Vera Bradley Inc (VRA) 2022 Q4 法說會逐字稿

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Vera Bradley Fourth Quarter and Fiscal Year-End Conference Call.

(Operator Instructions)

As a reminder, today's conference call is being recorded. I would now like to turn the call over to Mr. Mark Dely, Vera Bradley's Chief Administrative Officer. Please go ahead.

Good morning, and welcome, everyone. We'd like to thank you for joining us for today's call. Some of the statements made during our prepared remarks and response to your questions may constitute forward-looking statements made pursuant to and within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, as amended.

Such forward-looking statements are subject to both known and unknown risks and uncertainties that could cause actual results to differ materially from those that we expect. Please refer to today's press release and the company's most recent Form 10-K filed with the SEC for a discussion of known risks and uncertainties. Investors should not assume that the statements made during the call will remain operative at a later time.

We undertake no obligation to update any information discussed on today's call. I will now turn the call over to Vera Bradley's CEO, Rob Wallstrom. Rob?

Thank you, Mark. Good morning, and thank you for joining us on today's call. John Enwright, our CFO, also joins me today. At the beginning of the year, we set out to further enhance our 2 strong brand franchises, Vera Bradley and Pura Vida, and drive revenue and earnings growth through 4 key strategies: executing our digital-first strategy, enhancing our product innovation pipeline, further engaging our communities through marketing, and continuing to evolve our distribution channels.

During the year, we made headway on these fronts for both brands, generated strong cash flow, delivered a consolidated year-over-year revenue increase of over 15%, and essentially returned to pre-pandemic revenue levels. Our Vera Bradley brand had a solid year of revenue growth, with year-over-year total sales increasing over 18% as customers responded to our product innovation and collaborations supported by data driven and targeted marketing.

Our customer base grew year-over-year and our demographics are younger and more diverse. Our Pura Vida brand total sales grew just over 6% for the year. We saw double-digit growth in Pura Vida wholesale revenues and our first successful retail store opening during fiscal 2022. However, the significant shift in social and digital media effectiveness due to the Apple IDFA update affecting DTC companies resulted in e-commerce sales falling short of expectations.

In addition to the Apple IDFA update, we faced a series of other unprecedented macro issues, including dramatic supply chain delays and freight cost increases, the delayed renewal of GSP tariff relief and substantial digital advertising cost increases, all of which materially affected profitability during the year. The incremental freight costs and GSP impact combined affected our EPS by approximately $0.25 for the full year. Excluding these 2 items, we would have put the company in line with our original guidance of $0.80 to $0.90.

Even though our earnings results were below our expectations, much of what negatively affected our earnings, particularly the supply chain challenges in GSP related to those 2 issues. In the fourth quarter, we began initiating strategic price increases across both of our brands to mitigate some of these inflationary and supply chain pressures. And we are continuing to implement price increases throughout 2022.

In the hindsight, we should have implemented price changes more quickly. The price increases should more than offset continuing rising freight costs to deliver year-over-year gross margin improvement in fiscal 2023. GSP, or Generalized System of Preferences, is more specific to the Vera Bradley brand. The lower gross margin rate throughout the year reflected higher tariffs from previously duty-free countries where we source products whose GSP or duty-free status expired at the beginning of 2021.

Our expectation was that Congress would pass the GSP legislation early in 2021. But they are still working on the legislation as we head into 2022. In the past, Congress has retroactively reinstated the duty-free status of such tariffs to the beginning of the year. Although industry and government sources are still expecting it to be retroactive, we are not certain when or if this will happen. We continue to diligently manage our expenses, and we ended the fiscal year with a solid balance sheet with ample cash of over $88 million and no debt.

Even facing the macro challenges of the last year, we generated $34 million of free cash flow, slightly above our 10-year average and returned $7.7 million to shareholders through stock repurchases. We remain in a strong position to continue to invest in our 2 lifestyle brands, take advantage of additional growth opportunities over time and return capital to shareholders through continued share repurchases or future dividends.

Our organization remained focused on the long term and achieved key strategic wins while navigating through the dramatically rising inflationary environment. Our extraordinary culture has allowed us to not only persevere through these challenges, but it has made us stronger and is even more critical during this tight labor market. Just last month, we were extremely honored to receive the #1 ranking on the Forbes list of America's Best Midsize Employers for 2022. Our culture is one of our key competitive advantages.

As I noted in fiscal 2022, we were keenly focused on 4 strategies to strengthen our brands and propel the business forward. First, we continue to drive our digital-first strategy. We made strategic organizational shifts and investments to pivot us to a digital-first company, evolving into a customer-centric, data-driven, technology-enabled and digitally-focused enterprise, which allows us to effectively engage with our customers and offer a seamless shopping experience. Over 1/3 of our consolidated revenues are now generated from e-commerce sales and excluding our factory stores, over half of our total company sales are driven by e-commerce.

Second, we further enhanced our product innovation pipeline, collaborations and category extensions. We continue to build our Vera Bradley and Pura Vida lifestyle brands to attract new customers and increase share of wallet with existing customers. Third, we continue to build our community through marketing. Both brands are working to engage, diversify and grow their customer bases through analytics, targeted marketing and ESG efforts. We consistently rank at the top of the industry for our Net Promoter and customer satisfaction scores for both brands. And fourth, we further evolved our distribution channels. We are continually looking for new ways to reach our customers and to reinvent the shopping experience in the ever-changing retail environment. The future of both brands will be a powerful combination of digital and brick-and-mortar.

At both of our brands, we accomplished a lot during the year. A more complete list is outlined in this morning's release, but allow me to mention just a few. At Vera Bradley, we continued another year of high-profile product collaborations with several iconic brands, including Disney, Harry Potter and Peanuts, accelerated our robust fabric innovation process and launched our Cotton ReIMAGINED Collection, expanded our apparel collection, continued to strengthen and rationalize our store base, continued to expand options for customers to shop, including launching our Canadian website and added distribution on chewy.com. And continued to engage, diversify and grow our customer base through analytics, targeted marketing and VB Cares efforts. Our customer count grew by nearly 15% over last year, essentially bringing us back to prepandemic levels.

And social media followers continued to grow with Facebook at nearly 2 million, Instagram approaching 600,000, and TikTok climbing. At Pura Vida, we entered into several high-profile product collaborations including Hello Kitty, Disney and Harry Potter, bringing new customers to our brand. We continue to strengthen our position as a lifestyle brand by expanding into new product categories including apparel, launched our first jewelry collection with Outer Banks star and influencer Madison Bailey, which is appealing to a more diverse customer.

Opened our first retail store in San Diego's Westfield UTC Mall in August, which is performing well ahead of expectations. Added over 400 new wholesale partnerships and Nordstrom as a department store distributor. Added Pure Vida shop-in-shops to 23 full-line Vera Bradley stores and completed Pura Vida's ERP integration so that our entire enterprise is now on a unified technology platform.

We also reinforced our commitment to be a purpose- and ESG-driven organization. Pure Vida completed its B-Corp Impact Assessment, and just last month was awarded its B Corporation Certification. We amplified our company-wide diversity inclusion initiative Project Quilt to continue to enhance diversity, equality and inclusion, focusing on 3 key areas: the associate experience, the customer experience and the community experience.

We further strengthened and diversified our Board of Directors with the addition of Nancy Twine, Founder and CEO of Briogeo Hair Care, bringing our female Board representation to 60% and making us 1 of only 8% of the Russell 3000 Index companies with a gender-balanced board. And we continued to strengthen our community support and charitable efforts under the umbrella of VB Cares and through our Pure Vida charity bracelet program.

Now let me turn the call over to John to review the financial results. John?

Thanks, Rob, and good morning. Let me go over a few highlights for the fiscal year. The numbers I will discuss today are all non-GAAP. For a complete detail of items excluded from the non-GAAP numbers as well as a reconciliation of GAAP to non-GAAP numbers, please refer to today's press release.

Consolidated net revenues totaled $540.5 million for the year, an increase of 15.4% over $468.3 million in the prior year. Consolidated net income of $19.7 million or $0.57 per diluted share, compared to $21.4 million or $0.63 per diluted share in the prior year.

Vera Bradley Direct segment revenues for the current fiscal year totaled $354.9 million, a 22.7% increase over $289.3 million in the prior year. Vera Bradley Indirect segment revenues for the fiscal year totaled $66 million, essentially flat with $66.5 million in the prior year.

Pura Vida segment revenues totaled $119.6 million, a 6.3% increase over $112.5 million in the prior year, primarily reflecting a rebound in wholesale account orders from the prior year that were negatively impacted by COVID-19, partially offset by a decline in e-commerce revenues.

Gross profit for the current fiscal year totaled $287.9 million or 53.3% of net revenues, compared to $266.8 million or 57% of net revenues. In the prior year, we significantly expanded our gross margin by approximately 200 basis points through sale of cotton masks, which was not replicated this year. The current year-end margin was negatively affected by approximately 145 basis points for higher freight costs and approximately 70 basis points for the GSP issue.

For the fiscal year, SG&A expense totaled $258.8 million or 47.9% of net revenues in the current year, compared to $233 million or 49.7% of net revenues in the prior year. As expected, current year expenses were higher than the prior year, primarily due to expense reductions related to COVID-19 in the last year that are no longer applicable.

Year-over-year expense leverage was achieved on higher revenues. For the fiscal year, our operating income was $30.1 million or 5.6% of net revenues in the current year, compared to $34 million or 7.3% of net revenues in the prior year.

Now let's turn to the balance sheet. Net capital spending for the fiscal year totaled $5.5 million, compared to $5.7 million in the prior year. Cash and cash equivalents as of year-end, totaled $88.4 million, compared to $65.5 million at prior year-end. We had no borrowings on our $75 million ABL credit facility at year-end. Total fiscal year inventory was $149.2 million, compared to $141.4 million at last fiscal year-end. During the fourth quarter, we repurchased approximately $5.6 million of our common stock at an average price of $8.63, bringing our year-to-date purchases to $7.7 million.

In 2021, our Board approved a new $50 million share repurchase authorization, which expires in December 2024. We anticipate we will repurchase the entire $50 million well before the expiration date. Over the last 7 years, we repurchased nearly $115 million of the company's stock equating to 9.3 million shares.

Now let's shift to our outlook for fiscal 2023. We are providing estimates for fiscal 2023 based on current trends and expectations, taking into consideration certain industry economic headwinds such as continued freight and digital marketing increases. All forward-looking guidance numbers that I will discuss are non-GAAP. For fiscal 2023, our expectations are as follows: Consolidated net revenues of $555 million to $575 million, Net revenues totaled $540.5 million in fiscal 2022. Year-over-year Vera Bradley revenues are expected to grow in the low to mid-single-digit range, and Pura Vida revenues are expected to be flat to up by low-single digits.

Free cash flow between $35 million and $45 million, compared to $34.4 million in the prior year. Consolidated gross margin of 54.5% to 55%, compared to 53.3% last year. The year-over-year increase is primarily related to retail price increases, partially offset by incremental inbound and outbound freight costs.

No GSP benefit is included in gross margin guidance. Consolidated SG&A expense of $273 million to $281 million, compared to $258.8 million in the prior year. The expected SG&A increase is primarily related to inflationary increases in payroll and marketing as well as general variable increases associated with higher sales expectation.

Consolidated operating income of $29.5 million to $35.5 million, compared to $30.1 million in fiscal 2022. Consolidated diluted EPS of $0.57 to $0.67 based on diluted weighted average shares outstanding of 33.3 million. Diluted EPS totaled $0.57 last year. Net capital spending of approximately $10 million to $12 million, compared to $5.5 million in the prior year, reflecting investments associated with new Vera Bradley factory stores, new Pura Vida stores and technology and logistics enhancements. Rob?

Thanks, John. As we look to fiscal 2023 and beyond, we remain focused on 4 key strategies: driving our digital-first strategy, enhancing our product innovation pipeline, building our community through marketing and evolving our distribution channels. By executing against these strategies, we will not only continue to strengthen our 2 core brands but we will deliver stable revenue and earnings growth and continue to generate meaningful cash flow to further invest in the business, pursue growth opportunities and return capital to shareholders.

Let's talk about our 2 brands. Let's begin with an update on the Vera Bradley brand. Vera Bradley demonstrated solid fourth quarter comp growth over fiscal 2021 and has experienced 4 quarters of solid sales growth despite supply chain disruptions.

For fiscal 2023, we will continue to lean into what is working in product, marketing and distribution and also continue to innovate in each of these areas to expand our customer base and market share. Going forward, we expect Vera Bradley to be a low- to mid-single-digit growth brand, generating the majority of the company's annual cash flow.

On the product front, our focus continues to be on building on our dominance in our 3 core franchise areas of everyday, travel and youth in campus. Customers are responding to our continual pipeline of customer-centric product and fabric innovation. We're constantly innovating to bring our customers more eco-friendly options with a target of updating 100% of our fabrics to more sustainable alternatives by 2025.

We're planning on adding another exciting year of product collaborations with some new ones thrown into the mix this year, in addition to the continuation of our fan favorites like Harry Potter, Disney, Peanuts and Crocs.

We will continue to implement our price increases throughout the first half of this year, which will drive higher AURs and offset freight-related gross margin pressure. Additionally, if GSP legislation eventually passes, this will be an incremental benefit to gross margin.

Turning to marketing. Our investments in customer data science and business analytics have continued to position us well, allowing us to collect and analyze data and respond to customer changes and adjust marketing spend on a real-time basis and in an agile way. We are continually focused on looking for new ways to creatively engage our customers, grow brand awareness and introduce new customers to our brand in a cost-effective manner, but that is becoming more challenging and expensive for both of our brands.

Since the company's 2019 acquisition of Pura Vida, Pura Vida has shared its digital expertise with Vera Bradley and helped Vera Bradley enhance its digital effectiveness. Vera Bradley's marketing platform will continue to be a blend of digital and more traditional channels like direct mail, e-mail, quality media placements, PR and targeted TV ads. And now Pura Vida will be able to leverage Vera Bradley's traditional marketing capabilities to help replatform their marketing mix going forward.

On the distribution front, over the long term, we have prioritized digital as the primary revenue growth driver for Vera Bradley, making major strategic shifts and investments to pivot us to a digital-first company. But we are enabling her to shop in a seamless manner and want her to shop where and how she wants to shop. Stores continue to be an integral part of this omnichannel strategy. Digital sales are typically higher in markets where we have a retail presence. And the average omnichannel customer spends over 3x more than the single channel customer.

We are continuing to improve the profitability of our full-line fleet by focusing on our highest potential stores and rationalizing our existing portfolio through select store closures as appropriate, which remains a fluid process. We also expect to open 5 new factory stores this year. On the wholesale side of the business, we will continue to expand our digital marketplaces like Amazon, meeting customers where they are shopping.

Now let's switch to Pura Vida. As I previously mentioned, at Pura Vida, we generated double-digit wholesale revenue growth and a successful retail store opening in fiscal 2022. But marketing challenges resulted in an underperformance in e-commerce, causing total Pura Vida sales to grow by just 6%. We are putting resources against addressing that issue in fiscal 2023. For next year, we expect Pura Vida's normalized revenue growth to be in the low- to mid-single range.

In the product area, increasing AURs, innovation and collaborations will continue to play a key role in Pura Vida's long-term growth. We are continually adding new designs and elements to our jewelry collections, and we will continue to build our apparel collection of hoodies and tees by introducing bottoms later this year. We are building a lifestyle brand. As I noted, we began increasing pricing on Pura Vida products in the fourth quarter, which had boosted AURs and more than offset margin pressure caused by continuing freight increases in fiscal 2023.

Now turning to marketing. Addressing our marketing issues is a key priority for the company. We are in the process of strengthening our internal marketing and data analytics talent and platform at Pura Vida, much like we did 3 years ago at Vera Bradley. Our teams continue to work diligently to dive deeper into customer analytics and build a more diverse and balanced marketing program, like growing our SMS subscriber base, onboarding a new e-mail marketing agency and spreading a portion of our marketing resources to other platforms like TikTok, podcast and YouTube.

We know it will take time to gain traction with these other platforms. As digital marketing becomes more costly, Vera Bradley will be able to help Pura Vida leverage more traditional channels like direct mail and e-mail as they continue to diversify their marketing program. In addition to the marketing changes, we will focus on opening stores to further engage our existing customer and to attract new customers to the brand.

Our San Diego store is allowing us to showcase the Pura Vida lifestyle with a full array of existing products and new product innovations, especially as we expand into new product categories like apparel. The store continues to exceed our expectations, and we continue to experience double-digit improvement in our San Diego e-commerce business relative to the rest of the country since the store opened, demonstrating the power a retail presence has in driving digital sales, omnichannel loyalty and spending. So we are very excited about additional store growth.

Our second Pura Vida store will open in Irvine Spectrum in Orange County in July of this year. We expect to open another store on the East Coast in the high-traffic tourist beach location this summer and one additional store in fall. And we look forward to even more store growth in the future.

Pure Vida's future growth will be a balance of online growth and growth in physical distribution channels. Importantly, stores will play an important role going forward in new customer acquisition as we continue to diversify our marketing platforms. Our wholesale growth remains strong, and we expect to continue to add new partnerships this year.

Operator, we will now open the call to questions.

(Operator Instructions)

We'll go first to Oliver Chen with Cowen.

Vera Bradley guidance -- the Vera Bradley guidance, what are your thoughts on the pricing relative to channel in terms of what's incorporated in the low- to mid-single? And then on the topics, you gave a lot of great details on both supply chain and privacy, what's ahead for risk factors for both? Have those conditions stabilized and what's incorporated in your guidance in terms of those issues? They're both pretty different. Would love your thoughts.

Yes. Thank you, Oliver. In terms of guidance, as we think about revenue growth at Vera Bradley and price increases, we do expect that the price increase overall for the entire assortment will be close to the overall revenue growth. So another way of thinking about that is the primary driver of the growth will be through price increasing. We believe that those price increases should cover off what we anticipate to be the incremental freight cost, and we are expecting incremental freight costs this year as that continues to kind of work through the product assortment.

And then in terms of the marketing with privacy, we know that there's continued to be digital pricing increases. But we believe that the changes in the algorithms we're hoping we're through the worst part of it, but there's still more work to be done. At Pura Vida, the way we're really talking about Pura Vida's platform, is they were very, very focused on the social media kind of larger Facebook platform for marketing.

And now we're really working on bringing in talent, bringing in analytics like we did at Vera Bradley a couple of years ago to really balance out that marketing platform, to make sure that we're leveraging out influencers, more traditional avenues like looking at and evaluating direct-mail campaigns and other ways to be more focused on first-party marketing as opposed to being so reliant upon third-party marketing.

So we have a lot of developments that are under work over there, and we'll be bringing more detail this year.

The only thing I would add to the question in regards to logistics, ultimately, we've seen it get slightly better and only slightly better. We still expect this year to be a very challenging year. As you know, with everything that's going on in the ports, everything that's going on in the macro environment, we anticipate and we've built into our guidance what we believe is the appropriate amount of kind of cost for our logistics network.

But just to give you a sense of the scale of the increase, if you think about prepandemic, our now a container -- our contract container cost is about 4x what it used to be, in previous years, in historical previous years, pre-pandemic. So it's obviously a significant amount. That number could range up depending on things, if we're going to buy things on spot. But right now, we anticipate and we've guided towards, we believe everything is built into our numbers.

Okay. And you mentioned on pricing that you know you...

Oliver, just one more thing that we failed to mention. I just want to make sure we did mention is that the way we have done guidance is we're not building in any relief on GSP. So if GSP were to get past, that could be an incremental benefit.

Okay. That's very helpful. And then in your remarks, you had mentioned you issued increased prices earlier. It's not very easy, necessarily, for you to change prices given your distribution channels. How will you approach price increases across the portfolio as you look up surgically and measure elasticity? And what do you think the market appetite is for that?

That's a great question. And you're right, Oliver, the change in the prices definitely is not easy for us just based upon how we deliver the diversity of our supply chain and the fact that most of our product is continuation in style. So it was one of the reasons we were not quick and we didn't want to respond too quickly because of that challenge. But it was a decision that we made last year, we started to work through deliveries to make sure that we can change prices as they come in. We've been working on being more fluid and rapid in our price changing ability as we go forward to shorten that time line.

So we think that, that's really a key. And then what we're doing is we are monitoring as we begin to change prices, we have started to change prices, a few of our factory items, we did at the end of the year and Vera Bradley. We also started to taking price changes in Pura Vida. So far, we have not seen any negative reaction from the consumer. So we're hoping that we see that continue as we continue to raise prices. But throughout the first half of this year.

Okay. Rob, on the channel strategy at Vera Bradley, what channels do you see the most opportunity as you think about outlet relative to your retail and wholesale partners? And then last question. You have a really strong position in terms of capitalization. I know you mentioned potential dividend, but what's on your mind regarding returning capital to shareholders as well as building a bigger platform?

Thanks, Oliver. I think in terms of distribution, what I would say is a few different things that we have going on. One, we do think that the factory division, our e-commerce business and even e-commerce wholesale, so it's places like Amazon probably provide the more upsized growth. But we do believe that full-line still plays a real critical role for them. And particularly as everybody begins to travel, we think that full-line is an area that we're looking at. But I would say the other 3 are the bigger growth areas.

As you think about capital, you're right, we do have a very strong balance sheet, very good cash flow. It gives us a lot of ability. As we've said, we always want to make sure we're funding our growth first as our first priority in terms of capital allocation. But second, we do continue to evaluate what's out in the marketplace as we know valuations were higher last year. So you didn't see us do anything last year, but we continue to evaluate the market, but we want to make sure we're we remain highly, highly disciplined from a valuation standpoint.

But we also do believe that returning capital to shareholders is going to be an important part of our story. We've seen that last year with our share repurchase, the $50 million share repurchase plan that we announced. And we think that's important. And we are having conversations with the Board of exploring all the other opportunities, including something like the future dividend. So I'm sure there'll be more that we'll talk about that in the future.

We'll go next to Eric Beder with SCC Research.

Could you talk a little bit about -- so your -- the logistics is going to remain an issue. What are you -- steps are you taking to ensure kind of that the stores have a continuing flow of product and that product is there in the depth that it can be?

It's a great question, Eric.

So Eric, we're looking at opportunities, as you know, to airfreight some product and as we look at in-stock levels, in-stock was challenged in the fourth quarter. So we've been looking at air freight -- additional air freight, above and beyond, what we spent last year to get to a better position. We're also looking at utilizing different ports, and bringing our product in through different ports, and having the ability to truck things in a little bit more seamlessly versus taking things through L.A. and then taking it through kind of the train through Chicago down into Fort Wayne. So we're looking at kind of all of our options in regards to making sure we get to a better place from an in-stock level.

I think the other big one, though, too, Eric, is that what we did last year, when we were starting to have in the delays that we actually started placing orders earlier, extending the time between the ex-factory date and the date that we should be receiving the goods, and we should begin to see some of that benefit begin to flow through as we close out the first quarter and move into the second quarter. So that's one action that we took last year. It just takes a while to ripple through the supply chain.

Great. When you look at the collaborations, I know that you ramp those up at Pura Vida. And to, I guess, some extent at Vera Bradley. How do you look at keeping those fresh, making sure that they're relevant and if they continue to bring in kind of the customers you wanted to?

It's a great question, Eric. In terms of collaborations and keeping it fresh, part of it is making sure that we're looking at these partnerships, and a lot of them have a very broad access in terms of IP licensing. So as you think about the different franchises, whether it's Disney, as you think about the world of Disney, there are a lot of different franchises inside of it. So we're exploring that and how we continue to bring freshness, because to your point, we do believe that freshness really becomes a key aspect of it. So even as we talk about some of these partnerships that we're continuing as you see these collaborations come out this next year, I think you'll see a lot of really new exciting franchises that we'll be collaborating with.

Great. And last question, over the last basically 3 or 4 years, you've kind of changed pretty much all the fabrications at Vera Bradley. What should we be thinking -- and you've talked about innovation and obviously you've done that. What's your thinking about the next round here as you kind of lever kind of basically creating a whole different set of fabrications here for the Vera Bradley chain?

So in terms of -- you're right that from a fabric innovation standpoint, we have done a tremendous amount of work over the last couple of years with introducing ReActive, Cotton ReIMAGINED, Performance Twill, and we feel it gives us a really good base from a fabric innovation standpoint. And we'll continue to do some minor adjustment there, but we think we have a very good fabric base. I think as we think about how are we going to move forward with innovation, one, is what we talk about in category extensions. So you're seeing us continuing to extend out. We've had success as we've been bringing home products into market, home decorative type of products in the market, expanding in apparel, particularly around things around the cozy categories, kind of our flip-flop slipper and kind of what's happening on the footwear part of the business.

I think you'll see a lot of innovation coming out of -- those 3 areas would be really important to us as we move forward. I think the third area that you're going to see us continue to bring innovation in, it's just how we think about fabrics and patterns and how they interrelate and how to bring more novelty and kind of new ways of looking at our patterns and mixing our patterns as we go forward to just bring some more freshness. So I think there's a lot of exciting things in the innovation channel still at Vera Bradley.

(Operator Instructions)

We'll go next to Steve Marotta with CLK & Associates.

John, as far as GSP goes, could you describe the magnitude of that on the headwinds? If you said that in the prepared remarks, I missed it. In other words, if there was a magic wand, tomorrow it gets passed, what would be the tailwind to gross margin in the near term?

Yes, about a full point of margin to the company if it gets passed. Obviously, if it's retroactive all the way back to the duty we paid last year, we would pull that out, but it could be about 2 points worth of benefit.

That's really helpful. And also, if you provided any quarterly or partial year guidance, I missed it. Could you go over how you think the sales and earnings will be weighted through the year?

Yes. So we did not provide any quarterly guidance, given some of the volatility in the world right now. So ultimately, we're sticking with an annual guidance number.

Would you like to take the opportunity to give us a little thoughts on your quarterly...

Not at this time.

Okay. Fair enough. Lastly, Rob, you mentioned in the prepared remarks about strengthening the marketing teams, I believe, at both Pura Vida and Vera Bradley. Can you talk a little bit about -- is there anything else that you can do? I know it's a little like pushing on a string given the fact that one big marketing door has closed, but are there others that are being tested, that could be levered, that might be opportunities for a little bit of upside from a direct-to-consumer standpoint?

Thanks, Steve. So first of all, to clarify, with Vera Bradley, over the last couple of years, we have been building up the marketing team. Not only the team, but the tools, the processes, the analytics, and we've continued to see really nice results from that. Now what our plan really is to do is help to take a lot of those learnings and best practices at Vera Bradley and to let Pura Vida leverage those.

So how do we go ahead and enhance the talent that we have there that was really focused on social media advertising and get a broader look at how we leverage marketing in totality, how we bring in the additional tools, what I would call really the first-party marketing tools. And so we're going to be kind of building more strength into the Pura Vida marketing team as we go into this year, really taking the lessons that we learned at Vera Bradley and leveraging a lot of the assets that we currently have at Vera Bradley, both from a talent standpoint as well as a process standpoint.

In terms of other ways of driving business at Pura Vida due to the challenges we have right now as we work through this marketing, one of the things that we believe will be critical, as you've seen in a lot of DTC companies, is the importance of stores. We're very encouraged by what we've seen with the first store in San Diego. We've had very, very strong results there. And what's been exciting is not only very strong 4-wall results, but seeing those results lift the e-commerce business and really help the customer acquisition and growth of the customer in the San Diego marketplace.

And if we see that continue as we open up 3 more stores this year, we think that we have the ability to ramp up that growth and store growth for Pura Vida, which could become a very important part of not only the growth story but also the marketing customer acquisition story as we move forward. So that's definitely one of the prime areas we're looking at to drive additional customer acquisition and focus for the brand.

At this time, there's no further questions. I will turn the call back to Rob Wallstrom for additional or closing remarks.

Thank you. We are committed to being a purpose-driven multilifestyle brand, stable growth company, generating strong cash flow. Our solid cash position debt-free balance sheet and ability to generate free cash flow has positioned us to continue to invest in our 2 lifestyle brands, seek out accretive acquisitions of other cash-generating purpose-driven brands over time and returning capital to shareholders through continued share repurchase or future dividends.

Although fiscal 2022 had its challenges and fiscal 2023 will still be filled with inflationary challenges, we have a solid long-term vision for the future of our company and a clear path to achieve our goals. Our team is focused, our balance sheet is solid, our brands are strong, and we are positioned for long-term stable growth.

We remain excited about the opportunities for Vera Bradley, Inc. Thank you, and we look forward to speaking with you on June 1 on our first quarter earnings call.

This concludes today's call. Thank you for your participation. You may now disconnect.