What changed in this filing

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Item 1A. Risk Factors

2023-03-28 compared with 2022-03-29 · 122 added, 139 removed, 278 unchanged (48% 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 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, 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 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.

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.

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 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

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.

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

The success of our long-term strategic plan and growth strategies, including Project Restoration, 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 growth strategies.

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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 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 confidence and consumer spending may be influenced by levels of inflation, fluctuating interest rates and credit availability (including possible exposure to bank failures), 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, the COVID-19 pandemic or other public health matters, 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.

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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, styles, and collections or meet changing consumer demands in the future.

We cannot assure 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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Also, the aggregate results of operations of our stores have fluctuated in the past and will fluctuate in the future.

Numerous factors influence comparable sales, including fashion trends, competition, national and regional economic conditions, the COVID-19 pandemic, pricing, inflation, the timing of the release of new merchandise and promotional events, changes in our merchandise mix, marketing programs, changes in consumer shopping trends, site selection strategy, and weather conditions.

Numerous factors influence comparable sales, including fashion trends, competition, national and regional economic conditions, pricing, inflation, the timing of the release of new merchandise and promotional events, changes in our merchandise mix, marketing programs, changes in consumer shopping trends, site selection strategy, public health matters, and weather conditions.

These factors may cause our comparable sales results to be lower in the future than in recent periods or lower than expectations, either of which could result in a decline in the price of our common stock.

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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, through wholesale retailers, and through our first retail store opened in August 2021.

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.

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

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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 2024.

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 additional Vera Bradley

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

We have closed a total of 63 underperforming full-line stores and two underperforming factory outlet stores since the beginning of fiscal 2018 and forecast that we will close additional full-line stores.

We plan to open additional Vera Bradley factory outlet stores during fiscal 2024.

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.

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.

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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.

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

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

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.

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.

We are subject to risks associated with leasing substantial amounts of space, including future increases in occupancy costs.

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In our Vera Bradley Indirect business and Pura Vida wholesale business, we compete with numerous manufacturers, importers, and distributors of handbags, accessories, and other products for the limited space available for the display of such products to the consumer.

In our Vera Bradley Direct business and Pura Vida e-commerce business, we compete against other gift and specialty retailers, department stores, catalog retailers, and Internet businesses that engage in the retail sale of similar products.

In our Vera Bradley Direct business and Pura Vida e-commerce and retail store business, we compete against other gift and specialty retailers, department stores, catalog retailers, and Internet businesses that engage in the retail sale of similar products.

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, which impacts our margins.

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

To the extent that we decrease our promotional activity or are otherwise unable to effectively compete on pricing, our ability to maintain sales levels may be adversely 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.

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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.

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

Risks Related to Global Sourcing and Distribution

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We generally do not enter into long-term formal written agreements with our manufacturers and instead transact business with each of them on an order-by-order basis.

In the event of a disruption in our contract manufacturers’ systems, we may be unable to locate alternative manufacturers of comparable quality at an acceptable price, or at all.

In the event of a disruption in our contract manufacturers’ systems, we may be unable to locate alternative manufacturers of comparable quality at an acceptable price or in a timely manner, or at all.

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.

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.

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, public 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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We generally do not enter into long-term formal written agreements with our suppliers and typically transact business with each of them on an order-by-order basis.

In the event of a significant disruption in the supply of fabrics or raw materials from our current sources, we may not be able to locate alternative suppliers of materials of comparable quality at an acceptable price, or at all.

In such a case, we could have difficulty meeting consumer demand and net revenues could be adversely impacted.

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

In addition to the aforementioned events, public health emergencies (such as 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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Our business is subject to the risks inherent in global sourcing and manufacturing activities.

We source our Vera Bradley fabrics primarily from manufacturers in China and South Korea and outsource the production of a significant majority of our products to companies in Asia.

We source our Vera Bradley raw materials primarily from various suppliers in Asia, with the majority of non-cotton based products coming from China and South Korea.

Our cotton-based products are sourced from areas outside of China.

For Vera Bradley, we outsource the production of a significant majority of our products to companies in Asia.

We source our Pura Vida components primarily from Asia and outsource the production of products primarily to El Salvador.

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• availability of raw materials;

• compliance with labor laws and other foreign governmental regulations;

• c ompliance with labor laws and other foreign governmental regulations;

• compliance with U.S.

import and export laws and regulations;

import and export laws and regulations including the Uyghur Forced Labor Prevention Act (“UFLPA”) as described below ;

• disruption or delays in shipments;

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

The UFLPA went into effect on June 21, 2022.

The act establishes a rebuttable presumption that the importation of any goods manufactured in whole or partially in Xinjiang Uyghur Autonomous Region of the PRC, or produced by certain entities, is prohibited to entry to the United States.

The Commissioner of U.S.

Customs and Border Protection employs a risk-based approach that prioritizes the highest-risk goods based on current data and intelligence available to them at the time of entry.

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.

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

Our utilization of these delivery services, or those of any other shipping companies that we may elect to use, is subject to risks, including increases in fuel prices, which would increase our shipping costs, employee strikes and inclement weather, which may impact the shipping company’s ability to provide delivery services sufficient to meet our shipping needs.

Our utilization of these delivery services, or those of any other shipping companies that we may elect to use, is subject to risks, including increases in fuel prices, which would increase our shipping costs, employee strikes, labor shortages, and inclement weather, which may impact the shipping company’s ability to provide delivery services sufficient to meet our shipping needs.

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.

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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.

There may also be events that are beyond our control that could cause delays in these functions, including but not limited to, changing macroeconomic trends, public health pandemics such as COVID-19 and other catastrophic events, 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

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.

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.

Risks Related to Pura Vida

We have taken material impairment charges related to goodwill and other indefinite-lived intangible assets associated with the Pura Vida acquisition in the past and may be required to take additional impairment charges in the future , which may adversely affect the company’s financial condition and results of operations.

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

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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 29, 2022, was $44.3 million and $44.2 million, respectively.

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.

During fiscal 2023, we recorded a full impairment of goodwill totaling $44.3 million and an impairment charge for the Pura Vida brand intangible asset of $25.0 million.

The carrying value of the intangible assets as of January 28, 2023, was $15.9 million.

When the Company performs future impairment tests, it is possible that the carrying value of the remaining 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.

Risks Related to Information Technology and Security

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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 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, 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.

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(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 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.

(ii) the level of merchandise returns we experience;

(iii) governmental regulation;

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

(v) credit card fraud;

and (vi) 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

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tax laws bearing upon our revenues, income, property, or other aspects of our operations or business would, if enacted, affect our results of operations in ways and to a degree that we cannot currently predict.

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

We have recorded long-lived asset impairment charges in the past and we may record material long-lived 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 asset groups may not be recoverable.

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As such, we recorded non-cash charges of $0.8 million and $0.1 million during fiscal years 2023 and 2022, 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.

We also recorded $0.6 million of a non-cash impairment charge relating to a corporate right-of-use asset in fiscal 2023.

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

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

Risks Related to Legal Matters

Risks Related to Legal and Regulatory Matters

There are claims made against us from time to time that can result in litigation or regulatory proceedings, which could distract management from our business activities and result in significant liability or damage to the images associated with our brands.

We increasingly face the risk of litigation and other claims against us.

Litigation and other claims may arise in the ordinary course of our business and include employee claims, custom and duty claims, commercial disputes, intellectual property issues, product-oriented allegations, and slip and fall claims.

Litigation and other claims may arise in the ordinary course of our business and include employee claims, custom and duty claims, commercial disputes, intellectual property issues, marketing and solicitation claims, product-oriented allegations, and slip and fall claims.

Often these cases raise complex factual and legal issues, which are subject to risks and uncertainties and which could require significant management time.

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The inability to protect our 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.

Any litigation regarding our proprietary rights could be time consuming and costly and could consume significant amounts of management time that would otherwise be spent operating and growing our business.

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 claimed to violate their intellectual property rights or to receive payment of monetary amounts related thereto.

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.

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.

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.

General Risk Factors

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 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.

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.

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 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.

We may suffer negative publicity and our business may be harmed if we need to recall any products we sell.

We have in the past needed to, and may in the future need to, recall products that we determine may present safety issues.

If products we sell have safety problems of which we are not aware, or if we or the Consumer Product Safety Commission recall a product sold in our stores, we may suffer negative publicity and, potentially, product liability lawsuits, which could have a material adverse impact on our reputation, financial condition and results of operations or cash flows.

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

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.

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

The success of our Environmental, Social, and Governance (“ESG”) actions may impact the value of our brands.

There has been increasing stakeholder and regulatory focus on ESG matters affecting public companies.

Expectations regarding ESG disclosures, setting and executing ESG-related goals, and achieving measurable progress in a timely manner could expose us to market, operational, and execution costs or risks.

We expect that stakeholder expectations, as well as laws, rules and regulations, in these areas will continue to evolve quickly, which may result in the need for increased resources for ESG monitoring and reporting and adjustments to our operations may be necessary.

We could face scrutiny with respect to the accuracy, adequacy, or completeness of our ESG-related disclosures.

Additionally, disclosures about our ESG-related initiatives or goals, and progress against those goals, may be based on standards for measuring progress that are still developing, internal controls and processes that continue to evolve, and assumptions or third-party information that we believe to be reasonable but are subject to change in the future.

We could also be subject to scrutiny with respect to the scope or nature of our ESG-related initiatives or goals, or for any revisions to those goals.

If our ESG-related data, processes, and reporting are incomplete or inaccurate, or if we fail to achieve progress with respect to these initiatives or goals on a timely basis, or at all, our reputation and the value of our brands could be adversely affected.

Any harm to our reputation resulting from failure or perceived failure to meet ESG-related goals, metrics, or disclosures could adversely affect our business, financial performance, and growth.

Risks Related to the Securities Markets and Ownership of Our Common Stock

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The market price of our common stock may fluctuate significantly in response to a number of factors, most of which we cannot control, including:

• the continued outbreak of COVID-19 and its adverse impact on the capital markets;

• actions by other shopping mall or lifestyle center tenants;

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• strategic actions by us or our competitors, such as acquisitions or restructurings;

• the continued outbreak of COVID-19 and its adverse impact on the capital markets;

• changes in accounting principles.

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In the past, stockholders have instituted securities class action litigation following periods of market volatility.

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.

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 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.

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.

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Investors should also recognize that the reliability of any forecasted financial data diminishes the further into the future that the data are forecast.

Further, the COVID-19 pandemic could cause a material adverse impact to the Company’s liquidity, results of operations, and financial condition that cannot be predicted.

In light of the foregoing, if investors, analysts, and others fail to review our guidance within the proper context or place undue reliance on our guidance, deviations from such guidance may result in incongruous fluctuation in our stock price.

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• prohibiting our shareholders from calling a special meeting of shareholders;

• prohibiting our shareholders from amending our amended and restated bylaws;

• requiring advance notice for raising business matters or nominating directors at shareholders’ meetings.

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It is possible that these provisions could make it more difficult to accomplish transactions that shareholders might deem to be in their best interest.

Risks Related to the COVID-19 Pandemic

The outbreak of the novel coronavirus (COVID-19), or events related thereto, may 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.

The COVID-19 pandemic has in the past and may again in the future result 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 have experienced in the past due to the COVID-19 pandemic, and may experience in the future, significantly reduced traffic, demand, and sales.

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

In recent fiscal years, 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 experience in the future delayed shipments and increased shipping costs for some of our 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 impact on our results of operations, financial condition, and share price will likely depend on future developments 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 could be adversely impacted.

General Risk Factors

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 her services or those of other key individuals in the future.