What changed in this filing

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Item 1A. Risk Factors

2022-03-29 compared with 2021-03-30 · 59 added, 68 removed, 358 unchanged (26% of the section changed)

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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.

Further, new variants of the virus and new and 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.

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 workforce availability, as well as global supply chain challenges such as vessel and container shortages and port congestion.

As a result of the aforementioned restrictions, or other related factors, we have experienced and may continue to experience delayed shipments and increased shipping costs for some of our fiscal 2023 merchandise.

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

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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.

We may also from time to time use air freight as a shipping method to expedite the receipt of certain inventory, causing us to incur additional freight costs.

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.

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 to 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

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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 typically 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 and verabradley.ca, 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, 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.

If our omni-channel distribution model is unsuccessful, our business, financial condition, and results of operations could be materially adversely affected.

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 new stores 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 and Pura Vida 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.

Consequently, the rate at which we have opened new stores has slowed and we do not currently plan to open any new full-line stores during fiscal 2023.

We have closed a total of 44 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 plan to open additional Vera Bradley

factory outlet stores and Pura Vida retail stores during fiscal 2023.

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

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Closing stores could result in significant costs to us.

Since December 2014, we have closed 43 underperforming Vera Bradley stores.

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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 COVID-19 pandemic 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, or if we are unable to obtain the staffing levels required to effectively operate the facilities.

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

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.

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.

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

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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

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.

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

Losses or disruptions associated with our distribution systems could have a material adverse effect on our business and operations.

Our operating results depend on the orderly operation of our receiving and distribution functions, which also depends on our vendors' adherence to our shipping and receiving schedules.

We may not anticipate all of the changing demands that our operating activities may impose on our receiving and distribution functions.

There may also be events that are beyond our

control that could cause delays in these functions, including but not limited to, public health pandemics such as COVID-19 and other catastrophic events, changing macroeconomic trends, and general disruptions or delays in shipping and receiving.

In addition, we rely on the flow of our goods through worldwide ports on a consistent basis.

Disruption at the ports could create significant risks to our business, particularly if the occurrence is during a peak import time.

For example, COVID-19 has resulted in a shortage of shipping containers, the lack of available shipping vessels, capacity constraints, and a general shipping backlog.

If we experience significant delays in our receipt of product, we may experience an increase in freight costs, unanticipated inventory shortages, and missed sales opportunities which could adversely affect our financial condition, results of operations, and cash flows.

Risks Related to the Acquisition of Pura Vida

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• 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 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.

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.

We used 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.

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The carrying value of these assets as of January 29, 2022, was $44.3 million and $44.2 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.

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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.

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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 forecasting.

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

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

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.

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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.

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, including, among other things, the integration into our processes and procedures, system disruptions, and change management.

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.

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

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(iv) governmental regulation;

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

(v) e-commerce security breaches involving unauthorized access to our systems 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.

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

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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 $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.

For example, our assessments during fiscal years 2022 and 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 $0.1 million and $7.4 million during fiscal years 2022 and 2021, respectively, 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.

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Although we have not been inhibited from selling our products in connection with intellectual property disputes, intellectual property-related obstacles may 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 may be 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.

In particular, we may be 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.

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We may not be able to attract and retain employees as needed in the future.

Our results of operations could suffer if we are unable to attract and retain retail and distribution center employees required for our business.

We must attract, motivate, and retain a sufficient number of qualified retail and distribution center employees.

Historically, competition for talent in these positions has been intense and turnover is generally high, both of which have been amplified by the COVID-19 pandemic.

If we are unable to attract and retain such employees with the necessary skills and experience, we may not achieve our objectives and our financial condition, results of operations, and cash flows could be adversely impacted.

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

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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.

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

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.

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The phaseout of the London Interbank Offered Rate (LIBOR), or the replacement of LIBOR with a different reference rate, may adversely affect interest rates.

On July 27, 2017, the Financial Conduct Authority (the authority that regulates LIBOR) announced that it would phaseout LIBOR by the end of 2021.

It is unclear whether new methods of calculating LIBOR will be established such that it continues to exist after 2021, or if alternative rates or benchmarks will be adopted.

Changes in the method of calculating LIBOR, or the replacement of LIBOR with an alternative rate or benchmark, may adversely affect interest rates and result in higher borrowing

This development could materially and adversely affect the Company's results of operations, cash flows and liquidity.

We cannot predict the effect of the potential changes to LIBOR or the establishment and use of alternative rates or benchmarks.

We may need to renegotiate our revolving credit facility or incur other indebtedness and changes in the method of calculating LIBOR, or the use of an alternative rate or benchmark, may negatively impact the terms of such indebtedness.

If changes are made to the method of calculating LIBOR or LIBOR ceases to exist, we may need to amend certain contracts and cannot predict what alternative rate or benchmark would be negotiated.

The Financial Conduct Authority (the authority that regulates LIBOR) began to phase out LIBOR by the end of 2021 and announced that it would completely phase out LIBOR by June 30, 2023.

It is unclear which new methods of calculating interest rates or benchmarks will be adopted.

The replacement of LIBOR with an alternative rate or benchmark may adversely affect interest rates and result in higher borrowing costs.

This development could materially and adversely affect our results of operations, cash flows and liquidity.

We cannot predict the effect of the termination of LIBOR or the establishment and use of alternative rates or benchmarks.

We may need to renegotiate our revolving credit facility or incur other indebtedness and the use of an alternative rate or benchmark may negatively impact the terms of such indebtedness.

Assuming LIBOR ceases to exist, we may need to amend certain contracts and cannot predict what alternative rate or benchmark would be negotiated.

This may result in an increase to our interest expense.

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• our entry into new markets;

• the impact of wars, hostilities, riots, social unrest or acts of terrorism on trading markets;

• changes in laws or regulations that impact the retail industry;

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If we were involved in securities litigation, we could incur substantial costs and our resources and the attention of management could be diverted from our business.

Our business could be negatively affected as a result of the actions of activist stockholders.

Over the last few years, proxy contests and other forms of stockholder activism have been directed against numerous public companies in retail businesses.

We could become engaged in a consent solicitation, or proxy contest, or experience other stockholder activism, in the future.

Our business could be negatively affected as a result of the actions of activist shareholders.

Over the last few years, proxy contests and other forms of shareholder activism have been directed against numerous public companies in retail businesses.

We could become engaged in a consent solicitation, or proxy contest, or experience other

shareholder activism, in the future.

Activist shareholders may advocate for certain governance and strategic changes at our company.

In the event of stockholder activism, particularly with respect to matters which our Board of Directors (“Board”), in exercising their fiduciary duties, disagree with or have determined not to pursue, our business could be adversely affected because responding to actions by activist stockholders can be costly and time-consuming, disrupting our operations and diverting the attention of management, and perceived uncertainties as to our future direction may result in the loss of potential business opportunities and may make it more difficult to attract and retain qualified personnel, business partners, and customers.

In the event of shareholder activism, particularly with respect to matters which our Board of Directors (“Board”), in exercising their fiduciary duties, disagree with or have determined not to pursue, our business could be adversely affected because responding to actions by activist shareholders can be costly and time-consuming, disrupting our operations and diverting the attention of management, and perceived uncertainties as to our future direction may result in the loss of potential business opportunities and may make it more difficult to attract and retain qualified personnel, business partners, and customers.

In addition, if faced with a consent solicitation or proxy contest, we may not be able to respond successfully to the contest or dispute, which would be disruptive to our business.

If individuals are elected to our Board with a differing agenda, our ability to effectively and timely implement our strategic plans and create additional value for our stockholders may be adversely affected.

A limited number of shareholders control a large percentage of the voting power of our common stock, and therefore investors may have limited ability to determine the outcome of shareholder votes.

If individuals are elected to our Board with a differing agenda, our ability to effectively and timely implement our strategic plans and create additional value for our shareholders may be adversely affected.

A limited number of shareholders control a significant percentage of the voting power of our common stock, and therefore investors may have diminished ability to determine the outcome of shareholder votes.

Robert Hall, Barbara Bradley Baekgaard, Joan Hall (Mr.

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As a result, these shareholders are able to exercise significant influence over all matters requiring shareholder approval, including the election of directors, any amendments to our second amended and restated articles of incorporation, and significant corporate transactions.

This concentrated ownership of outstanding common stock may limit an investor's ability to influence corporate matters, and the interests of these shareholders may not coincide with our interests or interests of investors.

This concentrated ownership of outstanding common stock may diminish an investor's ability to influence corporate matters, and the interests of these shareholders may not coincide with our interests or interests of investors.

As a result, we may take actions that investors do not believe to be in our interests or their interests and that could depress our stock price.

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This guidance, which consists of forward-looking statements, is prepared by our management and is qualified by, and subject to, the assumptions and the other information contained or referred to in the release.

Our guidance is not prepared with a view toward compliance with published guidelines of the American Institute of Certified Public Accountants, and neither our independent registered public accounting firm nor any other independent expert or outside party compiles or examines the guidance and, accordingly, no such person expresses any opinion or any other form of assurance with respect thereto.

Our guidance is not prepared with a view toward compliance with published guidelines of the American Institute of Certified Public Accountants, and neither our independent registered public accounting firm nor any other independent expert or outside party compiles or examines our guidance and no such person expresses any opinion or any other form of assurance with respect thereto.

Guidance is based upon a number of assumptions and estimates that, while presented with numerical specificity, are inherently subject to significant business, economic, and competitive uncertainties and contingencies, many of which are beyond our control and are based upon specific assumptions with respect to future business decisions, some of which will change.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors