Greetings, and welcome to the Vera Bradley, Inc. Fourth Quarter Fiscal 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mark Dely, Chief Administrative Officer. Thank you, sir. You may begin.

Good morning, and welcome, everyone. I'd like to thank you for joining us for today's call. Some of the statements made during our prepared remarks 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 most recent Form 10-Ks 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. We undertake no obligation to update any information discussed on today's call. I will now turn the call over to Vera Bradley CEO, Jackie Ardrey. Jackie?

Good morning, everyone, and thank you for joining us today for Vera Bradley's fourth quarter and full-year earnings call. The fourth quarter remained challenging as we continue to navigate the early stages of Project Restoration, our comprehensive strategic initiative to transform our business model and brand positioning. While we experienced sequential improvement, particularly in our Vera Bradley direct channel, which performed overall at expectations, I acknowledge that our transformation is taking longer than initially anticipated. The migration of business from stores, particularly in our outlet locations, to e-commerce represented an unexpected shift, creating near-term profitability challenges that we are actively addressing with targeted strategies. We remain confident in our strategic direction, and we continue to make refinements based on selling data and customer feedback. Most of these shifts are occurring in our product and pricing strategy. We will be expanding our heritage products, reducing assortment at higher price points, as well as bringing back regular deliveries of licensed products and some styles our customers are asking for. I'm also excited to share that we have a strong pipeline of new business development in our indirect channel that will begin to bear fruit later this year. Before we dive deeper into our results, I'd like to share an important development. In an effort to concentrate our resources on strengthening Vera Bradley's position in the marketplace aligned with our long-term transformation, yesterday, we signed a purchase agreement to sell the Pura Vida business. The sale of Pura Vida represents a significant step in our strategic evolution. We expect to close this sale by the end of the first quarter. I'll now provide more detail on our quarterly performance and our strategic initiatives before handing it over to Michael Schwindle to discuss our financial results in greater depth. We registered fourth quarter revenues of $100 million. Our direct channel performance was mixed. E-commerce revenues were roughly flat to last year, a significant sequential improvement from Q3, while our branded outlet stores experienced declines in both traffic and conversion. During the quarter, we observed a significant divergence in customer behavior that provides valuable insights for strategic tactical adjustments as we move forward. While our outlet business faced challenges due to macroeconomic pressures and our concentration of customers with household incomes under $75,000, we are seeing promising growth in higher income segments. Most notably, we achieved approximately 10% growth among customers aged 18 to 34 with household incomes above $100,000. This shift highlights both our current challenges and future opportunities as we execute our transformation strategy. We are also encouraged by accelerating new customer acquisition, a trend that has continued into this year. Our early cohort analysis reveals that new customers are making higher value purchases compared to historical averages and spending more on repeat purchases. We remain committed to diversifying our customer base for the long-term health of the Vera Bradley brand. Our Q4 gross margin was 45.7%, below our expectations and down from 52.3% last year. This variance reflects a mix shift across our store and online channels in response to a strategic decision to adjust promotional and pricing strategies to strengthen our value position and address market conditions. Moving forward, we're implementing a refined testing framework for both promotional cadence and pricing architecture to optimize the balance between customer engagement and margin protection across all channels. We introduced expanded price points across both branded and outlet channels, which successfully increased customer engagement. This approach delivered particularly strong results in gifting items under $50, cosmetic cases, and our Wicked collection product line. Inventory optimization remains a cornerstone of our strategic transformation. Building on our previous discussions, we have implemented comprehensive changes to our inventory approach across sourcing, procurement, and management. Our merchandising and planning teams have established rigorous inventory controls across all channels by focusing on three key initiatives: curating tier assortments, implementing strategic key item management, and enforcing more disciplined buying practices. Additionally, our enhanced material sourcing capabilities now enable us to rapidly adjust to evolving consumer preferences. These efforts have already yielded measurable results, with year-end inventory 7% below prior year levels. Looking ahead to fiscal 2026, we're targeting a further 10% reduction in overall inventory. This disciplined approach will increase our operational agility to respond to customer trends while accelerating our product innovation cycle to deliver greater newness to the market. Looking ahead, we're steadily decreasing our business reliance on clearance and liquidation activities, a natural byproduct of our stronger inventory management practices. Over a multi-year period, we anticipate several structural changes in the business, some of which have already begun. While we may experience some reduced sales velocity, this will be partially offset by improved gross margins as clearance and liquidation become structurally smaller components within our business model. This shift will affect both our direct channel and our indirect channel, which has historically relied more heavily on high levels of discounting. Having said that, a particular Q4 highlight was our performance on Target Marketplace, which delivered exceptional results and is informing our new channel initiative to be where she shops. This digital marketplace success demonstrates the importance of engaging customers in their preferred shopping environments. We are developing a clearer path forward for our business designed to diversify our distribution and strengthen our partnerships. I look forward to updating you on our progress in future calls. Shifting briefly to our indirect channel, in Q4, the primary headwind we faced stemmed from a reduction in specialty accounts and strategically reduced liquidation sales. Our Urban Outfitters collaboration was a standout performer in Q4, as we deepened our strategic partnership with more exciting things to come. Urban Outfitters' customer base aligns well with our more diverse and younger target demographic, creating mutual value for both Vera Bradley and Urban Outfitters. I'd like to highlight our data-driven product refinements based on sales analytics and customer insights. Our Q4 rollout of adjusted styles has showcased encouraging results, outperforming the balance of our assortment. These targeted modifications, including longer and wider straps and zipper closures, directly address specific customer requests we've identified through our feedback channels. This successful initial response validates our agile adaptation strategy, and we're accelerating implementation throughout Q1 and Q2. This early market validation not only confirms our customer-centric approach but also demonstrates our ability to rapidly translate feedback into tangible product improvements that drive results. Partnerships and collaborations continue to be a vital component of our strategic approach. Our Wicked collection was extremely successful, not only driving significant revenue but also attracting new high-value customers within our target demographic range. This success reinforces our belief that licensed properties remain an important customer acquisition tool for Vera Bradley, and we have several exciting properties in our pipeline for both our outlet and branch channels this year. As I mentioned, I'm excited about our partnership and collaboration pipeline that will begin to take shape later this year and next year. We are in advanced negotiations with several major retailers and expect to finalize these partnerships in the near future. While we can't disclose specific names today, these opportunities represent significant potential for brand heat and expansion, new customer acquisition, and revenue growth. We look forward to sharing more details about these exciting developments in the coming months as these partnerships are finalized. Operational improvements continue to be a core focus as we strengthen the fundamentals of our business. As discussed in prior calls, we're making great progress on enhancing our operational acumen within the organization. We've sharpened our attention to cost structure through targeted improvements in store operations, distribution center efficiency, marketing effectiveness, and overall cost management. As Michael will discuss, we met our internal SG&A expectations and we anticipate further improvements this year. I'm also pleased to report that our previously announced efficiency initiative for fiscal 2026 remains on track, and we expect to deliver cost savings of a minimum of $20 million this year. Importantly, in light of the uncertain macro and consumer environment, we will continue to manage the Vera Bradley business prudently. Our capital spending will be down significantly in fiscal 2026, and we anticipate improved working capital and other operational efficiencies to result in a higher cash position at year-end compared to last year. We enter the new fiscal year in a strong financial position with no debt, $30 million in cash, and liquidity of $75 million, providing flexibility to operate our business transformation while maintaining a solid financial foundation. As we look ahead to fiscal 2026, we see this as a year of stabilization requiring patience and continued optimization. Vera Bradley is on a journey to long-term health, and the steps we are taking today are critical to our successful path forward. This year, we will focus on stabilizing our customer file and beginning to grow from a healthier place. Marketing spend, diversification, and optimization serve as critical inputs to our success. Generating brand heat and relevancy is a key focus for fiscal 2026. Recognize that when our business was at its peak, placements in thousands of doors across the country drove brand awareness. Today, our approach has evolved to leverage social media, strategic collaborations, and targeted wholesale door expansion. Exposure on mass retailers where people shop with modernized and relevant products will be a critical part of our brand revitalization. I want to emphasize that our leading indicators show we're on the right path. Although lagging indicators are developing more slowly than we'd like, we have confidence that the adjustments we're making are the right ones for long-term health. The green shoots we've discussed today all validate our strategic direction. We remain committed to returning Vera Bradley to long-term profitable growth and creating value for our shareholders. I want to thank our teams across the organization for their continued agility and flexibility as we march forward on the Vera Bradley transformation journey. With that, I will pass it to Michael Schwindle to provide a financial review of our fourth-quarter results and our outlook for fiscal 2026. Michael?

Thanks, Jackie. Good morning, everyone, and thank you for joining us. I'll open this up for questions in a few minutes, but first, I want to cover the results for the quarter as well as briefly discuss our guidance for fiscal 2026. For the sake of clarity, all the numbers I am discussing today are non-GAAP and exclude the charges outlined in today's press release. A complete detail of items excluded from the non-GAAP numbers as well as a reconciliation of GAAP to non-GAAP can be found in that release. Additionally, our prior year was a fifty-three-week year versus a normal fifty-two-week year. This extra week in the prior year fourth quarter and full year contributed approximately $6 million in net revenues and increased diluted earnings per share by approximately one cent. Where appropriate, I will be highlighting our performance on a fifty-two-week basis on this call. So for the fourth quarter of fiscal 2025, our consolidated revenues totaled $100 million compared to $133.3 million in the prior year fourth quarter. Our net loss for the fourth quarter totaled $8.3 million or 30 cents per diluted share compared to net income of $3.5 million last year or 11 cents per diluted share. In terms of segment performance, Vera Bradley direct segment revenues for the current year fourth quarter totaled $76.5 million, a 17.8% decrease from $93 million in the prior year fourth quarter. On a fifty-two-week basis, however, the fourth quarter direct revenue decreased approximately 17.5% with the largest impact in the outlet channel, which continued to experience similar challenges to prior quarters. Total revenues year over year were also impacted by eight new store openings and six store closures since the prior year fourth quarter. Vera Bradley indirect segment revenues for the fourth quarter totaled $9.9 million, a 39% decrease from $16.1 million in the prior year fourth quarter. The decrease was related primarily to a decline in specialty and key account orders, and a decrease in liquidation sales, as well as end-of-quarter third-party shipping delays, which caused some shipments to slip into the first quarter of our fiscal 2026. Pura Vida segment revenues for the fourth quarter totaled $13.6 million, a 44% decrease from $24.2 million in the prior year fourth quarter, primarily related to declines in e-commerce and wholesale revenues, partially offset by retail store growth associated with two new stores. In response to rising digital marketing costs that began in late third quarter last year, the Pura Vida team has been focused on marketing efficiency, as well as digital marketing diversification. Non-GAAP fourth-quarter gross margin totaled $45.7 million, or 45.7% of net revenues compared to $69.6 million, or 52.3% of net revenues in the prior year. The year-over-year margin rate decrease was driven by sales channel mix, which also contributed to increased outbound freight costs, along with excess inventory reserve adjustments in the Pura Vida segment. Non-GAAP SG&A expense totaled $57.9 million or 57.9% of net revenues compared to $65.7 million or 49.3% of net revenues in the prior year fourth quarter. The $7.8 million decrease in expenses was primarily due to cost reduction initiatives along with lower variable expenses. We have discussed in prior updates our focus on strong operating discipline, and we're pleased with the progress the organization is making in building this discipline. We continue to closely examine areas of our organization for process and cost opportunities, and our teams are increasingly diligent and attentive to cost management. Our fourth quarter non-GAAP consolidated operating loss totaled $12 million compared to an operating income of $4.1 million in the prior year. Now turning to the balance sheet. Our year-end cash and cash equivalents totaled $30.4 million. We continue to have no borrowings on our $75 million ABL facility at quarter end. Total year inventory declined 7%, to $110 million compared to $118.3 million at the prior year fiscal year-end. We have been intensely focused on redefining how we approach inventory acquisition and management, as Jackie noted earlier, and will continue to take strategic actions in our merchandising and sourcing processes to improve both product flow and quality. These efforts have already impacted meaningfully our ability to navigate this fiscal year and will continue to drive improvements as well as reduced inventory levels into the future. During the fourth quarter, we repurchased approximately $600,000 of common stock or approximately 113,000 shares, bringing the total repurchase for the fiscal year to approximately $21.8 million. In December 2024, our Board of Directors approved an additional $30 million repurchase authorization, which commenced in December fiscal 2025 and extends for three years. The company does not currently have plans to purchase under the 2024 share repurchase agreement but anticipates utilizing it in the future, depending on the company's cash position. Finally, I'd like to go through our guidance for fiscal 2026. As a reminder, all forward-looking guidance is on a non-GAAP basis. This guidance also excludes results for Pura Vida pursuant to our sale announcement this morning, and for all periods, we'll exclude Pura Vida except where I note otherwise. As Jackie noted in her comments, we continue to make progress in our transformation journey. In light of economic trends and consumer uncertainty, however, we expect continued business headwinds for this coming year, similar to what other retailers have noted in their business updates. Our customer continues to experience wide-ranging economic concerns, which have caused shifts across our channels that we are actively addressing with targeted strategies. For the full year of fiscal 2026, we expect consolidated net revenues of approximately $280 million. This broadly reflects continued consumer challenges, especially in the first half of this year. As a result, we expect to see sequential improvement as we move through the year. We expect consolidated gross margin for the year of approximately 52.5% compared to 50.3% in fiscal 2025. The gross margin change is the result of product margin improvements along with lower supply chain costs from continued structural cost reductions. Consolidated SG&A expense is expected to be approximately $155 million compared to $178.2 million in fiscal 2025. Year-over-year SG&A expense reductions are the result of continued structural cost reductions across many aspects of our business along with decreased variable costs. We remain very dedicated to sound business discipline, and we are pleased to see the financial and operational improvements that have come with organizational simplification and focus. All this is expected to result in a consolidated operating loss of approximately $6 million compared to an operating loss of $16.9 million in fiscal 2025. Consolidated diluted earnings per share are expected to be approximately a 15 cent loss. Fiscal 2025's non-GAAP diluted earnings per share totaled 64 cents on a total company basis, which does include Pura Vida. In terms of capital spend, we expect approximately $4 million this year versus $10 million last year. This reflects a much tighter focus on our business, particularly around technology and infrastructure investments. In terms of inventory management, we continue to sharpen our focus around disciplined buying and open-to-buy management as we mentioned earlier. This heightened focus will help drive our improvements from last year and will enable us to make further inventory reductions of approximately 10% in fiscal 2026, our third year in a row of structural inventory reductions. As a result, we expect an end-of-year cash balance of approximately $40 million. That concludes our formal remarks. Christine, can you open up the line for questions?

Thank you. We will now be conducting a question and answer session. One moment please while we poll for questions. Thank you. Our first question comes from the line of Eric Beder with SCC Research. Please proceed.

Good morning, Jackie, Michael. In terms of the digital marketplaces, you mentioned Target. Is the focus here to add more of those, and what are you seeing in the differences in terms of purchasing and customer base from those items?

So, Eric, it's a great question. We're definitely seeing on Target Marketplace that the customer doesn't look very different, and what we're selling is pretty similar to what we're selling. I think it's again, as I mentioned, about being where the customer wants to shop and meeting her where she is. And that has been a really great development. The Target Marketplace has been extremely successful and much better than our expectations. So it's helped us pivot into an indirect strategy that we think is going to bear fruit later this year.

And in terms of collaborations, how should we be thinking here this year in terms of the flows of those collaborations?

The Wicked collection is more what we call IP or intellectual property. It's a bit more under our control in terms of negotiating with those properties and launching them. We did pull back a little with the IP collections. But we're seeing that IP can bring us a very desirable customer, and our existing customers love our IP group. So you'll definitely see a more robust assortment this year and next year. We've got a really nice pipeline even through next year that will really help us bring new customers to the brand.

How do you balance the old customer and new customer to make both of them happy?

We watch our selling very closely in terms of age ranges, new versus existing to understand her better. As for the straps and zippers, we made a mistake. Some of the styling we replaced was just not something she wanted. As we see those styles come in, they're outselling what the previous styles were. We're hopeful that the customer is resilient and sees we're listening. She definitely told us she hears us and we gave them what they asked for as quickly as we could.

Okay. Good luck with the rest of the year.

Thank you, Eric.

Our next question comes from the line of Daniel Harriman with Sidoti. Please proceed with your question.

Jackie, Michael, just curious about your ability to pivot again if something else should come up. And with the revenue guide, should this be seen as managing the business through a conservative lens and the macroeconomic headwinds?

Thanks, Daniel. The pivots we've had to make were expected given the amount of change. Pivoting is not necessarily a bad thing. When you shake up a strategy, there are things you have to adjust. The team is excited and embracing the change. I do think our consumer is stressed right now, and that is reflected in our guidance. Especially in our outlet channels, we have customers under $75,000 household income not coming to stores right now. We're working on strategies to improve performance within the four walls as well as marketing programs. We expect this year to continue to be tough, and we are making all adjustments based on customer feedback and selling results.

That's really helpful, Jackie. Thank you so much.

Thank you.

Thank you. We have reached the end of the question and answer session. Ms. Ardrey, I'd like to turn the floor back over to you for closing comments.

Thank you all for joining today. We look forward to talking to you next time on our next call. This concludes our remarks today. Thank you.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.