Good day everyone. Welcome to the Vera Bradley, Fourth Quarter and Year End Fiscal 2018 Earnings Conference Call. Today's conference is being recorded. At this time I’d like to turn the conference over to the Chief Administrative Officer, Mr. Mark Dely. Please go ahead.

Good morning and welcome everyone. We’d like to thank you for joining us for Vera Bradley's fourth quarter and fiscal year-end earnings call. Some of the statements made on today's call during our prepared remarks and in response to your questions may constitute forward-looking statements made pursuant to and within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 as amended. Such forward-looking statements are subject to both, known and unknown risks and uncertainties that could cause actual results to differ materially from those that we expect. Please refer to today's press release and the company's Form 10-K for the fiscal year ended January 28, 2017 filed with the SEC for a discussion of known risks and uncertainties. Investors should not assume that the statements made during the call will remain operative at a later time. The company undertakes no obligations to update any information discussed on the call. I will now turn it over to Vera Bradley's CEO, Rob Wallstrom. Rob.

Thank you, Mark. Good morning everyone and thank you for joining us on today's call. I am joined today by John Enwright, our CFO. I want to take a minute to welcome Kevin Korney to our leadership team. Kevin joined Vera Bradley in January as our Chief Merchandising Officer. Kevin has nearly 20 years of apparel, accessories and footwear merchandising experience with several well-known retailers. Most recently he served as VP of Global Merchandising for Converse and prior to Converse, Kevin served as Senior Divisional Merchandise Manager for Fossil where we worked with our Chief Creative Officer Beatrice Mac Cabe. Kevin gained prior experience with Dallas Cowboys Merchandising, The Walt Disney Company, Nautica, Ralph Lauren and Gap. Kevin’s leadership, strategic, analytical and creative skills make him a great fit for Vera Bradley and his important role. Now let’s turn to the results. From both the fourth quarter and the year, we are pleased that revenues were at the high end of our guidance and our gross margin rate exceeded our expectations. In addition, expense management was a key factor in achieving our results. Allow me to take a minute to highlight several of our fiscal 2018 accomplishments. In the Product arena we reinvigorated and reinvented cotton, which remains the most important piece of our business. Customers are responding to our newly-introduced Iconic cotton collection, featuring micro-quilting, added functionality and innovation, and several new updated silhouettes. We expanded our licensing program by launching technology-related products, swimwear, bedding, stationery, hosiery and medical uniforms, which is important to extending our brand and reaching new customers and markets. We continue to see an extremely positive response from the market in terms of placement in both existing and new distribution. For example, our Smartphone cases are offered in 2,500 AT&T stores and Vera Bradley bedding…

Thanks Rob and good morning. As I discuss the quarter in the year, current and prior year income statement number exclude severance, store impairment, consulting and other charges outlined in today’s release. As a reminder, the current year fourth quarter and full year results included an extra week that contributed approximately $4.1 million in net revenue and an estimated $0.01 in diluted EPS. Let me go over a few highlights for the quarter. Current year fourth quarter net revenues of $132 million were at the high end of our guidance range of $127 million to $132 million. Prior year fourth quarter revenues totaled $134.8 million. Excluding charges, non-GAAP fourth quarter net income totaled $11.8 million or $0.33 per diluted share at the high end our guidance range of $0.30 to $0.33. This compares to $10.1 million or $0.28 per diluted share last year. Current year fourth quarter direct segment revenues totaled $110.4 million, a 1.4% increase over $108.9 million in the prior year’s fourth quarter. Comparable sales, including e-commerce decreased 4.6% for the quarter, which was more than offset by new store growth. As expected, indirect segment revenues decreased 17% to $21.6 million from $26 million in the prior year fourth quarter, reflecting a reduction in the number of specialty accounts, coupled with a reduction in orders from both specialty accounts and certain key accounts. Excluding charges, fourth quarter gross profit totaled $74.3 million or 56.3% of net revenues, compared to $75.1 million or 55.7% of net revenues in the prior year. The year-over-year 60 basis point improvement primarily related to a reduction in product cost, which caused the percentage to above our 55.4% to 55.8% guidance range. Excluding charges fourth quarter SG&A expenses totaled $57.1 million or 43.2% of net revenues compared to $60.2 million or 44.6% of net…

Thanks John. As we enter fiscal 2019, continue to implement Vision 20/20 and focus on getting healthy, we will be monitoring and reporting on our four key elements: progress on restoring full price selling, retaining our customer base, delivering our SG&A and cost of sales reductions and cash flow generation. As you know, Vision 20/20 is our aggressive plan to turn around the business over the next three years. Vision 20/20 really is a three pronged approach designed to restore brand and company health by one, moving to a less clearance-driven business model; two, meaningful reducing our SG&A expenses structure; and three, continuing to focus on our product design and refining our creative process. Innovation remains top of mind. The first two areas are designed to get us healthy, but all three will lay the foundation for future growth of the business. On the product and pricing front, we will focus on three key areas: First, in February 2018 we began significantly reducing the amount of clearance product available on verabradley.com and in our full-line stores. This will help to reset our customers’ pricing expectations and restore our full-price business. Part of this strategy includes implementing a limited number of flash sale events throughout the year. Second, we are focusing on our best performer and narrowing our current product offerings by eliminating unproductive or incongruent categories and SKUs from our assortment. For example, we are discontinuing fragrance and jewelry this year. As we reduce clearance and narrow our offerings, inventory levels will continue to come down. Lastly, we are focused on building tighter assortment guardrails around introducing new categories, patterns and pricing, assuring the right fit for our brand and that our products not only provide thoughtful solutions, but also reflect our signature attributes of comfortable, casual and affordable. We…

Our guidance reflects Vision 20/20 and issues that Rob just outlined. Keep in mind that all guidance numbers are non-GAAP. Prior year non-GAAP numbers that will reference exclude the severance to impairment, consulting, tax reform legislation and other charges outlined in today’s release. The current year non-GAAP estimates exclude similar items. For the first quarter we expect net revenues of $84 million to $89 million compared to prior year first quarter revenues of $96.1 million. We expect direct segment net revenues to be down in the mid to high single digit range compared to the prior year, including a comparable sales decrease including e-commerce in the high single digit to low teen percentage range. We believe our indirect net revenue will be down in the mid to high teen range during the quarter. We expect our gross margin will be flat to slightly up compared to the 54.8% in the prior year first quarter. SG&A expense is expected to range from $51 million to $53 million, compared to $56.4 million in the prior year first quarter. We expect our first quarter diluted loss per share will be $0.08 to $0.10 compared to a $0.09 loss in the prior year first quarter. We expect inventory to be in the $85 million to $95 million range at the end of the first quarter, compared to $105.4 million at the end of the first quarter last year. For the full year we expect net revenues of $405 million to $425 million compared to $454.6 million last year. Our revenue guidance assumes direct segment net revenue to be down by high single digits to a low teen percentage range compared to last year, with comparable sales including e-commerce down in the low to mid-teen percentage range. Indirect net revenues are expected to decline in the high single digit to low teen percentage range for the full year. Our gross margin for fiscal 2019 is expected to be flat to up slightly compared to the 56.1% last year. We expect SG&A expense total between $210 million and $215 million for the year compared to $221.4 million last year. We expect diluted EPS excluding charges for the full fiscal year to range from $0.35 to $0.45. Before charges diluted EPS totaled $0.60 last year. We expect to generate $40 million to $50 million operating cash flow in fiscal 2019. We expect out net capital expenditures will total $10 million for the full year, primarily related to factory store openings and continued technology investments. Let me turn the call back over to Rob who will give us an update on our focus areas for fiscal 2019 and Vision 20/20. Rob.

By continuing our focus on product, marketing and distribution and by executing Vision 20/20, we expect that our business and brand will become healthier, operating performance will improve and cash flows will remain strong over the next three years. We are laying the foundation for a stronger company and brighter future. I am very optimistic about the future of our company. The Vera Bradley brand is unique, strong and resilient. Our loyal customer base continues to expand and both licensed and international partners continue to show strong interest in our brand. We look forward to returning to solid growth. Operator, we will now open up the call to questions.

[Operator Instructions]. We’ll have our first question from Mark Altschwager with Baird.

Great, good morning. Thanks for taking the question. I just wanted to start out on the comp. How are you thinking about the comp cadence over the course of the year and should the clearance reductions have a disproportion impact in any particular quarters?

So as we think about the comp for the full year, I think it won’t really have any disproportion impact for any particular quarter Mark. If you think about e-commerce, we have been taking – we are going to take clearance out of e-commerce and it should have kind of ratably over the course of the year, the same impact.

Okay, that’s helpful, thanks. And then I know its early, but just can you talk more about the initial progress on the reduction of the clearance assortment. Curious what the customer is doing? Is she transaction in another clearance pattern, switching to full price, not converting at all, just wondering what the initial reaction has been as you look to reset the pricing expectations?

Yeah Mark, a couple of things. One it is early, right, we took most of that reduction just beginning in the first part of February. So we are still looking at all of those results. I will tell you that one thing that we are keeping a very close eye on is watching the full price business and what we have seen and which is reflected in our guidance is that we have seen an improvement in our full price trend as we’ve hit February and we’ve reduced the clearance. So we are seeing an upswing in the full price trend, which is encouraging. But obviously very early innings in this, but that’s exactly what we are going to be monitoring, is how we migrate the customer to our various channels as we go through this year.

Thanks great, and one more quick one if I may just on the balance sheet cash flow. It looks like guidance doesn’t appear or incorporate much from a buyback perspective. I think you have over, I think a third of the market cap in cash right now and the outlook implies positive free cash flow the year. So just curious how you are thinking about that from a capital allocation standpoint? Thanks.

You know, right now we are taking a conservative approach when looking at kind of share repurchase. As you know we bought back every quarter since we’ve had the share repurchase plan in place and we still have about $13.4 million of authorization in place. But as we work through Vision 20/20 we want to kind of see kind of how the first part of the year kind of really goes and then we will continue to kind of look at kind of share repurchase program for the remainder of the year.

Thanks for the color. Best of luck!

Thanks.

Thank you, Mark.

We’ll have our next question from Oliver Chen, Cowen & Company.

Hi, thanks a lot Rob and John. What are your thoughts for 20/20 and also the resumption of growth and the key factors you will be watching in terms of this year versus next and kind of rebasing and positioning the business for growth and the context of that question. You know which channel might that occur earlier and which metrics will be important? Thank you.

Thank you, Oliver. So a couple of things; as we look at comps we know that this year we’ll be taking all of the clearance business out, which is really suppressing the comp performance this year. What we are going to be tracking very closely is the full price performance in our stores in verabradley.com. But that’s the first place that we would begin to expect to see the positive momentum. And then as we get out of this year and moving into next year then obviously we believe we would be in a better position to move to a more positive performance in our direct channels. We do expect our direct channels will show the positive momentum before indirect, just because the way the indirect channels will watch the performance. We expect that our indirect partners are hoping to see their full price business begin to improve. As they do that, we expect that their orders will get stronger in the back half of the year, but a lot of those orders will not start shipping until the next fiscal year. So we don’t expect any meaningful change in trend in our indirect channel until we get into the next fiscal year.

Okay and Rob the new management and the product story, I mean it sounds like you made a progress with thinking about patterns and innovation in the context of our growth. But what’s next for you in terms of where do you think product should go versus now and the other question I had is, are you happy with online outlet and has it been brand appropriate in terms of managing that division relative to other channels and how the customer segmentation has worked?

Yeah Oliver, I’ll start with your second one first and then I’ll move to product, because that will be a little bit longer conversation. On the online outlet so far we have been happy with the initial performance and I would tell you one of the things that we’ve been most happy about is our ability to use it to clear our excess clearance inventory in a very, very quite manner. So we are not publically advertising the online outlet. You know you have to know about it, you have to kind of be in our data base. We are really focusing our solicitation to our customer base only on our hyper promotional customers. So it’s really a very clean way for us to liquidate some inventory. We have very strong rules in place internally on that. We are going to hold and kind of cap the volume that we are doing on the online outlet, because we do not want that to be a growth vehicle for the company. It is just a liquidation channel for the company. So we feel very good about the initial results and what we’ve seen in the customer base so far in that. In terms of the product area, what to expect around product. A few things; I think you are going to see us continue to bring innovation to market around fabrications. It’s been very interesting as we’ve gone through this journey over the last couple of years and watching what the customer is responding to. There’s been a lot of interest in solid fabrics. So our denim collection that we have right now is performing very well, our velvet collection we had in fourth quarter was performing very well, and we believe that this solid classification continued to grow, but particularly…

Okay and just lastly, in the context of what you said and as we look ahead, how are you feeling about good, better, best and average unit retails and things we should think about and like-for-like versus mix and how that impacts comp store sales?

Great question? I think two ways of answering. In terms of overall mix, we are adding kind of at all three levels. There are certain things that we are doing on the top end, and our rolling luggage obviously is driving a much higher AUR than our average, so that will be a positive push. At the same time we are looking at things like our backpack category where we think we’ve been missing an opening price point backpack. So we will be introduced in an opening price point back pack as we get to Back to Campus. So in terms of the overall mix of the assortment, the AUR, from a ticketed standpoint, we don’t expect a major movement, but as we put more of the focus on full price selling we should expect to see the AUR improve.

Thank you. Best regards!

Thanks Oliver.

[Operator Instructions]. We’ll have our next question from Edward Yruma, KeyBanc Capital Markets.

Hi, good morning. Thanks for taking the question. I guess first on the kind of store closure program. As we think about store closures after this year, how much revenue is still associated with those stores? And secondarily, as stores close where are you seeing is the strongest recapture? Is it in the direct channel, is it e-commerce or is it in your indirect channel?

So Ed, I didn’t catch your first question, but at the end of this year, I mean we have about 45 stores to close over the next three years. Ultimately it’s going to be about 15 per year. I didn’t catch the end part of your question. Can you just repeat it?

Well, just how much revenue is still associated I guess with that full. I’m trying to understand what kind of headwind we are going to see over the next couple of years from store closures. And then I guess the follow up to that is when stores close, where are you seeing any revenue recapture.

Okay, on the first part of your question, ultimately we have each store that we close – well, it’s not going to be a material amount of kind of revenue that will kind of – we’ll see come of the revenue line. We will be able to offset that roughly with our factor door opening. So we would expect to see growth collectively from our comp store growth as well as total grow in Vision 20/20 outside of FY’19. In regards to from our recapture perspective, we haven’t seen any significant recapture at any of channel currently. The one we hope to see the host recapture would be in e-commerce. But so far we haven’t seen a significant amount. But just remember we only closed five doors, so there hasn't been a significant sample size yet.

Got it, and Rob a bigger picture question. As you did Vision 20/20, how would you assess your target customer? Kind of where you make her happy, where have you not and then I guess stepping back, you know that there’s been some push over the past couple of years. To broaden the customer base, I guess kind of where were you successful and where were you not? Thanks.

That’s a great question. I’ll start with the second half first in terms of where were we successful, because that will help explain the future. You know one thing we definitely did find over the last few years as we pursued the different market programs and the product expansion, we were seeing the best growth in kind of that 20 to 35 year old area, but not is a significant way to totally change the mix of our consumer. So we continue to have a very, very broad consumer base, definitely over penetrated young, a little under penetrated in the 20 to 35 and a little over penetrated again in kind of the 40 plus. But we are going to continue to really focus on this multi generational aspect of our brand. So we still will be targeting this 20 to 35 year old customer, but at the same time making sure that our adverting is much more kind of multi generational. So I would expect to see a lot of more from that, from us as we go out through the year. In terms of overall from a products and assortment standpoint, one thing we did find is we just need to make sure that this casual, comfortable, affordable lifestyle is really key and that’s key to both our younger customer, our kind of 20 to 35 year old customer and our older customer. They all are looking for something that really has a more casual bend to it, has an affordable bend to it and one thing we learned as we looked at things like our leather business that we’ve been working on is that our most success in leather was when it was really focused on looks that were a little bit more casual, a little less dressy, kind of the sharper price points, and that’s a great area of learning for us. So I think you are going to find that our assortments are just going to be much more consistent and much more focused as we move through this year.

Great. Thanks so much.

Thank you.

And at this time we have no further questions in the queue. I’ll turn the conference back over to Mr. Rob Wallstrom to offer any additional or closing results.

Well thank you for joining us today, and we look forward to speaking to you on our first quarter call on June 6.