1. Buy Recommendation: Vera Bradley (VRA)

2. VRA Overview
Vera Bradley, Inc. is a designer, producer, marketer, and retailer of functional accessories for women. The Company’s products include a range of offering of handbags, accessories, and travel and leisure items
Direct segment consists 75 stores in the United States (which includes 10 outlet stores). There are seven pop-up stores in Japan, and VeraBradley.com
Indirect includes 3,300 independent retailers

3. Investment Thesis
Purchase a designer brand with good growth potential at a discounted cost and then sell in 1-2 years.

4. Key Investment Points
Unique brand name which is vital in the crowded consumer retail market
Solid customer base and distribution platform
Updated supply chain that can support future growth
There is ample room for growth and they have a good retail strategy to reach their goals

5. SWOT Analysis Strengths Unique Brand
Good relationships with indirect sellers
Integrated product design team that deliver consistent products across all channels
Direct and E-commerce sales growth.
62 Million visited website last year, a % increase yoy
Weaknesses
Management’s handling of Inventory
Distribution network already includes 3,300 independent retailers
Primarily manufacture products in China
Opportunities
New Product lines
Branding rights to other companies, joint partnerships (DIS)
E-Commerce
Small company with plenty of room to grow
Japan
Threats
Manufacturing costs
Fashion industry is unpredictable
Consumer confidence and spending
Small-cap company means increased volatility
Indirect sellers (new venture with Dillards)
Direct sales up %30

6. Stock Price History - 12 Month

7. Earnings Surprise
1 week price change

8. Decline in operating CF’s Lower sales growth than peers
Why Undervalued?
Revised guidance for 1st quarter (fiscal 2014) left something to be desired
Decline in operating CF’s
Lower sales growth than peers
90 bps Increase in SGA
Criticism over managements handling of inventory
(SGA can be attributed to starting new baby line, so should level off)
CF’s because taking on debt recently to aid in expansion plans
Sales growth is vs can be partially attributed to lower in-store sales

9. How do we know it’s undervalued?
Many analysts believe fair value is around $30
P/E is while Industry Average is 24.36
S&P is 17.82
P/Projected Earnings is while Industry is 32.11
P/B is 4.56 while Industry Average is 5.09

10. Financial Snapshot
Between the calendar year of 2008 and 2012, Vera Bradley more than doubled its annual revenues from $239 million to $541 million.
Net earnings almost tripled, expanding from $24 million to $69 million over the same time period.
Revenues are up 21% yoy
52wk Range:
Volume:
320,541
Avg Vol (3m):
431,063
Market Cap:
888.37M
P/E (ttm):
12.88
EPS (ttm):
1.70
Beta
1.02
RETURN ON EQUITY (%)
VRA Ind Avg S&P 500 Q Q
Q NA

11. Purchase 250 shares at limit price of $21.75 Total purchase of $5,437
Recommendation
Purchase 250 shares at limit price of $21.75
Total purchase of $5,437
1 yr Target of 28.43
Buy at and sell at 28 yields a %28.7 gain
Currently our Sector is underweight by 4% ($22,298). If CarMax purchase goes through for $4,968 then we will still be %3.1 underweight.
This purchase would drop us to %2.16 ($11,893)