What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-03-27 compared with 2025-03-28 · 139 added, 131 removed, 218 unchanged (55% of the section changed)

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Some of our major achievements for fiscal 2026 are as follows:

We made continued progress on our long-term strategic plan, Project Restoration, our comprehensive strategic initiative to transform our business model and brand positioning.

As a Company, we continued to carefully manage both gross margin and expenses and have instilled a culture of discipline around gross margin and expense control.

We continued to strengthen and streamline our organizational structure and right-size our leadership team and cost structure for the size of our business, to address the continuing challenging macroeconomic environment and to best position us to achieve our long-term strategic plans.

We also continued to make investments in customer data science, business analytics, and pricing optimization, allowing us to collect and analyze data and make fact-based decisions to more efficiently run our business.

While we remain confident in our strategic direction, we continue to make refinements based on selling data and customer feedback.

Most of these shifts are occurring in our product and pricing strategy.

At the Vera Bradley brand:

• We launched the first phase of our renewed vision for Vera Bradley in July fiscal 2025, which included elevated brand product, marketing, store design and website in our Brand stores and on verabradley.com.

• We expanded our NFL collection by adding representation for more teams.

• We continued another year of product collaborations with iconic brands such as Disney, Wicked, and Peanuts, which align with our target customers and expand our customer reach.

We began execution of Project Sunshine, a comprehensive strategy to strengthen our market position by tapping into our brand’s strong emotional connection with consumers.

We are simplifying decision-making, removing organizational complexity, and focusing resources on high-impact initiatives.

This operational focus, paired with prudent cost management, will allow us to invest in the brand, innovation, and customer experiences, all while driving shareholder value.

These improvements are about agility — building a responsive organization to fully leverage our unique brand position.

• Our Direct segment has seen promising improvement throughout the fiscal year, giving us confidence that Project Sunshine is beginning to resonate with our customers

• We partnered with Anthropologie for exclusive product collaborations which align with our target customers and expand our customer reach.

• We continued another year of product collaborations with iconic brands such as Disney, Peanuts, Harry Potter, and Gilmore Girls which resonate with our customers.

• We implemented Outlet 2.0, one of our pillars of Project Sunshine, which will provide a more brand-enhancing retail experience for our customers.

• We are a Better Cotton TM member and continue to increase our procurement of cotton from Better Cotton TM supply chain partners.

• Our online site – outlet.verabradley.com, has brought new customers to the brand and provided steady performance throughout the year, helping offset weakness in the outlet store channel.

• We continued to strengthen and rationalize our store base.

We are continuing to look for opportunities to improve the full-line profitability of our full-line store portfolio by re-balancing our existing fleet through select closures along with identifying future market opportunities.

We will continue to focus on our highest-potential stores by enhancing the customer experience.

In fiscal 2025, we closed five underperforming full-line stores and one outlet store, and opened one full-line store and seven outlet stores, ending the fiscal year with 39 full-line and 87 outlet locations.

At the Pura Vida brand:

• Pura Vida found positive responses through collegiate football, gymnastics, and sorority activations.

• In fiscal 2025, Pura Vida had collaborations with Dutch Brothers Coffee, Kulani Kinis swimwear, and the Varsity Cheer League;

partnered with key influencers;

and offered themed-collections centered around key events such as Shark Week.

• Pura Vida continued to innovate and expand on our personalized offerings through harper charms, which still targets our core customer, and provides her endless options to suit her style.

• Two new Pura Vida store locations were opened in fiscal 2025.

In fiscal 2026, we closed twelve underperforming full-line stores and one outlet store, and opened two full-line stores, ending the fiscal year with 29 full-line and 86 outlet locations.

How We Assess the Performance of Our Business

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Net revenues reflect sales of our merchandise and revenue from distribution and shipping and handling fees, less returns and discounts.

Revenues for the VB Direct segment reflect sales through Vera Bradley full-line and outlet stores and the Vera Bradley websites (verabradley.com, international.verabradley.com, and outlet.verabradley.com).

There were no sales from our Vera Bradley annual outlet sale in Fort Wayne, Indiana for fiscal year 2023 as it was cancelled due to the COVID-19 pandemic.

Revenues for the VB Indirect segment reflect sales of Vera Bradley-branded products to specialty retail partners;

Revenues for the VB Direct segment reflect sales through full-line and outlet stores, our websites (verabradley.com, international.verabradley.com, and outlet.verabradley.com), and direct to consumer marketplaces.

Revenues for the VB Indirect segment reflect sales to specialty retail partners;

department stores;

national accounts;

third-party e-commerce sites;

and third-party inventory liquidators, as well as royalties recognized through licensing agreements related to the Vera Bradley brand.

Revenues for the Pura Vida segment reflect revenues generated through the Pura Vida website (www.puravidabracelets.com ), through the distribution of Pura Vida-branded products to wholesale retailers, and through Pura Vida retail stores.

and third-party inventory liquidators, as well as royalties recognized through licensing agreements.

Comparable Sales

Typically, comparable sales are calculated based upon our stores that have been open for at least 12 full fiscal months and net revenues from our Vera Bradley e-commerce operations.

Typically, comparable sales are calculated based upon our stores that have been open for at least 12 full fiscal months and net revenues from our e-commerce operations.

Comparable store sales are calculated based solely upon stores that have been open for at least 12 full fiscal months.

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Gross profit is equal to our net revenues less our cost of sales.

Cost of sales includes the direct cost of purchased merchandise, distribution center costs, operations overhead, duty, all inbound freight costs incurred, and inventory adjustments including adjustments described in Note 16 to the Notes to the Consolidated Financial Statements herein.

Cost of sales includes the direct cost of purchased merchandise, distribution center costs, operations overhead, duty, all inbound and outbound freight costs incurred, and inventory adjustments.

The components of our reported cost of sales may not be comparable to those of other retail and wholesale companies.

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•VB Indirect business expenses consisting primarily of employee compensation and other expenses associated with sales to Indirect retailers;

•Pura Vida business expenses primarily related to employee compensation and store expenses.

Advertising, marketing, and product development expenses include employee compensation, media costs, creative production expenses, marketing agency fees, new product design costs, public relations expenses, and market research expenses.

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Cost Savings Initiatives and Other Charges

During fiscal 2025, the Company continued the implementation of targeted cost reductions.

Expense savings are being derived across various areas of the Company, including retail store efficiencies, marketing expenses, inf ormation technology contracts, professional services, logistics and operational costs, and corporate payroll.

During fiscal 2026, the Company continued targeted cost reductions.

Expense savings are being derived across various areas of the Company, including retail store efficiencies, marketing expenses, information technology contracts, professional services, logistics and operational costs, and corporate payroll.

Refer to Note 14 to the Notes to the Consolidated Financial Statements herein for additional information regarding charges for cost savings initiatives and remaining liabilities, as well as other charges not comparable with the prior year.

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We have also seen a trend of steeply increasing digital media costs.

To mitigate some of these inflationary and supply chain pressures, we implemented strategic price increases across both of our brands in late fiscal 2022 through fiscal 2024.

To mitigate some of these inflationary and supply chain pressures, we implemented strategic price increases in late fiscal 2022 through fiscal 2024, as well as in fiscal 2026.

We will continue to monitor our pricing as it relates to the current macroeconomic trends.

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Fiscal Year Ended (1)

($ in thousands) February 1,

($ in thousands) January 31,

2026 February 1,

2024 January 28,

2025 February 3,

Statement of (Loss) Income Data:

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158,142 188,462 193,247

Impairment of goodwill and intangible assets 6,237 5,429 69,256

Other income, net 1,193 832 899

Operating (loss) income (42,356) 10,442 (94,871)

Interest income (expense), net 1,118 890 (153)

(Loss) income before income taxes (41,238) 11,332 (95,024)

Income tax expense (benefit) 20,950 3,494 (15,640)

Operating (loss) income from continuing operations (31,912) (28,792) 11,617

Interest (expense) income, net (462) 752 661

(Loss) income from continuing operations before income taxes (32,374) (28,040) 12,278

Income tax expense 303 5,339 3,682

Net (loss) income from continuing operations (32,677) (33,379) 8,596

Loss from discontinued operations, net of income tax (15,163) (28,809) (758)

Net (loss) income $ (47,840) $ (62,188) $ 7,838

Net loss attributable to redeemable noncontrolling interest — — (19,649)

Net (loss) income attributable to Vera Bradley, Inc.

$ (62,188) $ 7,838 $ (59,735)

Percentage of Net Revenues:

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Selling, general, and administrative expenses 58.6 % 59.1 % 50.4 %

Impairment of goodwill and intangible assets 1.7 % 1.2 % 13.9 %

Other income, net 0.4 % 0.3 % 0.2 %

Operating (loss) income (11.4) % 2.2 % (19.0) %

Interest income (expense), net 0.3 % 0.2 % — %

(Loss) income before income taxes (11.1) % 2.4 % (19.0) %

Income tax expense (benefit) 5.6 % 0.7 % (3.1) %

Operating (loss) income from continuing operations (11.8) % (9.0) % 3.0 %

Interest (expense) income, net (0.2) % 0.2 % 0.2 %

(Loss) income from continuing operations before income taxes (12.0) % (8.8) % 3.2 %

Income tax expense 0.1 % 1.7 % 1.0 %

Net (loss) income from continuing operations (12.1) % (10.5) % 2.2 %

Loss from discontinued operations, net of income tax (5.6) % (9.0) % (0.2) %

Net (loss) income (17.7) % (19.5) % 2.0 %

Net loss attributable to redeemable noncontrolling interest — % — % (3.9) %

Net (loss) income attributable to Vera Bradley, Inc.

(16.7) % 1.7 % (11.9) %

The following tables present net revenues by operating segment, both in dollars and as a percentage of our net revenues, and Vera Bradley full-line and outlet store data for the last three fiscal years:

Fiscal Year Ended (1)

($ in thousands, except as otherwise indicated) February 1,

($ in thousands, except as otherwise indicated) January 31,

2026 February 1,

2024 January 28,

2025 February 3,

Net Revenues by Segment:

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VB Indirect 41,860 61,186 73,803

Pura Vida 53,172 87,073 98,414

Total $ 269,651 $ 318,795 $ 383,713

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VB Indirect 15.5 % 19.2 % 19.2 %

Pura Vida 14.3 % 18.5 % 19.7 %

Total 100.0 % 100.0 % 100.0 %

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2026 February 1,

2024 January 28,

2025 February 3,

Vera Bradley Store Data (3) :

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The extra week in fiscal 2024 contributed approximately $4.9 million in net revenues and added an estimated $0.01 to diluted net income per share in fiscal 2024.

By segment, the extra week contributed net revenues of approximately $2.8 million to Direct, $2.1 million to Indirect, and $1.1 million to Pura Vida in fiscal 2024.

(2) Impairment charges, related primarily to underperforming stores, tot aled $2.6 million , and $1.4 million duri ng the fiscal years ended February 1, 2025, and January 28, 2023, respectively.

By segment, the extra week contributed net revenues of approximately $2.8 million to Direct and $2.1 million to Indirect.

(2) Impairment charges, related primarily to underperforming stores, totaled $1.0 million, and $2.4 million during the fiscal years ended January 31, 2026, and February 1, 2025, respectively.

There were no store impairment charges in fiscal 2024.

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For fiscal 2026, net revenues decreased $49.1 million, or 15.4%, to $269.7 million, from $318.8 million for fiscal 2025.

Fiscal 2024 net revenues also include approximately $6.0 million attributable to the extra week in fiscal 2024.

For fiscal 2025, net rev e nues decreased $52.3 million, or 16.9%, to $257.6 million, from $309.9 million for fiscal 2024.

For fiscal 2026, net revenues decreased $29.8 million, or 11.6%, to $227.8 million, from $257.6 million for fiscal 2025.

Vera Bradley comparable sales decreased $28.6 million, or 11.6%, which includes a 20.8% decrease in comparable store sales, partially offset by a 1.2% increase in e-commerce sales.

The decrease in comparable sales and comparable store sales was impacted by reduced traffic and conversion primarily in the outlet channel.

For fiscal 2026, net revenues decreased $19.3 million, or 31.5%, to $41.9 million, from $61.2 million for fiscal 2025.

The decrease was primarily related to a decline in specialty and key account orders as well as a decrease in liquidation sales.

For fiscal 2026, gross profit decreased $33.8 million, or 21.3%, to $125.0 million, from $158.8 million for fiscal 2025.

As a percentage of net revenues, gross profit decreased to 46.4% for fiscal 2026, from 49.8% for fiscal 2025.

The decrease in consolidated gross profit as a percentage of net revenues for the fiscal year was driven by a $5.2 million inventory write-down related to the Brands' strategic product shift toward cotton and heritage prints, as well as lower margin sales associated with inventory originating from prior strategic initiatives, partially offset by improved product margins across channels driven by more favorable promotional activity and pricing.

Selling, General, and Administrative Expenses (“SG&A”)

For fiscal 2026, SG&A expenses decreased $30.4 million, or 16.1%, to $158.1 million, from $188.5 million for fiscal 2025.

As a percentage of net revenues, SG&A expenses were 58.7% and 59.1% for fiscal 2026 and fiscal 2025, respectively.

The decrease in consolidated SG&A expenses for fiscal 2026 was primarily due to a decrease in employee-related expenses of $13.4 million due to a reduction in headcount and incentive compensation;

decreased advertising and selling expenses of $15.6 million due to decreased sales, partially offset by a $4.0 million write-off of media credits that were not expected to be fully utilized;

a $1.9 million decrease building related expenses;

lower impairment charges related to store assets of approximately $1.4 million compared to the prior year;

$0.8 million reduction in corporate expenses;

a decrease of $0.5 million for software maintenance costs;

and $0.8 million in net other expense reductions.

Other Income, Net

For fiscal 2026, net other income increased $0.4 million, or 43.4%, to $1.2 million, from $0.8 million in the prior year.

The increase in net other income was primarily attributable to income from the Transition Services Agreement ("TSA") resulting from the sale of Creative Genius.

Operating Loss from Continuing Operations

For fiscal 2026, operating loss from continuing operations increased $3.1 million, or 10.8%, to $(31.9) million, from $(28.8) million for fiscal 2025.

As a percentage of net revenues, operating loss from continuing operations was (11.8)% and (9.0)% for fiscal 2026 and fiscal 2025, respectively.

Operating loss from continuing operations decreased due to the factors described above.

The following table provides additional information about our operating loss from continuing operations (in thousands):

Fiscal Year Ended $

2026 February 1,

Operating Loss from continuing operations:

VB Direct $ 18,322 $ 25,240 $ (6,918) (27.4) %

VB Indirect 8,582 15,414 (6,832) (44.3) %

Unallocated corporate expenses (58,816) (69,446) 10,630 15.3 %

Operating loss from continuing operations $ (31,912) $ (28,792) $ (3,120) (10.8) %

For fiscal 2026, operating income decreased $6.9 million, or 27.4%.

As a percentage of VB Direct segment net revenues, operating income in the VB Direct segment was 8.0% and 9.8% for fiscals 2026 and 2025, respectively.

The decrease in operating income as a percentage of VB Direct segment net revenues was primarily due to decreased sales, a decrease in gross margin as a percent of net revenues driven by inventory reserve charges, and SG&A expense deleverage associated with decreased sales.

VB Indirect .

For fiscal 2026, operating income decreased $6.8 million, or 44.3%.

As a percentage of VB Indirect segment net revenues, operating income in the VB Indirect segment was 20.5% and 25.2% for fiscals 2026 and 2025, respectively.

The decrease in operating income as a percentage of VB Indirect segment net revenues was primarily due to reduced margin for indirect liquidations sales and SG&A expense deleverage resulting from decreased sales.

Corporate Unallocated .

For fiscal 2026, corporate unallocated expenses decreased $10.6 million, or 15.3% to $58.8 million from $69.4 million in the prior-year period.

The decrease in corporate unallocated expenses was primarily due to a $5.5 million decrease in employee related expenses including incentive compensation and salaries resulting from headcount reductions;

a decrease of $2.1 million for corporate expenses and professional fees;

a reduction in advertising expenses of $5.4 million,

partially offset by a $4.0 million write-off of media credits that were not expected to be fully utilized;

decreased building expenses of $0.8 million;

and $0.8 million in net other expense reductions.

Interest (Expense) Income, Net

For fiscal 2026, there was net interest expense of $(0.5) million, a $1.3 million increase from net interest income of $0.8 million in fiscal 2025.

Income Tax Expense

For fiscal 2026, we recorded income tax expense of $0.3 million at an effective tax rate of (0.9)%, compared to $5.3 million at an effective tax rate of (19.0)% for fiscal 2025.

The effective tax rate change was primarily attributable to the full valuation allowance recorded in the prior year against the Company's net deferred tax assets, as well as the relative impact of permanent and discrete items in the current-year period compared to the prior-year period which largely relates to non-deductible executive compensation.

Net Loss from Continuing Operations

For fiscal 2026, net loss from continuing operations decreased $0.7 million, or 2.1%, to $(32.7) million, from $(33.4) million in fiscal 2025 due to the factors described in the captions above.

Loss from Discontinued Operations

For fiscal 2026, loss from discontinued operations decreased $13.6 million, or 47.4%, to $(15.2) million, from $(28.8) million in fiscal 2025.

For fiscal 2026, net loss decreased $14.3 million, or 23.1%, to $(47.8) million, from $(62.2) million in fiscal 2025 due to the factors described in the captions above.

Fiscal 2025 Compared to Fiscal 2024

For fiscal 2025, net revenues decreased $64.9 million, or 16.9%, to $318.8 million, from $383.7 million for fiscal 2024.

For fiscal 2025, net revenues decreased $52.3 million, or 16.9%, to $257.6 million, from $309.9 million for fiscal 2024.

Vera Bradley comparable sales decreased $49.6 million, or 16.6%, which includes a 22.2% decrease in comparable store sales as well as a 7.3% decrease in e-commerce sales.

The decrease in comparable sales and comparable store sales was

impacted by reduced traffic, conversion, and units sold primarily in the outlet channel as well as the full-line channel.

The decrease in comparable sales and comparable store sales was impacted by reduced traffic, conversion, and units sold primarily in the outlet channel as well as the full-line channel.

Fiscal 2024 net revenues also include approximately $2.8 million attributed to the extra week in fiscal 2024.

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Fiscal 2024 net revenues also include approximately $2.1 million attributed to the extra week in fiscal 2024.

For fiscal 2025, net revenu es decreased $33.9 million, or 38.9%, to $53.2 million, from $87.1 million for fiscal 2024.

The decrease was primarily due to a decrease in e-commerce sales due to a continued decline in social and digital media effectiveness, as well as decreased wholesale sales, partially offset by an increase in retail store sales.

Fiscal 2024 net revenues also include approximately $1.1 million attributed to the extra week in fiscal 2024.

For fiscal 2025, gross prof it decreased $69.6 million, or 27.1%, to $187.8 million, from $256.4 million for fiscal 2024.

For fiscal 2025, gross profit decreased $45.2 million, or 22.1%, to $158.8 million, from $204.0 million for fiscal 2024.

As a percentage of net revenues, gross profit decreased to 49.8% for fiscal 2025, from 53.2% for fiscal 2024.

The decrease in consolidated gross profit as a percentage of net revenues for the fiscal year was driven by sales channel mix, reduced margins for indirect liquidation sales, and inventory adjustments related to excess inventory in the Pura Vida segment.

The decrease in gross profit as a percentage of net revenues was driven by increased outbound freight costs, sales channel mix, and reduced margins for indirect liquidation sales.

Selling, General, and Administrative Expenses (“SG&A”)

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As a percentage of net revenues, SG&A expenses were 59.1% and 50.4% for fiscal 2025 and fiscal 2024, respectively.

SG&A expenses related to Vera Bradley and corporate unallocated were $186.9 million compared to $192.1 million in the comparable prior-year period.

SG&A expenses related to Pura Vida were $36.9 million compared to $49.4 million in the comparable prior-year period.

The decrease in consolidated SG&A expenses for fiscal 2025 was primarily due to a decrease in employee-related expenses of $13.4 million due to a reduction in headcount and incentive compensation;

a $2.6 million decrease in selling expenses due to decreased sales;

decreased advertising of $2.5 million, primarily related to Pura Vida variable advertising due to decreased sales, partially offset by Vera Bradley advertising largely related to Project Restoration;

a $1.6 million decrease in intangible asset amortization;

and $0.2 million in other net expense reductions.

These decreases were partially offset by an increase of $2.6 million for property, plant, and equipment impairment charges in the current year.

Impairment of Intangible Assets

Fiscal 2025 included a $6.2 million charge for impairment of the indefinite-lived Pura Vida brand intangible asset, which reflects a full impairment and is recorded within the Pura Vida segment.

A $5.4 million impairment charge of the indefinite-lived Pura Vida brand intangible asset was recorded in fiscal 2024 within the Pura Vida segment.

For additional information, refer to Note 15 of the Consolidated Financial Statements herein.

The decrease in SG&A expenses for fiscal 2025 was primarily due to a decrease in employee-related expenses of $12.1 million due to a reduction in headcount and incentive compensation and decreased selling expenses of $2.0 million due to decreased sales, partially offset by an increase of $6.8 million in advertising expenses, and $2.4 million of property, plant, and equipment charges recorded in fiscal 2025, and $0.1 million in net other expenses.

Other Income, Net

For fiscal 2025, net other inco me totaled $0.9 million, consistent with the prior year.

Operating (Loss) Income

For fiscal 2025, there was an operating loss of $(42.4) million, a $52.8 million decrease, or 505.7%, from operating income of $10.4 million for fiscal 2024.

As a percentage of net revenues, operating (loss) income was (11.4)% and 2.2% for fiscal 2025 and fiscal 2024, respectively.

Operating (loss) income decreased due to the factors described above.

The following table provides additional information about our operating (loss) income (in thousands):

For fiscal 2025, net other income decreased $0.1 million, or 7.5%, to $0.8 million, from $0.9 million for fiscal 2024.

Operating (Loss) Income from Continuing Operations

For fiscal 2025, there was an operating loss from continuing operations of $(28.8) million, a $40.4 million increase, or 347.8%, from operating income from continuing operations of $11.6 million for fiscal 2024.

As a percentage of net revenues, operating (loss) income from continuing operations was (9.0)% and 3.0% for fiscal 2025 and fiscal 2024, respectively.

Operating (loss) income from continuing operations increased due to the factors described above.

The following table provides additional information about our operating (loss) income from continuing operations (in thousands):

Fiscal Year Ended $

2025 February 3,

Operating (Loss) Income:

Operating (Loss) Income from continuing operations:

VB Direct $ 25,240 $ 61,873 $ (36,633) (59.2) %

VB Indirect 15,414 24,279 (8,865) (36.5) %

Pura Vida (15,121) (2,321) (12,800) (551.5) %

Unallocated corporate expenses (69,446) (74,535) 5,089 6.8 %

Operating (loss) income $ (42,356) $ 10,442 $ (52,798) 505.6 %

Operating (loss) income from continuing operations $ (28,792) $ 11,617 $ (40,409) 347.8 %

For fiscal 2025, operating income decreased $36.6 million, or 59.2%.

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The decrease in operating income as a percentage of VB Indirect segment net revenues was primarily due to reduced margin for indirect liquidations sales, an increase in wholesale discounting, and SG&A expense deleverage resulting from decreased sales.

For fiscal 2025, operating loss increased $12.8 million, or 551.5%.

As a percentage of Pura Vida segment net revenues, operating loss in the Pura Vida segment was (28.4)% and (2.7)% for fiscals 2025 and 2024, respectively.

The increase in operating loss as a percentage of Pura Vida net revenues was primarily due to decreased sales, increase in inventory reserves, SG&A expense deleverage associated with decreased sales, and increased promotional activity.

Corporate Unallocated .

For fiscal 2025, corporate unallocated expenses decreased $5.5 million, or 7.5% to $67.9 million from $73.4 million in the prior-year period.

The decrease in corporate unallocated expenses was primarily due to a $6.2 million decrease in employee related expenses including incentive compensation and salaries resulting from headcount reductions and $0.2 million in net other expense reductions, partially offset by an increase of $0.6 million in advertising related to Project Restoration and an increase in professional fees of $0.3 million.

For fiscal 2025, corporate unallocated expenses decreased $5.1 million, or 6.8% to $69.4 million from $74.5 million for fiscal 2024.

The decrease in corporate unallocated expenses was primarily due to a $5.9 million decrease in employee related expenses including incentive compensation and salaries resulting from headcount reductions and $0.1 million in net other expense reductions, partially offset by an increase of $0.6 million in advertising related to prior strategic initiatives and an increase in professional fees of $0.3 million.

Interest Income, Net

For fiscal 2025, net interest income increased $0.2 million to $1.1 million from $0.9 million in fiscal 2024.

For fiscal 2025, there was net interest income of $0.8 million, a $0.1 million increase from $0.7 million in fiscal 2024.

Income Tax Expense

For fiscal 2025, we recorded income tax expense of $21.0 million at an effective tax rate of (50.8)%, compared to income tax expense of $3.5 million at an effective tax rate of 30.8% for fiscal 2024.

The effective tax rate change was primarily attributable to the full valuation allowance recorded against the Company's net deferred tax assets, as well as the relative impact of permanent and discrete items in the current-year period compared to the prior-year period which largely relates to non-deductible executive compensation.

For fiscal 2025, we recorded income tax expense of $5.3 million at an effective tax rate of (19.0)%, compared to $3.7 million at an effective tax rate of 30.0% for fiscal 2024.

The effective tax rate change was primarily attributable to the full valuation allowance recorded in fiscal 2025 against the Company's net deferred tax assets, as well as the relative impact of permanent and discrete items in fiscal 2025 compared to fiscal 2024 which largely relates to non-deductible executive compensation.

Net (Loss) Income from Continuing Operations

For fiscal 2025, there was a net loss from continuing operations of $(33.4) million, a $42.0 million increase, or 488.3%, from net income from continuing operations of $8.6 million in fiscal 2024 due to the factors described in the captions above.

Loss from Discontinued Operations

For fiscal 2025, loss from discontinued operations increased $28.0 million, or 3701.0%, to $(28.8) million, from $(0.8) million in fiscal 2024.

Net (Loss) Income

For fiscal 2025, there was a net loss of $(62.2) million, a $70.0 million decrease, from net income of $7.8 million in fiscal 2024 due to the factors described in the captions above.

Fiscal 2024 Compared to Fiscal 2023

Refer to the Company's Annual Report on Form 10-K filed wit h the SEC o n March 29, 2024, for a comparison of fiscal 2024 to fiscal 2023 operating results.

For fiscal 2025, there was a net loss of $(62.2) million, a $70.0 million increase, or 893.4%, from net income of $7.8 million in fiscal 2024 due to the factors described in the captions above.

Liquidity and Capital Resources

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We also have access to additional liquidity, if needed, through borrowings under our $75.0 million asset-based revolving credit agreement (the “Credit Agreement”).

There was no debt outstanding under the Credit Agreement as of February 1, 2025.

Availability under the Credit Agreement is driven by a borrowing base comprised primarily of eligible accounts receivable and inventory, each subject to advance rates, eligibility criteria, and applicable reserves.

As a result, borrowing capacity may fluctuate based on the level and quality of receivables and the composition and valuation of inventory.

There was no debt outstanding under the Credit Agreement as of January 31, 2026.

The Company also owns two real estate properties that are unencumbered, which provide additional financial flexibility and may serve as a potential source of liquidity or collateral, if needed.

Historically, our primary cash needs have been for merchandise inventories;

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2026 February 1,

2024 January 28,

2025 February 3,

Net cash (used in) provided by operating activities $ (9,971) $ (14,102) $ 47,993

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Net cash used in financing activities (233) (22,515) (3,548)

Net Ca sh (Used in) Provided by Operating Activities

Net cash (used in) provided by operating activities consists primarily of net (loss) income adjusted for non-cash items, including depreciation, amortization, impairment charges, deferred taxes, and stock-based compensation;

Net Cash (Used in) Provided by Operating Activities

and the effect of changes in assets and liabilities.

Net cash used in operating activities was $14.1 million during fiscal 2025, as compared to net cash provided by operating activities of $48.0 million during fiscal 2024.

The increase in cash used in operating activities was primarily related to a net loss of $(62.2) million, a $70.0 million decrease, from net income in the comparable prior-year period, $0.3 million in other non-cash items, partially offset by a change in deferred income taxes of $18.6 million and property, plant, and equipment impairment charges of $2.6 million in the current year period.

Additionally,there was a net use of cash in the current year period in changes in assets and liabilities of $12.9 million, primarily driven by a decrease cash provided by inventories.

Net cash used in operating activities was $10.0 million during fiscal 2026, as compared to $14.1 million during fiscal 2025.

The decrease in cash used in operating activities was primarily driven by a $14.3 million decrease in net loss in the current year and the $20.4 million valuation allowance recorded in the prior year period against the Company's deferred tax assets, partially offset by a loss on sale of business of $15.2 million, as well as other non-cash adjustments and changes in working capital.

Net Cash Used in Investing Activities

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Net cash used in investing activities was $1.5 million in fiscal 2026, compared to $10.4 million in fiscal 2025.

The decrease in cash used in investing activities was primarily a result of the purchase of the remaining 25% interest in Pura Vida for $10.0 million in the prior year, partially offset by an increase in property, plant, and equipment spending of $6.6 million primarily as a result of 8 store openings and Project Restoration initiatives in the current year, compared to 3 store openings in the prior year.

The decrease in cash used in investing activities was primarily a result of decreased property, plant, and equipment spending of $7.1 million due to a reduction in store openings and remodels in fiscal 2026, compared to fiscal 2025, as well as $1.8 million in proceeds from the sale of Creative Genius in the current year.

Net Cash Used in Financing Activities

Net cash used in financing activities w as $22.5 million in fiscal 2025 compared to $3.5 million in fiscal 2024.

The increase in cash used in financing activities was primarily due to an increase in repurchases of common stock of $19.6 million.

Net cash used in financing activities was $0.2 million in fiscal 2026 compared to $22.5 million in fiscal 2025.

The decrease in cash used in financing activities was primarily due to a decrease in repurchases of common stock of $21.8 million.

Refer to the Company's Annual Report on Form 10-K filed with the SEC on March 28, 2025, for a comparison of fiscal 2025 to fiscal 2024 cash flow activity.

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(“VBD”), a wholly-owned subsidiary of the Company, entered into an asset-based revolving Credit Agreement (the “Credit Agreement”) among VBD, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders from time to time party thereto.

On August 3, 2023, certain subsidiaries of the Company, JP Morgan Chase Bank, N.A., as the administrative agent, and lenders from time to time party thereto, entered into a Third Amendment (the “Third Amendment”) to the Credit Agreement.

On March 11, 2025, certain subsidiaries of the Company, JP Morgan Chase Bank, N.A., as the administrative agent, and lenders from time to time party thereto, entered into a Fourth Amendment (the “Fourth Amendment”) to the Credit Agreement.

The Credit Agreement provides for certain credit facilities to VBD in an aggregate principal amount not to initially exceed the lesser of $75.0 million or the amount of borrowing availability determined in accordance with a borrowing base of certain assets.

Borrowings under the credit facilities are available to finance general corporate purposes of VBD and its subsidiaries, including but not limited to Vera Bradley International, LLC, Vera Bradley Sales, LLC, and Creative Genius, LLC (collectively, the “Named Subsidiaries”).

The Credit Agreement also contains an option for VBD to arrange with lenders to increase the aggregate principal amount by up to $50.0 million.

On October 21, 2025, VBD amended the agreement to include, among other things:

(i) permit the sale of certain real property assets without requiring the application of the proceeds from such sale to be used to repay amounts outstanding under the Credit Agreement, (ii) remove the prohibition against sale and leaseback transactions and (iii) increase the amount of Company assets permitted to be disposed of in any fiscal year outside the ordinary course of business from $5,000,000 to $10,000,000.

As of January 31, 2026, the Company had no borrowings outstanding under the Credit Agreement and had availability of $58.6 million, subject to the borrowing base provisions of the facility.

For further information regarding the Credit Agreement, please see Note 6 of the Notes to Consolidated Financial Statements set forth in Part II, “Item 8.

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We perform physical inventory counts throughout the year and adjust the shrinkage provision accordingly.

The balance of inventory adjustments wa s $7.7 million an d $8.1 million for these matters as of the fiscal years ended February 1, 2025, and February 3, 2024, respectively.

We believe we have the ability to sell some of our retired finished goods through a number of channels, including our Vera Bradley and Pura Vida websites, the Vera Bradley online outlet site, Vera Bradley outlet stores, the Vera Bradley Annual Outlet Sale, and through third-party liquidators as needed.

The balance of inventory adjustments wa s $6.0 million an d $0.7 million for these matters as of the fiscal years ended January 31, 2026, and February 1, 2025, respectively.

We believe we have the ability to sell some of our retired finished goods through a number of channels, including our Vera Bradley websites, the Vera Bradley online outlet site, Vera Bradley outlet stores, the Vera Bradley Annual Outlet Sale, and through third-party liquidators as needed.

Valuation of Long-lived Assets

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With respect to our stores, we analyze store economics, location within the shopping center, the size and shape of the space, and desirable co-tenancies in our selection process.

Impairment charges are classified in SG&A expenses and were $2.6 million, and $1.4 million for the periods ended February 1, 2025, and January 28, 2023, respectively.

Impairment charges are classified in SG&A expenses and were $1.0 million, and $2.4 million for the periods ended January 31, 2026, and February 1, 2025, respectively.

No impairment charges were recorded in fiscal 2024.

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If economic conditions were to deteriorate, future impairment charges may be required.

Goodwill and Other Intangible Assets

Prior to February 1, 2025 identifiable intangible assets consisted of the Pura Vida brand and customer relationships.

Prior to fiscal 2024, the Company performed an annual impairment test for its goodwill.

Goodwill was fully impaired during fiscal 2023, leaving no balance.

The Pura Vida brand, an indefinite-lived asset, is not amortized but assessed for impairment at least annually or whenever events or circumstances indicate that the brand may be impaired.

The Pura Vida customer relationship, a definite-lived intangible asset, is amortized over its estimated useful life and is also subject to impairment testing, similar to the Company’s other long-lived assets.

Our annual intangible asset impairment test may be completed through a qualitative assessment to determine if the fair value of the Pura Vida brand is more likely than not greater than the carrying amount.

If we elect to bypass the qualitative assessment, or if a qualitative assessment indicates it is more likely than not that the estimated carrying value exceeds the fair value, we test for impairment using a quantitative process.

Our quantitative process includes comparing the carrying value to the fair value of the Pura Vida brand, with any excess recognized as an impairment loss.

Fair value is estimated using a relief-from-royalty method.

The estimates and assumptions used in the determination of the fair value of the Pura Vida brand include the projected revenue growth, long-term growth rate, the royalty rate, and discount rate.

As of February 1, 2025, the Company had no intangible assets as it recorded a full impairment charge of the Pura Vida brand within the Pura Vida reporting unit during fiscal 2025.

The Company performed a quantitative analysis of the Pura Vida brand for the annual impairment test in the second quarter of fiscal 2025, at which time no impairment was recorded.

Subsequent to the annual impairment test, due to triggering events, the Company performed an additional quantitative analysis and recorded an impairment charge of $6.2 million in the fourth quarter of fiscal 2025, further described in Note 15 of the Consolidated Financial Statements herein.

For the annual impairment analysis performed during fiscal 2024, the Company performed a quantitative analysis, as well as subsequent analyses due to triggering events, further described in Note 15 of the Notes to the Consolidated Financial Statements herein.

An impairment charge of $5.4 million was recorded during fiscal 2024 for the Pura Vida brand.

For the annual impairment analysis performed during fiscal 2023, the Company performed a quantitative analysis, as well as subsequent analyses due to triggering events, further described in Note 15 of the Notes to the Consolidated Financial Statements herein.

Impairment charges of $44.3 million and $25.0 million were recorded during fiscal 2023 for goodwill and the Pura Vida brand, respectively.

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 7. Management’s Discussion and Analysis