Executive Summary

Q2 FY2026 revenue declined 24.6% YoY to $70.9M, missing S&P Global consensus of $78.5M*, while adjusted EPS was ($0.02) vs. ($0.15) consensus*, aided by cost controls and sequential gross margin improvement to 50.1% .
Direct revenue fell 16% to $60.5M with comps down 17.3%, and Indirect revenue fell 52% to $10.3M as key account orders declined; inventory decreased 13% YoY to $96.7M as management emphasized tighter buying and SKU rationalization .
Management withdrew guidance (no forward outlook), citing transformation efforts and a dynamic consumer backdrop; CFO quantified an ~$11M annualized tariff headwind and is pursuing mitigation with suppliers and pricing levers .
Strategic actions include: re-focus on heritage products (Vera Tote, “100 bag” reissue), omnichannel consistency (aligned outlet promotions), and “Outlet 2.0” pilots in holiday; social-first campaigns drove faster follower growth and new customer acquisition .

What Went Well and What Went Wrong

What Went Well
- Sequential improvement: comps improved each month in Q2; gross margin improved ~600 bps sequentially versus Q1 due to lower liquidation and mix benefits despite higher shipping costs .
- Brand/marketing traction: “Don’t Forget to Have Fun” and social-first strategy boosted engagement; six weeks post-launch, Instagram follower growth exceeded the prior 12 months and TikTok more than doubled vs prior 12 months; VB.com new customers +23% .
- Product pipeline: return of iconic styles and heritage prints; launch plans for the under-$100 “100 bag” and partnerships (e.g., Disney, Peanuts; Anthropologie collaboration noted) signal momentum into holiday .
What Went Wrong
- Top-line pressure: consolidated revenue -24.6% YoY; Direct comps -17.3% on conversion declines across full-line, outlet, and e-commerce; Indirect -52.5% on reduced key account orders/liquidation .
- Profitability strain (YoY): Q2 operating swung to a GAAP loss of ($4.6)M (–6.5% margin) vs +$2.4M last year; SG&A deleverage at 57.1% of sales (vs 47.3% LY) despite cost reductions .
- External headwinds and uncertainty: management is not providing guidance; tariffs estimated at ~$11M annualized impact, requiring mitigation and/or pricing actions .

Financial Results

Overall performance vs prior periods

Metric	Q4 FY2025	Q1 FY2026	Q2 FY2026	Q2 FY2025
Revenue ($USD Millions)	$100.0	$51.65	$70.86	$94.00
Diluted EPS – Continuing Ops (GAAP)	($1.69)	($0.66)	($0.17)	$0.25
Adjusted EPS – Continuing Ops (Non-GAAP)	($0.30)	($0.36)	($0.02)	$0.09
Gross Margin % (GAAP)	45.0%	44.1%	50.1%	49.7%
SG&A % of Revenue (GAAP)	62.2%	79.0%	57.1%	47.3%
Operating Income (Loss) ($USD Millions, GAAP)	($23.32)	($17.86)	($4.59)	$2.39
Operating Margin % (GAAP)	(23.3%)	(34.6%)	(6.5%)	2.5%

Vs. S&P Global consensus (Q2 FY2026)

Metric	Consensus	Actual	Surprise
Revenue ($USD Millions)	$78.52*	$70.86	($7.66)
Adjusted EPS ($)	($0.15)*	($0.02)	+$0.13
EBITDA ($USD Millions)	($3.14)*	$0.34*	+$3.48

Values with an asterisk (*) are retrieved from S&P Global.

Segment performance

Metric	Q2 FY2025	Q1 FY2026	Q2 FY2026
Direct Revenue ($M)	$72.2	$43.1	$60.5
Direct Operating Income ($M, GAAP)	$13.43	($5.54)	$9.34
Direct Operating Margin % (GAAP)	18.6%	(12.9%)	15.4%
Indirect Revenue ($M)	$21.8	$8.6	$10.3
Indirect Operating Income ($M, GAAP)	$4.74	$1.98	$2.19
Indirect Operating Margin % (GAAP)	21.8%	23.1%	21.2%

KPIs and balance sheet

KPI	Q4 FY2025	Q1 FY2026	Q2 FY2026
Comparable Sales (YoY)	(17.5%)	(25.0%)	(17.3%)
Inventory ($M)	$110.0	$99.2	$96.7
Cash & Equivalents ($M)	$30.37	$11.28	$15.18
ABL Borrowings ($M)	$0.0	$0.0	$10.0

Guidance Changes

Metric	Period	Previous Guidance (3/12/25)	Current (Q2 FY2026)	Change
Revenue (Consolidated)	FY2026	≈$280M	No guidance provided	Withdrawn
Gross Margin %	FY2026	≈52.5%	No guidance provided	Withdrawn
SG&A ($)	FY2026	≈$155M	No guidance provided	Withdrawn
Operating Loss ($)	FY2026	≈($6)M	No guidance provided	Withdrawn
Diluted EPS	FY2026	≈($0.15)	No guidance provided	Withdrawn
Capex ($)	FY2026	≈$4M	No guidance provided	Withdrawn
Year-end Cash ($)	FY2026	≈$40M	No guidance provided	Withdrawn

Note: Guidance was suspended in Q1 and remains not provided in Q2 .

Earnings Call Themes & Trends

Topic	Q4 FY2025 (Q-2)	Q1 FY2026 (Q-1)	Q2 FY2026 (Current)	Trend
Product/Heritage refresh	Expand heritage, reduce high price points	Bring back heritage styles; fix zippers/straps; license cadence	Reissue “100 bag”; return of Vera Tote; strong IP drops	Intensifying
Omnichannel/promo alignment	Testing promo/pricing architecture	“Be where she shops” emphasis	Unified outlet promos; reduced discounting	Improving consistency
Wholesale/marketplaces	Pipeline; Target Marketplace strong	Costco first order; Urban Outfitters Marketplace; Target growth	Maintain Dillard’s/Von Maur; Anthropologie collab; more to come	Expanding
Outlet strategy	—	—	“Outlet 2.0” pilots in holiday; staffing optimization	New initiative
Inventory discipline	Target ~10% FY26 reduction	Inventory down ~3% YoY	Inventory down 13% YoY; SKU rationalization	Improving
Tariffs/supply chain	—	—	~$11M annualized tariff impact; mitigation plan	New headwind
Guidance posture	FY26 guidance issued	Guidance suspended	No guidance	Withdrawn

Management Commentary

“We are in the early stages of making meaningful adjustments to our product design and assortment…bringing back iconic styles such as the Vera Tote…super excited for the…reissue of the original 100 bag…just in time for the holiday gifting season.” – Executive Chairman Ian Bickley .
“We now have our digital and store channels running the same promotions…resulted in improved margin rates as we have effectively reduced discount levels overall.” – Ian Bickley .
“Outlet 2.0…shift the paradigm…through improved assortments, including select full-price product…[and] labor optimization…pilot…during the holiday season.” – Ian Bickley .
“Non-GAAP operating loss…($0.6)M vs operating income of $3.3M last year…inventory decreased 13.2% to $96.7M…borrowings of $10M against our $75M ABL facility at quarter end.” – CFO Marty Layding .
“With regard to tariffs, we estimate a total annualized impact of $11 million…we are currently not providing guidance.” – CFO Marty Layding .

Q&A Highlights

The Q2 call did not include a substantive Q&A session; the operator concluded without analyst questions .
Notable clarifications from prepared remarks: sequential comp improvement across months; tariff headwind (~$11M annualized) with mitigation levers; no guidance while transformation proceeds .

Estimates Context

Q2 FY2026 results vs S&P Global consensus: Revenue $70.86M vs $78.52M* (miss), Adjusted EPS ($0.02) vs ($0.15)* (beat), EBITDA $0.34M vs ($3.14)M* (beat). Coverage depth is thin (1 estimate for both revenue and EPS*), limiting read-through on broader Street expectations. Values with an asterisk (*) are retrieved from S&P Global.

Key Takeaways for Investors

Revenue softness and Indirect channel contraction drove a top-line miss vs consensus, but adjusted EPS outperformed on cost control and sequential gross margin recovery .
The strategy is pivoting decisively to heritage products, omnichannel consistency, and outlet experience upgrades; initial social metrics and VB.com new-customer growth are encouraging leading indicators into holiday .
Balance sheet and liquidity remain manageable but tighter: cash $15.2M with $10M ABL drawn; inventory is trending lower, which should support future margin health and reduce liquidation reliance .
External headwinds are non-trivial: ~$11M annualized tariffs and a pressured consumer (notably in outlets) argue for continued caution; management is not providing guidance .
Near-term catalysts to watch: holiday performance of the “100 bag”/heritage relaunch, Outlet 2.0 pilot results, and traction with Anthropologie and other unnamed wholesale partners .
For modeling, anchor on cost-discipline and margin improvement trajectory rather than near-term sales acceleration; note estimates are based on minimal coverage (1 data point), which may exaggerate “beats/misses”* .

Appendix: Additional Context (Prior Two Quarters)

Q1 FY2026: Revenue $51.7M; GAAP EPS ($0.66); Adjusted EPS ($0.36); Gross margin 44.1%; comps (25.0%); inventory $99.2M; no ABL borrowings; guidance suspended .
Q4 FY2025: Revenue $100.0M; GAAP EPS ($1.69); Adjusted EPS ($0.30); Gross margin 45.0%; comps (17.5%); year-end inventory $110.0M; no ABL borrowings; FY2026 guidance initially provided (later withdrawn) .

Relevant press releases around Q2: reporting date announcement (8/28/25) .

Vera Bradley, Inc. (VRA)·Q2 2026 Earnings Summary