Vera Bradley Sets Up To Reposition Its Brand Following Q2 EPS Beat

Baird Equity Research maintained its Neutral rating on Vera Bradley, Inc.

shares. Analysts, Mark Altschwager and Drew North, also retained their target price of $18 on the company's stock. The brokerage pointed out that the second quarter results represented a disciplined SG&A apart from the inventory management despite incremental headwinds on gross margin. However, the lead analyst sees that the biggest factor is the brand's repositioning next year. Baird is encouraged by the big branding initiatives, which are in the early weeks. However, the analyst is worried as to what would happen if Vera Bradley's efforts failed to transform into comps gain at the speed the company expects. That would mean risk to estimates. "In recent years management has vastly improved the product assortment, in-store merchandising, and overall operations yet meaningful top-line improvement has been slower to develop due to lower awareness among traditionally under-penetrated demographic groups (25-35 year-old women)," the lead analyst told in a research note to clients. The brokerage expects the second half of the next year to have the brand transformation impact. That included refreshed assortment of product, fresh SoHo flagship, Store refreshes, a new portal and a complete marketing tactics. In all, the analyst pointed out that the management sees gaining 600 bp comp inflection by the fourth quarter. While trimming its next two year's EPS projections from $0.94 to $0.90 and $1.03 to $1.00 respectively, the brokerage believes that the long-term growth path is intact though clouds surround the near-term visibility. On Friday, the stock shed $0.02, or 0.12 percent, to $16.63.