Vera Bradley reports Q3 revenue decline of 11.7%, but Project Sunshine shows early signs of progress in transforming brand and operations.

Our collective expertise and passion will deliver the results our customers, shareholders and communities expect from Vera Bradley and we are off to a promising start. Importantly, we have now branded the work of our Strategy and Transformation Committee and our five strategic pillars as Project Sunshine Anchoring on Reclaiming Vera Bradley's joyful optimism while fueling operational excellence Project Sunshine has been successfully cascaded to our entire organization and we are galvanized as a team around these mission critical objectives at every level. First, we are sharpening our brand focus, leveraging our joyful and authentic brand DNA through innovative product relevance and storytelling to reconnect with our loyal customers while engaging new audiences ensuring consistent messaging across all consumer touch points. Second, we are resetting our go to market approach by transforming our product planning, promotional and inventory decisions through data led insights to create more productive assortments supported by integrated marketing. Third, we are rewiring our digital ecosystem to optimize performance across all digital touch points from social media and VB.com to our outlet, online presence and emerging social commerce platforms, ensuring clear brand identity and channel roles supported by cohesive storytelling for customer acquisition and retention. Fourth, implementing Outlet 2.0 under the umbrella of a broader reinvention of our physical retail to develop a more brand enhancing and productive outlet experience. Given the importance of this channel to our business, this aligns with our efforts to create cohesive customer experiences across all digital and brick and mortar channels. And finally, we are reimagining how we work by building critical new capabilities and aligning our organizational structure, operating model and culture for sustainable future growth. Before diving into our progress on each of these five transformation initiatives, I would like to briefly discuss our results for the third quarter. We registered revenues of $62.3 million, 11.7% below prior year. This compared to a 24.6% decline during the second quarter. Revenues in our Direct business segment were $49.7 million, 5.3% below prior year compared to a decline of 16.2% in the second quarter. Importantly, we achieved sequential improvement in our key metrics in nearly all Direct segment channels, highlighted by positive comparable channel sales in our brand channels that have been product led and have continued for five months, extending from back to school through the Black Friday weekend. Additionally, we are making progress on improving profitability and cash management through more disciplined pricing and promotional strategies. In summary, while we recognize there's still significant work ahead, these early wins in our Direct segment give us confidence that our focused approach to product innovation, brand storytelling and operational excellence is moving Vera Bradley in the right direction. We remain committed to building upon this foundation as we continue executing our transformation strategy. Now let me dive a little deeper into each of these five transformation initiatives, the progress we have made and the impact it is already having on our business. Strategic Initiative Number one Sharpening Our Brand Focus as we continue our Project Sunshine transformation, we are fundamentally reshaping how Vera Bradley operates. We lost track of what made Vera Bradley special and unique and what customers loved about us. We became indistinguishable from other brands and over reliant on promotions with an aging customer base. We are now moving to recapture our joyful, authentic DNA that our customers love while attracting new generations through innovative products and compelling storytelling. As we continue to sharpen our brand focus, we've developed new brand guidelines that are both modern and authentic to who we are. We are being intentional about what Vera Bradley represents. We are feminine, creative, cheerful, whimsical, joyful, fun, colorful, approachable, high quality and smart value. Equally important is what we are not. We are not trying to be luxury, high fashion or sophisticated in ways that make us seem exclusive, intimidating or too expensive to our customers. This clarity in our brand identity is helping us reinforce the unique and differentiated positioning that made us successful to begin with and sharpened how we show up and communicate with consumers. We need to stay true to the joyful, functional and accessible brand that our customers fell in love with while ensuring we remain relevant and compelling to new generations. This brand clarity has already been informing our product development, marketing campaigns and customer experience across all touch points and we believe this authentic approach will help us reconnect with our core customers while attracting new ones who are seeking the joy and optimism that only Vera Bradley can deliver. This is the market wide space that only Vera Bradley can own. As we continue to execute our Project Sunshine strategy, we remain focused on what our customers truly value about Vera Bradley. Our research confirms that customers are drawn to three core pillars that define our brand promise. First is joyful functionality, the thoughtful organization, lightweight materials and practical designs that make daily life and travel easier for our customers. Second is our distinctive patterns and color palette, those signature prints and border iconography that allow our customers to express their individuality and optimism in ways that no other brand can deliver. And third is smart value, providing high perceived quality at an attainable price point. This is not just about promotional pricing, but about making our customers feel smart about the investment they are making. As we continue our transformation journey through Project Sunshine, I want to emphasize how our approach differs fundamentally from our previous Project Restoration initiative. We are building from our DNA, not rebranding, leaning into Vera Bradley's distinctive heritage in cotton color prints, joy and craft Rather than trying to emulate other brands, this time we are focusing on both new and existing customers and engaging them through lifestyle and needs. Rather than trying to grow only with new customers and moving loyal shoppers to outlet channels, our strategy is focused on a realistic, disciplined and sustainable build rather than an overnight turnaround. Most importantly, we are carefully integrating data and insights into every decision from product development and pricing to storytelling, using results and customer understanding to drive our decisions. We are also fundamentally changing how we work with clearer roles, cross functional alignment and shared incentive. Designed for peak performance, this disciplined customer centric approach gives us confidence that we are building the foundation for sustainable, profitable growth while staying true to what makes Vera Bradley special. Beginning with product, which has been our primary focus to date, I'm pleased to report that we continue to see momentum in several areas that give us confidence that Project Sunshine is moving in the right direction. Building on the success of our back to school business highlighted by product wins across iconic backpacks and lunch bags, Q3 results were positively impacted by the return of additional iconic styles and proven heritage inspired prints and border iconography including the Vera Tote and Glenna Satchel, the original 100 bag and our Patchwork Rachel Ditze and Mistletoe Lattice prints. Our refocused investment in cotton was also a key driver of performance during Q3. Our shift to a social first marketing approach is also delivering measurable results, driving new customer acquisition on VB.com, while while significantly expanding our social media reach. We're thrilled that our initial orders of the original 100 bag sold through across the majority of SKUs. At the same time, our social campaign including the New York City Rockettes drove new consumers to purchase on VB.com the hundred bag is also attracting a younger customer, achieving more than twice the penetration of Gen Z customers than we currently have across the business on other products. Our collaboration with Anthropologie also garnered significant social media impressions and the customer response to the product demonstrates our ability to reach new customer segments and has fueled additional collaboration plans for Spring, Summer and fall winter of 26 for spring summer 26, we have made a larger commitment on the original 100 bag with more depth and exciting new prints and colors. In addition to relaunching the iconic Hathaway tote that can be reversed inside out, bringing joy to our customer with value added design and delightful function. It comes in three sizes including a crossbody. These products will be supported by strong integrated marketing. So far, the feedback from our teams and key wholesale accounts has has been very encouraging. Next Up Resetting our Go to Market Approach as part of our comprehensive Project Sunshine Transformation, we are fundamentally updating our go to market approach to deliver what our customers truly need and value. We are taking action across six critical areas. First, we're rationalizing our SKU count and making bigger commitments focused on hero styles that resonate with our consumers. Second, we're clarifying our Go to Market process and channel assortment strategy to ensure the right products reach the right customers through the right channels. Third, we're implementing integrated social first marketing to support our hero styles, building on the success we've seen with campaigns like our Back to School initiative with a joyful and nostalgic tone. Fourth, we're revamping our inventory management and planning capabilities to improve turns and and reduce excess stock. Fifth, we're driving pricing and promotion governance to protect margins while delivering smart value to our customers. And finally, we're building robust analytics and business intelligence capabilities to inform data driven decisions. This represents a complete rebuilding of the engine that turns our creativity into commercial results and we are already seeing early positive indicators from these efforts and in our sequential quarterly improvements and enhanced operational discipline. Next we are aligning Next Rewiring our Digital Ecosystem we are aligning our digital ecosystem to drive growth and meet our customers where they shop. While digital is already a significant part of Vera Bradley's revenue and profitability, it should operate as an interconnected flywheel with each channel fueling momentum for the next while also helping to create a seamless customer experience. A well connected ecosystem builds exponential value and each campaign, interaction and conversion adds to the flywheel. The goal is to create a connected experience powered by shared data, unified storytelling and coordinated execution. We see this as mission critical for our transformation and are investing the necessary capabilities and resources to bring this to Life now. Outlet 2.0 as part of our comprehensive Project Sunshine Transformation, we are making considerable progress on our Outlet 2.0 initiative, which represents a fundamental shift in how we approach our Outlet Channel strategy. Building on the pilot program we launched during the holiday season, Outlet 2.0 is designed to elevate customer experience while maintaining our smart value proposition. The enhancements include a curated, more focused assortment with an initial 35% SKU reduction, strategically adding new brand product from our heritage and select IP collections. We have introduced elevated visual merchandising elements including mannequins, light boxes and brand fixtures that hero our signature color pattern and lifestyle stories. Additionally, we have refreshed our marketing elements with lifestyle imagery and product storytelling infused with the color and femininity that defines Vera Bradley. Our enhanced selling experience incorporates updated training, improved in store tools and personalized selling spaces designed to add on sales. We are taking a disciplined test and learn approach with ongoing results tracking from our Q4 learnings informing our future rollout strategy. This transformation. Moves us from a discount focused model to a smart value curated experience that reinforces brand equity while driving conversion and profitability. Reimagining how We Work as part of our fifth strategic initiative under Project Sunshine, we are fundamentally reimagining how we work to build the agile, responsive organization needed to capitalize on Vera Bradley's iconic brand positioning. We're shifting from what I call a relay race mentality where work is passed between functional silos to operating like a crew team where every function moves in rhythm toward the same goal. This transformation involves reimagining our organizational design and operating model, evaluating key processes to unlock efficiencies and simplify work, and ensuring we have the right skills, capabilities and roles in place to support our key growth initiatives and new processes. We're not just talking about efficiency improvements, we're building the foundational capabilities that will enable us to move faster, make better decisions, and execute with the precision that our customers and shareholders expect. This organizational evolution is critical to our success and through Project Sunshine, we're actively engaging our entire organization along this journey to ensure we have the collective expertise and passion needed to deliver sustainable results. We are pleased with the progress we are making with Project Sunshine and expect the cumulative impact of these initiatives to continue to positively impact the momentum of our business going forward. To sum up, we're refocusing the brand on our heritage of joy, color and authentic connection through innovative products and compelling storytelling that resonates with both our loyal customers and new generations of consumers. We've deepened our customer understanding through enhanced research, segmentation and our new Customer Intimacy program, which is already informing our product development and marketing strategies. Our commitment to reducing discounts while protecting margin continues to show progress as we've improved inventory terms, streamlined our SKU count and enhanced our planning and forecasting capabilities, all while shifting to a smart value positioning anchored in quality rather than constant promotions. We are removing organizational silos by redesigning our processes and leveraging data to drive actionable insights for decision making across all functions. Additionally, we're driving a more sustainable business model by leveraging technology to improve efficiency, reduce manual tasks, and increase our agility to address the changing market landscape. Throughout this transformation, our unwavering focus remains on profitability, cash generation, and building a sustainable cost structure that supports our long term growth objectives. These foundational improvements are already contributing to sequential improvements we've seen across our channels and we remain confident these five strategic pillars represent a holistic transformation that builds on our distinctive brand heritage while positioning Vera Bradley for long term success in an evolving retail landscape. And finally, I would like to update you on our CEO search. We continue to be focused on finding the right future leader for Vera Bradley. It's a critical decision for the business that we want to get right. While we do not have any updates currently, we are moving forward rapidly with Project Sunshine and shoring up key leadership positions across the business, including the recent appointment of our Chief Brand Officer. With that, I will turn the call over to Marty for a detailed financial review and then we'll be happy to take your questions.

Thanks, Ian Good morning everyone and thank you for joining us. I have a few brief comments to make about our performance for the quarter 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. For the third quarter of fiscal 2026, our consolidated revenues totaled 62.3 million compared to 70.5 million in the prior year. Third quarter net loss from continuing operations for the third quarter totaled negative 8.3 million or negative $0.30 per diluted share compared to negative 3.7 million last year or negative $0.13 per diluted share. Results from continuing operations for the quarter were significantly affected by a 5.9 million inventory write down related to the brand's strategic product shift toward cotton and heritage prints, along with a 4 million write off of television media credits which were acquired to support the company's project restoration efforts and won't be fully utilized. With the focus on digital and performance marketing, the previously mentioned charges had a negative 35 cent impact on diluted earnings per share for the quarter. In terms of segment performance, Vera Bradley Direct segment revenues for the current third quarter totaled 49.7 million, a 5.3% decrease from 52.5 million in the prior year. Third quarter comparable sales similarly declined 5.8%, which represents our third quarter of sequential comparable sales improvement. Initial efforts to improve products, along with a return back to school resulted in positive brand comps and overall positive growth versus last year. Total revenues year over year were also impacted by five new store openings and 14 store closures since the prior year. Third Quarter Vera Bradley indirect segment revenues for the third quarter totaled 12.6 million, a 30.2% decrease from 18 million in the prior year. Third Quarter the decrease. Was related primarily to a decline in specialty and key account orders which were partially offset by increased liquidation sales. The quarter's performance also marks a sequential improvement relative to the preceding quarter. Third quarter gross margin totaled 26 million or 41.7% of net revenues compared to $38.4 million or 54.5% in net revenues in the prior year. The decrease in year over year margin rate resulted from the previously mentioned inventory write down as well as additional duty expenses partially offset by pricing improvements. Excluding the inventory write down, gross margin for the current quarter was 51.2% which represents our third consecutive quarter of gross margin improvement. SG&A expenses totaled 37.4 million or 16.0% of net revenues compared to 43.6 million or 61.8% of net revenues for the prior year. Third quarter the 6.2 million decrease in expenses was primarily due to lower compensation expenses and other cost reduction initiatives which were partially offset by the previously mentioned meteor credit write off third quarter operating loss from continuing operations totaled negative 11.1 million or negative 17.8% of net revenues compared to negative 5 million or negative 7.1% of net revenues in the prior year. Operating loss excluding the previously mentioned inventory reserve Immediate credits write off totaled negative 1.2 million or negative 1.9% of net revenues. Continuing our efforts from last quarter, we are focusing on store performance, inventory levels and website performance in order to improve product availability and navigation of the online outlet website. We are pleased with the trajectory of the improvement made to date, evidenced by sustained sequential comp improvements across three of our four direct channels and continued cost efficiency. Focus the team continues to review our processes and actions to identify opportunities for new approaches to how we work. Now turning to the balance sheet cash and cash equivalents at the end of the quarter totaled 10.7 million. We had borrowings of 10 million on our 75 million ABL facility. At quarter end, our third quarter inventory decreased year over year by 24.3% to 82.9 million compared to 109.6 million at the end of third quarter last year. Furthermore, our inventory balance has declined 9.3% from the end of fiscal 2025 and remains lower even after accounting for the inventory reserve recorded this quarter. We recognize that inventory performance is a key opportunity for our business and are focused on developing strategies to improve our turns over the next 12 months we made good progress on aligning our receipts with sales expectations this quarter, along with continued focus on assortment optimization to reduce SKU counts, while developing strategies to reduce lead times, enabling faster response where we see consumer excitement for our products. In closing, we remain committed to disciplined expense control and inventory management during this turnaround period. We are confident that these actions, combined with the execution of our strategic initiatives, will lead to improved performance and enhanced shareholder value over the long term. This concludes our presentation and we can now open it up to questions.

Thank you. We'll now be conducting a question and answer session. If you'd like to ask a question at this time, please press Star one from your telephone keypad and a confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Thank you. In one moment while we poll for questions. Thank you.

Thank you. Our first question is from the line of Eric Bader with SCC Research. Please proceed with your question.

Good morning.

Good morning. Good morning, Eric. Hi. So.

A lot of changes this quarter, more rolling into Q4. When we roll into 2026, what should we be thinking about as the kind of the key signpost that Project Sunshine is starting to have an even greater impact than it had in Q3 and into Q4?

Yeah. Thanks, Eric. Look, I think from day one I've really believed that product is really the key. And as you know, this was the first thing that we really began to focus on. We were able obviously to have a more limited impact on product for back to school and holiday, although some successes. And really the first sort of window where we've been able to have a significant impact on product will be spring summer of 2026, really starting with product that will flow between January and July. What gives us a lot of confidence is that our sort of strategy around refocusing on the reinvention of iconic styles with critical delightful function, returning heritage inspired prints and the border iconography, reinvesting back into cotton, which is now north of 50% and it was below 40% and sort of much more qualitative and impactful IP products, as well as really focusing on sort of occasions that we can own like back to school, spring break, Mother's Day, travel, all of that. What we see and what we're doing is working. And so we're entering really into the spring summer season with confidence that knowing that we've been able to make bigger Commitments into the things that we really believe are going to work. And I believe that success with product will be the most important thing that can turn the business and frankly is. The sort of positive experience that we're having in our brand channels right now I believe is primarily product led.

Okay. When you look at outlet 2.0.

Yes.

In some ways.

We visited two of them and it's a great concept. It also in some ways provides for some consumers who have lost kind of their full price store a way for them to still see and touch kind of full price items. I'm curious what's kind of been the response to consumers to seeing kind of full price items in the Outlet 2.0 stores? And when you look at it, does that become a bridge given that a lot of, you know, there's been a lot of closures in the full price stores? Yeah, no, great. Listen, great question. I'll first talk about outlet 2.0 and then I think I'll talk more broadly about sort of distribution and how customers can access the full price product and brand experience. Look, on outlet 2.0, it's early days. We launched seven pilot stores this holiday season. I would say that the qualitative feedback that we are getting from our teams as well as customers has been very positive. Positive about the overall store environment. Positive that it's more brand enhancing. Positive about the customer journey in the stores with much clearer destinations and heroing of lifestyles and different products. Stronger visual merchandising also supported by in store imagery. And what we have seen again at a very, very high level and recognizing it's early. Is even with sort of the very strong focused assortment editing of the assortment of SKUs. We'Ve seen sort of performance in line with stores that. Have 35% more SKUs. We're also seeing a positive impact on the profitability of each customer that comes in the store. So we're leveraging the traffic that we do have because it's going to take longer to get traffic to come back with stronger conversion. And we're also seeing that the more time that these outlet 2.0 stores have to work through the new system, the better they're performing. And frankly, we're already seeing certain things in outlet 2.0 that we feel we can take to other stores without having to do the full sort of outlet 2.0 update where we can get some wins. We also are planning to do more follow ups. We're going to be visiting a couple of the stores with the team next week. We're also planning to do some customer intercepts. So it's very much a test and learn approach to your question. Specifically about full price product. We're seeing very encouraging reaction to customers on the limited assortment of heritage product and select IP that we put into these stores. We think there's potentially more potential there. But again, that's I think, improving. Impacting, sort of the impact we're having on the profitability of each customer more broadly on how customers can really access our brand proposition. Clearly, VB.com today is probably our most important vehicle and we're continuing to really upgrade the customer experience there to really represent the best of what Vera Bradley can be. And we also are looking very carefully at our overall full price brand fleet. But we have to get more confident, I think, in the business before we start making big commitments there. So in the meantime, we're leveraging our outlet channel. And also we are putting another big focus onto our wholesale accounts, especially our specialty accounts. I mean those, as I said in the first call last quarter. It'S specialty retail and wholesale that actually are the ones that helped to build Vera Bradley into a nationwide brand. And we still feel very strongly that with those strong relationships we have there, which we're focused on building, that they can continue to play a very, very important role in our transformation.

Yeah, I agree. I also think there's somewhat of a lagging indicator, but we'll see. Final question. I'd say two questions here. One on inventory. It was a really impressive job reducing inventory. How should we be thinking about the opportunities, I guess to capture working capital and get more productive going forward with the inventory. And you know, how long of a journey do you think it can be to go a little find that younger customer that historically it seems, takes a few years to start moving that kind of average age down? Thank you.

Yeah, great question. I'll let Marty handle the first part on the inventory and then maybe I can talk about sort of your question about the younger customer.

Thanks for the question, Eric. On inventory, we definitely see the opportunity for improvement there and to improve our from a productivity standpoint. And today our turns are less than 2, but we have seen, you know, we're starting to see the improvement in turns this quarter and we think that we're on track through our planning processes and other activities we're taking on to kind of move that into the graphics greater than 2 to 3 range over the course of the next 12 to 18 months.

Great. And look, Eric, I think on the younger customer, you're right. It will take some time. And look I think first and foremost we have a significant opportunity in front of us to reengage with our loyal customer who is still the biggest and most important part of our business. We have an opportunity to reengage them with the brand, bring back lapsed purchasers. I think also get them used to buying better products that really invoke what I like to think of as the OG Vera Bradley with, with not only the iconic styles and function and prints, but also bringing back some of that craft. If you look at the hundred bag where we have that sort of iconic quilt through lining, the reversible tote which we're introducing for spring is really phenomenal. It's basically a two in one bag. And so we have that opportunity. But I think where we're now focused. Besides product. With the recent appointment of Melinda as our Chief Brand officer, is now also starting to shift some of that focus into the marketing and the digital commerce, which are both areas where I believe we have significant opportunity to reinforce the great work we're doing on product with great storytelling that can and targeted storytelling that can really. Spark the emotion of younger customers. We saw in a limited way with the 100 bag, which we weren't able to have as much product as we wanted to have. We didn't have quite all the right focused marketing. But even that, we saw twice the penetration of Gen Z customers on that bag that we have across other products in the range. And that for me is super encouraging. And I think the speed at which we can travel is all about what we see and how agile we can be at leaning into things and making them bigger.

Okay. All right, great. And good luck for the rest of the holiday season.

Thank you.

Thank you. As a reminder, if you'd like to ask a question, you may press Star one. Thank you. At this time, ladies and gentlemen, this does conclude our question and answer session and will also conclude today's conference. We thank you for your participation. You may now disconnect your lines and have a wonderful day.