Vera Bradley Inc (VRA) 2014 Q3 法說會逐字稿

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to today's Vera Bradley fiscal 2014 third-quarter results conference call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for questions. As a reminder, today's conference call is being recorded. I would now like to turn the call over to Stacy Knapper, Vera Bradley's Vice President and General Counsel. Please go ahead, ma'am.

Thank you, Rebecca. Good afternoon and welcome. We would like to thank you for joining us this afternoon for Vera Bradley's fiscal 2014 third-quarter results conference call. Some of the statements made on the conference call during our prepared remarks and in 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 Form 10-K for the fiscal year ended February 2, 2013 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. The Company undertakes no obligation to update any information discussed on the call.

We understand that this is a busy period for reporting and intend to keep today's call to an hour in length. Therefore, during our question-and-answer session, we do ask that participants pose one question with one follow-up to allow as many callers as possible the opportunity to take part in today's call. I will now turn the call over to Vera Bradley's Chief Executive Officer, Rob Wallstrom.

Thank you, Stacy. Good afternoon, everyone, and thank you for joining us for Vera Bradley's third-quarter 2014 earnings conference call. With me today on the call is Kevin Sierks, our Interim Chief Financial Officer, and Roddy Mann, our Executive Vice President of Strategy and Business Development. Let me begin by saying how excited and honored I am to be joining such an exceptional Company in the Fort Wayne community. Vera Bradley is unique in so many ways. It has a rich history, rooted in the desire of two women, Barbara Baekgaard and Patricia Miller, to bring feminine, highly functional travel bags and accessories to the American market.

Over the years, the Vera Bradley brand has established a highly loyal customer following built upon a distinct product offering as well as a unique go-to-market approach consisting of gift shops and boutiques. Mike Ray, my predecessor, along with Barbara and Patricia, understood the need to evolve from a Company based solely in the specialty gift channel to a multi-channel business in order to realize the full potential of the brand. And, I would like to thank Mike for the work he did in helping Vera Bradley begin this next stage of evolution.

For those of you who don't know me I have 30 years of experience in retail starting in the department store industry and spending the last 18 years at Saks Fifth Avenue. At Saks, my first 12 years were in the full line division and most recently as the President of Saks OFF 5th. And, throughout my career, I have developed extensive experience in brand positioning, product development, operations, and retail expansion. And, during my tenure with Saks Fifth Avenue, I had the privilege of being the group Senior Vice President and Director of the New York City flagship in leading the transformation of the store. My mission was to reposition the store, maximizing brand value, and returning the store to a growth vehicle. This transformation included building the status luxury accessory shop, spearheading the renowned exterior holiday installation and developing the world-famous 10022 Shoe Floor that repositioned Saks as a luxury leader in New York City.

As President of Saks OFF 5th, I developed and implemented a strategic plan that repositioned the division as a growth vehicle and resulted in Saks OFF 5th becoming a market leader. This strategy included developing a new store prototype, expanding private brand programs, revitalizing the marketing creative, stabilizing the supply chain, and most recently launching SaksOFF5th.com. I believe that this background has provided me with a strong foundation to drive Vera Bradley's future success, and I look forward to drawing upon these skills as I work with the team.

I've spent my first 30 days with the Vera Bradley team visiting both our own stores as well of those of our retail partners and learning about our structure and strategies, and what I have experienced so far makes me even more excited about the opportunity. Our employees and business partners are passionate about the brand and its future. And, Barb, our Chief Creative Officer and Co-Founder is an incredibly creative force, who not only had the foresight to create Vera Bradley, but also the drive to continually evolve the brand. She is an iconic modern entrepreneur. And, Barbara's creative vision has set the stage for us to broaden our customer base, enter new markets, and expand the product offering.

Attaining these goals, however, will require us to more fully complete the transition from only a single channel business to the multi-channel retailer we are today. Over the next several months I will be evaluating several areas of the business, focusing on the product assortment, and the indirect and direct distribution channels including e-Commerce, in order to develop a strategic plan that will drive improved financial performance and increase long-term shareholder value. This will require a focused, persistent effort over time including investments in people in the distribution channels. We are working diligently to make improvements in our organization that will enable us to stabilize the business and generate more consistent sales and earnings growth over the long-term. With that, I'll turn it over to Kevin, who will provide additional details regarding our third-quarter financial results as well as guidance for our fiscal 2014 fourth-quarter and full-year.

Thanks, Rob, and good afternoon. I will begin my remarks with a review of our fiscal 2014 third-quarter, and then provide you with our outlook for the remainder of the year. Our third-quarter performance delivered top and bottom line financial results at or above our expectations. Net revenues for the third quarter decreased 6% to $130.1 million compared to $138.3 million in the prior quarter. In the direct segment, net revenues increased 7% to $68.9 million. The revenue increase resulted primarily from the opening of 20 new full-price stores and 4 outlet locations during the past 12 months. The direct segment accounted for 53% of total net revenues in the third quarter versus 46% in the prior year. We ended the quarter with 84 full-price and 15 outlet stores.

Comparable store sales decreased 6.5% during the quarter as we continued to see lower traffic levels. This was due in part to a difficult retail environment, including soft mall traffic as well as the overall product assortment performing below our expectations. E-Commerce sales decreased $2.2 million, or 8%, in line with our expectations primarily due to lower traffic and lower average transaction size. We completed a few things during the third quarter that are expected to improve our website for the customer over the long-term. First, we began to segment our e-mails between our full-price and outlet customers in order to improve full-price selling and conversion rates over the long-term. Second, we migrated our site to a responsive design in order to provide a better shopping experience for our mobile customers. This new design provides an optimal viewing experience regardless of the device she uses to shop.

Traffic from mobile devices was nearly 50% of the traffic for the third quarter, an increase of over 10% compared to the third quarter of last year. Indirect net revenues decreased 17% to $61.2 million, in line with our guidance for the quarter. As we work toward improving the productivity in our indirect segment, we are placing greater focus on our key accounts such as Dillard's and Disney and have aligned resources accordingly. We are on track to reduce our specialty gift channel distribution by approximately 400 retailers as we exit fiscal 2014 due to a combination of remediation, natural attrition, and a more selective approach to opening new specialty gift stores.

The continued sales decline in our specialty gift channel was partly offset by growth in our key accounts including our new business with Disney. The Vera Bradley for Disney collection launched at the Florida World of Disney store in September. Hundreds of people waited in line for a chance to purchase items from the collection and meet Barbara, our Chief Creative Officer. Disney has since rolled out additional locations and Disneystore.com.

Consolidated gross profit for the third quarter decreased 10% to $71.9 million resulting in a gross margin rate of 55.3% compared to 58% in the prior year. This was in line with our expectations. The decline was primarily due to increased promotional activity compared to last year. As part of our effort to achieve operational excellence, we continue to focus on expense Management. As such, we reduced total SG&A expense by 9% to $48.8 million for the third quarter, compared to $53.6 million in the prior year. As a percentage of net revenue, SG&A was favorable by 125 basis points versus the prior year.

Cost reductions came primarily from a decrease in discretionary spending, headcount management, and successful contract negotiations with suppliers. SG&A was also favorably impacted by a reduction in variable executive compensation expenses associated with Company performance. Operating income for the third quarter decreased 12.3% to $24.2 million, or 18.6% of net revenues, compared to $27.6 million, or 19.9% of net revenues in the prior year. Operating income in our direct segment decreased by 16% to $14.9 million with operating margin of 21.6% in the third quarter of this year compared to 27.6% in last year's third-quarter. This was primarily driven by lower gross margins related to increased promotional activity.

Operating income in our indirect segment decreased by 14.3% to $26 million compared to $30.3 million in the same period last year with operating margins of 42.4% compared to 40.9% in the third quarter of last year. Improved operating margin resulted from a decrease in variable sales [team] compensation expense and expense management measures. The effective tax rate for the quarter increased to 36.9% compared to 35.2% in the prior year, primarily driven by the state tax incentive received in the prior year related to the completion of our October 2002 distribution center expansion. Net income for the third quarter decreased 14% to $15.2 million, or $0.37 per diluted share, compared to net income of $17.7 million, or $0.44 per diluted share in the prior year.

Key balance sheet highlights at the end of the third quarter include cash and cash equivalents of $13.7 million and a debt-free balance sheet. Accounts Receivable of $42.9 million compared to $46.9 million in the prior year and related days sales outstanding of 68 compared to 64 in the prior year. Inventory at the end of the third quarter was $150.5 million compared to $135.3 million in the prior year, an increase of 11%. This growth is lower than our guidance primarily due to the timing of inventory shipments from China that shipped early in the fourth quarter.

I would now like to move on to guidance for the fourth quarter. On November 7, we launched our winter collection featuring two new prints, Canterbury Magenta and Venetian Paisley, as well as an assortment of holiday gifts. On November 21, we re-released a popular pattern from 2007, Pink Elephants, in a limited assortment. This represents our first fan favorite relaunch to date.

On December 5, we released our final print of the calendar year, Clementine. These launches were not able to overcome the headwinds we face as a business, particularly in the current retail environment. As such, we have updated our expectations for the fourth quarter. In addition, our guidance reflects our expectation that the challenging consumer environment will continue as well as the softness in the consumer response to our overall merchandise assortment. We expect this to result in continued weak traffic and an increase in the level of planned promotional activity.

Please keep in mind that fiscal 2013 was a 53-week year. The incremental 53rd week contributed approximately $4.9 million in sales and $0.02 to diluted earnings per share for both the fourth-quarter and full-year results. In the fourth quarter of fiscal 2014, we expect net revenues to be in a range of $145 million to $150 million compared to $163 million in the prior year. We expect the direct segment net revenues to decline in the low- to mid-single digits, with comparable store sales decline in the mid-teens. Indirect net revenues are anticipated to decline in the high teens. Gross margin for the fourth quarter is expected to decline by 340 to 380 basis points, primarily due to increased promotional activity compared to the prior year.

SG&A as a percentage of net revenues is expected to be approximately 34.5%, or 33.7% net of other income. Diluted earnings per share are expected to be in the range of $0.44 to $0.47. Our earnings-per-share estimate assumes an effective tax rate of 38% and fully diluted weighted average shares outstanding of 40.6 million. This guidance reflects our expectation that the challenging retail environment will continue as well as the softness in the consumer response to our merchandise assortment resulting in weak traffic and a higher level of planned promotional activity.

For the full-year fiscal 2014, we expect net revenues to be in a range of $523 million to $528 million. This includes direct segment net revenue growth in the high single digits with comparable store sales decline of mid- to high single digits. Indirect net revenues are expected to decline in the mid-teens. We expect gross margin to decline by 135 to 145 basis points for the full year. SG&A as a percentage of net revenues is expected to be approximately 38.5%, or 38% net of other income. The reduction to incentive compensation expense for the entire year is estimated to be $6 million to $7 million.

We expect diluted earnings per share for the full year to be in a range of $1.41 to $1.44. This estimate includes an effective tax rate of 38% and fully diluted weighted average shares outstanding of 40.6 million. We estimate inventory to be approximately $160 million at the end of the year. It is important to note that approximately $23 million of finished goods inventory for our summer launch planned for March 2014 is included in this total.

There is not a comparable amount in last year's inventory balance as it was shipped subsequent to year-end. This timing difference is primarily due to the Chinese New Year being earlier this year. With regard to capital spending, during the last quarter, we announced our plans to consolidate all corporate personnel onto one campus at our current distribution and design centers. Based on the current progress of this previously announced $27 million project, we expect our total capital expenditures to be approximately $25 million for the full year. With that, we will open up the call for questions.

(Operator Instructions)

Mark Altschwager, Robert W. Baird.

Good afternoon. Thanks for taking the question. Rob, welcome. Look forward to working with you.

Thank you.

Just starting out, Rob, I was hoping you could talk about what drew you to Vera Bradley? And then, I know it's early, but what is your initial assessment of the business? And, what are the key opportunities that you've identified so far?

Excuse me. Thank you, Mark. First of all, in terms of what drew me to Vera Bradley -- really I would break it down into four primary reasons. First of all, it's really the brand. The brand is so iconic and unique and has such a strong customer loyalty. It has a great foundation, and I believe it's really positioned long-term for significant growth. As we look to the future years, there's a lot of expansion opportunities.

And then, third, really the opportunity to work with Barb. As I got to know her more and more, I just think that she is an extraordinary design talent. She has an amazing eye for design and pattern and truly just exceptional drive and a great entrepreneur and so thought that was a great opportunity. And, number four, was really the Vera Bradley culture. It is a great organization, a great team. I think it's really positioned for a lot of future success.

And, I think the second part of your question was really in terms of maybe what are some of the go-forward opportunities. And, obviously, what I've been doing right now is having been on board for about 30 days, is really been immersing myself in the Company and spending a lot of time throughout the Company speaking with various people, visiting our customers, visiting our stores, visiting key accounts, and really kind of taking it in and learning a lot. Right now in terms of laying out a specific plan, it is obviously a little bit early to do that. But, as I talk to everybody, I just continue to be so excited about what the future growth is. We obviously have a few short-term headwinds that you see in the fourth quarter guidance, but I do believe that the long-term opportunity here is very significant.

Thank you. Just to follow up, could you maybe address the department store channel specifically? You bring a unique perspective given your background. So, just wondering if there is an opportunity for Vera to focus more on department store retailers including maybe bringing new partners to the table?

I think it's a great question, and it is definitely something that we are talking about as part of the strategic review. We have not made any decisions, but what I can tell you, is one of the first places I did get the chance to go was down to Little Rock and speak with Bill Dillard and really spend some time with his organization. And, it was very exciting to hear their enthusiasm for the brand, and I believe that they're really an incredible partner and a partner that we can leverage so that we can continue to maximize the department store channel. So, we'll obviously be making those decisions going forward in terms of the role of the department stores, but we do believe that starting with Dillard's has been a very solid success and a great foundation that we'll look at as we go forward.

Great, thank you.

And then, if I could interrupt real quick, I think I was told I misspoke during the call. I wanted to correct the tax incentive related to the distribution center expansion occurred in 2012, not 2002. I just want to make sure everybody knew that.

Edward Yruma, KeyBanc Capital Markets.

Hi, thanks so much. This is Luke in for Ed. Rob, welcome. Good to have you. Hey, Kevin. Wanted to just maybe follow up a little more on the strategic plan. I know it's a little early to give specific color there, but what types of things or characteristics are you kind of looking for as you parcel out the business -- direct, indirect, e-comm. Any specific-type things that make you more excited?

Luke, thanks for the question. I think, again, obviously it is early, and it's hard to give a lot of specifics in terms of where we're going because I want to make sure that even though I might have initial thoughts -- I want to make sure that I fully vet them before going forward. But, I think if you look on a macro level, obviously things like e-Commerce are a significant opportunity. It's really the entry point into our brand so that is obviously an area that we're focusing on.

And, I do believe one thing that is important to keep in mind is that Vera Bradley from an indirect standpoint -- the gift channel that we talk a lot about is a strong part of our heritage. Almost two-thirds of our customer experience the brand through the gift channel. So, it's definitely a channel that we want to focus on stabilizing and really get higher productivity out of our key accounts there, and we believe that that's important as well as our expansion of the direct part of the business will continue as we go forward.

Great. And then, just following up on the indirect channel there, is there any other thoughts as the Company's kind of been going down the road of looking to rationalize that channel over the last year. And, any additional work? Or, more -- whether it's cutting -- or a different maybe viewpoint as to how you think about the rationalization of that channel? Thank you.

In terms of talking about the rationalization what I would say is a couple of things. One, it will always be critical for our brand to have the right presentation to our consumer. That will always be critical to us, and that's something that we will be looking at. But, at the same time, we want to work with the channel, work with our key partners, figure out how we can maximize the business. And, that is one area that I think is really under strategic review in terms of how it all fits together. But, as I said, it is an important foundation of our business. It's very important currently to our business, and we want to develop a very solid plan for that channel as we go forward.

Thanks so much.

Thanks.

Oliver Chen, Citigroup.

Welcome, Rob. Thanks a lot for all the details on the call. Regarding the promotional heightened activity in the marketplace, what's the nature of the incremental promotions you're having to offer? And, is there a contrast between the trends you're seeing in the outlet versus full-price? Also, Rob, if you could speak to your longer-term vision for the product in terms of how you think the patterning strategy may evolve? And also, what you think about the brand with respect to lifestyle and product extensions?

Okay. Thank you, Oliver. A couple of questions.

Maybe I'll start with the stores, with regards to what we are seeing in the outlet stores versus the full-price stores. We're seeing traffic come down a lot in our full-price stores, and traffic tends to be up a little bit especially in Q3, just a few percent in our outlet stores. So, that's kind of the difference there in terms of traffic.

In terms of the promotional environment, definitely heightened in Q3, and we're predicting it to be even more so in Q4, especially given the holiday period and what we've seen out there during Black Friday and over the holiday weekend. So, that's kind of what we're seeing. What we're also seeing in our outlet stores is we're doing a lot of the similar promotions this year compared to last year, but we're getting a little less out of them. So, in order to get the revenues, we're actually promoting a little deeper, and it's taken that in order to drive conversion. So, we're seeing it be very much a promotional environment out there and we're having to compete for that business.

Are you offering promotions on whole-store percentages off? Is that a strategy that you are doing now? What kind of rate are you offering when you do that?

Yes, it's a good question. With regards to our full-price stores, we really don't do that in our full-price stores. We typically have promotions to specific styles or patterns. In the outlet stores, we've done two different types of promotions this year. We've done some tiered promotions where we will have actually a clearance section where we're moving some of our slower-moving inventory. And then, we'll also have some other product in the store that's a certain percentage off.

Thank you.

And then, to go ahead and talk to a couple of your other questions in terms of patterns -- and, I think, obviously the patterns are so important to our business, and the Company has been doing a lot over the recent history in terms of working with biometrics and other ways of really continuing to focus our pattern development. I do think that there's an opportunity for us to continue to learn more about our customer, continue to be more customer-centric, and really look how certain patterns respond -- different segments respond to different patterns. So, I do think that there is some work to be done around how we bring the patterns to market would probably be the right way to talk about that. That's something that we're taking a look at.

Your second point, I think, was really around the lifestyle. And, one thing that's really been interesting as I've dug more and more into the Vera Bradley business and really the success is really the very unique heritage and success that the Company has built on what I've really called the casual bag business. Starting out as a travel Company between the duffels, backpacks, totes -- really pretty extraordinary results in those categories. And, that whole casual bag category, Vera Bradley has a very strong position. And, I do think there's an opportunity to leverage that as well as maybe to fill out a little bit broader in terms of to not only be strong in the casual bag business but potentially to find a way to appeal more strongly to a career customer, and that is something that we're taking a look at as we build the strategic plan.

Thanks a lot, and happy holidays, everybody.

Thank you.

Thanks, Oliver.

Ike Boruchow, Sterne Agee.

Hi, this is actually Tom Nikic on for Ike. I'm not sure if you gave this or not, but did you say what your store opening plans were for Q4?

No, we didn't talk about our store openings for Q4. We have opened 23 stores to date. The most recent one was opened in October of this year, and we don't have any plans to open any in Q4. And so, the next stores that will be opened will be in fiscal 2015.

Okay. And, have you thought about your real estate expansion plans for fiscal 2015 and beyond? You've been opening at a pretty rapid pace. Do you think that will sort of rein in beginning next year?

We're still in the midst of discussing which doors we'll open next year. We do expect to be kind of within our normal range of 14 to 20 doors next year in terms of store openings. But nevertheless, we're still in the middle of our operating plan, and we're still taking the executive team through that.

Thank you very much.

Evren Kopelman, Wells Fargo.

Thank you, good afternoon. Regarding your guidance for next year, I think for the indirect channel you talked about a mid-teen decline in sales. Maybe talk about what's assumed in there in terms of the number of doors? Maybe you can share where you will be in terms of the number of doors at the end of this year, and what's assumed in that number for the end of 2014?

Yes. As far as this year, we're down about 175 doors from where we started this year. And, we expect to be down about another 225 doors as we exit this year. So, about 400 doors is what we plan to be down, Evren, this year -- year over year. And then, as we look to fiscal 2015, we're being a little bit more particular about which doors we open in the indirect segment. But, we do plan to continue to open doors to the extent they're right for the brand, and they have a certain volume. But, nevertheless, we're still in the process of determining how many doors we'll have in fiscal 2015.

Okay. So, would you say then that decline that you've guided to for next year is primarily a decline in, I guess, existing doors?

Yes. So, if you look at this year, Evren, let me start with this year -- fiscal 2014. The majority of the reduction in our sales is really existing doors, it's not due to our 175 doors being down this year. That's playing into it, but more than anything, you can think about it as the comp doors being the majority for that reduction this year.

Right. That makes sense. The other question was on your gross margin guidance for next year. First off, I wanted to make sure I heard it right. Did you say it was an increase of 135 to 145 basis points?

No, Evren, that 135 to 145 basis points -- keep in mind, that's the gross margin contraction we're expecting for fiscal 2014, which is the year we're in. So, we're not providing any guidance for next year.

Okay. Then, how should we think about next year, given obviously the decline this year. Could gross margin be up next year?

I still feel like with our inventory position -- still having too much retired inventory on our balance sheet, I still feel like gross margins will be challenged into fiscal 2015. I think I stated maybe on the last call, we thought 12 months out we'd definitely be challenged from a gross margin perspective. To the extent sales continue to be soft that puts more pressure on margin because we will have more retired inventory, and we will have to move that through our outlet channel. And, our outlet channel obviously comes with a lower gross margin than our full-price channel. So, I continue to expect there to be some pressure on margin as you look to next year.

Okay, thank you.

Thanks, Evren.

(Operator Instructions)

Janet Kloppenburg, JJK Research.

Hi, everybody, and welcome, Rob.

Thank you.

I had a couple of questions. Rob, I wondered if you had enough time yet to take a look at the indirect channel? Kevin, I don't know what -- I know you're down about 400 accounts in the specialty gift channel. I'm wondering if Rob has had a chance to consider what the optimal number may be for this channel? And, when thinking about the department stores -- adding department stores or other national specialty chains to compensate for the decline with the smaller gift retailers, I'm wondering if Dillard's has any restrictions there, Rob? In that, maybe they would like an exclusive relationship as opposed to having the brand shared across the country? So, I would love your perspective on that channel and also about the opportunity to grow beyond Dillard's?

And then, Kevin, if you would for me -- with respect to the inventories, I think you said they would be about $160 million at the end of the year versus, I think, last year about $130 million. But, am I to think that really adjusted it's more like $137 million because that $23 million is a product that came in early. And, if you could just discuss the proportion of aged inventory at the end -- what you expect it to be at the end of the fourth quarter and when you think you'll be clean of that? Thank you.

Let me start with that. Your numbers were pretty close. The $160 million -- if you take out the $23 million and compare that to last year, that's a very fair comparison, Janet. With regards to retired inventory, we don't break out the aging of our inventory, externally anyway. But, as far as our retired inventory levels, they kind of hit their height of the end of Q3. We expect them to come down in Q4, which makes me feel a little better, but we still have too much inventory on our balance sheet. We still want to find a way to move through it a little quicker because it does put pressure on margin. With regards to the indirect channel, then I'll turn it over to Rob, the 400 doors that I referenced in the prepared remarks is related to year over year so as we exited last year compared to how we'll exit this year, we will be approximately 400 doors down.

From where though, what was the number?

The number last year was about almost 3,600 -- or about 3,500, and we expect to be around 3,100 at the end of this year.

Okay.

Just to give you roundabout numbers.

Thank you.

Janet, to answer your question in terms of how much have I had a chance to develop a point of view on what is the optimal door strategy in the gift channel, I have not come to any conclusions there, first of all. But, I have had the opportunity to meet with some of those retailer partners. I've also had conversations with a few and really trying to get my arms around that channel and really understand how that fits with our strategic plan going forward. But, I believe it does. I think that part of the trick is that the gift channel is unique. I think it's unique in terms of the customer who is entering our brand through that channel. It also is different in terms of really what the customer is looking for in terms of merchandise assortments.

I think there's an opportunity to look at our different channels slightly different and really modify the product assortment to be appropriate for the customer. I think that this idea of customer-centric product assortment by channel, by pattern, is really a great opportunity for us going forward, and something that we're going to be diligently working on. And, why it's also very important for us to get our Chief Merchandising Officer on board and really help through that process. But, I do believe that the specialty channel, like I said, I think is a strong heritage. I think it has helped us build a very unique customer base, a very unique customer loyalty. And, it's definitely something that I think is important as we go forward.

Your second point was regarding Dillard's and the department store opportunity. Obviously, Dillard's is a very special partner to us. The relationship we have with them, I think, is very unique. We consider them a big partner, and as we go forward and we look at this channel, we're going to keep that in mind as we think about what's appropriate in terms of expansion. But, it's not that we have any type of formal agreements or restrictions, but we really want to maximize our business with each of our partners. We will be a great partner, and we will work with them as we move forward in this channel.

How should we be thinking about the timing of bringing on the Chief Merchandising Officer?

Well, that search is underway, but we don't have a time yet. We just began that process just a little while ago. So, we're moving quickly, and I believe it's a key hire but I don't have a date that I can discuss.

Okay, thanks so much and lots of luck. Happy holidays.

Thank you very much.

Thanks, Janet.

Steve Marotta, CL King.

Good evening, everybody. With regards to the 20 full-price stores that have opened over the last 12 months, can you talk a little bit about their productivity either versus plan or versus the previous 20 stores, for instance, that have opened? Is there a delta there that's directional or more impacted by the decline in the business? Again, if you could just talk about the productivity of the new doors, that would be helpful.

Those stores are opening a little softer than our expectations as well. So, you saw that our comp was down 6.5% for the quarter, and as we look at those stores, we've also opened that aren't in our comp base yet, they are still opening soft and at the low end of kind of our range of expectation or even slightly below that. So, it's not that the existing or the class of older doors is necessarily performing poorer than the newer doors. Really we have some really good doors in each class that we've opened the doors, and that goes for the comp base versus the non-comp base.

That's very helpful. I had one other question regarding patterns that were tested and rolled out in Q3 and Q4 versus patterns that have been tested and are planned to roll out in Q1 and Q2 of next year? Is there any delta between those two testings? Or, is everything running roughly in line with one another? In other words, trying to gauge whether you'd be more optimistic regarding patterns in Q1 and Q2 of next year than actuals of Q3 and Q4 this year?

Steve, this is Roddy. I'll answer that. I think you can pretty much think of them generally in line. There's not necessarily -- there's some patterns typically -- there are some that perform well or test well and some that test less than well. Generally speaking, I think the business is facing some headwinds -- that's all of the patterns, even ones that are performing well. Canterbury Magenta is one example of that, which is not quite enough to overcome other challenges we're facing.

That's helpful, thank you.

Thanks, Steve.

And, seeing no other questions at this time, I'd like to turn the conference back over to Rob for any additional or concluding remarks.

Thank you very much, Rebecca. Despite the current challenges, I continue to be excited about the future potential for Vera Bradley. Over the next several months, I will continue to evaluate opportunities and work with the team to position us for the next stage of growth. I look forward to sharing my thoughts and our progress with you as we make this journey. Thank you.

And, ladies and gentlemen, that does conclude today's presentation. We do thank everyone for your participation.