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Buy Recommendation: Vera Bradley (VRA)

Buy Recommendation: Vera Bradley (VRA). 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

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Buy Recommendation: Vera Bradley (VRA)

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  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

  6. Stock Price History - 12 Month

  7. Earnings Surprise

  8. 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

  9. How do we know it’s undervalued? • Many analysts believe fair value is around $30 • P/E is 12.85 while Industry Average is 24.36 • S&P is 17.82 • P/Projected Earnings is 10.45 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 RETURN ON EQUITY (%) VRA IndAvg S&P 500 Q4 2012 35.45 22.39 13.11 Q4 2011 46.70 21.90 14.55 Q4 2010NA 20.15 13.57

  11. Recommendation • Purchase 250 shares at limit price of $21.75 Total purchase of $5,437 • 1 yr Target of 28.43 • Buy at 21.75 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)

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