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

Hello, everyone, and thanks for being here this morning. We appreciate your presence on Vera Bradley's earnings call. During our prepared remarks and while answering your questions, certain things we say might be 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 anticipate. For a discussion of known risks and uncertainties, please see today's press release along with the company's most recent 10-K filed with the SEC. Investors shouldn't assume that anything stated on the call will still hold true later on. We take on no obligation to update any information discussed on today's call. Now I'll hand things over to Rob Wallstrom, Vera Bradley's CEO. Rob?

Thanks, Mark. It's a good morning, and I appreciate everyone being on today's call. Our CFO, John Enwright, is with me here as well. For the third quarter, consolidated revenue was up 7.9% compared to a year ago, and that's a 5.7% gain versus fiscal 2020, before the pandemic hit. At the Vera Bradley brand, revenues keep building momentum each quarter, with customers responding to new products and collaborations backed by targeted, data-driven marketing. Comparable sales for Vera Bradley in the third quarter climbed almost 8% versus last year and almost 6% versus fiscal 2020. Pura Vida came back to double-digit growth this quarter, rising 11.7% from a year ago. E-commerce revenue at Pura Vida is still being held back by Apple's iOS 14.5 update from earlier this year, which made Facebook and Instagram ads less effective; those 2 platforms had been the main marketing channels for Pura Vida sales, and we're in the process of moving to a different marketing platform. Meanwhile, our first Pura Vida store, located in San Diego, keeps performing well above what we expected, and we plan to open 3 to 5 more stores next year. Going forward, Pura Vida's growth will be broadened by balancing online expansion with physical distribution channels. As is true across much of the industry, supply chain difficulties persist, along with substantially higher freight costs, which created significant pressure on gross margins this quarter. We figure those added freight expenses, including shipping product by air, reduced diluted EPS by roughly $0.05 this quarter and $0.10 across the 9 months. To offset some of this inflation and supply chain pressure, we've started making strategic retail price increases at both brands. Those increases started in this year's fourth quarter and will keep going over the next few quarters. Also, more specifically for Vera Bradley, the lower margin rate reflects higher tariffs from countries that used to be duty-free, where we source products, because duty-free status under the generalized system of preferences, or GSP, wasn't renewed by Congress at the start of the calendar year; historically, Congress has restored such tariffs' duty-free status retroactively back to the beginning of the year. We expect GSP status to be renewed again, though we can't promise if or when that happens; this renewal delay hurt diluted EPS by about $0.03 this quarter and $0.06 across the 9 months. Despite the current supply chain and GSP issues, on a year-to-date basis before certain items, non-GAAP EPS of $0.41 is above last year and even above where we stood in fiscal 2020 before the pandemic; we're confident that both Vera Bradley and Pura Vida have significant long-term growth opportunities far beyond their core product categories, even with headwinds and uncertainty still ahead. The four main growth levers we keep relying on are these: first, pushing our digital-first approach even higher; second, strengthening the pipeline for new products, plus partnerships and stretching into additional categories; third, growing our community of customers via marketing while making their loyalty to the brand even deeper; and fourth, changing how our distribution channels work. We're sitting on a solid amount of cash, we carry no debt on our balance sheet, and we can produce free cash flow, which gives us room to keep putting money into our lifestyle brands as well as to look for purchases of other brands that are comfortable, affordable and purpose-driven down the road. Our people have been motivated, our brands carry real strength, and we're set up to grow over the long term; our attention stays fixed on the goal of being a purpose-driven multilifestyle brand and a high-growth company; at this point I'll hand things over to John so he can walk through our financial information.

Thanks, Rob, and good morning. I'd like to walk through several highlights from the third quarter. All of the figures I'll mention today are non-GAAP. For a full list of the detailed items excluded from those non-GAAP figures, along with a reconciliation of GAAP to non-GAAP figures, please see today's press release. For the third quarter of this year, our consolidated net revenues reached $134.7 million. That's up 7.9% from $124.8 million a year earlier, and it also represents a 5.7% gain compared with the $127.5 million we saw in the pre-pandemic third quarter of fiscal 2020. On the bottom line, total company consolidated net income for this year's third quarter was $6.2 million, or $0.18 per diluted share. A year ago, that figure stood at $10.2 million, or $0.30 per diluted share. Turning to our Vera Bradley Direct segment, revenues for the current third quarter were $86.6 million, which is 10.8% higher than the $78.2 million recorded last year. Comparable sales increased 7.8% versus the prior year and were up 5.6% compared with fiscal 2020. Over the past year, we shut down 9 full-line locations for good while bringing 6 factory outlet shops online. In the Vera Bradley Indirect segment, revenue reached $20.9 million, which was down 6.4% compared with $22.3 million during the same quarter a year earlier. That decline came mostly from fewer orders tied to a smaller volume of mass sales, along with reduced sales to certain key accounts, though these were partly offset by specialty account orders bouncing back in other product categories that COVID-19 had hurt in the prior year. The Pura Vida segment brought in $27.2 million in revenue, up 11.7% from $24.3 million a year before, fueled by growth in wholesale account sales. For the third quarter, gross profit was $72.3 million, representing 53.6% of net revenues. A year earlier, that figure stood at $73.8 million, or 59.1% of net revenues. Roughly 230 basis points of gross margin expansion came last year from Cotton Max sales, and nothing comparable happened this year. Higher inbound and outbound freight costs also dragged the rate down by about 155 basis points in the current year. On top of that, the lower margin rate reflects increased tariffs on countries that formerly enjoyed duty-free treatment under GSP, a status that lapsed at the start of the year; this weighed on gross margin by roughly 95 basis points. Because we can't predict what Congress will do about reinstating tariffs retroactively, none of that benefit is now expected to land in this fiscal year. For the third quarter of the current year, SG&A expense totaled $63.7 million, equal to 47.3% of net revenues, versus $59.4 million, or 47.6% of net revenues, a year earlier. The rise in current year SG&A over the prior year came about as anticipated, driven mainly by last year's COVID-19-related cost cuts that no longer apply. Consolidated operating income for the third quarter was $8.7 million, or 6.5% of net revenues, against $14.4 million, or 11.6% of net revenues, in the prior year. Now let me turn to our outlook for the fourth quarter. There's still a lot of unpredictability in retail right now, and it's hard to say what our financial results will look like down the road. That said, we've put together Q4 projections, and they're based on current conditions plus our own assumptions, factoring in wider industry and economic dynamics that could influence sales and gross margin through the remainder of the year. Compared with the same time last year, both volume and traffic are continuing to rise, and we intend to hold operating expenses steady. Even so, like many others in retail, we're dealing with ongoing supply chain strain — production delays, shipments taking longer, and much higher expected expenses for freight in both directions. All of that is baked into our guidance. Just remember, every forward-looking figure I mention below is non-GAAP. For Q4 of fiscal 2022, here's where our expectations now stand: consolidated net revenues between $155 million and $160 million; in last year's fourth quarter, net revenues came to $142.4 million; consolidated gross margin between 51.6% and 52.1%, versus 54.7% in last year's fourth quarter. That anticipated rate drop stems from continuing supply chain difficulties and added expenses tied to inbound and outbound freight. The current year gross margin estimate does not factor in the retroactive reinstatement of GSP. Remember, our earlier estimates and the prior year gross margin both reflected the GSP benefit. Consolidated SG&A expense between $68 million and $69 million, versus $63.3 million in last year's fourth quarter. That anticipated SG&A rise is mostly tied to broad variable increases that come with a higher sales outlook. Consolidated diluted EPS between $0.24 and $0.29, versus diluted EPS of $0.31 a year ago. With the fourth quarter outlook factored in, our full-year guidance is as follows: we expect consolidated net revenues of $546 million to $551 million, compared with $468.3 million in fiscal 2021; free cash flow of $45 million to $50 million, up from $15 million the prior year; and a consolidated gross margin of 53.5% to 53.6%, down from 57% in fiscal 2021; the current-year gross margin estimate does not include the retroactive GSP restatement of approximately $4 million to $5 million in gross profit, or 70 to 90 basis points. Last year's gross margin got a lift of about 200 basis points because of mass sales. On a consolidated basis, SG&A expense landed somewhere between $260 million and $261 million, compared with $233 million in fiscal 2021. Consolidated operating income was in the range of $34 million to $37 million, against $34 million the year before. Consolidated diluted EPS fell between $0.65 and $0.70 — a year ago, diluted EPS was $0.63. If GSP is reinstated retroactively, that would contribute an estimated $0.09 to $0.11 per diluted share this year. Net capital spending came in at approximately $6 million to $8 million, compared with $5.7 million the prior year. With that, let me turn to the balance sheet. Cash, cash equivalents and investments at quarter end came to $75.3 million, versus $77.3 million at the close of last year's third quarter and $65.5 million at fiscal year-end. At the close of the quarter, we had zero outstanding under our $75 million ABL credit facility. Our inventory at quarter end totaled $148.3 million, versus $141.6 million at the close of Q3 a year ago. The higher quarter-end inventory figure stems from extra Pura Vida inventory. By the time we reach fiscal year-end, we anticipate inventory will decline in the low single-digit range on a year-over-year basis. In Q3, we restarted buying back our stock, acquiring 214,000 shares for roughly $2.1 million. The Board of Directors gave the green light this month to a fresh buyback program worth $50 million, which runs out in December 2024. Rob?

Thanks, John. To begin, I'd like to discuss the performance of the Vera Bradley brand. During the third quarter, Vera Bradley achieved solid comparable growth relative to fiscal 2021 and 2020, and for three consecutive quarters now, comparable sales growth has risen sequentially, despite interruptions in the supply chain. With domestic travel continuing to gain momentum, the travel category remained strong, surpassing both the prior year and fiscal 2020 figures. Back-to-school, as we had expected, extended over a longer period this year, carrying deep into the third quarter. When combining the second and third quarters, back-to-school revenue increased considerably compared with last year, in line with expectations, and finished roughly even with fiscal 2020 levels, leaving us satisfied with our back-to-school results. Consumers continue to embrace the ongoing wave of new products and fabrics we introduce. Cotton, Performance Twill, and ReActive all saw gains compared to last year, while our factory ultra-light line continued building momentum. Our enthusiasm for recycled cotton remains strong, and we're eager to roll out additional solid color options each season. Research and innovation stay at the core of what we do, allowing us to offer shoppers a wider range of environmentally friendly options, and we're dedicated to converting all of our fabrics to more sustainable versions by 2025. Our apparel lineup expanded with the addition of graphic tees, proper jackets and vest, leggings, plus a broader assortment of pajamas within our already beloved Cozy Collection of sleepwear and robes. Collaborations on products made for yet another thrilling quarter, with Harry Potter and Disney among them. The Disney Bonjour Belle cap we put out was a massive hit among Beauty and the Beast enthusiasts across the board. As we head into the holiday period, we've got a broad assortment of gift items ready across every price tier — everything from key chains and duffels to robes and our well-liked throws. Then in November, we launched our very first partnership with the much-loved Peanuts brand, rolling out a Snoopy holiday collection that includes 3 limited edition patterns, among them a Cozy Sleepwear line made for the whole family. Novelty really resonates with our shoppers, and Peanuts has performed strongly so far this holiday season. I should also mention that difficulties with the supply chain and delivery delays are still with us, and we don't expect that to ease up anytime soon. When it comes to marketing, the big bets we've placed on data science, business analytics, and capturing customer data keep delivering, and you can see that in Vera Bradley's numbers; social media engagement is climbing. To be specific, we're leaning more on content created by users, our influencer and ambassador initiatives have scaled up, we keep improving how we tell stories and sell through social channels, and we've widened our use of Facebook Live and Reels. Our TikTok efforts keep growing too — during the third quarter we drew more than 2 million views, with average engagements per post exceeding 13,000. Through these strategies, combined with strong media buys, public relations work, and focused television spots, we keep building brand recognition — media impressions rose almost 40% versus last year, surpassing 4.6 billion, driven by our recent product introductions, partnerships, and BB Care's programs. We're equally proud that our marketing keeps showing more of our lasting dedication to diversity and inclusion. The ways we connect with shoppers along their journey and send messages tailored to each individual are keeping the customers we already have, getting new ones involved in a meaningful way, and helping bring back those who had stopped shopping — and this is happening throughout both our full-line and factory store fleets at a rate far above what we saw previously. When we look at the third quarter, our count of active customers has surpassed what it was in the third quarter of fiscal 2020 as well, which shows the Vera Bradley brand's base growing throughout the pandemic. Shoppers have steadily been coming back into physical stores, and thanks to where we've aimed our marketing plus new products and partnerships, the people who buy from us are getting younger and more varied. Throughout, we've kept pushing our VB Cares mission forward. October, naturally, holds special meaning for us given that it's breast cancer awareness month. A set of yearly fundraising events is put on by the Vera Bradley Foundation for Breast Cancer to back the pioneering, life-saving work done by the Vera Bradley Foundation Center for Breast Cancer Research at Indiana University School of Medicine. Another $1.5 million went from the foundation to the center this year, which lifts cumulative giving so far to $37.5 million. Now on to distribution. Growth keeps being led by our digital operation, with our stores providing support. Compared with fiscal 2020 levels, our verabradley.com operation expanded by close to 60%. Over time, digital has turned into a major source of our revenue, yet stores still underpin this omnichannel approach. Store traffic kept getting better during the third quarter, and our comp store revenues came close to reaching where they stood before the pandemic. What we want is for shoppers to enjoy a seamless experience led by their own preferences. In markets where a retail location exists, digital sales tend to be stronger, and someone who shops across channels spends on average over 3x what a single channel customer does. Our attention stays on improving and reimagining what customers experience in our full-line stores, and several digital shopping conveniences that became popular while the pandemic was ongoing have stayed that way, including appointment selling, buy online, pick up in store and curbside pickup. By concentrating on our strongest potential stores, fine-tuning and localizing what we carry, and streamlining the portfolio we currently have via chosen closures where it makes sense, we keep raising the profitability of our full-line fleet; even so, this is still an evolving process. Take, for instance, how at the start of the year we anticipated shutting as many as 10 locations during this fiscal year, yet that figure has been reduced by half thanks to a mix of better-than-expected store results and leases we negotiated successfully. Vera Bradley keeps widening the ways customers can shop. 2 new factory stores opened during the quarter, which brings our total openings this year to 6. On top of that, we launched a factory pop-up test store in the Phoenix market. We finished the quarter with 72 full-line stores and 75 factory locations. Our Canadian site was the first localized international experience we've introduced, and it's run by our own team; we remain enthusiastic about options like Afterpay that let shoppers split payments into installments, and that's pushing up units per transaction along with sales. Chewy.com joined us as a fresh distribution partner for our pet product line, and we launched a Vera Bradley location at LAX Airport, reflecting our emphasis on growing travel. Let's turn now to Pura Vida. As I mentioned earlier, we were happy that Pura Vida sales came back to double-digit growth during the quarter, at almost 12% versus last year. Even so, that was below the 15% to 20% we had anticipated. Pura Vida's e-commerce revenue remained held back by the Apple iOS update, which weakened how well Facebook and Instagram ads performed — those being Pura Vida's main marketing channels for generating sales. Conversely, the first Pura Vida store, which we opened at Westfield UTC mall in San Diego during mid-August, is still doing extremely well and going well beyond what we expected; as a result, we intend to launch additional Pura Vida locations nationwide next year. We're hoping 2 will be open by summer.

With the San Diego location, we're able to present the Pura Vida way of life through a complete selection of items we already carry plus fresh innovations—particularly as we move into additional categories such as apparel, which currently accounts for roughly 10% of sales volume at that store. Since that shop opened, our e-commerce operation in San Diego has posted a double-digit gain compared with the remainder of the nation, which shows how much a physical retail footprint can do to boost digital revenue along with omnichannel loyalty and spending. Going forward, Pura Vida's expansion will come from keeping online and brick-and-mortar distribution in balance. As we keep diversifying our marketing platforms, stores are going to be key for bringing in new customers. Wholesale keeps growing nicely as we bring on additional partners. This year alone we've brought in more than 350 new accounts, which is ahead of what we had projected; come this fall, Dillard's will join Nordstrom as a department store distributor for Pura Vida. Within accounts we already have, we're meaningfully growing our footprint through bigger in-store displays, and with these retailers we're seeing healthy growth in our core product categories. Compared with fiscal 2020, the wholesale accounts we currently have are, on average, ordering more often and in greater volume, since many of them have seen traffic come back strongly. When it comes to products, innovation and collaborations will stay just as important to Pura Vida's growth as they are for Vera Bradley. Along with always bringing new designs and elements into our jewelry offerings, we've expanded well beyond jewelry too. We're genuinely building a lifestyle brand. The spring launch of our apparel line of < > and tees showed clearly how far the Pura Vida lifestyle has reached, and it keeps gaining momentum; tie-dye, surf graphics and the Pura Vida Live Free logo are the top-performing styles so far. Right now we're expanding our size ranges, styles and logos, and bottoms will come next year. We view this as a major revenue opportunity in the future. Apparel draws in not just our current shoppers but also brings new ones to our brand. Our Hello Kitty collaboration, with its collection of rings, bracelets and necklaces, has been hugely popular among Hello Kitty super fans. And naturally, Disney's Princess fans are delighted by our jewelry collection showcasing their beloved characters, from Jasmine to Cinderella. Each of these collections has attracted new customers to our brand, and the feedback so far has made us very happy. On top of that, our long-awaited Pura Vida plus Harry Potter collection debuted just this week and has already gotten off to a terrific start. In August, we launched a jewelry line with Madison Bailey, who is an influencer and a star of Outer Banks, and that's bringing in customers from a wider range of backgrounds. We've got a number of additional high-profile collaborations and licensing deals lined up to launch in the months ahead. Stay tuned for those. Let's turn now to marketing. Since day one, Pura Vida has demonstrated an ability to engage shoppers, build loyalty, and welcome new fans into the Pura Vida lifestyle. As I mentioned earlier, the spring Apple update damaged Pura Vida's e-commerce revenue, since connecting with potential customers and driving purchases has historically relied heavily on platforms like Facebook and Instagram. Our team has worked hard to dig further into customer analytics and to develop a broader, better-balanced marketing approach — for example, expanding our SMS subscriber base, bringing on a new e-mail marketing agency, and directing part of our marketing resources toward additional platforms such as TikTok, podcast and YouTube. We recognize that building momentum on these additional platforms will require time. We stay constantly committed to finding fresh ways to creatively connect with our customers and attract new ones to our brands cost-effectively, something that is unquestionably growing harder and pricier for both of our brands. Ever since the company acquired Pura Vida in 2009, Pura Vida has played a key role in passing along its digital know-how to Vera Bradley, as Vera Bradley substantially improved its social media effectiveness and brand awareness. On the other side, Vera Bradley can assist Pura Vida in taking advantage of more traditional channels such as direct mail and e-mail as they keep diversifying their marketing campaign. To sum up, we stay concentrated on our 4 key growth drivers. First, we keep advancing our digital first strategy. We've made strategic changes and put money into becoming a digital-first business, growing into an enterprise that's customer-centric, driven by data, enabled by technology, and focused on digital, which allows us to connect with our customers well and deliver a smooth shopping experience. Today, more than 1/3 of our consolidated revenues come from e-commerce sales. And when factory stores are left out, e-commerce powers over half of our total company sales. Next, we keep building up our pipeline for product innovation, along with collaborations and category extensions. Over at Vera Bradley, you can see this in the debut of our COTTON ReIMAGINED collection, the rollout of additional alternative fabrics, our commitment to sustainability, and many product collaborations, including Harry Potter, Disney, Crocs and Peanuts. Pura Vida continues to deliver fresh energy and buzz within its main jewelry line, even as it moves into additional lifestyle areas like clothing and accessories, and also launches high-profile partnerships involving Disney, Hello Kitty, and Harry Potter. Third, we're growing our community via marketing. Through data insights, focused campaigns, and VB Cares initiatives, Vera Bradley keeps drawing in, widening, and developing its shopper base. Compared with a year ago, Vera Bradley's customer total rose by close to 20%, which in effect returns us to where we stood before the pandemic, and its social following keeps expanding—Facebook sits at just about 2 million, Instagram is nearing 600,000, and TikTok is on the rise. Pura Vida has demonstrated an ability to build shopper connections, cultivate loyalty, and draw new enthusiasts into its lifestyle brand — customer counts overall rose by double digits during fiscal 2020, and the brand also surpassed 2.2 million Instagram followers and 450,000 TikTok followers, a bit higher than the level recorded a year after launch. Fourth, we continue to change up our distribution approach. We're constantly seeking new ways to reach our customers and reimagine how they shop — whether that's a redesigned verabradley.com, a tie-up with Afterpay, the launch of our Canadian Vera Bradley site, our company's first-ever retail store, or broader department store and wholesale relationships at Pura Vida. For both brands, tomorrow will bring a potent mix of online and physical retail. Operator, let's take questions now.

It seems like the marketing work you're doing at Vera is producing solid gains. Could you share a bit more about how the customer file has grown? I'm also wondering what you've learned about how newer customers are engaging — specifically, are there certain categories or fabrications where newer customers are performing especially well?

Sure. When it comes to the number of new customers we're adding, a couple of things are really fueling that. First, all the fresh collaborations we've got going — teaming up with new brands is drawing new customers in, and that's been great to watch. On top of that, we're noticing our customer skewing younger, and we view that as a good sign within the file; all in all, we're quite happy with how things are going on the Vera Bradley side. And another point, which we touched on before but I'll repeat, is that besides being younger, the customer base is growing more diverse as our marketing keeps diversifying, and that's wonderful to see — it genuinely supports the long-term strength of the customer file.

That's excellent. Turning to gross margin, there are plenty of short-term headwinds and mixed signals, as you described. When we consider the coming year, do you have any view on how gross margin might shape up in '22, calendar '22, I suppose, regarding how you weigh continuing supply chain expenses against the growing advantages from the price hikes? Naturally, we recognize GSP is a variable in this, but how ought we to think about those other mixed signals across the next few quarters?

Yes. Thank you, Mark. It's John here. When we plan for the coming year, we are factoring in every supply chain expense you anticipate freight will resemble this year's level. In certain instances, you might observe some acceleration during the first half of the year relative to the first half of the year before. After that it should settle into what you might call the latter half of the year; our belief is that freight costs will remain with us for no less than another 12 months. Regarding GSP, it is a variable if it gets approved. Clearly, that would deliver a favorable effect on margin in the coming year. Yet those are why we implemented certain price hikes during the fourth quarter and are seeking further price hikes to counterbalance it. So we will present a plan along with some guidance in our March release. In the end, our view is that cost pressure will persist on the freight side. We also think there will be some inflationary cost pressure on the product side, given certain price increases that vendors in Asia are seeking. So we are collaborating with them to make sure we pay fairly, yet we believe some inflationary pressures will exist as well.

To build on that point, Mark, like we mentioned, we're attempting to offset every cost pressure affecting pricing by raising prices. As John mentioned, we began implementing price hikes. Pura Vida was where we started, and they introduced certain increases initially in July. While tracking that, we've observed generally favorable customer response to it. We began making some restricted price hikes at Vera Bradley and witnessed a comparable reaction. Thus, we have a plan laid out across the coming months to keep that effort going. That's going to be a crucial lever we must utilize to assist in easing the gross margin strain going forward.

On the subject of pricing, what's taking place at present compared with the plan moving ahead? And how do you think about what fits well within the portfolio? Then regarding inventory, it sounded like there was additional Pura Vida inventory. How does the Vera Bradley inventory position compare with freshness and what you're observing on the demand side? And as you work your way through that Pura Vida inventory, what are the main strategies you're using to accomplish that?

So perhaps I'll take the pricing question and then I'll let John handle the inventory question; but from a pricing perspective, what we're attempting to accomplish across both brands is to ensure we're extremely deliberate and targeted with our price increases; so we're reviewing each item individually. Across both brands, there's a substantial amount of continuative product; so that makes altering prices somewhat more difficult since we had to change prices on both existing and future inventory. But we've essentially been phasing that in over the coming 6 months; and again, as I mentioned, we're going to adopt a highly focused approach to how we set prices on those items, correct? It's very much item by item with considerable research supporting it; so I believe that's the first thing we're examining. And then we keep looking at how we continue to assess promotional activity as we head into next year. And I think that's the other area where we're devoting additional time. As many of you may recall, a few years back, we removed a great deal of the clearance business from Vera Bradley and truly have been operating a very clean business. So we didn't have as many — as much opportunity to cut back that activity this year; but we're starting to examine, especially in the factory channel, what opportunities exist to review the promotional activity and boost margins.

Now, when we look at inventory on a year-over-year basis, I'd describe it as two different stories with the 2 brands, correct? If you consider Pura Vida, we're definitely sitting at a level that's above where we'd like to be at present, and above where we stood a year ago; and we're making some efforts in order — to move a portion of that inventory via certain Vera Bradley locations, providing an additional channel through which to sell it. We're examining possibilities with additional partners on the wholesale side to move some of that inventory. And during the quarter we put together certain deals to clear some of that inventory, and we'll consider continuing that into next year as well. But we need to be careful not to cheapen the brand by doing so too frequently through the Pura Vida website. So we'll follow a pretty steady method similar to what we've previously done with the Vera Bradley brand back when we were "a little bit over inventory" and take our time working through it, since a portion of the product truly doesn't turn obsolete, so we can sell it gradually. With the Vera Bradley product, I believe we're at a point where year-over-year, there's certainly no inventory increase. I'd say as time goes on, we'll probably say the last 3 months, we're out of stock on certain items that we were — we figured we'd be in a stronger position through the holiday simply because containers are stuck in certain places, so there was an expectation. We flew and air freighted items in that we absolutely wanted here, but there was expectation for other product categories in those styles to arrive that have just been held up. We expect to receive those shortly, but in the end, as the supply chain remains somewhat challenging, things are taking somewhat longer than we originally anticipated to get product here.

All right, that is quite useful. Regarding the GSP renewal being pushed back, what is — do you have any background on the reason that could have taken place compared with what you had anticipated before? I realize many factors there are beyond anyone's control. Any insight would be great.

Yes; so I believe I apologize, I missed the final portion.

It would also help to know which countries this affected.

Understood. Sure. From a supply chain standpoint, the nations impacted were Cambodia, Indonesia, and Myanmar, since those are where we sourced during this year. Across the entire year, there was strong reason to think Congress would act to renew it. Our optimism was greater early in the year. As the months went on, we grew somewhat less confident it would be approved, yet we still trusted what we were told, and I believe we continue to hear that passage will occur in some form. The House simply views what should go into the bill differently from the Senate. Like anything with Congress, it all just takes more time than you expect. So at the point when we put out third quarter guidance, or full year guidance, at the close of the second quarter, we still expected it would occur this year. Since it is December and it still has not occurred, our expectations have shifted, and we do not expect it this year. We hope it will occur in the early part of next year, but at present we are not counting on it. Our assumption is that it will not occur, so our decisions are being made accordingly.

All right. And IDFA has created a tough set of circumstances for many folks throughout this sector; what's your perspective on where things stand for you and the approaches you're taking? Which key approaches fall within your own control? And what developments do you foresee regarding marketing spend along with effectiveness that we ought to be aware of?

Yes. I believe we missed the start, but let me confirm I've got it correct, Oliver. I believe it concerned the iOS update and what's happening with digital cost; and I believe regarding how we approach it, the thing is ensuring we truly keep broadening our marketing platform, which becomes the central phrase, correct? So if you consider a few of the initiatives Vera Bradley has undertaken, since they've been pursuing items such as connected TV and additional channels, plus examining areas like direct mail. One development I'm noticing in retail, and I believe it applies both in the marketing arena and in the distribution arena, is that this blend of digital and perhaps what we'd regard as more traditional methods will prove essential for success moving ahead, correct? This — the digital space is shifting, costs are climbing. So you must strike a balance with digital spend, become far more targeted, possess much more data, much more first-party data yet offset that with certain more traditional outreach possibilities, how do you get customers enthusiastic via other channels, whether that's something like a direct mail or connected TV, events. We've achieved great success at Pura Vida with holding events in stores and drawing crowds into that new store. And so we believe all of that turns into part of the new platform along with simply utilizing stores as a major customer acquisition opportunity; so once more, more complicated, more balanced, need to ensure you have the data and science supporting it. But I believe what's thrilling for us is that we can sort of keep cross leveraging our skills across our brands, correct? Vera Bradley possesses a long history of more traditional, and they've been building out a genuinely strong digital platform, and we can apply a few of those lessons Vera Bradley has learned to share with Pura Vida and really strengthen them.

All right. Regarding store footfall — the physical locations — what patterns are you noticing across the outlet channel compared with full price? And how do you expect those figures to play out against 2019 levels?