The following discussion summarizes the significant factors affecting the condensed consolidated operating results, financial condition, liquidity, and cash flows of the Company as of and for the thirteen weeks ended May 2, 2026 and May 3, 2025. The following discussion should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended January 31, 2026, and our unaudited condensed consolidated financial statements and the related notes included in Item 1 of this Quarterly Report. The results of operations for the thirteen weeks ended May 2, 2026, are not necessarily indicative of the results to be expected for the full fiscal year.
Strategic Progress, Macroeconomic Factors, and Other Factors Impacting our Financial Condition and Results of Operations
Strategic Progress. We are continuing execution of Project Sunshine, a comprehensive strategy to strengthen our market position by tapping into our brand’s strong emotional connection with consumers. We are simplifying decision-making, removing organizational complexity, and focusing resources on high-impact initiatives. This operational focus, paired with prudent cost management, will allow us to invest in the brand, innovation, and customer experiences, all while driving shareholder value. These improvements are about agility — building a responsive organization to fully leverage our unique brand position.
The five key initiatives of Project Sunshine are:
Sharpening Our Brand Focus: We are restoring Vera Bradley’s distinctive, joyful brand positioning by strengthening product, emphasis on social-first marketing, storytelling, and partnering selectively across wholesale and IP to rebuild relevance and demand.
Resetting Our Go-to-Market Model: We are rebuilding our commercial engine with sharper hero product focus, disciplined pricing and promotions, improved inventory planning, and integrated, insight-led execution across channels.
Rewiring the Digital Ecosystem: We are integrating our digital commerce platforms to create a seamless customer journey, supported by enhanced site functionality, data-driven decisions, and improved conversion and profitability.
Outlet 2.0: We are transforming our outlet channel from discount driven to a curated, brand-building smart-value experience that is delivering higher sales, conversion, and profitability.
Reimagining How We Work: We are streamlining the organization while investing in critical talent and capabilities to create a more agile, future-fit company positioned for sustainable long-term growth.
Macroeconomic and Other Factors. We continue to closely monitor the dynamic economic landscape and are actively managing the impact of changing tariff costs. While ongoing inflationary pressures and related macroeconomic factors continue to influence consumer discretionary spending, our business has demonstrated resilience to start the fiscal year. We delivered a strong start to fiscal 2027 and remain focused on executing our strategic initiatives and adapting to current market conditions to support sustained long-term growth.
Management Transition
In June 2025, the Company announced the departure of its former Chief Executive Officer (“CEO”), Jacqueline Ardrey. In March 2026, Board member Ian Bickley was appointed permanent CEO and Executive Chairman after serving as our Interim CEO since July 2025. Martin Layding was named Chief Financial Officer in June 2025 and was promoted to also serve as the Chief Operating Officer in March 2026.
Recent Transactions
The sale of Pura Vida was completed on March 31, 2025. See Note 13 to the Notes to the Condensed Consolidated Financial Statements herein for additional information. The loss on sale was presented as part of results of the discontinued operations. We have reflected the results of operations of the Pura Vida business as discontinued operations in the Consolidated Statement of Operations. This business was historically presented as its own reporting unit.
How We Assess the Performance of Our Business
In assessing the performance of our business, we consider a variety of performance and financial measures.
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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 Direct segment reflect sales through full-line and outlet stores; e-commerce sites (verabradley.com, verabradleyoutlet.com, and international.verabradley.com); direct to consumer marketplaces; and typically the Vera Bradley annual outlet sale. Revenues for the Indirect segment reflect sales of Vera Bradley-branded products to specialty retail partners; key accounts consisting of department stores, national accounts, and third-party inventory liquidators; and royalties recognized through licensing agreements related to the Vera Bradley brand.
Comparable Sales
Comparable sales are calculated based upon our stores that have been open for at least 12 full fiscal months and net revenues from our e-commerce operations. Remodeled stores are included in both comparable sales and comparable store sales unless the store was closed for more than one week of the current or comparable prior period, in which case the non-comparable temporary closure periods are not included, or the remodel resulted in a significant change in square footage. 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.
Measuring the change in year-over-year comparable sales allows us and our investors to evaluate how our store base and e-commerce operations are performing. 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, as well as timing 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.
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, duties, all inbound freight costs incurred, and inventory adjustments, if any. 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; inbound freight and other logistical costs; outbound freight; 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. Selling expenses include:
•Direct business expenses, such as store expenses, employee compensation, and store occupancy and supply costs;
•Indirect business expenses consisting primarily of employee compensation and other expenses associated with sales to Indirect retailers; and
Advertising, marketing, and product development expenses include employee compensation, media costs, creative production expenses, marketing agency fees, new product design costs, public relations expenses, and market research expenses. Administrative expenses include employee compensation for corporate functions, corporate headquarters occupancy costs, consulting and software expenses, and charitable donations, as well as severance charges and consulting fees associated with cost savings initiatives disclosed in Note 11 to the Notes to the Condensed Consolidated Financial Statements herein.
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Results of Operations
The following tables summarize key components of our condensed consolidated results of operations for the periods indicated, both in dollars and as a percentage of our net revenues ($ in thousands):
Thirteen Weeks Ended
May 2, 2026 May 3, 2025
Statement of Operations Data:
Net revenues $ 55,702 $ 51,652
Cost of sales 26,871 28,885
Gross profit 28,831 22,767
Selling, general, and administrative expenses 34,128 40,804
Other income, net 649 180
Operating loss from continuing operations (4,648) (17,857)
Interest (expense) income, net (65) 4
Loss from continuing operations before income taxes (4,713) (17,853)
Income tax expense 112 407
Net loss from continuing operations $ (4,825) $ (18,260)
Percentage of Net Revenues:
Net revenues 100.0 % 100.0 %
Cost of sales 48.2 % 55.9 %
Gross profit 51.8 % 44.1 %
Selling, general, and administrative expenses 61.3 % 79.0 %
Other income, net 1.2 % 0.3 %
Operating loss from continuing operations (8.3) % (34.6) %
Interest (expense) income, net (0.1) % — %
Loss from continuing operations before income taxes (8.4) % (34.6) %
Income tax expense 0.2 % 0.8 %
Net loss from continuing operations (8.6) % (35.4) %
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The following tables present net revenues and operating income (loss) by operating segment, both in dollars and as a percentage of associated net revenues, and store data for the periods indicated ($ in thousands, except as otherwise indicated):
Thirteen Weeks Ended
May 2, 2026 May 3, 2025
Net Revenues by Segment:
Direct $ 44,853 $ 43,083
Indirect 10,849 8,569
Total $ 55,702 $ 51,652
Percentage of Net Revenues by Segment:
Direct 80.5 % 83.4 %
Indirect 19.5 % 16.6 %
Total 100.0 % 100.0 %
Thirteen Weeks Ended
May 2, 2026 May 3, 2025
Operating Income (Loss) by Segment:
Direct $ 3,107 $ (5,536)
Indirect 4,009 1,980
Less: Corporate unallocated (11,764) (14,301)
Total $ (4,648) $ (17,857)
Operating Income (Loss) as a Percentage of Net Revenues by Segment:
Direct 6.9 % (12.8) %
Indirect 37.0 % 23.1 %
Vera Bradley Store Data (1):
Total stores opened during period — 2
Total stores closed during period (3) (2)
Total stores open at end of period 112 126
Total gross square footage at end of period 354,709 386,091
Average net revenues per gross square foot (2) $ 65 $ 58
Comparable sales (including e-commerce) increase (decrease) (3) 13.4 % (25.0) %
(1)Includes Vera Bradley full-line and outlet stores.
(2)Dollars not in thousands. Average net revenues per gross square foot are calculated by dividing total net revenues for our stores that have been open at least 12 full fiscal months as of the end of the period by total gross square footage for those stores. Remodeled stores are included in average net revenues per gross square foot unless the store was closed for a portion of the period.
(3)Comparable sales are calculated based upon stores that have been open for at least 12 full fiscal months and net revenues from e-commerce operations. Comparable sales increase (decrease) is reported as a percentage of the comparable sales for the same period in the prior fiscal year. Remodeled stores are included in comparable sales unless the store was closed for a portion of the current or comparable prior period, in which case the non-comparable temporary closure periods are not included, or the remodel resulted in a significant change in square footage.
Thirteen Weeks Ended May 2, 2026, Compared to Thirteen Weeks Ended May 3, 2025
Net Revenues
For the thirteen weeks ended May 2, 2026, net revenues increased $4.0 million, or 7.8%, to $55.7 million, from $51.7 million in the comparable prior-year period.
Direct. For the thirteen weeks ended May 2, 2026, net revenues in the Direct segment increased $1.8 million, or 4.1%, to $44.9 million, from $43.1 million in the comparable prior-year period. Vera Bradley comparable sales increased 13.4%, which includes an 11.6% increase in comparable store sales as well as an increase in e-commerce sales of 15.5%. In addition, non-
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comparable revenue decreased $3.5 million, primarily attributable to not hosting the Vera Bradley annual outlet sale in the current year period. The increase in comparable sales and comparable store sales was primarily due to improved e-commerce conversion and average ticket price, as well as increased traffic in outlet and full-line stores.
Indirect. For the thirteen weeks ended May 2, 2026, net revenues in the Indirect segment increased $2.3 million, or 26.6%, to $10.8 million, from $8.6 million in the comparable prior-year period. The increase was primarily due to improvement in specialty and department stores, while cut-to-order sales enabled continued growth across key accounts.
Gross Profit
For the thirteen weeks ended May 2, 2026, gross profit increased $6.0 million, or 26.6%, to $28.8 million, from $22.8 million in the comparable prior-year period. As a percentage of net revenues, gross profit increased to 51.8% for the thirteen weeks ended May 2, 2026, from 44.1% in the comparable prior-year period. The year over year margin rate improvement was driven by favorable sales mix and lower freight and duty costs in the current year period, as well as reduction in costs related to inventory write-offs associated with the sale of Pura Vida, purchase order cancellation fees, and professional fees in the prior-year period.
Selling, General, and Administrative Expenses
For the thirteen weeks ended May 2, 2026, SG&A expenses decreased $6.7 million, or 16.4%, to $34.1 million, from $40.8 million in the comparable prior-year period. As a percentage of net revenues, SG&A expenses decreased to 61.3% for the thirteen weeks ended May 2, 2026, from 79.0% in the comparable prior-year period. For the thirteen weeks ended May 2, 2026, consolidated SG&A expenses decreased primarily due to a $2.9 million reduction in advertising costs, driven by cost optimization efforts including reduction and phasing of advertising spend throughout the year; a $1.3 million reduction in building expenses resulting from store closures and favorable lease negotiations; $1.0 property, plant, & equipment charges in the prior-year period that did not recur in the current year period; a $0.7 million reduction in employee-related costs, including reduced headcount, partially offset by an increase in variable compensation; a $0.3 million reduction in professional fees; and a $0.5 million reduction in net other expenses.
Other Income, Net
For the thirteen weeks ended May 2, 2026, net other income increased $0.4 million to $0.6 million, from $0.2 million in the comparable prior-year period. The increase in net other income was primarily due to income from the TSA resulting from the sale of Creative Genius.
Operating Loss from Continuing Operations
For the thirteen weeks ended May 2, 2026, operating loss from continuing operations decreased $13.3 million, or 74.0%, to $(4.6) million, from $(17.9) million in the comparable prior-year period. As a percentage of net revenues, operating loss from continuing operations was (8.3)% and (34.6)% for the thirteen weeks ended May 2, 2026 and May 3, 2025, respectively. Operating loss from continuing operations decreased due to the factors described above.
Direct. For the thirteen weeks ended May 2, 2026, operating income in the Direct segment increased $8.6 million, or 156.1%, to $3.1 million, from an operating loss of $(5.5) million in the comparable prior-year period. As a percentage of Direct segment net revenues, operating income (loss) in the Direct segment was 6.9% and (12.8)% for the thirteen weeks ended May 2, 2026 and May 3, 2025, respectively. The increase in operating income as a percentage of Direct segment net revenues was primarily due to an increase in gross margin as a percentage of net revenues as described above, expense reductions of $1.6 million in advertising costs and $1.1 million in building expenses resulting from store closures and favorable lease negotiations, the absence of $1.0 million of property, plant, and equipment impairment charges recognized in the prior-year period, as well as improved leverage of SG&A expenses.
Indirect. For the thirteen weeks ended May 2, 2026, operating income in the Indirect segment increased $2.0 million, or 102.5%, to $4.0 million from $2.0 million in the comparable prior-year period. As a percentage of Indirect segment net revenues, operating income in the Indirect segment was 37.0% and 23.1% for the thirteen weeks ended May 2, 2026 and May 3, 2025, respectively. The increase in operating income as a percentage of Indirect segment net revenues was due to an increase in gross margin as a percentage of net revenues as well as improved leverage of SG&A expenses.
Unallocated. For the thirteen weeks ended May 2, 2026, unallocated expenses decreased $2.5 million, or 17.7%, to $11.8 million from $14.3 million in the comparable prior-year period. The decrease in unallocated expenses was primarily due to a $1.0 million decrease in advertising expenses, a $0.5 million reduction in professional fees, and a $0.4 million reduction in employee-related costs, partially offset by a $0.6 million increase in net other expenses.
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Interest (Expense) Income, Net
For the thirteen weeks ended May 2, 2026, interest expense increased $0.1 million, to $(0.1) million from interest income of $4.0 thousand in the comparable prior-year period.
Income Tax Expense
The effective tax rate for the thirteen weeks ended May 2, 2026, was (2.4)%, compared to (2.3)% for the thirteen weeks ended May 3, 2025. See Note 7 "Income Taxes" of the Notes to the Condensed Consolidated Financial Statements for additional information about the Company's interim provision for income taxes.
Net Loss from Continuing Operations
For the thirteen weeks ended May 2, 2026, there was a net loss from continuing operations of $(4.8) million, a $13.5 million decrease, from $(18.3) million in the comparable prior-year period due to the factors described above.
Liquidity and Capital Resources
General
Our primary sources of liquidity are cash on hand and cash equivalents, as well as 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”). Availability under the Credit Agreement is driven by a borrowing base comprised primarily of eligible accounts receivable and inventory, each subject to advance rates, eligibility criteria, and applicable reserves. As a result, borrowing capacity may fluctuate based on the level and quality of receivables and the composition and valuation of inventory. There was no debt outstanding under the Credit Agreement as of May 2, 2026. The Company also owns two real estate properties that are unencumbered, which provide additional financial flexibility and may serve as a potential source of liquidity or collateral if needed. Historically, our primary cash needs have been for merchandise inventories; payroll; store rent; capital expenditures associated with operational equipment, buildings, information technology, and opening new stores; and share repurchases. The most significant components of our working capital are cash and cash equivalents, merchandise inventories, accounts receivable, accounts payable, and other current liabilities.
We believe that cash on hand and cash equivalents, cash flows from operating activities, and the availability of borrowings under our Credit Agreement or other financing arrangements will be sufficient to meet working capital requirements and anticipated capital expenditures, and other strategic uses of cash, if any, for the foreseeable future.
Cash Flow Analysis
A summary of operating, investing, and financing activities is shown in the following table (in thousands):
Thirteen Weeks Ended
May 2, 2026 May 3, 2025
Net cash used in operating activities $ (5,250) $ (17,902)
Net cash used in investing activities (333) (968)
Net cash used in financing activities (412) (171)
Net Cash Used in Operating Activities
Net cash used in operating activities consists primarily of net loss 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.
Net cash used in operating activities for the thirteen weeks ended May 2, 2026 was $5.3 million, compared to $17.9 million for the thirteen weeks ended May 3, 2025. The decrease in cash used in operating activities was primarily attributable to a net loss of $(4.8) million, a $28.6 million improvement, from the comparable prior-year period, net of the $15.2 million loss on sale of business recognized in the prior-year period. Operating cash flows also benefited from continued inventory management initiatives, which resulted in a $2.9 million source of cash from inventories during the current year period compared to a $7.4 million use of cash in the prior-year period. These favorable impacts were partially offset by changes in accounts payable and accrued liabilities, which represented a $5.2 million net use of cash in the current year period, primarily attributable to the timing of payments at the end of fiscal 2026.
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Net Cash Used in Investing Activities
Investing activities consist 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 $0.3 million for the thirteen weeks ended May 2, 2026, compared to $1.0 million for the thirteen weeks ended May 3, 2025. The decrease in cash used in investing activities was primarily attributable to a decrease in property, plant, and equipment spending of $1.6 million in the current year period, partially offset by $0.9 million proceeds from the sale of Pura Vida recognized in the prior-year period.
Net Cash Used in Financing Activities
Net cash used in financing activities was $0.4 million for the thirteen weeks ended May 2, 2026, compared to $0.2 million for the thirteen weeks ended May 3, 2025. The increase in cash used in financing activities was primarily attributable to higher tax withholding payments related to equity compensation.
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. On March 11, 2025, certain subsidiaries of the Company, JPMorgan Chase Bank, N.A., as the administrative agent, and lenders from time to time party thereto, entered into a Fourth Amendment (the “Fourth Amendment”) to the Credit Agreement. The Credit Agreement provides for certain credit facilities to VBD in an aggregate principal amount not to initially exceed the lesser of $75.0 million or the amount of borrowing availability determined in accordance with a borrowing base of certain assets. 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. The Credit Agreement also contains an option for VBD to arrange with lenders to increase the aggregate principal amount by up to $50.0 million.
On October 21, 2025, VBD amended the agreement to include, among other things, to: (i) permit the sale of certain real property assets without requiring the application of the proceeds from such sale to be used to repay amounts outstanding under the Credit Agreement, (ii) remove the prohibition against sale and leaseback transactions and (iii) increase the amount of Company assets permitted to be disposed of in any fiscal year outside the ordinary course of business from $5,000,000 to $10,000,000.
As of May 2, 2026 and January 31, 2026, the Company had no borrowings outstanding and availability of $68.0 million and $58.6 million, respectively, under the Credit Agreement, subject to the borrowing base provisions of the facility.
For further information regarding the Credit Agreement, please see Note 6 of the Notes to Condensed Consolidated Financial Statements herein.
Material Cash Requirements
As of May 2, 2026, there were no material changes outside the ordinary course of business to material cash requirements, as disclosed in our Annual Report on Form 10-K for the fiscal year ended January 31, 2026.
Off-Balance-Sheet Arrangements
We do not have any off-balance-sheet financing or unconsolidated special-purpose entities.
Critical Accounting Policies and Estimates
The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses, as well as the related disclosures of contingent assets and liabilities at the date of the financial statements. A summary of the Company’s significant accounting policies is included in Note 2 to the Company’s consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2026.
Certain accounting policies and estimates of the Company are considered critical, as these policies and estimates are the most important to the depiction of the Company’s consolidated financial statements and require significant, difficult, or complex judgments, often about the effect of matters that are inherently uncertain. Such policies are summarized in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for
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the fiscal year ended January 31, 2026. There were no significant changes to any of the critical accounting policies and estimates described in the Annual Report as of May 2, 2026.
Recently Issued Accounting Pronouncements
Refer to Note 1 “Description of the Company and Basis of Presentation” within Item 1 “Financial Statements” of this Quarterly Report on Form 10-Q for a discussion of recently issued accounting pronouncements.
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