[Management View]
Vera Bradley announced significant executive transitions, with Ian Bickley assuming interim leadership as executive chairman following CEO Jackie Ardrey's planned departure in July. The board has formed a new strategy and transformation committee to accelerate operational and strategic initiatives. The company is focusing on cost controls, brand relevance, and wholesale expansion while acknowledging shifting customer demographics and demand patterns.

[Outlook]
The company has suspended its prior guidance due to leadership changes and significant uncertainties in the consumer environment. Planned marketing campaigns aim to increase penetration in the 34-year-old demographic, with a July launch targeting holiday and back-to-school periods.

[Financial Performance]
Revenue for Q1 2026 was $51.7 million, down from $67.9 million in the prior year first quarter. Net loss from continuing operations (non-GAAP) increased to $10 million from $600,000 in the prior year's first quarter. Comparable sales declined 25%, driven by lower store traffic and conversion. Gross margin (non-GAAP) contracted to 47.5% from 51.3% in the prior year's first quarter.

[Q&A Highlights]
Question 1: Can you provide more details on the strategic initiatives you mentioned, particularly in wholesale expansion?
Answer: We have quickly built momentum behind our strategy and are successfully diversifying our wholesale accounts with new relationships. We shipped our order to Costco in Q1, launched on Urban Outfitters marketplace last week, continued to deliver strong revenue increases on Target marketplace, and have a healthy pipeline of new partnerships for the rest of the year, including exclusive products for Anthropologie. These targeted partnerships are based on data insights from both our current customer and lookalike prospective customers and have guided our efforts and outreach.

Question 2: What are the key factors driving the decline in comparable sales and gross margin?
Answer: The decline in comparable sales was primarily driven by traffic and conversion declines in our full-line and outlet stores, as well as an overall channel shift from our stores to our online sites. The gross margin decline was driven by the channel shift from stores to online sites, which also contributed to increased outbound freight costs. Customers continued to demonstrate pricing sensitivity, evidenced by significantly higher clearance penetration despite similar inventory levels and promotional positioning.

Question 3: How are you addressing the changes in customer demographics and demand patterns?
Answer: We are seeing encouraging shifts in our customer file, with recently acquired new customers comprising 45% of our active twelve-month file versus 30% last year. These new customers have a different age and income profile and are showing slightly different product affinities. We are leaning into these insights to inform future assortments. Our new social marketing campaign launching in July will target the 34-year-old demographic and run through the holiday season, featuring a return to nostalgia and fun while highlighting the longstanding emotional connection of the Vera Bradley brand.

Question 4: Can you elaborate on the cost reduction initiatives and their impact on SG&A expenses?
Answer: Non-GAAP SG&A expense totaled $38.3 million or 74.2% of net revenues, down from $44.7 million or 65.7% of net revenues in the prior year first quarter. The $6.4 million decrease in expenses was primarily due to cost reduction initiatives along with lower variable expenses. We continue to closely examine all areas of our organization for process and cost efficiencies, and these efforts have been pivotal in building strong operating discipline.

[Sentiment Analysis]
The tone of the management was cautiously optimistic, focusing on strategic initiatives and cost controls amidst challenging market conditions. Analysts' sentiment was mixed, with concerns about declining sales and margins but interest in the company's strategic shifts and new customer acquisition efforts.

[Quarterly Comparison]
| Key Metrics | Q1 2026 | Q1 2025 |
|------------------------------|------------------|------------------|
| Revenue | $51.7 million | $67.9 million |
| Net Loss (Non-GAAP) | $10 million | $600,000 |
| Comparable Sales Decline | 25% | - |
| Gross Margin (Non-GAAP) | 47.5% | 51.3% |
| SG&A Expense (Non-GAAP) | $38.3 million | $44.7 million |
| Operating Loss (Non-GAAP) | $13.6 million | $9.4 million |
| Cash and Cash Equivalents | $11.3 million | - |
| Inventory | $99.2 million | $101.8 million |

[Risks and Concerns]
The company faces significant uncertainties in the consumer environment, leading to the suspension of prior guidance. The decline in store traffic and conversion, along with increased outbound freight costs, are impacting profitability. The ongoing executive turnover adds to the uncertainty.

[Final Takeaway]
Vera Bradley is undergoing significant executive transitions and strategic shifts to address challenging market conditions and changing customer demographics. While the company faces declining sales and margins, it is focusing on cost controls, brand relevance, and wholesale expansion. The suspension of prior guidance reflects the uncertainties ahead, but the new strategic initiatives and marketing campaigns targeting younger demographics offer potential for future growth.