Vera Bradley Inc. (VRA) appears to be back on track after releasing better-than-expected fourth-quarter results on Wednesday and improved guidance for the new fiscal year. Earnings per share of 25 cents were two cents ahead of consensus expectations, while revenue of $118.19 million was better than the $116.35 million consensus. Interestingly, same-store sales fell 11.2% during the quarter, normally an ominous sign, except that the consensus was for a 14.5% drop.
For fiscal 2020, the company now expects revenue in the range of $420 million to $440 million, ahead of the previous $407 million consensus, and is forecasting earnings per share of 64 cents to 74 cents, better than the 63-cent consensus.
As a result, it has been a great week for Vera Bradley shares, which perked up 22% on Wednesday and added 3% on Thursday. It has been quite a wild ride for VRA over the past year plus; after rising steadily through early September and topping out in the $17 range, shares fell more than 50% by mid-December. A member of my 2019 Double Net Value Portfolio, shares of Vera Bradley are up 63% year to date.
There's no doubt that Vera Bradley is in a sector, specialty retail, that has been extremely volatile and likely will continue that way. The thing that attracted me to the stock in the first place in June 2017 was a company with a solid balance sheet and well-known brand name that seemed to be cheap despite being in a difficult industry. Indeed, the balance sheet has improved somewhat since then; VRA ended its latest quarter with $156.6 million, or about $4.50 per share, in cash and investments, up from $2.80 a share when I took a position. The company still has no debt on the books.
In addition to building its liquidity, Vera Bradley also repurchased 500,000 shares during the fourth quarter at an average price of $10.11 a share, and a total of 1.3 million shares at an average price of $12.58 during the year. There is still $47.2 million remaining on the company's $50 million repurchase authorization.
Vera Bradley currently trades at about 2.62x net current asset value (current assets less all liabilities) and has an enterprise value (market cap plus debt minus cash) of just $350 million. With a still-solid brand name and ample liquidity, I still would not be shocked to see Vera Bradley taken out by a bigger fish if the price is right given large ownership by insiders, who would need to decide that they are ready to sell. VRA does have many of the earmarks of the several double-nets that have been acquired over the last few years.
In the meantime, I hope the company continues to opportunistically buy back shares and at least consider initiating a dividend.