What changed in this filing

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Item 1A. Risk Factors

2021-03-30 compared with 2020-03-31 · 211 added, 170 removed, 215 unchanged (64% of the section changed)

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Additional risks not currently known to us, or that we currently deem to be immaterial, also may materially adversely affect our business, financial condition, and results of operations in future periods.

Risks Related to Our Business

The continued outbreak of the 2019 novel coronavirus (COVID-19) may cause significant disruptions in our global supply chain, operations, and revenue streams, which could adversely impact our results of operations.

Travel restrictions, mall closures or reduced mall operating hours, and community and self-quarantines related to the COVID-19 pandemic could have a material adverse impact on the Company’s revenues and profits.

In light of the pandemic, we have temporarily closed our full-line and factory outlet stores.

The stores are currently closed through April 4, 2020;

however, some or all of the closures will likely continue beyond this date.

COVID-19, first identified in Wuhan, China, has led to work and travel restrictions within, to, and out of mainland China, as well as temporary factory closures or production and logistics constraints due to workforce availability in China.

Although we continue to reduce our reliance on production from China, we expect our China production to be approximately 20% during fiscal 2021.

As a result of the aforementioned restrictions, we may experience delayed shipments and increased shipping costs for some of our fiscal 2021 merchandise.

As a result of the above-mentioned factors, the Company’s liquidity, results of operations, and financial condition could be materially adversely impacted.

If we are unable to successfully implement our long-term strategic plan, including Vision 20/20, and growth strategies, our future operating results could suffer.

In fiscal 2018, we began to implement our Vision 20/20 plan, which is integrated into our long-term strategic plan, aimed to turnaround our business and restore brand and Company health by the end of fiscal 2021.

Risks Related to the COVID-19 Pandemic

The outbreak of the novel coronavirus (COVID-19), or events related thereto, may continue to cause significant disruptions in our revenue streams, operations, global supply chain and other facets of our business, which may continue to adversely impact our results of operations, financial condition, and share price.

Our operations are currently subject to significant disruptions as a result of the COVID-19 pandemic.

The pandemic has resulted in travel restrictions both domestically and internationally, community and self-quarantines, certain factory closures or reduced operations, as well as mall closures and reduced mall operating hours.

We temporarily closed our retail stores on March 19, 2020.

On May 5, 2020, we began to reopen our retail stores in a phased approach, with all stores open as of the end of fiscal 2021.

Despite the reopening of our retail stores, we have experienced, and may continue to experience, significantly reduced traffic, demand, and sales.

Further, evolving guidance and mandates from governments and public health officials, may necessitate additional closures to some, or all, of our retail stores, the stores of our Indirect segment partners and Pura Vida wholesale retailers, or otherwise detrimentally impact aspects of our operations.

The pandemic has also and may continue to reduce consumers' willingness and ability to travel to major cities and vacation destinations in which some of our stores are located.

Although not material as of the date of this filing, COVID-19 has led to temporary factory closures and production and logistics constraints due to wo rkforce availability primarily in China, among other impacts.

Although we continue to reduce our reliance on production from China, China accounted for approximately 15% of production (excluding mask production) during fiscal 2021.

As a result of the aforementioned restrictions, or other related factors, we may experience delayed shipments and increased shipping costs for some of our fiscal 2022 merchandise.

We may also be adversely impacted should the pandemic compromise operations at our corporate headquarters and distribution center located in Roanoke, Indiana.

The extent of the pandemic’s continued impact on our results of operations, financial condition, and share price will likely depend on future developments including, but not limited to, the duration of the spread of the outbreak, including the potential for spikes in the number of COVID-19 cases in future periods, including as may be related to the spread of new virus variants;

mitigation activities undertaken by governments and the general public;

the overall economic impacts of quarantines and business closures;

and current, and potentially long-term, changes in consumer behavior.

As a result of the above-mentioned factors, the Company’s liquidity, results of operations, and financial condition have been, and are likely to continue to be, adversely impacted.

Beginning in mid-March 2020, we began taking several actions to navigate the COVID-19 pandemic, protect our financial position, maximize our liquidity, and to position the Company for a strong reopening and future.

In addition to the aforementioned store closures, these actions included:

temporarily furloughing approximately 80% of our workforce during the first quarter;

temporarily reducing compensation for remaining salaried associates based on a graduated scale;

temporarily suspending cash compensation to our board of directors;

temporarily suspending our share repurchase program;

drawing $60.0 million of our $75.0 million Credit Agreement;

temporarily eliminating the Company 401(k) and associate charitable contribution matches;

tightly managing inventory levels through the cancellation of purchase orders, delay of receipts, or seeking price concessions where possible;

actively working with landlords on addressing rent abatements, payments terms, accelerating store closures, and delaying or cancelling certain planned new store openings;

reducing non-payroll operating expenses;

and extending vendor payment terms.

During the second quarter of fiscal 2021, we brought back the majority of associates from furlough;

began to reinstate portions of the base compensation reductions;

and paid back $30.0 million of our $60.0 million borrowing under our Credit Agreement.

During the fourth quarter of fiscal 2021, we reinstated the remaining base compensation adjustments and board of director reductions, paid back the remaining $30.0 million of borrowings under our Credit Agreement, and reinstated the Company 401(k) contribution match.

As of the end of fiscal 2021, substantially all of our associates have returned from furlough.

Measures to mitigate COVID-19 impacts to our business may result in additional risk exposure or prove ineffectual.

For example, we have and may continue to incur additional interest costs associated with borrowings under our Credit Agreement.

Our management team continues to focus on mitigating the risk of the COVID-19 pandemic.

This may result in less time to concentrate on other areas of the business, including operations, than prior to the pandemic and may cause increased risks of our ability to effectively manage our business operations if conditions related to the pandemic were to continue or worsen.

Risks Related to Our Business Operations and Industry

If we are unable to successfully implement our long-term strategic plans and growth strategies, our future operating results could suffer.

The success of our long-term strategic plan and growth strategies, alone or collectively, will depend on various factors, including the appeal of our product designs, retail presentation to consumers, effectiveness of our marketing initiatives, expense saving initiatives, competitive conditions, and economic conditions.

There is no assurance that we will be able to successfully implement our strategic plan and Vision 20/20 initiatives.

There is no assurance that we will be able to successfully implement our strategic plan and growth strategies.

If we are unsuccessful in implementing some or all of our strategies or initiatives, our future operating results could be adversely impacted.

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Our performance is subject to general economic conditions and their impact on levels of consumer confidence and consumer spending.

Consumer confidence and consumer spending may be influenced by the recent COVID-19 pandemic, fluctuating interest rates and credit availability, changing fuel and other energy costs, fluctuating commodity prices, levels of unemployment and consumer debt levels, changes in net worth based on market conditions, general uncertainty regarding the overall future economic environment, political turmoil, and weather and weather-related phenomena.

Consumer purchases of discretionary items, including our merchandise, generally decline during periods when disposable income is adversely affected or there is economic uncertainty, and this could adversely impact our results of operations.

Consumer confidence and consumer spending may be influenced by the ongoing COVID-19 pandemic, fluctuating interest rates and credit availability, changing fuel and other energy costs, fluctuating commodity prices, levels of unemployment and consumer debt levels, changes in net worth based on market conditions, general uncertainty regarding the overall future economic environment, political turmoil, and weather and weather-related phenomena.

Consumer purchases of discretionary items, including our merchandise, generally decline during periods when disposable income is adversely affected or there is economic uncertainty, and these occurrences could adversely impact our results of operations.

In the event that the U.S.

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Our products must appeal to a broad range of consumers whose preferences cannot be predicted with certainty and are subject to rapid change.

We cannot assure you that we will be able to develop appealing patterns and styles or meet changing consumer demands in the future.

We cannot assure you that we will be able to develop appealing patterns, styles, and collections or meet changing consumer demands in the future.

If we misjudge the market for our products, we may be faced with significant excess inventories for some products and missed opportunities for other products.

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Merchandise misjudgments could adversely impact our net revenues and results of operations.

The Pura Vida acquisition may not be successful in achieving intended benefits and may disrupt current operations.

We acquired a majority interest in Creative Genius, Inc.

or “Pura Vida,” on July 16, 2019.

This acquisition, and as with most any business acquisition, poses a number of potential integration risks that may result in negative consequences to our business, financial condition, and results of operations.

These risks include, but are not limited to:

failure of the business to perform as planned following the acquisition to achieve anticipated revenue or profitability targets;

the assimilation and retention of employees, including key employees;

higher than expected costs and/or a need to allocate resources to manage unexpected operating difficulties;

diversion of the attention and resources of management or other disruptions to current operations;

retaining key customers and suppliers;

retaining required regulatory approvals, licenses, and permits;

the assumption of liabilities of the acquired business not identified during due diligence;

other unanticipated issues, expenses, and liabilities.

Prior to its acquisition, Pura Vida was a privately-held company and its new obligations from being part of a public company may require significant additional resources and management consideration.

Upon the completion of the Pura Vida acquisition, Pura Vida became a subsidiary of our consolidated Company and must comply with U.S.

Generally Accepted Accounting Principles (“GAAP”), the Sarbanes-Oxley Act of 2002 (“SOX”), the Dodd-Frank Act and the rules and regulations subsequently implemented by the SEC and the Public Company Accounting Oversight Board.

We must ensure that Pura Vida establishes and maintains effective disclosure controls as well as internal controls and procedures for financial reporting under U.S.

GAAP, and such compliance efforts may be costly and may divert the attention of management.

There are a number of processes, policies, procedures, and functions that must be integrated, or enhanced at Pura Vida, particularly those related to the implementation of a SOX compliant control environment.

The execution of these plans may lead to additional unanticipated costs and time delays that could negatively impact our business, financial condition, and results of operations.

Because a significant portion of Pura Vida’s total assets are represented by goodwill, indefinite-lived intangible assets, and definite-lived intangible assets, we could be required to write off some or all of this goodwill and other intangibles, which may adversely affect the company’s financial condition and results of operations.

We are using the purchase method of accounting to account for the acquisition of a majority interest in Pura Vida consummated on July 16, 2019.

A portion of the purchase price for this business is allocated to identifiable tangible and intangible assets and assumed liabilities based on estimated fair values at the date of acquisition.

Goodwill is measured indirectly as the excess of the sum of (1) the consideration transferred (including contingent consideration, if any) and (2) the fair value of any noncontrolling interest in the acquiree over the net assets acquired and liabilities assumed.

The provisional purchase price allocation resulted in a preliminary goodwill value of $44.3 million and a preliminary value of $61.7 million related to other intangible assets.

Refer to Note 16 of the Notes to Consolidated Financial Statements set forth in Part II, “Item 8.

Financial Statements and Supplementary Data,” of this report.

for additional information regarding the provisional purchase price allocation.

When the Company performs impairment tests, it is possible that the carrying value of goodwill or other intangible assets could exceed their implied fair value and therefore would require adjustment.

Such adjustment would result in a charge to operating income in that period.

Once adjusted, there can be no assurance that there will not be further adjustments for impairment in future periods.

The Put/Call Agreement between the Company, certain of its subsidiaries, and Creative Genius, Inc.

may require us to purchase the remaining 25% interest in the Pura Vida business.

On July 16, 2019, as contemplated by the Interest Purchase Agreement, the Company and certain of its subsidiaries and the owners of the remaining twenty-five percent (25%) ownership interest in Pura Vida (the “Sellers”) which was not acquired by the Company (the “Remaining Pura Vida Interest”) entered into a Put/Call Agreement (the “Put/Call Agreement”).

Pursuant to the Put/Call Agreement, and subject to the terms and conditions thereof, the Sellers have the right to sell all of the Remaining Pura Vida Interest to the Company, and the Company has the right to purchase all of the Remaining Pura Vida Interests from Sellers, in each case generally at any time following the fifth anniversary of the closing date of the transaction until the tenth anniversary thereof.

In the event of a change in control of the Company, the parties may exercise a portion of their put and call rights prior to the fifth anniversary of the closing date (as defined in the Put/Call Agreement).

The execution of the Sellers right to require us to purchase the Remaining Pura Vida Interest may represent a significant financial obligation that could have a material adverse impact on our liquidity, results of operations, and financial condition.

We may experience declines in comparable sales and there can be no guarantee that the strategic initiatives we are implementing to improve our results will be successful.

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We currently sell our Vera Bradley-branded products into two segments:

Direct to consumers through Vera Bradley full-line and factory outlet stores in the United States, verabradley.com, the Vera Bradley online outlet site, and the Vera Bradley annual outlet sale in Fort Wayne, Indiana;

Direct to consumers through Vera Bradley full-line and factory outlet stores in the United States, verabradley.com, the Vera Bradley online outlet site, and typically the Vera Bradley annual outlet sale in Fort Wayne, Indiana;

and through our Vera Bradley Indirect wholesale business which consists of sales to specialty retail locations, department stores, national accounts, third-party e-commerce sites, third-party inventory liquidators, as well as royalties recognized through licensing agreements related to the Vera Bradley brand.

We currently sell our Pura Vida-branded products direct to consumers through our e-commerce websites, puravidabracelets.com and puravidabracelets.eu, and through wholesale retailers.

We currently sell our Pura Vida-branded products direct to consumers through our e-commerce websites, puravidabracelets.com, puravidabracelets.eu, and puravidabracelets.ca and through wholesale retailers.

These channels are sometimes in direct competition and sales through these channels may not be incremental to total sales.

We may not be able to successfully open new stores and/or operate new and current stores as planned, which could adversely impact our results of operations.

Our long-term future growth prospects include our ability to successfully open and operate new and current Vera Bradley stores.

Our long-term future growth prospects include our ability to successfully open new stores and operate new and current Vera Bradley stores.

In recent years, however, Vera Bradley comparable store sales have declined.

Consequently, the rate in which we have opened new stores has slowed and we do not currently plan to open any new full-line stores during fiscal 2022.

As part of our Vision 20/20 initiatives, we have closed a total of 26 underperforming full-line stores and one underperforming factory outlet store since the beginning of fiscal 2018 and forecast that we will close additional full-line stores.

We have closed 30 underperforming stores since December 2014.

We plan to open up to six new Vera Bradley factory outlet stores during fiscal 2021.

We have closed a total of 39 underperforming full-line stores and one underperforming factory outlet store since the beginning of fiscal 2018 and forecast that we will close additional full-line stores.

We plan to open five new Vera Bradley factory outlet stores and our first Pura Vida retail store during fiscal 2022.

We will continue to evaluate our plans for store openings in future years in light of demand and store performance.

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If we are unable to successfully execute our brand strategies, our results of operations could be adversely impacted.

Our results of operations could suffer if we lose key management or design associates or are unable to attract and retain the talent required for our business.

Our performance depends largely on the efforts and abilities of our senior management and product development teams.

These executives and design associates have substantial experience in our business and have made significant contributions to our growth and success.

Although we have entered into an employment agreement with our Chief Executive Officer, we may not be able to retain his services or those of other key individuals in the future.

The unexpected loss of services of key employees could have adverse impacts on our business and results of operations.

We may also need to attract and retain additional qualified employees and develop, train, and manage an increasing number of management-level, sales, and other employees.

Competition for qualified employees is intense.

We cannot assure you that we will be able to attract and retain employees as needed in the future.

Our results of operations are subject to quarterly fluctuations, which could adversely affect the market price of our common stock.

Our quarterly results of operations may fluctuate significantly as a result of a variety of factors, including, among other things:

timing of new store openings and store closings;

net revenues and profits contributed by new stores;

increases or decreases in store traffic and comparable sales;

shifts in the timing of holidays, particularly in the United States and China;

changes in our merchandise mix;

timing of marketing campaigns or promotions;

timing of sales to Vera Bradley and Pura Vida wholesale retailers;

timing of new pattern and collection releases and new product introductions.

Any quarterly fluctuations that we report in the future may not match the expectations of market analysts and investors.

This could cause the trading price of our common stock to fluctuate significantly.

A data security or privacy breach could damage our reputation and our relationships with our customers, expose us to litigation risk and adversely affect our business.

We remain dependent on information technology systems and networks, including the Internet, for a significant portion of our sales, primarily through our e-commerce operations and credit card transaction authorization and processing.

We are also responsible for storing data relating to our customers and employees and rely on third parties for the operation of our e-commerce websites and for the various social media tools and websites we use as part of our marketing strategy.

As part of our normal course of business, we often collect, retain, and transmit certain sensitive and confidential customer information, including the transmission of credit card information, over public networks.

There is a significant concern by consumers and employees over the security of personal information transmitted over the Internet, consumer identity theft and user privacy.

Despite the security measures we currently have in place, our facilities and systems and those of our third-party service providers may be vulnerable to security breaches, acts of vandalism, computer viruses, misplaced or lost data, programming and/or human errors, or other similar events.

Any electronic or physical security breach involving the misappropriation, loss or other unauthorized disclosure of confidential or personally identifiable information, including penetration of our network security, whether by us or by a third-party, could disrupt our business, severely damage our reputation and our relationships with our customers, expose us to risks of litigation and liability and adversely affect our business and results of operations.

We do not control third-party service providers and cannot guarantee that electronic or physical computer break-ins and security breaches will not occur in the future.

Any perceived or actual unauthorized disclosure of personally identifiable information regarding our customers or website visitors could harm our reputation and credibility, reduce our e-commerce net sales, impair our ability to attract website visitors, and reduce our ability to attract and retain customers.

We may also incur significant costs in complying with the various applicable state, federal, and foreign laws regarding unauthorized disclosure of personal information.

Our business could suffer if our computer systems and websites are disrupted or cease to operate effectively.

We are dependent on our computer systems to record and process transactions and manage and operate our business, including in designing, marketing, manufacturing, importing, tracking and distributing our products, processing payments, and accounting for and reporting results.

We also utilize an automated replenishment system to facilitate the processing of basic replenishment orders, the movement of goods through distribution channels, and the collection of information for planning and

In addition, we have e-commerce websites in the U.S.

Given the complexity of our business and the significant number of transactions that we engage in on an annual basis, it is imperative that we maintain constant operation of our computer hardware and software systems.

Despite our preventive efforts, including back-up systems, our systems are vulnerable from time to time to damage or interruption from, among other things, security breaches, computer viruses or power outages.

Any material disruptions in our information technology systems could have a material adverse effect on our business, financial condition and results of operations.

During the second quarter of fiscal 2020, we began a two-year process of re-platforming our enterprise resource planning and other key information systems to become more streamlined, nimble, and efficient in our technology platform and business processes.

We continue to assess our on premise and cloud-based technology solutions to ensure we have the optimal solutions for our business.

However, there are risks and uncertainties related to this re-platforming that could have a material adverse effect on our business, financial condition and results of operations.

We are exposed to business risks as a result of our e-commerce operations.

We operate e-commerce stores at www.verabradley.com, which includes an online outlet site we created in fiscal 2018, www.puravidabracelets.com, and www.puravidabracelets.eu.

Expanding our e-commerce business is one of the key objectives of our business strategy.

Our e-commerce operations are subject to numerous risks, including unanticipated operating problems, reliance on third-party computer hardware and software providers, system failures and the need to invest in additional computer systems.

Specific risks include:

(i) diversion of sales from our stores;

(ii) rapid technological change;

(iii) liability for e-commerce content;

and (iv) risks related to the failure of the computer systems that operate the websites and their related support systems, including from computer viruses, telecommunication failures and electronic break-ins and similar disruptions.

Internet operations involve risks which may be beyond our control that could have a direct material adverse effect on our operating results, including:

(i) price competition involving the items we intend to sell;

(ii) the entry of our vendors into the Internet business in direct competition with us;

(iii) the level of merchandise returns experienced by us;

(iv) governmental regulation;

(v) e-commerce security breaches involving unauthorized access to our and/or customer information;

(vi) credit card fraud;

and (vii) competition and general economic conditions specific to the Internet, e-commerce, and the accessories industry.

Our inability to effectively address these risks and any other risks that we face in connection with our Internet operations could materially adversely affect our business, financial condition, results of operations, and/or cash flows.

Closing stores could result in significant costs to us.

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We could, in the future, decide to close additional stores that are producing losses or that are not as profitable as we expect.

We could, in the future, decide to close additional stores beyond those currently forecasted that are producing losses or that are not as profitable as we expect.

If we decide to close any stores before the expiration of their lease terms, we may incur payments to landlords to terminate or “buy out” the remaining term of the lease.

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Our ability to attract customers to our stores depends heavily on the success of the shopping centers in which many of our stores are located.

Substantially all of our Vera Bradley Direct stores are located in regional mall shopping centers, and many of our Vera Bradley Indirect customers are also located in these shopping centers.

Substantially all of our Vera Bradley Direct stores are located in regional mall shopping centers, and many of our Vera Bradley Indirect customers are also located in regional mall shopping centers.

Factors beyond our control impact mall traffic, including public health pandemics such as COVID-19, general economic conditions, and consumer spending levels.

Consumer spending and mall traffic have been depressed in recent years.

As a result, mall operators have been facing increasing operational and financial difficulties.

As a result, mall operators have faced increasing operational and financial difficulties.

The increasing inability of mall “anchor” tenants and other area attractions to generate consumer traffic around our stores, the increasing inability of mall operators to attract “anchor” tenants and maintain viable operations, and the increasing departures of existing “anchor” and other mall tenants due to declines in the sales volume and in the popularity of certain malls as shopping destinations, have reduced and may continue to reduce our sales volume and, consequently, adversely affect our financial condition, results of operations, and cash flows.

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Some of our leases have early cancellation clauses, which permit the lease to be terminated by us or the landlord if certain sales levels are not met in specific periods or if the shopping center does not meet specified occupancy standards.

In addition to requiring future minimum lease payments, some of our store leases provide for the payment of common area maintenance charges, real

property insurance, and real estate taxes.

In addition to requiring future minimum lease payments, some of our store leases provide for the payment of common area maintenance charges, real property insurance, and real estate taxes.

Many of our lease agreements have escalating rent provisions over the initial term and any extensions.

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Our failure to effectively compete with other retailers for sales could have a material adverse effect on our financial condition, results of operations, and cash flows.

The market for bags, accessories, and travel items is increasingly competitive.

The market for bags, accessories, travel items and our other products is increasingly competitive.

Our competitive challenges include:

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Moreover, the general availability of contract manufacturing allows new entrants easy access to the markets in which we compete, which may increase the number of competitors and adversely affect our competitive position and our business.

In addition, in light of a continued difficult consumer environment, pricing is a significant driver of consumer choice in our industry and we regularly engage in price competition, particularly through our promotional programs.

To the extent that we decrease our promotional activity, our ability to maintain sales levels may be impacted.

Our wholesale business could suffer as a result of decisions by our wholesale retailers to decrease or eliminate the amount of merchandise purchased from us.

We do not enter into long-term agreements with any of our wholesale retailers.

Instead, we enter into a number of purchase order commitments with our customers for each of our lines every season.

A decision by a significant number of wholesale retailers, whether motivated by competitive conditions, operational or financial difficulties, reduced access to capital, or otherwise, to decrease or eliminate the amount of merchandise purchased from us or to change their manner of doing business with us could adversely impact our results of operations.

Although we recommend retail sale prices for our products to our wholesale retailers, we typically do not provide dealer allowances or other economic incentives to support those prices.

Possible promotional pricing or discounting by wholesale retailers in response to softening retail demand could have a negative effect on our brand image and prestige, which might be difficult to counteract.

Bankruptcies or other operational or financial difficulties of our wholesale retailers could adversely impact our business.

We sell our wholesale merchandise primarily to specialty retail and department stores across the United States and extend trade credit based on an evaluation of each wholesale retailer’s financial condition, usually without requiring collateral.

Perceived or actual financial difficulties of a customer could cause us to curtail or eliminate business with that customer or could decrease demand for our products by that customer.

Pending the resolution of a relationship with a financially troubled wholesale retailer, we might assume credit risk that we would otherwise avoid relating to our receivables from that customer.

Inability to collect on accounts receivable from our wholesale retailers would adversely impact our results of operations.

Risks Related to Global Sourcing and Distribution

We rely on various contract manufacturers to produce all of our products and generally do not have long-term contracts with our manufacturers.

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Identifying a suitable manufacturer is an involved process that requires us to become satisfied with the prospective manufacturer’s quality control, responsiveness and service, financial stability, labor practices, and environmental compliance.

fires, hurricanes, war, health pandemics such as COVID-19, or threats of terrorism, could affect our ability to meet customer demand for our products, adversely affect our net revenues, increase our cost of sales, and hurt our results of operations.

Any delay, interruption, or increased cost in the manufactured products that might occur for any reason, such as the lack of long-term contracts or regulatory requirements and the loss of certifications, power interruptions, fires, hurricanes, war, health pandemics such as COVID-19, or threats of terrorism, could affect our ability to meet customer demand for our products, adversely affect our net revenues, increase our cost of sales, and hurt our results of operations.

In addition, manufacturing disruption could injure our reputation and customer relationships, thereby harming our business.

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Any significant disruption in the operation of these facilities due to natural disaster or severe weather, or events such as fire, accidents, power outages, system failures, or other unforeseen causes, could devalue or damage a significant portion of our inventory and could adversely affect our product distribution and sales until such time as we could secure alternative facilities.

In addition to the aforementioned events, the recent public health pandemic related to COVID-19 could cause disruptions in our distribution operations if we were to temporarily suspend operations.

In addition to the aforementioned events, the COVID-19 pandemic could cause disruptions in our distribution operations if we were to temporarily suspend operations.

If we encounter difficulties with our distribution facilities or other problems or disasters arise, we cannot ensure that critical systems and operations will be restored in a timely manner or at all, and this would have a material adverse effect on our business.

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• political unrest;

natural disasters, acts of war and terrorism, changing macroeconomic trends, public health emergencies, and other external factors over which we have no control;

• natural disasters, acts of war and terrorism, changing macroeconomic trends, public health emergencies (such as COVID-19), and other external factors over which we have no control;

• quotas, duties, tariffs, or other trade restrictions or regulations.

Significant disruption of manufacturing for any of the above reasons could interrupt product supply and, if not remedied in a timely manner, could have an adverse impact on our results of operations.

Significant disruption of manufacturing for any of the above reasons, including the current political unrest in Myanmar, could interrupt product supply and, if not remedied in a timely manner, could have an adverse impact on our results of operations.

Additionally, we do not have complete oversight over our contract manufacturers.

Violation of labor or other laws by those manufacturers, or the divergence of a contract

manufacturer’s labor or other practices from those generally accepted as ethical in the United States or in other markets in which we may in the future do business, could also draw negative publicity for us and our brands, diminishing the value of our brands and reducing demand for our products.

Violation of labor or other laws by those manufacturers, or the divergence of a contract manufacturer’s labor or other practices from those generally accepted as ethical in the United States or in other markets in which we may in the future do business, could also draw negative publicity for us and our brands, diminishing the value of our brands and reducing demand for our products.

Our ability to source our products at favorable prices, or at all, could be harmed, with adverse effects on our results of operations, if new trade restrictions are imposed or if existing trade restrictions become more burdensome.

A significant majority of our Vera Bradley and Pura Vida products are currently manufactured for us in Asia and El Salvador, respectively.

A significant majority of our Vera Bradley and Pura Vida products are currently manufactured for us in Asia and Central America, respectively.

The United States and the countries in which our products are produced have imposed and may impose additional quotas, duties, tariffs, or other restrictions or regulations or may adversely adjust prevailing quotas, duties, or tariffs.

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Trade restrictions, which include embargoes, safeguards, and customs restrictions, could increase the cost or reduce the supply of products available to us or could require us to modify our supply chain organization or other current business practices, any of which could harm our results of operations.

We may be subject to unionization, work stoppages, slowdowns, or increased labor costs.

Currently, none of our employees are represented by a union.

Nevertheless, our employees have the right at any time under the National Labor Relations Act to organize or affiliate with a union.

If some or all of our workforce were to become unionized, our business could be exposed to work stoppages and slowdowns as a unionized business.

In addition, if the terms of the collective bargaining agreement were significantly more favorable to union workers than our current pay-and-benefits arrangements, our costs would increase and our results of operations would suffer.

We rely on independent transportation providers for substantially all of our product shipments.

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If for any reason we were to change shipping companies, we could face logistical difficulties that might adversely affect deliveries, and we would incur costs and expend resources in the course of making the change.

Moreover, we might not be able to obtain terms as favorable as those received from the service providers that we currently use, which in turn would increase our costs.

Moreover, we might not be able to obtain terms as favorable as those received from the service providers that we currently use, which in turn would increase our

We also would face shipping and distribution risks and uncertainties associated with any expansion of our distribution facilities and related systems.

Our inability or failure to protect our intellectual property or our infringement of other’s intellectual property could have a negative impact on our operating results.

We believe that our registered copyrights, registered and common law trademarks, and other proprietary rights have significant value and are critical to our ability to create and sustain demand for our products.

We cannot assure you that the actions taken by us to establish and protect our proprietary rights will be adequate to prevent imitation of our products or infringement of our rights by others.

The legal regimes of some foreign countries, particularly China, may not protect proprietary rights to the same extent as the laws of the United States, and it may be more difficult for us to successfully challenge the use of our proprietary rights by others in these countries.

The loss of copyrights, trademarks, and other proprietary rights could adversely impact our results of operations.

Any litigation regarding our proprietary rights could be time consuming and costly.

We are also subject to the risk that claims will be brought against us for infringement of the intellectual property rights of third parties, seeking to block the sale of our products considered to violate their intellectual property rights or payment of monetary amounts.

Although we have not been inhibited from selling our products in connection with intellectual property disputes, we cannot assure you that obstacles will not arise as we expand our product lines and extend our brands as well as the geographic scope of our sales and marketing.

In particular, we are subject to copyright infringement claims for which we may not be entitled to indemnification from our suppliers.

In addition, in recent years, companies in the retail industry, including us, have been subject to patent infringement claims from non-practicing entities, or “patent trolls.” Any infringement or other intellectual property claim made against us, whether or not it has merit, could be time-consuming and result in costly litigation.

As a result, any such claim, or the combination of multiple claims, could have a material adverse effect on our operating results.

If we are required to stop using any of our registered or nonregistered trademarks, our sales could decline and, consequently, our business and results of operations could be adversely affected.

Risks Related to the Acquisition of Pura Vida

The Pura Vida acquisition may not be successful in achieving intended benefits and may disrupt current operations.

We acquired a majority interest in Creative Genius, Inc.

or “Pura Vida,” on July 16, 2019.

This acquisition poses a number of potential integration risks that may result in negative consequences to our business, financial condition, and results of operations.

These risks include, but are not limited to:

• failure of the business to perform as planned following the acquisition to achieve anticipated revenue or profitability targets;

• the assimilation and retention of employees, including key employees;

• higher than expected costs and/or a need to allocate resources to manage unexpected operating difficulties;

• diversion of the attention and resources of management or other disruptions to current operations;

• retaining key customers and suppliers;

• retaining required regulatory approvals, licenses, and permits;

• the assumption of liabilities of the acquired business not identified during due diligence;

• other unanticipated issues, expenses, and liabilities.

Prior to its acquisition, Pura Vida was a privately-held company and its new obligations from being part of a public company may require significant additional resources and management consideration.

Upon the completion of the Pura Vida acquisition, Pura Vida became a subsidiary of our consolidated Company and must comply with U.S.

We must ensure that Pura Vida maintains effective disclosure controls as well as internal controls and procedures for financial reporting under U.S.

GAAP, and such compliance efforts may be costly and may divert the attention of management.

We are using the purchase method of accounting to account for the acquisition of a majority interest in Pura Vida consummated on July 16, 2019.

A portion of the purchase price for this business is allocated to identifiable tangible and intangible assets and assumed liabilities based on estimated fair values at the date of acquisition.

The purchase price allocation resulted in a goodwill value of $44.3 million and a value of $61.7 million related to other intangible assets.

The carrying value of these assets as of January 30, 2021, was $44.3 million and $47.3 million, respectively .

Refer to Note 15 of the Notes to Consolidated Financial Statements set forth in Part II, “Item 8.

Financial Statements and Supplementary Data,” of this report.

for additional information regarding the purchase price allocation.

When the Company performs impairment tests, it is possible that the carrying value of goodwill or other intangible assets could exceed their implied fair value and therefore would require adjustment.

Such adjustment would result in a charge to operating income in that period.

Once adjusted, there can be no assurance that there will not be further adjustments for impairment in future periods.

The Put/Call Agreement between the Company, certain of its subsidiaries, and Creative Genius, Inc.

may require us to purchase the remaining 25% interest in the Pura Vida business.

Risks Related to Information Technology and Security

A data security or privacy breach could damage our reputation and our relationships with our customers, expose us to litigation risk and adversely affect our business.

There is a significant concern by consumers and employees over the security of personal information transmitted over the Internet, consumer identity theft and user privacy.

We do not control third-party service providers and cannot guarantee that electronic or physical computer break-ins and security breaches will not occur in the future.

We may also incur significant costs in complying with the various applicable state, federal, and foreign laws regarding unauthorized disclosure of personal information.

Our business could suffer if our computer systems and websites are disrupted or cease to operate effectively.

In addition, we have e-commerce websites in the U.S.

Given the complexity of our business and the significant number of transactions that we engage in, it is imperative that we maintain constant operation of our computer hardware and software systems.

Any material disruptions in our information technology systems could have a material adverse effect on our business, financial condition and results of operations.

We continue to assess our on premise and cloud-based technology solutions in an effort to ensure we have the optimal solutions for our business.

However, there are risks and uncertainties related to this re-platforming that could have a material adverse effect on our business, financial condition and results of operations.

We are exposed to business risks as a result of our e-commerce operations.

We operate e-commerce stores at www.verabradley.com, which includes an online outlet site we created in fiscal 2018, www.puravidabracelets.com, www.puravidabracelets.eu, and www.puravidabracelets.ca.

Expanding our e-commerce business is one of the key objectives of our business strategy.

Specific risks include:

(i) diversion of sales from our stores;

(ii) rapid technological change;

(iii) liability for e-commerce content;

Internet operations involve risks which may be beyond our control that could have a direct material adverse effect on our operating results, including:

(i) price competition involving the items we intend to sell;

(ii) the entry of our vendors into the Internet business in direct competition with us;

(iii) the level of merchandise returns experienced by us;

(iv) governmental regulation;

(v) e-commerce security breaches involving unauthorized access to our and/or customer information;

(vi) credit card fraud;

and (vii) competition and general economic conditions specific to the Internet, e-commerce, and the accessories industry.

Our inability to effectively address these risks and any other risks that we face in

connection with our Internet operations could materially adversely affect our business, financial condition, results of operations, and/or cash flows.

Risks Related to Tax and Valuation Matters

Fluctuations in our tax obligations and effective tax rate may result in volatility of our operating results and stock price.

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We have recorded asset impairment charges in the past and we may record material asset impairment charges in the future.

Quarterly, we assess whether events or changes in circumstances have occurred that indicate the carrying value of long-lived assets may not be recoverable.

If we determine that the carrying value of long-lived assets is not recoverable, we will be required to record impairment charges relating to those assets.

Quarterly, we assess whether events or changes in circumstances have occurred that indicate the carrying value of long-lived asset groups may not be recoverable.

If we determine that the carrying value of long-lived asset groups are not recoverable, we will be required to record impairment charges relating to those assets.

For example, our assessments during fiscal 2021 indicated that operating losses or insufficient operating income existed at certain retail stores, with a projection that the operating losses or insufficient operating income for those locations would continue.

As such, we recorded non-cash charges of $6.3 million during fiscal 2018 within selling, general, and administrative expenses in the consolidated statements of operations to write down the carrying values of these stores' long-lived assets to their estimated fair values.

As such, we recorded non-cash charges of $7.4 million during fiscal 2021 within selling, general, and administrative expenses in the consolidated statements of operations to write down the carrying values of these stores' long-lived asset groups to their estimated fair values.

Our quarterly evaluation of store assets includes consideration of current and historical performance and projections of future profitability.

The profitability projections rely upon estimates made by us, including store-level sales, gross margins, and direct expenses, and, by their nature, include judgments about how current strategic initiatives will impact future performance.

If we are not able to achieve the projected key financial metrics for any reason, including because any of the strategic initiatives being implemented do not result in significant improvements in our current financial performance trend, this would indicate that the value of our long-lived assets was not recoverable and we would incur additional impairment of assets in the future.

If we are not able to achieve projected key financial metrics for any reason, including if any of the strategic initiatives we implement do not result in significant improvements in our current financial performance trend, this would indicate that the value of our long-lived assets was not recoverable and we would incur additional impairment of assets in the future.

In the event we record additional impairment charges, this could have a material adverse effect on our results of operations and financial condition.