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Buy Recommendation: Vera Bradley (VRA)

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Buy Recommendation: Vera Bradley (VRA). VRA Overview . Vera Bradley, Inc. is a designer, producer, marketer, and retailer of functional accessories for women. The Company ’ s products include a range of offering of handbags, accessories, and travel and leisure items

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Presentation Transcript
vra overview
VRA Overview
  • Vera Bradley, Inc. is a designer, producer, marketer, and retailer of functional accessories for women. The Company’s products include a range of offering of handbags, accessories, and travel and leisure items
  • Direct segment consists 75 stores in the United States (which includes 10 outlet stores). There are seven pop-up stores in Japan, and VeraBradley.com
  • Indirect includes 3,300 independent retailers
investment thesis
Investment Thesis

Purchase a designer brand with good growth potential at a discounted cost and then sell in 1-2 years.

key investment points
Key Investment Points
  • Unique brand name which is vital in the crowded consumer retail market
  • Solid customer base and distribution platform
  • Updated supply chain that can support future growth
  • There is ample room for growth and they have a good retail strategy to reach their goals
why undervalued
Why Undervalued?
  • Revised guidance for 1st quarter (fiscal 2014) left something to be desired
  • Decline in operating CF’s
  • Lower sales growth than peers
  • 90 bps Increase in SGA
  • Criticism over managements handling of inventory
how do we know it s undervalued
How do we know it’s undervalued?
  • Many analysts believe fair value is around $30
  • P/E is 12.85 while Industry Average is 24.36
    • S&P is 17.82
  • P/Projected Earnings is 10.45 while Industry is 32.11
  • P/B is 4.56 while Industry Average is 5.09
financial snapshot
Financial Snapshot
  • Between the calendar year of 2008 and 2012, Vera Bradley more than doubled its annual revenues from $239 million to $541 million.
  • Net earnings almost tripled, expanding from $24 million to $69 million over the same time period.
  • Revenues are up 21% yoy

RETURN ON EQUITY (%)

VRA IndAvg S&P 500

Q4 2012 35.45 22.39 13.11

Q4 2011 46.70 21.90 14.55

Q4 2010NA 20.15 13.57

recommendation
Recommendation
  • Purchase 250 shares at limit price of $21.75

Total purchase of $5,437

  • 1 yr Target of 28.43
  • Buy at 21.75 and sell at 28 yields a %28.7 gain
  • Currently our Sector is underweight by 4% ($22,298). If CarMax purchase goes through for $4,968 then we will still be %3.1 underweight.

This purchase would drop us to %2.16 ($11,893)