Why Shares of Vera Bradley Inc. Soared on Wednesday

What: Shares of Vera Bradley soared on Wednesday after the company reported its second-quarter results, easily beating analyst estimates for both earnings and revenue. At noon Wednesday, the stock was up about 22%.

So what: Vera Bradley reported quarterly revenue of $120.7 million, up 1.5% year-over-year and about $6 million higher than analysts were expecting. Revenue from the Direct segment, which includes the company's stores and e-commerce business, grew by 7.7% year-over-year to $83.8 million, driven by new store openings. Comparable-store sales declined 15.2%, while e-commerce sales fell 14.7%. The Indirect segment shrank, with revenue declining 10.3% to $36.9 million.

Vera Bradley reported EPS of $0.15, down from $0.19 during the second quarter of 2014 but $0.04 better than analysts were expecting. Gross margin improved to 55.1%, up from 53.3% in the same period last year, while SG&A expenses increased to 47.5% of revenue, up from 42.6%. In the third quarter, the company expects revenue to decline slightly year-over-year to $120 million to $123 million.

Now what: Vera Bradley's second quarter was downright awful, with growth being driven by new store openings and comparable sales falling off a cliff. But with the stock price having already been cut in half so far this year prior to earnings, expectations were extremely low. Guidance for the full year, while still calling for revenue and earnings declines, was raised, which was enough to send the stock soaring.

The story at Vera Bradley is that things aren't quite as terrible as they could have been. That doesn't sound like a compelling reason to buy the stock.

The article Why Shares of Vera Bradley Inc. Soared on Wednesday originally appeared on Fool.com.

Timothy Green has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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