sometimes in direct competition and sales through these channels may not be incremental to total sales.
We currently sell our Pura Vida-branded products direct to consumers through our e-commerce websites, puravidabracelets.com, puravidabracelets.eu, and puravidabracelets.ca, through wholesale retailers, and through our five retail stores. These channels are sometimes in direct competition and sales through these channels may not be incremental to total sales.
We cannot predict the effect of the termination of LIBOR or the establishment and use of alternative rates or benchmarks. We may need to renegotiate our revolving credit facility or incur other indebtedness and the use of an alternative rate or benchmark may negatively impact the terms of such indebtedness.
We cannot predict the effect of the termination of LIBOR or the establishment and use of SOFR. We may need to renegotiate our revolving credit facility or incur other indebtedness and the use of SOFR or another benchmark rate may negatively impact the terms of such indebtedness.
We record tax expense based on our estimates of future payments, which includes reserves for uncertain tax positions in multiple tax jurisdictions. At any one time, many tax years are subject to audit by various taxing jurisdictions.
We are subject to income taxes in many U.S. and certain foreign jurisdictions. We record tax expense based on our estimates of future payments, which includes reserves for uncertain tax positions in multiple tax jurisdictions. At any one time, many tax years are subject to audit by various taxing jurisdictions.
In particular, we may be subject to copyright infringement 26 Table of Contents claims for which we may not be entitled to indemnification from our suppliers.
In particular, we may be subject to copyright infringement claims for which we may not be entitled to indemnification from our suppliers.
We source our Vera Bradley fabrics primarily from manufacturers in China and South Korea and outsource the production of a significant majority of our products to companies in Asia. We source our Pura Vida components primarily from Asia and outsource the production of products primarily to El Salvador.
For Vera Bradley, we outsource the production of a significant majority of our products to companies in Asia. We source our Pura Vida components primarily from Asia and outsource the production of products primarily to El Salvador.
We operate e-commerce stores at www.verabradley.com, which includes an online outlet site we created in fiscal 2018, www.verabradley.ca, www.puravidabracelets.com, www.puravidabracelets.eu, and www.puravidabracelets.ca. Expanding our e-commerce business is one of the key objectives of our business strategy.
We are exposed to business risks as a result of our e-commerce operations. We operate e-commerce stores at www.verabradley.com, which includes an online outlet site we created in fiscal 2018, www.verabradley.ca, www.puravidabracelets.com, www.puravidabracelets.eu, and www.puravidabracelets.ca. Expanding our e-commerce business is one of the key objectives of our business strategy.
Consumer confidence and consumer spending may be influenced by the ongoing COVID-19 pandemic, fluctuating interest rates and credit availability, changing fuel and other energy costs, fluctuating commodity prices, levels of unemployment and consumer debt levels, changes in net worth based on market conditions, general uncertainty regarding the overall future economic environment, political turmoil, and weather and weather-related phenomena.
Consumer confidence and consumer spending may be influenced by levels of inflation, fluctuating interest rates and credit availability (including possible exposure to bank failures), changing fuel and other energy costs, fluctuating commodity prices, levels of unemployment and consumer debt levels, changes in net worth based on market conditions, general uncertainty regarding the overall future economic environment, political turmoil, the COVID-19 pandemic or other public health matters, and weather and weather-related phenomena.
Our quarterly evaluation of store assets includes consideration of current and historical performance and projections of future profitability. The profitability projections rely upon estimates made by us, including store-level sales, gross margins, and direct expenses, and, by their nature, include judgments about how current strategic initiatives will impact future performance.
The profitability projections rely upon estimates made by us, including store-level sales, gross margins, and direct expenses, and, by their nature, include judgments about how current strategic initiatives will impact future performance.
We plan to open additional Vera Bradley 19 Table of Contents factory outlet stores and Pura Vida retail stores during fiscal 2023. We will continue to evaluate our plans for store openings in future years in light of demand and store performance.
We plan to open additional Vera Bradley factory outlet stores during fiscal 2024. We will continue to evaluate our plans for store openings in future years in light of demand and store performance.
Michael Miller, directly or indirectly, beneficially own and have the ability to exercise voting control over, in the aggregate, 17.6% of our outstanding shares of common stock as of January 29, 2022.
Michael Miller, directly or indirectly, beneficially own and have the ability to exercise voting control over, in the aggregate, 19.0% of our outstanding shares of common stock as of January 28, 2023.
We sell our wholesale merchandise primarily to specialty retail and department stores across the United States and extend trade credit based on an evaluation of each wholesale retailer’s financial condition, usually without requiring collateral.
Bankruptcies or other operational or financial difficulties of our wholesale retailers could adversely impact our business. We sell our wholesale merchandise primarily to specialty retail and department stores across the United States and extend trade credit based on an evaluation of each wholesale retailer’s financial condition, usually without requiring collateral.
We may not be able to attract and retain employees as needed in the future. Our results of operations could suffer if we are unable to attract and retain retail and distribution center employees required for our business. We must attract, motivate, and retain a sufficient number of qualified retail and distribution center employees.
Our results of operations could suffer if we are unable to attract and retain retail and distribution center employees required for our business. We must attract, motivate, and retain a sufficient number of qualified retail and distribution center employees.
The phaseout of the London Interbank Offered Rate (LIBOR), or the replacement of LIBOR with a different reference rate, may adversely affect interest rates. The Financial Conduct Authority (the authority that regulates LIBOR) began to phase out LIBOR by the end of 2021 and announced that it would completely phase out LIBOR by June 30, 2023.
The phaseout of the London Interbank Offered Rate (LIBOR) and transition to the Secured Overnight Financing Rate (SOFR) may adversely affect interest rates. The Financial Conduct Authority (the authority that regulates LIBOR) began to phase out LIBOR by the end of 2021 and announced that it would completely phase out LIBOR by June 30, 2023.
The success of our long-term strategic plan and growth strategies, alone or collectively, will depend on various factors, including the appeal of our product designs, retail presentation to consumers, effectiveness of our marketing initiatives, expense saving initiatives, competitive conditions, and economic conditions. There is no assurance that we will be able to successfully implement our strategic plan and growth strategies.
The success of our long-term strategic plan and growth strategies, including Project Restoration, alone or collectively, will depend on various factors, including the appeal of our product designs, retail presentation to consumers, effectiveness of our marketing initiatives, expense saving initiatives, competitive conditions, and economic conditions.
Our performance is subject to general economic conditions and their impact on levels of consumer confidence and consumer spending.
Changes in general economic conditions, and their impact on consumer confidence and consumer spending, could adversely impact our results of operations. Our performance is subject to general economic conditions and their impact on levels of consumer confidence and consumer spending.
When the Company performs impairment tests, it is possible that the carrying value of goodwill or other intangible assets could exceed their implied fair value and therefore would require adjustment. Such adjustment would result in a charge to operating income in that period.
The carrying value of the intangible assets as of January 28, 2023, was $15.9 million. When the Company performs future impairment tests, it is possible that the carrying value of the remaining intangible assets could exceed their implied fair value and therefore would require adjustment. Such adjustment would result in a charge to operating income in that period.
Although not material as of the date of this filing, COVID-19 has led to temporary factory closures and production and logistics constraints due to workforce availability, as well as global supply chain challenges such as vessel and container shortages and port congestion.
In recent fiscal years, COVID-19 has led to temporary factory closures and production and logistics constraints due to workforce availability, as well as global supply chain challenges such as vessel and container shortages and port congestion.
The inability to protect our copyrights, trademarks, and other proprietary rights could adversely impact our results of operations. Any litigation regarding our proprietary rights could be time consuming and costly.
The inability to protect our copyrights, trademarks, and other proprietary rights could adversely impact our results of operations. Any litigation regarding our proprietary rights could be time consuming and costly and could consume significant amounts of management time that would otherwise be spent operating and growing our business.
In the event of a significant disruption in the supply of fabrics or raw materials from our current sources, we may not be able to locate alternative suppliers of materials of comparable quality at an acceptable price, or at all. In such a case, we could have difficulty meeting consumer demand and net revenues could be adversely impacted.
In the event of a significant disruption in the supply of fabrics or raw materials from our current sources, we may not be able to locate alternative suppliers of materials of comparable quality at an acceptable price or in a timely manner, or at all.
It is possible that these provisions could make it more difficult to accomplish transactions that shareholders might deem to be in their best interest. 30 Table of Contents Item 1B. Unresolved Staff Comments None.
It is possible that these provisions could make it more difficult to accomplish transactions that shareholders might deem to be in their best interest.
Any significant disruption in the operation of these facilities due to natural disaster or severe weather, or events such as fire, accidents, power outages, system failures, or other unforeseen causes, could devalue or damage a significant portion of our inventory and could adversely affect our product distribution and sales until such time as we could secure alternative facilities.
Any significant disruption in the operation of these facilities due to natural disaster or severe weather, or events such as fire, accidents, power outages, system failures, or other unforeseen causes, could devalue or damage a significant portion of our inventory and could adversely affect our product distribution and sales until such time as we could secure alternative facilities. 19 In addition to the aforementioned events, public health emergencies (such as the COVID-19 pandemic) could cause disruptions in our distribution operations if we were to temporarily suspend operations, or if we are unable to obtain the staffing levels required to effectively operate the facilities.
Actual results will vary from the guidance and the variations may be material. Investors should also recognize that the reliability of any forecasted financial data diminishes the further into the future that the data are forecast. Further, the COVID-19 pandemic could cause a material adverse impact to the Company’s liquidity, results of operations, and financial condition that cannot be predicted.
Actual results will vary from the guidance and the variations may be material. Investors should also recognize that the reliability of any forecasted financial data diminishes the further into the future that the data are forecast.
Assuming LIBOR ceases to exist, we may need to amend certain contracts and cannot predict what alternative rate or benchmark would be negotiated. This may result in an increase to our interest expense.
As LIBOR ceases to exist, we may need to amend certain contracts and cannot predict whether SOFR or another benchmark rate would be negotiated. This may result in an increase to our interest expense. 28 Item 1B. Unresolved Staff Comments None.
Anti-takeover provisions in our organizational documents and Indiana law may discourage or prevent a change in control, even if a sale of the Company would be beneficial to our shareholders, which could cause our stock price to decline and prevent attempts by shareholders to replace or remove our current management.
In light of the foregoing, if investors, analysts, and others fail to review our guidance within the proper context or place undue reliance on our guidance, deviations from such guidance may result in incongruous fluctuation in our stock price. 25 Anti-takeover provisions in our organizational documents and Indiana law may discourage or prevent a change in control, even if a sale of the Company would be beneficial to our shareholders, which could cause our stock price to decline and prevent attempts by shareholders to replace or remove our current management.
Violation of labor or other laws by those manufacturers, or the divergence of a contract manufacturer’s labor or other practices from those generally accepted as ethical in the United States or in other markets in which we may in the future do business, could also draw negative publicity for us and our brands, diminishing the value of our brands and reducing demand for our products.
Violation of labor or other laws by those manufacturers, or the divergence of a contract manufacturer’s labor or other practices from those generally accepted as ethical in the United States or in other markets in which we may in the future do business, could also draw negative publicity for us and our brands, diminishing the value of our brands and reducing demand for our products. 20 Our ability to source our products at favorable prices, or at all, could be harmed, with adverse effects on our results of operations, if new trade restrictions are imposed or if existing trade restrictions become more burdensome.
Our inability to effectively address these risks and any other risks that 25 Table of Contents we face in connection with our Internet operations could materially adversely affect our business, financial condition, results of operations, and/or cash flows.
Our inability to effectively address these risks and any other risks that we face in connection with our Internet operations could materially adversely affect our business, financial condition, results of operations, and/or cash flows. 22 Risks Related to Tax and Valuation Matters Fluctuations in our tax obligations and effective tax rate may result in volatility of our operating results and stock price.
The United States and the countries in which our products are produced have imposed and may impose additional quotas, duties, tariffs, or other restrictions or regulations or may adversely adjust prevailing quotas, duties, or tariffs.
A significant majority of our Vera Bradley and Pura Vida products are currently manufactured for us in Asia and Central America, respectively. The United States and the countries in which our products are produced have imposed and may impose additional quotas, duties, tariffs, or other restrictions or regulations or may adversely adjust prevailing quotas, duties, or tariffs.
Upward movement in the price of oil in the global oil markets would also likely result in rising fuel and freight prices, which could increase our shipping costs.
Upward movement in the price of oil in the global oil markets would also likely result in rising fuel and freight prices, which could increase our shipping costs. In the future, we may not be able to pass all or a portion of higher costs on to our customers.
Our wholesale business could suffer as a result of decisions by our wholesale retailers to decrease or eliminate the amount of merchandise purchased from us. We do not enter into long-term agreements with any of our wholesale retailers. Instead, we enter into a number of purchase order commitments with our customers for each of our lines every season.
We do not enter into long-term agreements with any of our wholesale retailers. Instead, we enter into a number of purchase order commitments with our customers for each of our lines every season.
These executives and design associates have substantial experience in our business and have made significant contributions to our growth and success. Although we have entered into an employment agreement with our Chief Executive Officer, we may not be able to retain his services or those of other key individuals in the future.
Although we have entered into an employment agreement with our Chief Executive Officer, we may not be able to retain her services or those of other key individuals in the future. The unexpected loss of services of key employees could have adverse impacts on our business and results of operations.
The unexpected loss of services of key employees could have adverse impacts on our business and results of operations. We may also need to attract and retain additional qualified employees and develop, train, and manage an increasing number of management-level, sales, and other employees. Competition for qualified employees is intense.
We may also need to attract and retain additional qualified employees and develop, train, and manage an increasing number of management-level, sales, and other employees. Competition for qualified employees is intense. We may not be able to attract and retain employees as needed in the future.
Our operations are currently subject to significant disruptions as a result of the COVID-19 pandemic. The pandemic has resulted in travel restrictions both domestically and internationally, community and self-quarantines, certain factory closures or reduced operations, as well as mall closures and reduced mall operating hours. We temporarily closed our retail stores on March 19, 2020.
The COVID-19 pandemic has in the past and may again in the future result in travel restrictions both domestically and internationally, community and self-quarantines, certain factory closures or reduced operations, as well as mall closures and reduced mall operating hours.
General Risk Factors Our results of operations could suffer if we lose key management or design associates or are unable to attract and retain the talent required for our business. Our performance depends largely on the efforts and abilities of our senior management and product development teams.
As a result of the above-mentioned factors, the Company’s liquidity, results of operations, and financial condition could be adversely impacted. 26 General Risk Factors Our results of operations could suffer if we lose key management or design associates or are unable to attract and retain the talent required for our business.
Moreover, the general availability of contract manufacturing allows new entrants easy access to the markets in which we compete, which may increase the number of competitors and adversely affect our competitive position and our business.
Moreover, the general availability of contract manufacturing allows new entrants easy access to the markets in which we compete, which may increase the number of competitors and adversely affect our competitive position and our business. 18 In addition, in light of a continued difficult consumer environment, pricing is a significant driver of consumer choice in our industry and we regularly engage in price competition, particularly through our promotional programs, which impacts our margins.
We rely on a limited number of distribution facilities for the products we sell. Distribution operations for Vera Bradley-branded products are currently concentrated in a single, company-owned distribution center in Roanoke, Indiana. Pura Vida-branded products are primarily distributed from one third-party distribution center in Tijuana, Mexico.
In such a case, we could have difficulty meeting consumer demand and net revenues could be adversely impacted. We rely on a limited number of distribution facilities for the products we sell. Distribution operations for Vera Bradley-branded products are currently concentrated in a single, company-owned distribution center in Roanoke, Indiana.
Significant disruption of manufacturing for any of the above reasons could interrupt product supply and, if not remedied in a timely manner, could have an adverse impact on our results of operations. Additionally, we do not have complete oversight over our contract manufacturers.
Customs and Border Protection employs a risk-based approach that prioritizes the highest-risk goods based on current data and intelligence available to them at the time of entry. Significant disruption of manufacturing for any of the above reasons could interrupt product supply and, if not remedied in a timely manner, could have an adverse impact on our results of operations.
It is unclear which new methods of calculating interest rates or benchmarks will be adopted. The replacement of LIBOR with an alternative rate or benchmark may adversely affect interest rates and result in higher borrowing costs. This development could materially and adversely affect our results of operations, cash flows and liquidity.
SOFR is calculated differently from LIBOR and the differences in their calculations may give rise to uncertainties. The replacement of LIBOR with SOFR may adversely affect 27 interest rates and result in higher borrowing costs. This change could materially and adversely affect our results of operations, cash flows, and liquidity.
The purchase price allocation resulted in a goodwill value of $44.3 million and a value of $61.7 million related to other intangible assets. The carrying value of these assets as of January 29, 2022, was $44.3 million and $44.2 million, respectively.
The purchase price allocation resulted in a goodwill value of $44.3 million and a value of $61.7 million related to other intangible assets. During fiscal 2023, we recorded a full impairment of goodwill totaling $44.3 million and an impairment charge for the Pura Vida brand intangible asset of $25.0 million.
If we are unsuccessful in implementing some or all of our strategies or initiatives, our future operating results could be adversely impacted. 18 Table of Contents Changes in general economic conditions, and their impact on consumer confidence and consumer spending, could adversely impact our results of operations.
There is no assurance that we will be able to successfully implement our strategic plan and growth strategies. If we are unsuccessful in implementing some or all of our strategies or initiatives, our future operating results could be adversely impacted.
Because a significant portion of Pura Vida’s total assets are represented by goodwill, indefinite-lived intangible assets, and definite-lived intangible assets, we could be required to write off some or all of this goodwill and other intangibles, which may adversely affect the company’s financial condition and results of operations.
Risks Related to Pura Vida We have taken material impairment charges related to goodwill and other indefinite-lived intangible assets associated with the Pura Vida acquisition in the past and may be required to take additional impairment charges in the future , which may adversely affect the company’s financial condition and results of operations.
The execution of the Sellers right to require us to purchase the Remaining Pura Vida Interest may represent a significant financial obligation that could have a material adverse impact on our liquidity, results of operations, and financial condition. 24 Table of Contents Risks Related to Information Technology and Security A data security or privacy breach could damage our reputation and our relationships with our customers, expose us to litigation risk and adversely affect our business.
Once adjusted, there can be no assurance that there will not be further adjustments for impairment in future periods. 21 Risks Related to Information Technology and Security A data security or privacy breach could damage our reputation and our relationships with our customers, expose us to litigation risk and adversely affect our business.
Removed
On May 5, 2020, we began to reopen our retail stores in a phased approach, with all stores open as of the end of fiscal 2021. Despite the reopening of our retail stores, we have experienced, and may continue to experience, significantly reduced traffic, demand, and sales.
Added
To the extent that we decrease our promotional activity or are otherwise unable to effectively compete on pricing, our ability to maintain sales levels may be adversely impacted. Our wholesale business could suffer as a result of decisions by our wholesale retailers to decrease or eliminate the amount of merchandise purchased from us.
Removed
As a result of the above-mentioned factors, the Company’s liquidity, results of operations, and financial condition have been, and are likely to continue to be, adversely impacted. Measures to mitigate COVID-19 impacts to our business may result in additional risk exposure or prove ineffectual.
Added
Pura Vida-branded products are primarily distributed from one third-party distribution center in Tijuana, Mexico.
Removed
For example, we have and may continue to incur additional interest costs associated with borrowings under our Credit Agreement. We may also from time to time use air freight as a shipping method to expedite the receipt of certain inventory, causing us to incur additional freight costs.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe following table shows the number of Vera Bradley full-line and factory outlet stores we operated in each state as of January 29, 2022: State Total Number of Vera Bradley Full-Line Stores Total Number of Vera Bradley Factory Outlet Stores State Total Number of Vera Bradley Full-Line Stores Total Number of Vera Bradley Factory Outlet Stores Alabama 1 1 Minnesota 1 1 Arizona 1 1 Mississippi — 2 Colorado 2 1 Missouri 1 2 Connecticut 2 1 Nebraska — 1 Delaware 1 1 Nevada — 1 Florida 2 9 New Hampshire — 1 Georgia 1 3 New Jersey 7 3 Hawaii 1 1 New York 5 5 Illinois 4 1 North Carolina — 6 Indiana 2 2 Ohio 3 1 Iowa 1 1 Oklahoma 2 1 Kansas 1 1 Pennsylvania 5 4 Kentucky 1 1 South Carolina — 3 Louisiana 1 1 Tennessee 2 2 Maryland 4 1 Texas 11 7 Massachusetts 1 1 Utah — 1 Michigan 5 2 Virginia 1 3 Wisconsin 1 2 Totals 70 75 Pura Vida.
Biggest changeThe following table shows the number of Vera Bradley full-line and factory outlet stores we operated in each state as of January 28, 2023: State Total Number of Vera Bradley Full-Line Stores Total Number of Vera Bradley Factory Outlet Stores State Total Number of Vera Bradley Full-Line Stores Total Number of Vera Bradley Factory Outlet Stores Alabama 1 1 Minnesota 1 1 Arizona — 1 Mississippi — 2 Colorado 1 1 Missouri 1 2 Connecticut 1 1 Nebraska — 1 Delaware 1 1 Nevada — 1 Florida 2 9 New Hampshire — 1 Georgia 1 3 New Jersey 3 3 Hawaii 1 1 New York 3 5 Illinois 3 2 North Carolina — 6 Indiana 2 2 Ohio 2 2 Iowa 1 1 Oklahoma 1 1 Kansas 1 1 Pennsylvania 4 6 Kentucky 1 1 South Carolina — 4 Louisiana 1 1 Tennessee 1 2 Maryland 3 1 Texas 9 7 Massachusetts — 1 Virginia 1 3 Michigan 4 2 Wisconsin 1 2 Totals 51 79 Pura Vida.
Item 2. Properties The following table sets forth the location, use, and size of our distribution, corporate facilities, and showrooms as of January 29, 2022. The leases on the leased properties expire at various times through 2032, subject to renewal options.
Item 2. Properties The following table sets forth the location, use, and size of our distribution, corporate facilities, and showrooms as of January 28, 2023. The leases on the leased properties expire at various times through 2033, subject to renewal options.
Location Primary Use Approximate Square Footage Leased/Owned Roanoke, Indiana Vera Bradley corporate headquarters, design center, and showroom 188,000 Owned Roanoke, Indiana Vera Bradley warehouse and distribution 428,500 Owned New York, New York Vera Bradley office and showroom 3,700 Leased Hong Kong Vera Bradley Asia sourcing office 5,100 Leased Atlanta, Georgia Vera Bradley showroom 5,600 Leased Dallas, Texas Vera Bradley showroom 1,800 Leased La Jolla, California Pura Vida corporate headquarters 7,400 Leased As of January 29, 2022, we also leased 149 store locations in the United States, including three store locations to be opened in fiscal 2023.
Location Primary Use Approximate Square Footage Leased/Owned Roanoke, Indiana Vera Bradley corporate headquarters, design center, and showroom 188,000 Owned Roanoke, Indiana Vera Bradley warehouse and distribution 428,500 Owned New York, New York Vera Bradley office and showroom 3,700 Leased Hong Kong Vera Bradley Asia sourcing office 5,100 Leased Atlanta, Georgia Vera Bradley showroom 5,600 Leased Dallas, Texas Vera Bradley showroom 1,800 Leased La Jolla, California Pura Vida corporate headquarters 7,400 Leased As of January 28, 2023, we also leased 134 Vera Bradley store locations, including a former location, and five Pura Vida store locations in the United States.
See below for more information regarding the locations of our open stores as of January 29, 2022. We consider these properties to be in good condition generally and believe that our facilities are adequate for our operations and provide sufficient capacity to meet our anticipated requirements.
The Vera Bradley locations include three stores to be opened in fiscal 2024. See below for more information regarding the locations of our open stores as of January 28, 2023. We consider these properties to be in good condition generally and believe that our facilities are adequate for our operations and provide sufficient capacity to meet our anticipated requirements.
The Vera Bradley properties in the above table are used by both the Vera Bradley Direct segment and Vera Bradley Indirect segment, excluding the two standalone showrooms which are used exclusively by the Vera Bradley Indirect segment. 31 Table of Contents Store Locations Vera Bradly .
The Vera Bradley properties in the above table are used by both the Vera Bradley Direct segment and Vera Bradley Indirect segment, excluding the two standalone showrooms which are used exclusively by the Vera Bradley Indirect segment. The Pura Vida headquarters is used by the Pura Vida segment. 29 Store Locations Vera Bradley .
In August 2021, we opened our first Pura Vida full-line retail store in San Diego, California. We lease all of our stores. Lease terms for our retail s tores are generally ten y ears with options to renew for varying terms.
As of January 28, 2023, Pura Vida had five retail store locations. Of the five locations, three were in California, one was in South Carolina, and one was in Arizona. We lease all of our stores. Lease terms for our retail s tores are generally ten y ears with options to renew for varying terms.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeAt this time, we are not able to estimate a possible loss or range of loss that may result from this matter or to determine whether such loss, if any, would have a material adverse effect on our financial condition or results of operations due to the fact that the Company is vigorously defending itself and management believes that the Company has a number of meritorious legal defenses. 32 Table of Contents In April of 2020, Chidimma Igboakaeze filed suit seeking class certification for all current and former hourly-paid employees who worked for the Company within the state of California during the four years preceding the filing until final judgement.
Biggest changeAt this time, we are not able to estimate a possible loss or range of loss that may result from this matter or to determine whether such loss, if any, would have a material adverse effect on our financial condition or results of 30 operations due to the fact that the Company is vigorously defending itself and management believes that the Company has a number of meritorious legal defenses.
The Company has filed a motion for summary judgement asking the Court to dismiss all claims with prejudice and grant judgment on its counterclaim. The motion is fully briefed and the Company is awaiting a decision from the Court.
The Company filed a motion for summary judgement asking the Court to dismiss all claims with prejudice and grant judgment on its counterclaim. On January 4, 2023, the Court granted the Company’s motion for summary judgment dismissing Vesi’s claims and also granted judgment on the Company’s counterclaims against the principals of Vesi for an immaterial amount.
Removed
The complaint alleged various violations of the California Labor Code related to wages, overtime, meal and rest breaks, non-compliant wage statements and records and other similar allegations related to employment. The Plaintiff also filed a Private Attorney General Act claim with the state of California regarding the same allegations.
Added
Item 4. Mine Safety Disclosure Not Applicable 31 PART II
Removed
This case was settled in the first quarter of fiscal 2022 for an immaterial amount. Item 4. Mine Safety Disclosure Not Applicable 33 Table of Contents PART II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosure 33 PART II. 34 Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 34 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 36 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 51 Item 8. Financial Statements and Supplementary Data 52
Biggest changeItem 4. Mine Safety Disclosure 31 PART II. 32 Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 32 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 34 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 47 Item 8. Financial Statements and Supplementary Data 48

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePeriod Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs October 31, 2021 - November 27, 2021 72,769 $ 10.47 72,769 $ 30,059,757 November 28, 2021 - January 1, 2022 71,136 9.19 71,136 — January 2, 2022 - January 29, 2022 — — — — 143,905 $ 9.84 143,905 Details regarding the activity under the 2021 Share Repurchase Program during the thirteen weeks ended January 29, 2022 are as follows: Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs October 31, 2021 - November 27, 2021 — $ — — $ — November 28, 2021 - January 1, 2022 200,413 8.43 200,413 48,310,797 January 2, 2022 - January 29, 2022 307,186 8.20 307,186 45,792,026 507,599 $ 8.29 507,599 Dividends Our common stock began trading on October 21, 2010, following our initial public offering.
Biggest changeDetails regarding the activity under the 2021 Share Repurchase Program during the thirteen weeks ended January 28, 2023 are as follows: Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs October 30, 2022 - November 26, 2022 66,500 $ 3.43 66,500 $ 28,285,779 November 27, 2022 - December 31, 2022 77,720 4.24 77,720 27,956,135 January 1, 2023 - January 28, 2023 42,600 5.31 42,600 27,729,991 186,820 $ 4.20 186,820 Dividends Our common stock began trading on October 21, 2010, following our initial public offering.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is listed on the NASDAQ Global Select Market under the symbol “VRA”. As of March 27, 2022, we had approximat ely 25 registered sh areholders of record.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is listed on the NASDAQ Global Select Market under the symbol “VRA”. As of March 27, 2023, we had approximately 25 registered sh areholders of record.
This graph assumes an initial investment of $100 on January 28, 2017, in our common stock, the S&P 500 Index, and the S&P 500 Apparel, Accessories, and Luxury Goods Index and assumes the reinvestment of dividends, if any. The comparisons shown in the graph below are based on historical data.
This graph assumes an initial investment of $100 on February 3, 2018, in our common stock, the S&P 500 Index, and the S&P 500 Apparel, Accessories, and Luxury Goods Index and assumes the reinvestment of dividends, if any. The comparisons shown in the graph below are based on historical data.
The payment of dividends is evaluated on a periodic basis. 34 Table of Contents Stock Performance Graph The graph set forth below compares the cumulative shareholder return on our common stock between January 28, 2017, and January 29, 2022, to the cumulative return of (i) the S&P 500 Index and (ii) the S&P 500 Apparel, Accessories, and Luxury Goods Index over the same period.
The payment of dividends is evaluated on a periodic basis. 32 Stock Performance Graph The graph set forth below compares the cumulative shareholder return on our common stock between February 3, 2018, and January 28, 2023, to the cumulative return of (i) the S&P 500 Index and (ii) the S&P 500 Apparel, Accessories, and Luxury Goods Index over the same period.
Refer to Note 13 of the Notes to the Consolidated Financial Statements as set forth in Part II, Item 8. of this Annual Report on Form 10-K for additional information regarding our share repurchase programs. Details regarding the activity under the 2018 Share Repurchase Program during the thirteen weeks ended January 29, 2022 are set forth below.
Refer to Note 13 of the Notes to the Consolidated Financial Statements as set forth in Part II, Item 8. of this Annual Report on Form 10-K for additional information regarding our share repurchase programs.
Unregistered Sales of Equity Securities and Use of Proceeds The following tables detail activity under the 2018 and 2021 Share Repurchase Programs during the thirteen weeks ended January 29, 2022.
Unregistered Sales of Equity Securities and Use of Proceeds The following table details activity under the 2021 Share Repurchase Program during the thirteen weeks ended January 28, 2023.
Company/Market/Peer Group 1/28/2017 2/3/2018 2/2/2019 2/1/2020 1/30/2021 1/29/2022 Vera Bradley, Inc. $ 100.00 $ 80.43 $ 76.38 $ 82.58 $ 72.84 $ 68.19 S&P 500 Index $ 100.00 $ 122.83 $ 122.76 $ 149.23 $ 174.97 $ 211.72 S&P 500 Apparel, Accessories, and Luxury Goods Index $ 100.00 $ 127.65 $ 118.97 $ 109.61 $ 107.20 $ 105.59 35 Table of Contents
Company/Market/Peer Group 2/3/2018 2/2/2019 2/1/2020 1/30/2021 1/29/2022 1/28/2023 Vera Bradley, Inc. $ 100.00 $ 94.96 $ 102.68 $ 90.57 $ 84.78 $ 59.48 S&P 500 Index $ 100.00 $ 99.94 $ 121.49 $ 142.45 $ 172.36 $ 160.94 S&P 500 Apparel, Accessories, and Luxury Goods Index $ 100.00 $ 93.20 $ 85.87 $ 83.98 $ 82.72 $ 60.32 33
Removed
The 2018 Share Repurchase Program expired on December 11, 2021.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

62 edited+56 added−62 removed38 unchanged
Biggest changeFiscal Year Ended (1) ($ in thousands) January 29, 2022 January 30, 2021 February 1, 2020 Statement of Income Data: Net revenues $ 540,453 $ 468,272 $ 495,212 Cost of sales 252,510 202,754 223,411 Gross profit 287,943 265,518 271,801 Selling, general, and administrative expenses (2) 261,993 252,588 253,425 Other income 961 135 1,098 Operating income 26,911 13,065 19,474 Interest expense (income), net 263 1,203 (1,085) Income before income taxes 26,648 11,862 20,559 Income tax expense (3) 6,430 1,173 5,315 Net income 20,218 10,689 15,244 Less: Net income (loss) attributable to redeemable noncontrolling interest 2,380 2,008 (803) Net income attributable to Vera Bradley, Inc. $ 17,838 $ 8,681 $ 16,047 Percentage of Net Revenues: Net revenues 100.0 % 100.0 % 100.0 % Cost of sales 46.7 % 43.3 % 45.1 % Gross profit 53.3 % 56.7 % 54.9 % Selling, general, and administrative expenses 48.5 % 53.9 % 51.2 % Other income 0.2 % — % 0.2 % Operating income 5.0 % 2.8 % 3.9 % Interest expense (income), net — % 0.3 % (0.2) % Income before income taxes 4.9 % 2.5 % 4.2 % Income tax expense 1.2 % 0.3 % 1.1 % Net income 3.7 % 2.3 % 3.1 % Less: Net income (loss) attributable to redeemable noncontrolling interest 0.4 % 0.4 % (0.2) % Net income attributable to Vera Bradley, Inc. 3.3 % 1.9 % 3.2 % 42 Table of Contents The following tables present net revenues by operating segment, both in dollars and as a percentage of our net revenues, and Vera Bradley full-line and factory outlet store data for the last three fiscal years: Fiscal Year Ended (1) ($ in thousands, except as otherwise indicated) January 29, 2022 January 30, 2021 February 1, 2020 Net Revenues by Segment: VB Direct $ 354,875 $ 289,274 $ 347,484 VB Indirect 66,001 66,517 81,811 Pura Vida 119,577 112,481 65,917 Total $ 540,453 $ 468,272 $ 495,212 Percentage of Net Revenues by Segment: VB Direct 65.7 % 61.8 % 70.2 % VB Indirect 12.2 % 14.2 % 16.5 % Pura Vida 22.1 % 24.0 % 13.3 % Total 100.0 % 100.0 % 100.0 % Fiscal Year Ended January 29, 2022 January 30, 2021 February 1, 2020 Vera Bradley Store Data (4) : Total stores opened during period 6 6 6 Total stores closed during period (5) (13) (11) Total stores open at end of period 145 144 151 Comparable sales (including e-commerce) increase (5) NM NM 3.4 % Total gross square footage at end of period 397,037 380,100 386,028 Average net revenues per gross square foot (6) $ 633 NM $ 652 (1) The Company utilizes a 52-53 week fiscal year ending on the Saturday closest to January 31.
Biggest change(11.9) % 3.3 % 1.9 % 38 The following tables present net revenues by operating segment, both in dollars and as a percentage of our net revenues, and Vera Bradley full-line and factory outlet store data for the last three fiscal years: Fiscal Year Ended (1) ($ in thousands, except as otherwise indicated) January 28, 2023 January 29, 2022 January 30, 2021 Net Revenues by Segment: VB Direct $ 328,231 $ 354,875 $ 289,274 VB Indirect 73,316 66,001 66,517 Pura Vida 98,414 119,577 112,481 Total $ 499,961 $ 540,453 $ 468,272 Percentage of Net Revenues by Segment: VB Direct 65.6 % 65.7 % 61.8 % VB Indirect 14.7 % 12.2 % 14.2 % Pura Vida 19.7 % 22.1 % 24.0 % Total 100.0 % 100.0 % 100.0 % Fiscal Year Ended January 28, 2023 January 29, 2022 January 30, 2021 Vera Bradley Store Data (4) : Total stores opened during period 5 6 6 Total stores closed during period (20) (5) (13) Total stores open at end of period 130 145 144 Comparable sales (including e-commerce) decrease (5) (9.5) % NM NM Total gross square footage at end of period 381,664 397,037 380,100 Average net revenues per gross square foot (6) $ 555 $ 633 NM (1) The Company utilizes a 52-53 week fiscal year ending on the Saturday closest to January 31.
Selling expenses include: • VB Direct business expenses, such as store expenses, employee compensation, and store occupancy and supply costs; • VB Indirect business expenses consisting primarily of employee compensation and other expenses associated with sales to Indirect retailers; and • Pura Vida business expenses primarily related to employee compensation.
Selling expenses include: •VB Direct business expenses, such as store expenses, employee compensation, and store occupancy and supply costs; •VB Indirect business expenses consisting primarily of employee compensation and other expenses associated with sales to Indirect retailers; and •Pura Vida business expenses primarily related to employee compensation and store expenses.
Various factors affect our comparable sales, including: • Overall economic trends; • Consumer preferences and fashion trends; • Competition; 39 Table of Contents • The timing of our releases of new patterns and collections; • Changes in our product mix; • Pricing and level of promotions; • Amount of store, mall, and e-commerce traffic; • The level of customer service that we provide in stores and to our on-line customers; • Our ability to source and distribute products efficiently; • The number of stores we open and close in any period; and • The timing and success of promotional and marketing efforts.
Various factors affect our comparable sales, including: • Overall economic trends; • Consumer preferences and fashion trends; • Competition; • The timing of our releases of new patterns and collections; • Changes in our product mix; • Pricing and level of promotions; • Amount of store, mall, and e-commerce traffic; • The level of customer service that we provide in stores and to our on-line customers; • Our ability to source and distribute products efficiently; • The number of stores we open and close in any period; and • The timing and success of promotional and marketing efforts.
Impairment Charges Property, plant, and equipment and lease right-of-use assets (the “asset group” for store-related assets) are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset group may not be recoverable. The reviews are conducted at the lowest identifiable level of cash flows.
Long-lived Assets Property, plant, and equipment and lease right-of-use assets (the “asset group” for store-related assets) are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset group may not be recoverable. The reviews are conducted at the lowest identifiable level of cash flows.
Impairment charges of $0.1 million and $7.4 million were recognized in the fiscal years ended January 29, 2022 and January 30, 2021, respectively, for property, plant, and equipment assets and lease right-of-use assets related to underperforming stores and are included in SG&A expenses in the Consolidated Statements of Operations and in impairment charges in the Consolidated Statements of Cash Flows.
Impairment charges of $1.4 million, $0.1 million, and $7.4 million were recognized in the fiscal years ended January 28, 2023, January 29, 2022, and January 30, 2021, respectively, for property, plant, and equipment assets and lease right-of-use assets related to underperforming stores and a corporate right-of-use asset and are included in SG&A expenses in the Consolidated Statements of Operations and in impairment charges in the Consolidated Statements of Cash Flows.
Our quantitative process includes comparing the carrying value to the fair value of the Pura Vida brand, with any 49 Table of Contents excess recognized as an impairment loss. Fair value is estimated using a relief-from-royalty method.
Our quantitative process includes comparing the carrying value to the fair value of the Pura Vida brand, with any excess recognized as an impairment loss. Fair value is estimated using a relief-from-royalty method.
Fiscal 2021 Compared to Fiscal 2020 Refer to the Company's Annual Report on Form 10-K filed with the SEC on March 30, 2021, for a comparison of fiscal 2021 to fiscal 2020 operating results. Liquidity and Capital Resources General Our primary sources of liquidity are cash on hand and cash equivalents, investments, and cash flow from operations.
Fiscal 2022 Compared to Fiscal 2021 Refer to the Company's Annual Report on Form 10-K filed with the SEC on March 29, 2022, for a comparison of fiscal 2022 to fiscal 2021 operating results. Liquidity and Capital Resources General Our primary sources of liquidity are cash on hand and cash equivalents, investments, and cash flow from operations.
We also have access to additional liquidity, if needed, through borrowings under our $75.0 million asset-based revolving credit agreement (the “Credit Agreement”) which was entered into on September 7, 2018. There was no debt outstanding as of January 29, 2022.
We also have access to additional liquidity, if needed, through borrowings under our $75.0 million asset-based revolving credit agreement (the “Credit Agreement”) which was entered into on September 7, 2018. There was no debt outstanding under the Credit Agreement as of January 28, 2023.
Increase is reported as a percentage of the comparable sales for the same period in the prior fiscal year.
Decrease is reported as a percentage of the comparable sales for the same period in the prior fiscal year.
Some of our competitors and other retailers calculate comparable or “same store” sales differently than we do. As a result, data in this report regarding our comparable sales and comparable store sales may not be comparable to similar data made available by other companies. Non-comparable sales include sales from stores not included in comparable sales or comparable store sales.
Some of our competitors and other retailers calculate comparable or “same store” sales differently than we do. As a result, data in this report regarding our comparable sales and comparable store sales may not be comparable to similar data made available by other companies.
Impairment charges are classified in SG&A expenses and were $0.1 million and $7.4 million for the periods ended January 29, 2022 and January 30, 2021, respectively. There were no impairment charges recorded for the period ended February 1, 2020. The discounted cash flow models used to estimate the applicable fair values involve numerous estimates and assumptions that are highly subjective.
Impairment charges are classified in SG&A expenses and were $1.4 million, $0.1 million, and $7.4 million for the periods ended January 28, 2023, January 29, 2022, and January 30, 2021, respectively. The discounted cash flow models used to estimate the applicable fair values involve numerous estimates and assumptions that are highly subjective.
As a result of the temporary closure of all Vera Bradley stores due to COVID-19 during portions of the first and second quarters of fiscal 2021, the Company's fiscal 2022 and fiscal 2021 comparable store sales and comparable sales calculations are not meaningful and therefore are not provided.
Non-comparable sales include sales from stores not included in comparable sales or comparable store sales. 35 As a result of the temporary closure of all Vera Bradley stores due to COVID-19 during portions of the first and second quarters of fiscal 2021, the Company's fiscal 2022 and fiscal 2021 comparable store sales and comparable sales calculations are not meaningful and therefore are not provided.
Capital expenditures for fiscal 2023 are expected to be approximately $10.0 million to $12.0 million related to planned investments associated with new Vera Bradley factory and Pura Vida store locations and technology and logistics enhancements. Net Cash Used in Financing Activities Net cash used in financing activities was $11.4 million in fiscal 2022 compared to $24.1 million in fiscal 2021.
Capital expenditures for fiscal 2024 are expected to be approximately $5.0 million related to planned investments associated with new Vera Bradley factory store locations and technology and logistics enhancements. Net Cash Used in Financing Activities Net cash used in financing activities was $20.1 million in fiscal 2023 compared to $11.4 million in fiscal 2022.
(“VBD”), a wholly-owned subsidiary of the Company, entered into an asset-based revolving Credit Agreement (the “Credit Agreement”) among VBD, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders from time to time party thereto.
Credit Agreement On September 7, 2018, Vera Bradley Designs, Inc. (“VBD”), a wholly-owned subsidiary of the Company, entered into an asset-based revolving Credit Agreement (the “Credit Agreement”) among VBD, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders from time to time party thereto.
The estimates and assumptions used in the determination of the fair value of the Pura Vida brand include the projected revenue growth, long-term growth rate, the royalty rate, and discount rate. As of January 29, 2022, the carrying value of the Pura Vida brand was $36.7 million.
The estimates and assumptions used in the determination of the fair value of the Pura Vida brand include the projected revenue growth, long-term growth rate, the royalty rate, and discount rate. 45 As of January 28, 2023, the carrying value of the Pura Vida brand was $11.7 million.
Cash Flow Analysis A summary of operating, investing, and financing activities is shown in the following table (in thousands): Fiscal Year Ended January 29, 2022 January 30, 2021 February 1, 2020 Net cash provided by operating activities $ 39,861 $ 20,702 $ 20,624 Net cash (used in) provided by investing activities (4,154) 17,680 (69,966) Net cash used in financing activities (11,413) (24,146) (14,285) Net Cash Provided by Operating Activities Net cash provided by operating activities consists primarily of net income adjusted for non-cash items, including depreciation, amortization, impairment charges, deferred taxes, and stock-based compensation; and the effect of changes in assets and liabilities.
Cash Flow Analysis A summary of operating, investing, and financing activities is shown in the following table (in thousands): Fiscal Year Ended January 28, 2023 January 29, 2022 January 30, 2021 Net cash (used in) provided by operating activities $ (13,421) $ 39,861 $ 20,702 Net cash (used in) provided by investing activities (8,239) (4,154) 17,680 Net cash used in financing activities (20,105) (11,413) (24,146) 42 Net Cash (Used in) Provided by Operating Activities Net cash (used in) provided by operating activities consists primarily of net (loss) income adjusted for non-cash items, including depreciation, amortization, impairment charges, deferred taxes, and stock-based compensation; and the effect of changes in assets and liabilities.
SG&A expenses related to Vera Bradley and corporate unallocated were $205.8 million compared to $194.7 million in the comparable prior-year period. SG&A expenses related to Pura Vida were $56.2 million compared to $57.9 million in the comparable prior-year period.
SG&A expenses related to Vera Bradley and corporate unallocated were $211.6 million compared to $205.8 million in the comparable prior-year period. SG&A expenses related to Pura Vida were $53.4 million compared to $56.2 million in the comparable prior-year period.
Selling, G eneral, and Administrative Expenses (“SG&A”) For fiscal 2022, SG&A expenses increased $9.4 million, or 3.7%, to $262.0 million, from $252.6 million for fiscal 2021. As a percentage of net revenues, SG&A expenses were 48.5% and 53.9% for fiscal 2022 and fiscal 2021, respectively.
Selling, G eneral, and Administrative Expenses (“SG&A”) For fiscal 2023, SG&A expenses increased $3.0 million, or 1.2%, to $265.0 million, from $262.0 million for fiscal 2022. As a percentage of net revenues, SG&A expenses were 53.0% and 48.5% for fiscal 2023 and fiscal 2022, respectively.
We perform physical inventory counts throughout the year and adjust the shrinkage provision accordingly. 48 Table of Contents The balance of inventory adjustments was $0.6 million and $0.7 million for these matters as of the fiscal years ended January 29, 2022, and January 30, 2021, respectively.
We perform physical inventory counts throughout the year and adjust the shrinkage provision accordingly. The balance of inventory adjustments was $16.5 million and $0.6 million for these matters as of the fiscal years ended January 28, 2023, and January 29, 2022, respectively.
Revenues for the Pura Vida segment reflect revenues generated through the Pura Vida websites, www.puravidabracelets.com, www.puravidabracelets.eu, and www.puravidabracelets.ca, through the distribution of Pura Vida-branded products to wholesale retailers, and through Pura Vida's first retail store opened in August 2021.
Revenues for the Pura Vida segment reflect revenues generated through the Pura Vida websites, www.puravidabracelets.com, www.puravidabracelets.eu, and www.puravidabracelets.ca, through the distribution of Pura Vida-branded products to wholesale retailers, and through Pura Vida retail stores.
Fiscal years 2022, 2021, and 2020 consisted of 52 weeks. (2) Impairment charges, related to underperforming stores, totaled $0.1 million and $7.4 million during the fiscal years ended January 29, 2022 and January 30, 2021, respectively. There were no impairment charges recorded during the fiscal year ended February 1, 2020.
Fiscal years 2023, 2022, and 2021 consisted of 52 weeks. (2) Impairment charges, related primarily to underperforming stores, totaled $1.4 million, $0.1 million, and $7.4 million during the fiscal years ended January 28, 2023, January 29, 2022, and January 30, 2021, respectively.
This represents the allocation of the Pura Vida net income to the noncontrolling interest. The change in net income was due to the factors described above in the Pura Vida operating segment. Net Income Attributable to Vera Bradley, Inc.
The change in net (loss) income was due to the factors described above in the Pura Vida operating segment. Net (Loss) Income Attributable to Vera Bradley, Inc.
For fiscal 2022, net income attributable to Vera Bradley, Inc. increased $9.1 million to $17.8 million from $8.7 million in fiscal 2021 due to the factors described in the captions above.
For fiscal 2023, net loss attributable to Vera Bradley, Inc. increased $77.5 million to $(59.7) million from net income attributable to Vera Bradley, Inc. of $17.8 million in fiscal 2022 due to the factors described in the captions above.
Income Tax Expense For fiscal 2022, we recorded income tax expense of $6.4 million at an effective tax rate of 24.1%, compared to income tax expense of $1.2 million at an effective tax rate of 9.9% for fiscal 2021.
Income Tax (Benefit) Expense For fiscal 2023, we recorded an income tax benefit of $15.6 million at an effective tax rate of 16.5%, compared to income tax expense of $6.4 million at an effective tax rate of 24.1% for fiscal 2022.
See “Forward-Looking Statements.” These forward-looking statements are subject to numerous risks and uncertainties, including those described under “Risk Factors.” Our actual results could differ materially from those suggested or implied by any forward-looking statements.
See “Forward-Looking Statements.” These forward-looking statements are subject to numerous risks and uncertainties, including those described under “Risk Factors.” Our actual results could differ materially from those suggested or implied by any forward-looking statements. Macroeconomic Environment We continue to experience challenges associated with the unpredictable macroeconomic environment in which we operate our businesses.
Our annual impairment test may be completed through a qualitative assessment to determine if the fair value of the Pura Vida brand is more likely than not greater than the carrying amount.
We test the Pura Vida brand for impairment annually, or more frequently if events or changes in circumstances indicate that the asset may be impaired. Our annual impairment test may be completed through a qualitative assessment to determine if the fair value of the Pura Vida brand is more likely than not greater than the carrying amount.
As a percentage of Pura Vida segment net revenues, operating income in the Pura Vida segment was 8.0% and 7.1% for fiscals 2022 and 2021, respectively.
Pura Vida. For fiscal 2023, operating loss increased $88.1 million. As a percentage of Pura Vida segment net revenues, operating (loss) income in the Pura Vida segment was (79.9)% and 8.0% for fiscals 2023 and 2022, respectively.
Net Income Net income is equal to income before income taxes less income tax expense. Net Income (Loss) Attributable to Redeemable Noncontrolling Interest Net income (loss) attributable to redeemable noncontrolling interest represents the operating results of Pura Vida that are not attributable to Vera Bradley, Inc. 40 Table of Contents Net Income Attributable to Vera Bradley, Inc.
Net (Loss) Income Attributable to Redeemable Noncontrolling Interest Net (loss) income attributable to redeemable noncontrolling interest represents the operating results of Pura Vida that are not attributable to Vera Bradley, Inc. Net (Loss) Income Attributable to Vera Bradley, Inc.
We have also been impacted by higher tariffs from previously duty-free countries, where we source products, as a result of the Generalized System of Preferences (“GSP”) duty-free status expiring at the end of calendar year 2020. We cannot guarantee if or when the GSP duty-free status will be reinstated and retro-actively applied by Congress.
We have also been impacted by higher tariffs from previously duty-free countries, where we source products, as a result of the expiration of the Generalized System of Preferences (“GSP”) duty-free status at the end of calendar year 2020.
Material Cash Requirements Our material cash requirements from known contractual and other obligations include the following: • The Put/Call Agreement associated with the July 2019 acquisition of Pura Vida, further described in Note 2 to the Notes to the Consolidated Financial Statements herein; • Operating lease obligations as disclosed further in Note 4 to the Notes to the Consolidated Financial Statements herein; • Purchase order commitments primarily related to inventory purchases; • Salaries, cash incentives, benefits, and other employee-related costs; • Planned capital expenditures; • Income tax payments; and • Other supply and service agreements entered into as part of our normal operations.
Material Cash Requirements Our material cash requirements from known contractual and other obligations include the following: • The $10.0 million purchase of the remaining Pura Vida Interests paid subsequent to fiscal 2023 as further described in Note 2 to the Notes to the Consolidated Financial Statements in Part II, Item 8 of this report; 43 • Approximately $3.1 million of severance liability associated with cost savings initiatives further described in Note 16 to the Notes to the Consolidated Financial Statements in Part II, Item 8 of this report; • Operating lease obligations as disclosed further in Note 4 to the Notes to the Consolidated Financial Statements in Part II, Item 8 of this report; • Purchase order commitments primarily related to inventory purchases; • Salaries, cash incentives, benefits, and other employee-related costs; • Planned capital expenditures; • Income tax payments; and • Other supply and service agreements entered into as part of our normal operations.
Comparable store sales are calculated based solely upon stores that have been open for at least 12 full fiscal months.
Comparable Sales Typically, comparable sales are calculated based upon our stores that have been open for at least 12 full fiscal months and net revenues from our Vera Bradley e-commerce operations. Comparable store sales are calculated based solely upon stores that have been open for at least 12 full fiscal months.
For fiscal 2022, operating income increased $25.0 million, or 51.5%. As a percentage of VB Direct segment net revenues, operating income in the VB Direct segment was 20.7% and 16.8% for fiscals 2022 and 2021, respectively.
For fiscal 2023, operating income decreased $22.4 million, or 30.5%. As a percentage of VB Direct segment net revenues, operating income in the VB Direct segment was 15.6% and 20.7% for fiscals 2023 and 2022, respectively.
Net cash provided by operating activities was $39.9 million during fiscal 2022, as compared to $20.7 million during fiscal 2021. The increase in cash provided by operating activities was primarily related to the change in assets and liabilities. The increase in net income of $9.5 million was offset by the change in non-cash items.
Net cash used in operating activities was $13.4 million during fiscal 2023, as compared to net cash provided by operating activities of $39.9 million during fiscal 2022. The increase in cash used in operating activities was primarily related to an increase in the net loss after non-cash charges of $47.5 million, as well as the change in assets and liabilities.
The guideline transaction method employs transaction multiples derived from the acquisition of controlling interests in stocks of companies that are engaged in the same or similar lines of business as the reporting unit. As of January 29, 2022, the Company had recorded $44.3 million of goodwill which was allocated to the Pura Vida reporting unit.
The guideline transaction method employs transaction multiples derived from the acquisition of controlling interests in stocks of companies that are engaged in the same or similar lines of business as the reporting unit.
SG&A expenses as a percentage of net revenues decreased primarily due to the aforementioned items, as well as SG&A expense leverage associated with increased sales. Other Income, Net For fiscal 2022, net other income increased $0.9 million to $1.0 million, from $0.1 million for fiscal 2021.
SG&A expenses as a percentage of net revenues increased primarily due to the aforementioned items, as well as SG&A expense deleverage associated with decreased sales.
Revenues for the VB Direct segment reflect sales through Vera Bradley full-line and factory outlet stores; the Vera Bradley websites verabradley.com and verabradley.ca; and our Vera Bradley online outlet site. There were no sales from our Vera Bradley annual outlet sale in Fort Wayne, Indiana for the past two years as it was cancelled due to the COVID-19 pandemic.
There were no sales from our Vera Bradley annual outlet sale in Fort Wayne, Indiana for the past three years as it was cancelled due to the COVID-19 pandemic.
Net Cash (Used in) Provided by Investing Activities Investing activities consisted primarily of investments and capital expenditures related to new store openings, buildings, operational equipment, and information technology investments, as well as the Pura Vida acquisition.
Net Cash Used in Investing Activities Investing activities consisted primarily of investments and capital expenditures related to new store openings, buildings, operational equipment, and information technology investments. Net cash used in investing activities was $8.2 million in fiscal 2023, compared to $4.2 million in fiscal 2022.
The effective tax rate increased primarily due to the relative impact of permanent and discrete items in the current-year period compared to the prior-year period, primarily as a result of stock-based compensation, and the relative impact of a $2.8 million tax benefit related to the net operating loss carryback provisions of the CARES Act in the prior-year that did not recur.
The effective tax rate decreased primarily due to the relative impact of permanent and discrete items in the current-year period compared to the prior-year period, primarily as a result of non-deductible executive compensation and stock-based compensation.
Gross Profit Gross profit is equal to our net revenues less our cost of sales. Cost of sales includes the direct cost of purchased merchandise, distribution center costs, operations overhead, duty, and all inbound freight costs incurred. The components of our reported cost of sales may not be comparable to those of other retail and wholesale companies.
Gross Profit Gross profit is equal to our net revenues less our cost of sales. Cost of sales includes the direct cost of purchased merchandise, distribution center costs, operations overhead, duty, all inbound freight costs incurred, and inventory adjustments including adjustments described in Note 16 to the Notes to the Consolidated Financial Statements herein.
Gross profit can be impacted by changes in volume; fluctuations in sales price; operational efficiencies, such as leveraging of fixed costs; promotional activities, including free shipping; commodity prices, such as for cotton; tariffs; and labor costs. Selling, General, and Administrative Expenses (“SG&A”) SG&A expenses include selling; advertising, marketing, and product development; and administrative expenses.
The components of our reported cost of sales may not be comparable to those of other retail and wholesale companies. Gross profit can be impacted by changes in volume; fluctuations in sales price; operational efficiencies, such as leveraging of fixed costs; promotional activities, including free shipping; commodity prices, such as for cotton; tariffs; and labor costs.
The increase in net other income was primarily due to legal settlements in the current-year period. Operating Income For fiscal 2022, operating income increased $13.8 million, or 106.0%, to $26.9 million from $13.1 million for fiscal 2021. As a percentage of net revenues, operating income was 5.0% and 2.8% for fiscal 2022 and fiscal 2021, respectively.
Operating (Loss) Income For fiscal 2023, operating loss increased $121.8 million, or 452.5%, to $(94.9) million from operating income of $26.9 million for fiscal 2022. As a percentage of net revenues, operating (loss) income was (19.0)% and 5.0% for fiscal 2023 and fiscal 2022, respectively. Operating loss increased due to the factors described above.
Fiscal 2022 Compared to Fiscal 2021 Net Revenues For fiscal 2022, net revenues increased $72.2 million, or 15.4%, to $540.5 million, from $468.3 million for fiscal 2021. VB Direct. For fiscal 2022, net revenues increased $65.6 million, or 22.7%, to $354.9 million, from $289.3 million for fiscal 2021.
Fiscal 2023 Compared to Fiscal 2022 Net Revenues For fiscal 2023, net revenues decreased $40.5 million, or 7.5%, to $500.0 million, from $540.5 million for fiscal 2022. VB Direct. For fiscal 2023, net revenues decreased $26.7 million, or 7.5%, to $328.2 million, from $354.9 million for fiscal 2022.
Any proceeds of the credit facilities will be used to finance general corporate purposes of VBD and its subsidiaries, including but not limited to Vera Bradley International, LLC and Vera Bradley Sales, LLC (collectively, the “Named Subsidiaries”).
Borrowings under the credit facilities are available to finance general corporate purposes of VBD and its subsidiaries, including but not limited to Vera Bradley International, LLC and Vera Bradley Sales, LLC (collectively, the “Named Subsidiaries”). The Credit Agreement also contains an option for VBD to arrange with lenders to increase the aggregate principal amount by up to $25.0 million.
Valuation of Long-lived Assets Property, plant, and equipment and operating right-of-use assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable.
We believe we have the ability to move some of our retired finished goods through a number of channels, including our Vera Bradley and Pura Vida websites, the Vera Bradley online outlet site, Vera Bradley factory outlet stores, the Vera Bradley Annual Outlet Sale which is planned to resume in June 2023, and through third-party liquidators as needed. 44 Valuation of Long-lived Assets Property, plant, and equipment and operating right-of-use assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable.
Our retail stores remained open during fiscal 2022; however, guidance and mandates from governments and public health officials may necessitate closures to some, or all, of our retail stores which we cannot predict. We have also experienced certain global supply chain disruptions due in part to the COVID-19 pandemic further discussed under Supply Chain Disruptions below.
We cannot predict the future impacts of the COVID-19 pandemic and its associated factors, which may necessitate temporary closures to some, or all, of our retail stores due to guidance and mandates from governments and public health officials, or require other Company action that may impact our operations.
As a percentage of VB Indirect segment net revenues, operating income in the VB Indirect segment was 30.8% and 36.8% for fiscals 2022 and 2021, respectively.
These decreases in SG&A expenses were partially offset by $0.8 million in incremental store impairment charges. VB Indirect . For fiscal 2023, operating income increased $2.6 million, or 13.0%. As a percentage of VB Indirect segment net revenues, operating income in the VB Indirect segment was 31.3% and 30.8% for fiscals 2023 and 2022, respectively.
These matters could have a material adverse effect on our liquidity, operating results, and financial condition. In the fourth quarter of fiscal 2022, we began initiating strategic price increases across both of our brands to mitigate some of these inflationary and supply chain pressures, and we will continue to implement price increases throughout fiscal 2023.
We implemented strategic price increases across both of our brands to mitigate some of these inflationary and supply chain pressures in late fiscal 2022 and early fiscal 2023. We will continue to monitor our pricing as it relates to the current macroeconomic trends.
The increase in operating income as a percentage of VB Direct segment net revenues was primarily due to SG&A expense leverage associated with increased sales, partially offset by a decrease in gross margin as a percentage of net revenues as described above and COVID-19-related expense savings from the prior-year period that did not recur.
The increase in operating income as a percentage of VB Indirect segment net revenues was primarily due to SG&A leverage associated with increased sales, partially offset by a decrease in gross margin as a percentage of net revenues as described above, including approximately 230 basis points related to inventory adjustments for the exit of certain technology products, excess mask products, and valuation adjustments to write discounted inventory down to its net realizable value, as well as certain purchase order cancellation fees.
We are unable to predict the extent of the impact that the COVID-19 pandemic will have on our operations, the economy, or other factors; therefore, it is possible additional impairments could be identified in future periods, and such amounts could be material. 41 Table of Contents Results of Operations The following tables summarize key components of our consolidated results of operations for the last three fiscal years, both in dollars and as a percentage of our net revenues.
We are unable to predict the extent of the impact that the inflationary environment, or other macroeconomic factors, will have on our operations, the economy, or other factors; therefore, it is possible additional impairments could be identified in future periods, and such amounts could be material. 37 Cost Savings Initiatives and Other Charges During fiscal 2023, the Company began implementation of its targeted cost reductions, which are expected to be fully realized in fiscal 2024.
These increases in SG&A expense were partially offset by a decrease in depreciation expense, as described above. Interest Expense, Net For fiscal 2022, net interest expense totaled $0.3 million compared to net interest expense of $1.2 million in fiscal 2021.
These increases were partially offset by a $3.6 million decrease in employee-related expenses, primarily related to a decline in incentive compensation expense as a result of company performance estimates and forfeitures along with reduced headcount. 41 Interest Expense, Net For fiscal 2023, net interest expense totaled $0.2 million compared to $0.3 million in fiscal 2022, consistent with the prior year.
Refer to Note 14 to the No tes to the Consolidated Financial Statements herein for additional information regarding the Pura Vida acquisition.
Refer to Note 15 to the Notes to the Consolidated Financial Statements herein for additional information regarding the goodwill and indefinite-lived intangible assets impairment tests.
Refer to the Company's Annual Report on Form 10-K filed with the SEC on March 30, 2021, for a comparison of fiscal 2021 to fiscal 2020 cash flow activity. Credit Agreement On September 7, 2018, Vera Bradley Designs, Inc.
The increase in cash used in financing activities was primarily due to $18.1 million of common stock repurchases in the current-year period compared to $7.7 million in the comparable prior-year period. Refer to the Company's Annual Report on Form 10-K filed with the SEC on March 29, 2022, for a comparison of fiscal 2022 to fiscal 2021 cash flow activity.
Fiscal year 2020 included proceeds from the sales of tickets to our annual outlet sale. Operating Income Operating income is equal to gross profit less SG&A expenses plus net other income. Operating income excludes interest income, interest expense, and income taxes. Income Before Income Taxes Income before income taxes is equal to operating income plus interest income less interest expense.
Other Income, Net Other income, net primarily includes certain legal settlements and sales tax credits received for timely filings, and sublease income. Operating (Loss) Income Operating (loss) income is equal to gross profit less SG&A expenses plus net other income. Operating (loss) income excludes interest income, interest expense, and income taxes.
For the annual impairment analysis performed during fiscal 2022, we performed a quantitative analysis. No impairment was recorded for the Pura Vida brand during fiscal 2022. The estimated fair values of our Pura Vida reporting unit and the Pura Vida brand are subject to change as a result of many factors including changing economic conditions.
The estimated fair value of the Pura Vida brand is subject to change as a result of many factors including changing economic conditions. Should actual cash flows and our future estimates deteriorate from the estimates we used, impairment charges for the Pura Vida brand asset may be necessary in future years. 46
Corporate Unallocated . For fiscal 2022, unallocated expenses increased $8.4 million, or 12.4% to $76.4 million from $68.0 million in the prior-year period.
These decreases to operating income were partially offset by reductions in advertising expense compared to the prior-year period. Corporate Unallocated . For fiscal 2023, corporate unallocated expenses increased $13.9 million, or 18.2% to $90.3 million from $76.4 million in the prior-year period.
The impairment charges are included in the VB Direct segment. There were no impairment charges recorded during the fiscal year ended February 1, 2020.
Impairment charges of $0.6 million were recorded within corporate unallocated during fiscal 2023. The remaining impairment charges were included in the VB Direct segment.
Net Income For fiscal 2022, net income increased $9.5 million, or 89.1%, to $20.2 million from $10.7 million in fiscal 2021 due to the factors described above. 45 Table of Contents Net Income Attributable to Redeemable Noncontrolling Interest For fiscal 2022, net income attributable to redeemable noncontrolling interest was $2.4 million compared to $2.0 million in the prior-year period.
Net (Loss) Income For fiscal 2023, net loss increased $99.6 million to $(79.4) million from net income of $20.2 million in fiscal 2022 due to the factors described in the captions above.
We may be subject to additional material cash requirements that are contingent upon certain events that have not yet occurred. Off-Balance Sheet Arrangements We do not have any off-balance sheet financing or unconsolidated special purpose entities.
We may be subject to additional material cash requirements that are contingent upon certain events that have not yet occurred. We expect to fund these cash requirements using cash on hand, cash provided by our operations and, to the extent necessary, borrowings under our Credit Agreement.
The following table provides additional information about our operating income (in thousands). 44 Table of Contents Fiscal Year Ended $ Change % Change January 29, 2022 January 30, 2021 Operating Income: VB Direct $ 73,506 $ 48,524 $ 24,982 51.5 % VB Indirect 20,323 24,502 (4,179) (17.1) % Pura Vida 9,519 8,031 1,488 18.5 % Less: Unallocated corporate expenses (76,437) (67,992) (8,445) 12.4 % Operating income $ 26,911 $ 13,065 $ 13,846 106.0 % VB Direct .
Fiscal Year Ended $ Change % Change January 28, 2023 January 29, 2022 Operating (Loss) Income: VB Direct $ 51,097 $ 73,506 $ (22,409) (30.5) % VB Indirect 22,965 20,323 2,642 13.0 % Pura Vida (78,591) 9,519 (88,110) (925.6) % Less: Unallocated corporate expenses (90,342) (76,437) (13,905) 18.2 % Operating (loss) income $ (94,871) $ 26,911 $ (121,782) (452.5) % VB Direct .
How We Assess the Performance of Our Business In assessing the performance of our business, we consider a variety of performance and financial measures. Net Revenues Net revenues reflect sales of our merchandise and revenue from distribution and shipping and handling fees, less returns and discounts.
Net Revenues Net revenues reflect sales of our merchandise and revenue from distribution and shipping and handling fees, less returns and discounts. Revenues for the VB Direct segment reflect sales through Vera Bradley full-line and factory outlet stores; the Vera Bradley websites verabradley.com and verabradley.ca; and our Vera Bradley online outlet site.
Executive Summary Some of our major achievements for fiscal 2022 are as follows: • In the Vera Bradley product area: • We accelerated our robust fabric innovation pipeline to develop new fabric offerings and continued to build on our platform of sustainable fabrics.
Executive Summary Some of our major achievements for fiscal 2023 are as follows: • At the Vera Bradley brand: • We expanded our robust product innovation pipeline, including launching our Featherweight Collection; continued another year of product collaborations with brands such as Disney, Harry Potter, and Crocs; and expanded our cozy, sleep, and outerwear collections. • We continued to strengthen and rationalize our store base.
The decrease in operating income as a percentage of VB Indirect segment net revenues was primarily due to a decrease in gross margin as a percentage of net revenues as described above, partially offset by a decrease in the bad debt provision compared to the prior-year period. Pura Vida. For fiscal 2022, operating income increased $1.5 million, or 18.5%.
These decreases were partially offset by price increases on certain merchandise in the current-year. VB Indirect. For fiscal 2023, net revenues increased $7.3 million, or 11.1%, to $73.3 million, from $66.0 million for fiscal 2022. The increase was primarily due to an increase in orders from certain key accounts. Pura Vida .
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The COVID-19 Pandemic During fiscal 2021, the COVID-19 pandemic resulted in global travel restrictions, quarantines, and certain factory closures or reduced operations, as well as mall closures and reduced mall operating hours.
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The COVID-19 pandemic caused supply chain disruptions that have resulted in delivery delays and increased inbound and outbound shipping costs; however, these s upply chain disruptions began to stabilize towards the end of fiscal 2023.
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Although the Vera Bradley and Pura Vida e-commerce operations remained open during this time, the aforementioned items had a material adverse impact on overall consumer demand, traffic, and sales during the period.
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In addition, the macroeconomic environment has been further challenged by inflationary pressures, including high gas prices, and other related factors that have impacted consumer discretionary spending, primarily customers with lower household incomes. We have also seen a trend of increasing digital media costs.
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We took various actions to navigate the pandemic which included, but were not limited to, temporarily closing all Vera Bradley store locations on March 19, 2020; temporarily furloughing 80% of our workforce during the middle of the first quarter; temporarily reducing base compensation for certain associates; preserving cash by drawing on our Credit Agreement, which was repaid during the fourth quarter of the 2021 fiscal year; and managing inventory, rent, and other expenses.
Added
We also continued the implementation of our targeted cost reductions, which are expected to be fully realized in fiscal 2024. Expense savings are being derived across various areas of the Company, including retail store efficiencies, marketing expenses, information technology contracts, professional services, logistics and operational costs, and corporate payroll.
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During the second quarter of fiscal 2021, we brought back substantially all associates from furlough and began to reinstate portions of the base compensation reductions. On May 5, 2020, we began to open our Vera Bradley retail stores in a phased approach.
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We will continue to review our expense structure in future years for additional cost reduction opportunities. While we continue to actively monitor this rapidly evolving macroeconomic environment and are working to mitigate the situation, these matters could have a material adverse effect on our liquidity, operating results, and financial condition.
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All factory and full line stores were opened as of the end of the prior-year, although with reduced hours, lower staffing levels, reduced foot traffic, and greatly enhanced safety protocols.
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We opened five new factory outlet stores and closed 19 underperforming full-line stores and one factory outlet store, ending the fiscal year with 51 full-line and 79 factory outlet locations.
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The sales of cotton face masks, coupled with a full year of Pura Vida operations, helped to offset sales declines otherwise associated with Vera Bradley in fiscal 2021. Net revenues from masks represented approximately 2% and 10% of consolidated net revenues for fiscals 2022 and 2021, respectively.
Added
We also continued to expand options for customers to shop, including enhancing our presence in third-party marketplaces and adding boutiques in select high-traffic airports. • At the Pura Vida brand: • We entered into several high-profile product collaborations, with brands such as Hello Kitty, Disney, and Harry Potter, and expanded our product offerings by launching our demi-fine collection and expanding our assortment of engravable jewelry, all designed to bring new customers to our brand. • We focused on building a more diverse, innovative, effective, and performance-based marketing program to drive Pura Vida e-commerce sales.
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We cannot predict the impact that the COVID-19 pandemic could have on our future liquidity, operating results, and financial condition, but it could have a significant adverse effect on these metrics. Supply Chain Disruptions During fiscal 2022 for the Vera Bradley brand, we faced supply chain disruptions that caused delivery delays.
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We began the process of implementing a comprehensive customer data platform to build a single, coherent, complete view of each Pura Vida customer so that we can better target and personalize marketing and become less reliant on third-party marketing. This project is scheduled for 34 completion in the spring of fiscal 2024.
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We are working diligently to mitigate the situation, but expect shipping delays and inbound and outbound freight expense increases to continue for the near future.
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We continued to engage our micro influencers, significantly expanded our TikTok presence, launched impactful ads on connected TV, optimized SMS, and aggressively explored other methods to effectively reach our customers. • We opened three new Pura Vida full-line stores during the year, bringing our full-line store count to four, which collectively exceeded our expectations.
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We expanded our full-line Performance Twill and recycled Re-Active collections and our Factory Ultralight fabrication and launched our Cotton ReIMAGINED Collection crafted from 50% recycled and 50% conventional cotton.
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These four full-line stores are playing a role in driving new customer acquisition as we continue to diversify our marketing platforms, and they demonstrate the power a retail presence can have in driving digital sales, omni-channel loyalty, and spending.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeSubstantially all purchases and sales involving foreign persons are denominated in U.S. dollars, and therefore we do not hedge using any derivative instruments. Historically, we have not been impacted materially by changes in exchange rates. 51 Table of Contents
Biggest changeThis may result in an increase to our interest expense. Foreign Exchange Rate Risk We source a majority of our finished goods from various suppliers primarily in Cambodia, Vietnam, Indonesia, El Salvador, China, and the Philippines. Substantially all purchases and sales involving foreign persons are denominated in U.S. dollars, and therefore we do not hedge using any derivative instruments.
In addition, the Financial Conduct Authority (the authority that regulates LIBOR) began to phase out LIBOR by the end of 2021 and announced that it would completely phase out LIBOR by June 30, 2023.
In addition, the Financial Conduct Authority (the authority that regulates LIBOR) began to phase out LIBOR by the end of 2021 and announced that it would completely phase out LIBOR by June 30, 2023 and transition to the Secured Overnight Financing Rate (“SOFR”). SOFR is calculated differently from LIBOR and the differences in their calculations may give rise to uncertainties.
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Assuming LIBOR ceases to exist, we may need to re-negotiate certain agreements and we cannot predict what alternative index would be negotiated with our lenders or the resulting impact on our interest expense. Foreign Exchange Rate Risk We source a majority of our finished goods from various suppliers primarily in Cambodia, Vietnam, Indonesia, El Salvador, and China.
Added
The replacement of LIBOR with SOFR may adversely affect interest rates and result in higher borrowing costs. We cannot predict the effect of the termination of LIBOR or the establishment and use of SOFR.
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We may need to renegotiate our revolving credit facility or incur other indebtedness and the use of SOFR or another benchmark rate may negatively impact the terms of such indebtedness. As LIBOR ceases to exist, we may need to amend certain contracts and cannot predict whether SOFR or another benchmark rate would be negotiated.
Added
Historically, we have not been impacted materially by changes in exchange rates. 47

Other VRA 10-K year-over-year comparisons