Vera Bradley, Inc. (VRA) Earnings Call Transcript & Summary

Hello, and thanks to each of you for being here on Vera Bradley's earnings call. During our prepared remarks, and when answering your questions, certain things we say might qualify as forward-looking statements, made under and within the meaning of the safe harbor provisions contained in the Private Securities Litigation Reform Act of 1995, as amended. Those forward-looking statements carry both known and unknown risks and uncertainties, which could lead actual results to differ materially from what we expect. For a discussion of known risks and uncertainties, please see today's press release along with the company's most recent Form 10-K filed with the SEC. Investors shouldn't assume that what is said during the call will still hold true at a later time. We have no obligation to update any information discussed on today's call. Now I'll hand the call over to Vera Bradley CEO Rob Wallstrom. Rob?

Thanks, Mark. Morning, everybody, and I appreciate your time on the call today. Joining me is our CFO, John Enwright. We reported consolidated revenue for the 2nd quarter that rose almost 12% versus the prior year. Looking at comps, Vera Bradley had basically recovered to the revenue mark it held in the 2nd quarter of fiscal 2020, before the pandemic, while Pura Vida grew almost 7% compared with fiscal 2020's 2nd quarter. In Q2, Vera Bradley brand revenues kept climbing as shoppers embraced new products, our stores operated at full capacity, and travel goods sales came back, even though we were up against the prior year's anniversary and extraordinarily robust mask sales. That said, two big issues dragged down our performance. First, Pura Vida's revenues took a hit from the Apple iOS 14.5 update, largely because of how it reduced the effectiveness of advertising on Facebook and Instagram. Those two platforms have served as our main marketing engines for generating sales, and Pura Vida has held a market-leading spot, repeatedly earning the rank of the number 1 engaged brand in jewelry on Instagram. Our team is working hard to swiftly shift part of our marketing spend onto other platforms, and as a result, we started seeing Pura Vida DTC sales volume gain momentum across the rest of Q2 and into the start of Q3. For the 2nd half of the year, we anticipate Pura Vida revenues will get back to a 15%-20% growth rate. Second, in line with much of the industry, Vera Bradley kept facing supply chain difficulties and sharply higher freight and tariff costs, which placed substantial pressure on gross margin during the quarter. We anticipate such pressures will persist over the moderate term. We managed to keep diligently controlling our SG&A expenses and our balance sheet, and cash flow is still strong. Thanks to our robust 1st quarter results, fiscal 2022 has begun well, with year-to-date earnings far exceeding last year and surpassing where we stood in fiscal 2020 before the pandemic. We recognize that headwinds and uncertainties will persist for the remainder of the year, yet we also understand that both of our lifestyle brands hold considerable long-term growth potential far beyond their core product categories. We remain on track and dedicated to our vision of becoming a purpose-driven, multi-lifestyle brand, high-growth company. I'll now hand the call over to John for the financial discussion.

Thanks, Rob, and good morning, everyone. I'd like to walk through several key points regarding Q2. Everything I'm about to share is presented on a non-GAAP basis. For full details on what gets excluded from those non-GAAP figures, along with a reconciliation between GAAP and non-GAAP, please see the press release we issued today. Consolidated net revenues came to $147 million in this year's second quarter, which represents growth of 11.6% compared with $131.8 million during the same period a year ago. Last year's revenue took a hit from stores being shut temporarily and operating fewer hours because of COVID-19, though mask sales gave those results a considerable boost. Turning to the current year's second quarter, Vera Bradley, Inc. reported consolidated net income of $9.5 million, equal to $0.28 per diluted share, versus prior-year net income of $10.9 million, or $0.32 per diluted share. In Q2 of this year, the Vera Bradley direct segment brought in $97.1 million, up 19.6% from $81.2 million in last year's second quarter. Because our stores were closed for part of last year's Q2, calculating comparable store sales doesn't make sense here. Looking at it on an apples-to-apples basis, comparable sales came in essentially flat, slipping only 1.3% during the second quarter of fiscal 2020. The Vera Bradley indirect segment generated $16.8 million, which is 5.1% below the $17.7 million recorded in last year's second quarter. That decline came from fewer orders, mostly tied to mask sales, though it was partly offset by improved specialty and key account orders along with other product categories that COVID-19 had hurt a year earlier. Pura Vida segment revenue reached $33.1 million, rising 0.8% from $32.8 million a year ago. Consolidated gross profit for Q2 was $80.4 million, or 54.6% of net revenues, versus $79.6 million, or 60.4% of net revenues, last year. Remember that a year ago we lifted our gross margin by roughly 300 basis points year over year thanks to cotton mask sales, something we didn't repeat this time. Higher inbound and outbound freight costs weighed on this year's rate. Beyond that, the lower margin rate reflects increased tariffs from countries that used to be duty-free, where the GSP duty-free status for products we source expired as the year began. Like what has occurred many times before, we expect Congress will retroactively restore the duty status on the tariffs that have been levied so far this year. On average, that's costing us about $1 million each quarter. Consolidated SG&A expense was $68 million, or 46.2% of net revenues, in this year's second quarter, versus $58.6 million, or 44.5% of net revenues, a year ago. Our SG&A came in above last year's level, as we anticipated, largely because of the COVID-19-related expense cuts we made last year. Consolidated operating income for Q2 reached $13.4 million, or 9.1% of net revenues, compared with $21.1 million, or 16% of net revenues, the prior year. I'd like to discuss what lies ahead for us. Uncertainty persists in the retail sector, and it's tough to forecast how we'll perform financially down the road. Our fiscal 2022 estimates are being revised, taking into account how we did in the 2nd quarter, the business trends we're currently seeing, and an assessment of specific macro industry and economic factors that might affect the company's sales and gross margin results for the rest of the year. We keep witnessing gains in volume and traffic relative to last year's levels, and we anticipate keeping our operating expenses in check. That said, similar to numerous other retailers, supply chain obstacles are hitting us — things like manufacturing delays, longer transit times, and significantly higher projected freight costs both inbound and outbound. Remember that every piece of forward-looking guidance we give is non-GAAP. Although quarterly guidance isn't something we're offering, I can share some directional thoughts about the 3rd quarter. For the Vera Bradley brand, we anticipate revenues rising by high single digits compared to a year ago, and by more than 20% for Pura Vida. We also anticipate that gross margin will remain under pressure because of persistent supply chain difficulties and extra freight costs, plus a GSP matter; our forecast is that GSP savings will make their way through the P&L during the fourth quarter, yet margin in the 3rd quarter will stay pressured until Congress renews GSP. Regarding fiscal 2022, here's how we've revised our annual expectation. Consolidated net revenues between $550 million and $565 million. Net revenues came to $468.3 million in fiscal 2021. Free cash flow in the range of $50 million to $55 million, versus $15 million a year ago. A consolidated gross profit percentage of 54.6% to 55.3%, versus 57% in fiscal 2021. The anticipated rate decrease stems from a reduction in mass penetration this year, combined with continuing supply chain difficulties and a big jump in freight costs. The current year gross margin estimate factors in the retroactive reinstatement of GSP. Consolidated SG&A expense between $260 million and $266 million, versus $233 million in fiscal 2021. The anticipated SG&A rise is mainly tied to Vera Bradley stores operating for the entire year, non-comparable compensation and CARES Act savings during fiscal 2021, and general variable growth linked to stronger sales expectations. Consolidated operating income between $40 million and $46 million, versus $34 million in fiscal 2021. Consolidated diluted EPS between $0.80 and $0.95, assuming diluted weighted average shares outstanding of $34.6 million and an effective tax rate of roughly 21%. Diluted EPS came to $0.63 a year ago. Net capital spending of roughly $8 million to $10 million, versus $5.7 million in the prior year, which reflects investments tied to new factory locations plus technology and logistic improvements. Now I'll move on to the balance sheet. Cash, cash equivalents, and investments totaled $76.5 million when the quarter ended, versus $77.1 million at the close of last year's 2nd quarter and $65.5 million at the end of last fiscal year. We carried no borrowings against our $75 million ABL credit facility when the quarter ended. Total inventory at quarter-end stood at $148 million, versus $136.2 million when the 2nd quarter wrapped up last year. Inventory at the close of the quarter came in above last year's level, and the main reason was additional Pura Vida stock. As we see it, by the time fiscal 2022 wraps up, inventory on a year-over-year basis ought to be lower by roughly 5%. Rob?

Thank you, John. Just to remind everyone, when it comes to fiscal 2022, our company has four main growth drivers. First, we're pushing our digital first strategy forward by changing how our products get distributed digitally and by continuing to sharpen and make use of digital experiences in order to serve our customers. Second, we're strengthening our pipeline for product innovation, our collaborations, and our category extensions so that we draw in new customers and grow share of wallet among those we already have. Third, we're growing our community via marketing and by establishing a positive brand movement with real impact — one that improves lives while also making customers more loyal to the brand. Fourth, we're developing our distribution channels by concentrating on upcoming growth possibilities and responding to the shifting retail landscape within the consumer marketplace. Let's start off with Vera Bradley. As I noted at the close of last quarter, we expected the travel and campus segments of the business to keep recovering during the 2nd quarter. Research showed that close to three-quarters of Americans intend to travel just this summer, and sales for our travel products have in fact been strong, going beyond our 2019 levels. Conversely, even though the overall back-to-school market has been solid, sales of non-tech and accessory items did not get back to pre-pandemic levels. In the same way, at Vera Bradley, our back-to-campus business did grow over 2020, yet sales stayed below the 2019 levels. As is true for many in the industry, supply chain disruptions hit us and created delivery delays all through the quarter. We've seen delays averaging roughly 30 days before a complete assortment of goods became available for each product launch. Sadly, we don't anticipate this improving during the fall season. We're working hard to lessen the impact to the greatest extent we can, yet we expect shipping delays and higher freight expenses to persist in the near term. Turning to products, we're still enthusiastic about our innovation pipeline and about developing new fabric offerings, which matter not just for growing share of wallet among existing customers, but also for drawing new customers to Vera Bradley. We stay quite optimistic regarding our new recycled cotton collection and can't wait to introduce new solid colors seasonally. Solid Galaxy Gray, purple, and red arrive this fall; navy will be offered in the spring, and we'll broaden our black styles next summer. Working with Lana Condor when we launched the Cotton ReImagined collection helped attract a younger and more diverse customer to the brand. We keep building on momentum in our other alternate fabrications, such as Performance Twill and our factory-exclusive Ultralight collection. We're always researching and innovating so we can give customers more eco-friendly choices, and we've committed to converting 100% of our fabrics to more sustainable alternatives by 2025. Product collaborations gave us yet another exciting quarter. Back in June, we launched our Classic Accessories outdoor range — furniture covers, seat and lounge covers, accent pillows, umbrellas, and rugs. Beyond verabradley.com, classicaccessories.com, and chosen Vera Bradley locations, you can also buy this line online via top retailers, including Wayfair, Amazon, Lowe's, and The Home Depot. During the quarter, we also rolled out the Disney and Harry Potter mini collections, which are always a hit. On the marketing side, the big bets we've placed over time on data science, business analytics, and capturing customer data keep delivering returns, showing up in what we do and what we achieve. Customer numbers grew, just as we anticipated. Activations built around the customer journey and personalized messaging at the individual level are pulling in new shoppers in a real way and helping bring back lapsed ones throughout our entire factory store lineup. Social media engagement is climbing. To be specific, we're using more content created by users, our influencer and ambassador programs have expanded, we keep improving how we tell stories on social, and social selling has grown. TikTok is getting more of our attention as we keep building that platform to boost Gen Z acquisition; together with strong media placements, these moves keep raising brand awareness, with media impressions rising more than 200% year over year, powered by our Cotton ReImagined campaign featuring Lana Condor, summer travel collections, back-to-school essentials, and collaborations. It makes us proud that our marketing increasingly mirrors our dedication to a more diverse and inclusive audience. We're honored to keep amplifying our VB Cares mission. Come August, we marked the 3rd straight year working with Blessings in a Backpack, backing that nonprofit's goal of getting food to millions of elementary school kids nationwide who otherwise might face hunger. So far, thanks to our customers' support, we've given more than $750,000 to this organization. This month, the Vera Bradley Foundation for Breast Cancer kicks off its yearly series of fundraising events, which support the pioneering research taking place at the Vera Bradley Foundation Center for Breast Cancer Research at Indiana University School of Medicine in Indianapolis. Up to now, the foundation has given over $36 million to the Foundation Center for Breast Cancer Research. As time has passed, our digital business accounts for a bigger share of revenue, while stores keep underpinning this omni-channel approach. A seamless shopping experience is what we want for our customer. In markets where we operate retail locations, digital sales tend to be stronger, and the typical omni-channel customer spends more than three times what a single-channel customer does. Plenty of customers have longed for face-to-face interaction, and plenty are looking for experiences they can share. We stay focused on improving and reimagining what customers experience in our full-line stores, and some digital shopping conveniences that became popular during the pandemic remain so — things like appointment selling, buy online pickup in store, and curbside pickup. We keep working on making our full-line fleet more profitable. We're doing that by zeroing in on the stores with the greatest potential, tailoring and localizing what we carry, and trimming our current portfolio through chosen shutdowns. Three full-line locations have already been shut down in the current year, and we anticipate shutting as many as two additional ones during this fiscal year, which would take our overall full-line shutdowns to 44 from the start of fiscal 2018. Four new factory stores have been launched in the current year, and we anticipate launching two additional ones before October ends. In the quarter, we rolled out Afterpay completely across every Vera Bradley channel, letting shoppers pay in installments, which produced higher units per transaction and greater sales; we're also thrilled that Vera Bradley is now distributed on Target plus Marketplace, which gives our brand wonderful visibility. As sustainability and resale keep building momentum, our collaboration with thredUP, which started earlier in the year, is doing the same. Let's now turn to Pura Vida. Although Pura Vida's business briefly decelerated in the 2nd quarter because of the iOS update, we feel we're set up to deliver 15%-20% revenue growth in the 2nd half of the year, powered by our new product launches, wholesale growth, the marketing initiatives and adjustments we've implemented, and our new store opening.

During the quarter, a key initiative we finished was integrating Project Novus ERP at Pura Vida, bringing our entire company onto a single technology platform and enabling stronger sourcing capabilities, customer service, CRM, data analytics, and accounting, among other functions. This vital infrastructure upgrade has put Pura Vida in a strategic position for growth ahead. Innovation at Pura Vida remains central to how we grow. Beyond constantly introducing fresh designs and elements into our jewelry lines, we've also expanded considerably past jewelry. We genuinely are creating a lifestyle brand. A strong illustration of how the Pura Vida lifestyle has extended came with April's debut of our apparel line of tees and hoodies; thus far, the best-performing styles are Pura Vida logos, tie-dyes, and surf graphics. Right now we're expanding our size ranges, styles, and logos; we see this as a meaningful revenue opportunity ahead. Backpacks arrived in May, and last month we rolled out our fun, affordable hat collection. Things such as apparel, backpacks, and hats don't just attract our current customers — they're also bringing new customers to the Pura Vida brand; in July, we teamed with Disney for an exciting release of Disney-themed jewelry and hair accessories, which Pura Vida and Disney fans alike adore. This enjoyable collection drew new fans to our brand, and the response so far has pleased us greatly; we have several other prominent product collaborations and licensing partnerships set to debut this fall. Stay tuned. During the quarter we partnered with well-known lifestyle influencer Sivan Ayla on a style pack launch that drove strong volume and reached a wider age demographic. Only last month, we rolled out our jewelry collection with Outer Banks star and influencer Madison Bailey, which is drawing a more diverse customer. As noted earlier, the recent Apple update hurt Pura Vida e-commerce revenues, because we've historically depended on platforms such as Facebook and Instagram to connect with potential customers and generate sales. Our team has worked hard to dig deeper into customer analytics and shift part of our marketing resources toward other platforms, including TikTok, podcasts, and YouTube. Consequently, we started seeing Pura Vida DTC sales volume strengthen across the rest of the 2nd quarter and into the start of the 3rd quarter. From its beginning, Pura Vida has shown expertise in engaging customers, fostering loyalty, and bringing new devotees into the Pura Vida lifestyle. We stay focused on finding fresh ways to creatively engage our customers, attract new customers to our brand, design more inclusive marketing, and achieve greater efficiency in paid advertising. Regarding distribution, our 1st Pura Vida store opened at San Diego's Westfield UTC Mall in mid-August and has gotten off to a great start, exceeding our initial plans. The store lets us showcase the Pura Vida lifestyle with a full array of existing products and new product innovations, gather invaluable customer feedback, and host influencer events. Just by looking at how many people follow the brand on social media, it's clear how much Pura Vida is loved. When Pura Vida's community of fans got to experience the Pura Vida lifestyle firsthand at the store, the response was overwhelming and showed us a whole new level of the brand's power. On opening day, we saw lines that reached three hours for most of the day. Both the feedback and the sales have gone past what we expected. We definitely think there are chances to bring the Pura Vida store concept to additional locations. We're also excited that Pura Vida shop in shops have launched in 23 Vera Bradley full-line locations, offering a complete assortment of jewelry items, and the Pura Vida charity bracelet program has launched across all Vera Bradley full-line and factory locations; so far, the results have made us very happy. Wholesale growth is still strong as we keep bringing on new wholesale partners. This year alone, we've brought in more than 250 new accounts, which went beyond our expectations, and now Dillard's is set to join Nordstrom's as a Pura Vida department store distributor. We keep substantially growing our footprint within existing retailers through bigger in-store presentations, and we're seeing solid growth in core product categories with our wholesalers. Compared with fiscal 2020, our current wholesale accounts have, on average, placed bigger orders more often, since many of them have seen a strong comeback in traffic. To sum up, we keep pushing our digital first strategy forward. We've made strategic shifts and investments to pivot us into a digital first company, evolving into a customer-centric, data-driven, technology-enabled, and digitally-focused enterprise, which lets us engage effectively with our customers and deliver a seamless shopping experience. 2nd quarter e-commerce sales rose over 20% compared with fiscal 2020. More than 1/3 of our consolidated revenues now come from e-commerce sales. If you exclude our factory stores, e-commerce drives over half of our total sales. We're continuing to strengthen our product innovation pipeline collaborations and category extensions, as shown at Vera Bradley by the launch of our Cotton ReImagined collection, the introduction of other alternative fabrics, our commitment to sustainability and countless product collaborations, plus the continual newness and excitement in Pura Vida's jewelry collections, along with expanding into new Pura Vida lifestyle categories such as apparel, backpacks, and accessories. Through marketing, we're building on our community. Vera Bradley keeps engaging and growing its customer base through analytics, social media, and VB Cares efforts. Pura Vida has shown expertise in engaging its customers, building loyalty in introducing new devotees into the Pura Vida lifestyle via Instagram, TikTok, and podcasts. As we evolve our distribution channels, we're continually seeking new ways to reach our customers and to reinvent the shopping experience, from our verabradley.com website redesign to partnering with thredUP, to the opening of our 1st ever Pura Vida store. Operator, we will now open up the call to questions.

Excellent, thanks. Good morning, and I appreciate you taking my question. To begin with, John, I’m sorry if this was covered already, but might you provide a bit of detail regarding Vera Bradley e-commerce sales during Q2 — specifically the growth rates compared with 2019?

Hold on a moment, since I can’t recall that immediately. If you’d prefer to move on to the following question, I’ll look that up for you.

All right, that's excellent. Regarding back to school, could you share additional specifics about how the season unfolded during August? Other companies have mentioned the possibility of a longer season this year. I'm curious whether you're noticing any signs of that. And on a separate note, are there any signals that the Delta variant is impacting how quickly your travel categories are recovering?

Yes, Mark, I'll handle that question. First off, when it comes to back to school, we too anticipate that the season will stretch out more. Once again, growth versus last year has definitely occurred in those back to school categories. The thing is, we simply haven't returned to where we were in 2019, and that appears to match what's happening elsewhere in the market for these accessories and non-tech categories. As for the Delta variant, something notable is that traffic kept getting better each month across the quarter. Once we reached mid-July, that rate of improvement decelerated, and it has more or less leveled off during August. The upward path has weakened somewhat, yet on the whole, we continue to believe the consumer remains strong. On the travel category, plenty of travel is still taking place out there, and we haven't yet observed any significant pullback in that category. We're monitoring it carefully, but as of now, we remain optimistic that the travel category will stay healthy as the year goes on.

Mark, on your e-commerce question: versus what we saw in 2020's second quarter, it's higher by roughly about 40%. If you set it against last year, it's lower by around 30% — though keep in mind that a big chunk of mask sales moved through that channel last year.

All right. Okay. Thanks. Is there anything more you can tell us about what's happening with AUR? My understanding is that roughly 2 years back, the company raised prices in order to counteract tariffs. I'm curious whether you're seeing chances right now to push prices higher so that some of these freight cost squeezes and broader inflation in AUC can be offset.

Yes, when it comes to AUR, we're observing an increase on a year-over-year basis. There's certainly a benefit we're getting from that. As for raising prices, we're discussing it among ourselves — what increases, if any, we might implement, and which product categories ought to be targeted for those increases, so that we can pass along part of the difficulties arising in the supply chain.

Price increases are something we expect to implement. Our goal is simply to ensure we handle them in a surgical manner. Additional details on that will be shared over the coming quarters.

Alright, that's clear. I appreciate the thorough explanation. I'll get back in line.

Thank you, Mark.

Appreciate it, Mark.

Absolutely. Hello, everyone.

Good morning.

Good morning.

When you look further out, what ought we to keep in mind regarding the Vera Bradley store footprint? Let's begin there.

Sure. When it comes to our footprint, we still see a chance to trim certain full line doors that aren't performing well, and we remain of the view that the factory channel holds growth potential for us. So, although we expect to cut back on full line doors, we are certainly exploring possibilities, as we resize, to create new avenues for Vera Bradley. Some existing full line doors will be let go, yet in the end we're seeking chances to launch a number of doors in discrete locations.

I realize you're sitting on quite a bit of cash at the moment. When it comes to acquisitions, buybacks, and how you put that capital to work, what's your thinking?

Like we've said before as well, at this point our attention is on holding discussions about M&A opportunities, and Rob and I are definitely sitting in on some meetings and having certain conversations about that. That's where our main emphasis lies when it comes to how we believe capital should be deployed. There's definitely a chance, as we discuss with the board, to put our cash to use in the best manner possible, and from a share repurchase standpoint we do have a program that's open. Should we conclude that's the appropriate move, we still have the chance to spend roughly $30 million during the rest of this year on share repurchases if we decide that's the right way to deploy our cash.

All right, everyone. Best of luck for the second half.

Thanks, Eric.

Hello, and thanks. Hey there, Rob. Hey, John.

Hello, Oliver.

About IDFA and the adjustments Apple made in iOS, how do you see things playing out when it comes to going after other platforms, and how might there be risk, or might there not be, when it comes to dealing with that challenge across the whole industry? Second, on freight and tariffs, why did they turn out worse than you anticipated, and what risk factors do you see ahead? This has clearly been an issue for the industry. I'm surprised it was worse than you expected, but in some ways I'm also not surprised. Thank you.

Yes. I'll handle the second portion of what you asked, and I believe Rob is going to cover the first portion, which is about the reasons freight and tariffs came in worse than our original expectations. When the year began, on the subject of GSP, our assumption was that it would occur during the first half of the year — that the renewal would take place in that first half. Given everything that has ultimately been happening in Washington, D.C., there has not been much progress. The House has a couple of bills, and the Senate does as well, but agreement simply has not been reached. Our expectation is that GSP ultimately gets approved and applies retroactively. However, since we figured it would already have gone through by this point, our assumption now is simply that it lands before the fourth quarter wraps up. As for freight costs, based on what everyone was telling us back in January, our read was that the pressure would last across the summer, and then toward late summer as we headed into peak season, things would ease up. That relief hasn't materialized. My sense is there are plenty of separate issues at play there. We've had outbreaks of COVID at certain plants, and that's forced some of those plants to shut, so simply getting things delivered when they're supposed to arrive has become difficult. We've also had certain ports in Asia close, and the result is that lead times for getting goods over to the U.S. end up being longer. At the ports of L.A. and Long Beach, dwell time has climbed back to the level we saw in February. Beyond that, there are additional problems in warehouses and with actually moving product by rail. My sense is that all of these difficulties have piled on top of one another. When this year began, and even when the 2nd quarter began, we figured a portion of that would ease off; at this point, we see no easing whatsoever for this year. Our view is that it will pose a challenge through a portion of next year, possibly spanning all of next year.

Speaking of expenses, Oliver, one difficulty we've faced is this: we shifted a portion of our goods to air freight, and shipping products that carry a lower AUR alongside bigger volume through the air costs a great deal; we're working hard to untangle the question of which items go by air, which stay on the water, and how to handle that whole process. That explains, I believe, why this cost has flowed through at a greater rate than we'd expected. Using air freight as heavily as we now do wasn't something we'd planned for. Regarding the Apple situation and what's happening there, one observation about Pura Vida is that, first of all, they've consistently excelled at shifting their marketing from one platform to another. Facebook was a strength for them. On Instagram they grew into the leading player; more recently they've been transitioning toward TikTok. They're skilled at making these moves and keeping things evolving; they're beginning to embrace podcasts and additional spaces like YouTube as a way to keep diversifying. The second item, though, is that we'd like to assist them in gaining still greater strength in data analytics leverage, drawing on certain lessons we've gained at Vera Bradley, so they can examine a few conventional marketing avenues alongside the newer digital ones and thereby enjoy a wider foundation. Once we get going on that and start making use of their SMS, their email, and a few of the purely digital ad efforts — Google Search, maximizing SEO — we believe chances exist for them to build a broader marketing platform, and those initial steps appear to be producing results, since business momentum is bouncing back as it progressed out of Q2 and into Q3.

One more point on that: while we keep opening locations—right now there's just a single Pura Vida store operating—as more of them come online, we'll get greater chances to do some 1st-party marketing, since we'll know more about the customer.

All right, that's quite useful. Regarding the patterns you're observing and where inventory stands, could you give us an update on that for both brands, Vera Bradley and Pura Vida, and what's your level of confidence about that inventory during back to school compared with holiday? Thanks.

Yes. Looking at Pura Vida, inventory is likely at the upper end, higher than what we'd prefer it to be. As you may recall, during the prior year we faced difficulties actually bringing production in, and we over-indexed because of that, and in the end, we're still moving through part of that inventory. I'd say Pura Vida is in good shape for holiday. They possess sufficient inventory for holiday, and I have no worries about being unable to support any sales growth there. When it comes to Vera Bradley, its inventory is in fact somewhat flat to down compared with the prior year. We were broken in a few different places. As we keep working on bringing product in for holiday, as Rob indicated, we're considering air freight and air freight tied to launches that must arrive on time. Consider that as holiday launches with a set window to arrive; we're attempting to make sure we have the correct product in on time. Overall inventory from Vera Bradley's standpoint is likely fine. It's just that particular categories we need to sort of make sure we receive on time so we can achieve the holiday sales.

All right. And what about traffic in stores in a broader sense? Is it still up and down? Longer term, how do you view that, compared with 2019 levels of traffic and sales per square foot, and door productivity?