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What happened

Shares of Vera Bradley (NASDAQ: VRA), the maker of women’s handbags and accessories, were moving higher Wednesday after the company reported better-than-expected results for its fiscal 2024 second quarter.

As of 12:08 p.m. ET, the stock was up 11.1%.

So what

For the quarter, which ended July 29, revenues slipped 1.7% to $128.2 million as sales at Pura Vida, its recently acquired bracelet brand, were down 3.6%, and Vera Bradley sales dipped 1.2% due to store closures. Comparable store sales were up slightly.

Investors were more impressed with results further down the income statement. Gross margin improved from 49.4% to 55.6% as the company benefited from lower freight expenses and the sell-through of previously reserved inventory. Adjusted earnings per share, meanwhile, increased from $0.08 to $0.33.

“We are very pleased with the meaningful year-over-year improvement in second-quarter earnings, driven by significant gross margin expansion and successful expense reduction efforts,” CEO Jackie Ardrey said in the earnings press release.

Now what

For the full fiscal year, the company forecast revenue of $490 million to $500 million. In fiscal 2023, it posted $500 million.

Management also projected a gross margin in the range of 53% to 53.8%, up from 51.4% last year, and said it expects earnings per share of $0.57 to $0.65, up from $0.24 last year.

Based on those forecasts, Vera Bradley stock looks cheap, trading at a forward price-to-earnings ratio of just 12.5. While the stock has historically struggled, the company’s turnaround efforts seem to be taking hold. If it can move toward revenue growth and continue improving margins, the stock should keep moving higher.

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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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