Good morning, ladies and gentlemen and thank you for standing by. Welcome to the Vera Bradley First Quarter Fiscal 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. (Operator Instructions) As a reminder, today’s conference call is being recorded. I would now like to turn the call over to Stacy Knapper, Vera Bradley’s Senior Vice President and General Counsel. Please go ahead.

Good morning and welcome everyone. We would like to thank you for joining us for Vera Bradley’s first quarter earnings conference call. Some of the statements made on today’s call during our prepared remarks and 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 Form 10-K for the fiscal year ended February 1, 2014 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. The company undertakes no obligation to update any information discussed on the call. I will now turn the call over to Vera Bradley’s Chief Executive Officer, Rob Wallstrom.

Thank you, Stacy. Good morning everyone and thank you for joining us on today’s call. With me today are Kevin Sierks, our EVP, Chief Financial Officer; Sue Fuller, EVP, Chief Merchandising Officer; and Julia Bentley, our Vice President of IR and Communications. While our first quarter revenues were modestly below our expectations, we were able to post earnings per share of our guidance due to better than expected gross margin and expense performance. However, we continue to face a difficult environment and one that is providing much more challenging than we anticipated just two short months ago. Direct segment sales are weaker than we expected. Sales from our existing customers have been relatively stable, but our traditional patterns and products simply are not attracting enough new customers to our brand. And overall traffic is down substantially. In our indirect segment, while orders from our major accounts are up, orders from our specialty gift channel retailers are down significantly on a year-over-year basis. Until we make meaningful changes to our product offering and marketing initiatives, we don’t expect the sales trends to substantially improve. And as a result, we are lowering our revenue and EPS projections for the fiscal year. As we have noted, this will be an important year of transition and transformation for Vera Bradley. We believe that the product distribution and marketing initiatives we have previously outlined as part of our long-term strategic plan are absolutely the right ones for the future. We are seeing some very encouraging signs from some of our initial product tests and we will be testing and rolling out more new products later this fall. We have been able to take time out of our product development and production cycles. And as soon as we see solid positive results on our product test…

Thanks Rob and good morning. Our net revenues totaled $113.5 million for the first quarter compared to $123 million in the prior year first quarter. Net income totaled $6.6 million or $0.16 per diluted share for the current year first quarter compared to net income of $9.2 million or $0.23 per diluted share last year. Our revenues of $113.5 million fell modestly below our guidance of $116 million to $120 million. Sales were below our expectations primarily due to weaker than expected comparable store sales performance in the company’s retail stores, lower than expected orders from our indirect specialty retail partners and a shortfall at the annual outlet sale. Direct segment revenues totaled $73.4 million, essentially flat with $73.7 million in the prior year first quarter. In our retail stores year-over-year net revenues grew 5.9% reflecting the opening of 16 full line and three outlet stores during the past 12 months, which was partially offset by a comparable store sales decline. Total company comparable store sales fell 9.4% for the quarter, which includes a 14.4% decline in store sales and a 3.2% decline in ecommerce sales. Our comparable store revenues were negatively impacted by year-over-year declines in traffic and underperformance of our product offering. Severe winter weather also affected store traffic during the first two months of the quarter and negatively impacted comps by at least 100 basis points. The direct segment accounted for approximately 65% of total net revenues in the first quarter versus 60% in the prior year first quarter. We had 88 full line stores and 16 outlet stores at the end of the quarter. Unfortunately as Rob noted, the indirect segment of our business continues to deteriorate. Indirect segment revenues decreased 18.9% to $40 million or from $49.3 million in the prior year first quarter primarily…

Thanks, Kevin and good morning everyone. While we have a very loyal customer base and a dominant share of the market in the cotton casual handbag and travel accessories business, we still own a narrow percentage of the total market share in these categories when all fabrications are included. We believe that we have a relevancy issue and that we are not attracting enough new customers with our existing products. To grow, we must become more relevant by modernizing and elevating our products to appeal to a wider array of customers. This will take time. But today I would like to share a bit of the progress we are making. As a reminder our product strategy is four pronged and includes an elevated product assortment, a focused product assortment, brand extensions and gross margin expansion. Let me update you on each of these. First, we are elevating our product assortment by adding aspriational halo products and extending our price offerings which is currently very narrow. Over time I believe at least 10% of our products will be in this halo category. In May we introduced a faux leather black and white laser cut tote and matching wallet. This tote has consistently been in our top selling SKUs. And we believe it is attracting a new customer to the brand. We subsequently released three other laser cut color combinations. Based on the success we will continue with our best selling black and white color combination and we will add several other seasonally appropriate color combinations later this fall. The success of this first faux leather launch makes us even more optimistic about the late August rollout of our collection of high quality faux leather handbags, totes and accessories. These goods will be available on verabradley.com and our full priced stores and…

Thanks, Sue. Let me update you on the second key component of our strategic plan on multi-channel distribution opportunities. Our goal is to shape Vera Bradley into a tightly integrated multi-channel business by growing our direct distribution channel, including full line stores, factory outlet stores and e-commerce, rightsizing and stabilizing our gift channel and further developing our department store and other indirect channel relationships. During the first quarter, we opened four full line stores located in New Orleans, Akron, Detroit and Houston and we will open another Houston location in the second quarter. We will add 8 additional stores in third quarter bringing our total for the year to 13. These new stores will be pretty equally divided between the Northeast, Midwest, and Southeast. As we have previously noted, we believe we will add an average of 20 to 25 new stores per year going forward expanding into essentially untapped geographies like the West Coast. We still believe that we can have about 300 full line stores over time. We are working with the design firm to create our new prototype full line store. Our goal is to modernize our stores while maintaining the warmth and feel that are associated with Vera Bradley. We believe the new design will better showcase our products making the merchandise the focal point of the store instead of the store itself and that the new design will resonate with new customers and demographics, while retaining the Vera Bradley familiarity for existing customers. We expect to launch the new prototype, including the new picture design early next year. In the meantime, later this fall, you should see a big difference in the way we are merchandising our products. Our visual presentation will be de-cluttered and instead of a sea of patterns, our traditional cotton quilted…

(Operator instructions) And we will take our first question from Edward Yruma with KeyBanc.

Hi, good morning and thanks for taking my questions. I guess first on the specialty or on the indirect performance, how much of the sales shortfall was due to kind of exiting doors due to the change in the order cadence and how much of it was kind of actual weakness in reorders from the accounts you want to continue moving forward with?

Yes. Good morning Ed. Most of it does relate to the comp doors. If you think about as we exited the year we had about 3,100 accounts now we have about 3,000 accounts. So the majority of that shortfall really did relate to the comp doors.

Got it. And as it relates to liquidated inventory I think you quoted as a number for the second quarter, you had also kind of guided to overall liquidation of inventory for the year in the last call, how should we think about your inventory liquidation particularly in light of the sales shortfall?

We expected to liquidate a little bit more in the first quarter than we did. As we talk to third party liquidation companies, we realized we could probably get better margin and better cash by selling it through our direct channels our self. So what you will see we are going to test this year as we are opening our hands – a little less than a handful of popup outlet stores. And we are going to try to sell our liquidation through that channel as opposed to third party. We announced in – I believe in the fourth quarter that we will sell up to $12 million of liquidated products. We lowered that slightly because of the shortfall in Q1. But nevertheless, we still expect to liquidate between $5 million and $10 million of the products through the course of the year.

Got it. And a final question on the Macy’s introduction is that the kind of final number for the remainder of the fiscal year or is there an opportunity to add more doors heading into holiday? Thank you.

Thank you, Ed. There are – there is an opportunity to add more doors. We are just making sure that we are working with Macy’s to rollout our stores in a very prudent manner and really getting the initial sell-throughs on the initial orders that are in the store before we develop the rollouts. But we are in discussions about additional stores this year.

Great. Thanks so much.

Our next question comes from Evren Kopelman with Wells Fargo.

Alright. Thank you. Good morning.

Good morning Evren.

Good morning. My question is also on the indirect side, the change in guidance for the full year is pretty significant, can you give us a little bit more color on I think it’s about $30 million reduction relative to your guidance just a couple of months ago, can you give us a little bit more color. And I am not sure if I heard it right, but how many accounts do you plan to have by the end of this year and then next year maybe that would be helpful too?

We expect to continue to have modest declines in the number of accounts. We haven’t stated exactly where we expect to end the year, but we do have that baked into our guidance. As far as why the additional reduction from the gift channel really relates to our fall early order period. So that’s one of our largest EOPs for the current year. Part of that hits Q2 and part of that hits Q3. And keep in mind fall is the second biggest time of the year for us from a sales perspective. So we already took those orders from the indirect side and those orders came in a lot lighter than we expected. We frankly used that experience to predict the sales for the remainder of the year, so that’s really what we expect for Q3 and Q4 as well as we roll into winter EOP and spring EOP that hits in January. So we really forecasted that segment according to how the fall EOP results came in which were obviously negative Evren.

Okay, that makes sense. On the more positive side the indirect margin looks like you are up in the quarter, can you talk about the drivers of that and what we should expect for that indirect margin for the rest of the year?

Sure. They have done a pretty good job paring back expenses. So a few things that we challenged our self with this year it is sales meetings and our premiere meetings on how we can do those more cost effectively. So a fair amount of that expense came out this year and you are seeing that in Q1. Also what you are seeing is a reduction in some compensation just as it relates to forecasting the sales in about 20 or so percent of the compensation for the sales consultants is based on sales performance. And as our sales performances came down we have taken down compensation in Q1 as well. But as far as the rest of the year, we don’t separate the operating margin percentage for indirect, but we have done a fairly good job managing that percentage in light of the sale fall.

Okay. And then lastly on the comp, so just to clarify you used to report comps without ecommerce and going forward it looks like you will be including ecommerce, maybe just for the timing for the full year, can you tell us what is your comp expectation for the full year without ecommerce just we have a comparable?

Yes, I sure can. So without ecommerce we are expecting to be kind of in the high-single digits to very low double digits decline.

Decline for the full year. Okay, great. Well, thank you very much good luck with everything.

Thank you.

And we will take our next question from Randy Konik with Jefferies.

Hey. I guess couple of questions. I guess first can you give us some I guess compare and contrast how you think about the wins, you have been able to have with the Dillard’s department store, how similar or different could we expect Macy’s to be? Within Macy’s, these shop-in-shops, however, is going to happen, can you give us some perspective on SKU count in those doors? And what percent would be like historical product or core product versus you sounded pretty excited about the faux-leather and the leather and some of the new products that you are coming out? So just kind of perspective of what you are going to be selling into Macy’s and is that different from Dillard’s? And I guess, when – I guess the other question I have is like more high level and it’s when you think about all the things you have been saying, the monochromatic wins, the faux-leather wins etcetera and you are wanting to reduce the new pattern introductions down to 8 or what have you? If we kind of use this, use Cadillac as an analogous to this type of story here. I guess, what we know about Cadillac is they totally changed out their product line, they got rid of the El Dorado, the Seville, the Deville, what have you, as they got wins with new product styles to open up the addressable market and go with different, almost different customer base. How do you think about that Cadillac type story in terms of what’s going on in Vera Bradley and in terms of what’s going to happen for long-term product trajectory at the business? Thanks.

Thanks, Randy. I will try to answer your questions and feel free to give us a follow-up if I miss part of it, but specifically you talked about Dillard’s and Macy’s to start with. And with Dillard’s, it’s been a very solid relationship and we recently just had a meeting with them and then we are very excited about our new product launches and very aggressively gone after our new leather program, which is very exciting to see. With the Macy’s approach as we look at these 70 locations, we are doing a very focused launch here over the summer really focusing on the back-to-school categories, which are completely appropriate for that timeframe though much more historical patterns, but also having solid flow through in terms of some of the microfiber coming in, but we don’t have the new fabrications in during the Macy’s launch, because they are not out yet. Most of these new fabrications will launch at the end of August going into September and we are still finalizing our future orders with Macy’s as we speak. But the initial launch will really be about focusing on back-to-school and back-to-school assortments. But we believe long-term, the Macy’s opportunity is significant, we just want to work together with them hand in hand to make sure that it’s a very profitable model for both of us. As we talked about the Cadillac example, what we are doing here, what we see currently when we look at our customer base is our loyal customer spend just holding up. So, even as we are having comp store decreases and seeing traffic decreases, we are seeing that traffic and the sales decrease coming out of new customers. So, what we believe is that we really are seeing a need to have more relevancy…

Can I follow-up?

Please.

Yes, great. So, I guess two follow-ups would be, in the Macy’s, how Dillard’s were started with a test and then rolled out to the entire I guess chain of stores. Could we expect if the Macy’s goes okay or goes well that there could be partnership that this gets, your products get rolled out into the entire 800 plus door chain of their business? And then separately or on top of that, do you view Dillard’s and Macy’s as kind of like the stopping point on the potential partnerships or could there be additional partnerships with other department store nameplates like a Bloomingdale’s or Nordstorm is my first follow-up? And I guess the second follow-up is with all the success going on with these new products. There is got to be a point, where the consumer thinks about or is just lost with the idea of over assortment and I heard the idea of cutting the SKU count 30% to 35%, how should we be thinking about how these products or this prime story of keeping core, but bringing new and being merchandised through the store, through the indirect channels of distribution with these partners. How will it look? How will the story of product look to the consumer? Thanks.

Okay, great. Thank you. Couple of things, one with Macy’s, we are excited about the Macy’s relationship. And I think what’s exciting is that we share a customer who is excited about both brands. And when we speak with Macy’s, they talked about that they have a high desire from their consumers, they were doing consumer research, but this was one of the top brands that the consumer was looking for. We do believe there is an opportunity to rollout to more Macy’s stores. We do know that if you look at the Michael Kors or Coach distribution to Macy’s, it’s the vast majority of the Macy’s store. So, we think that there is more opportunity in the long run. We just need to work through that, because just like we did in the Dillard’s relationship we want to get it in, we want to build a profitable model before we roll it out to all stores, but I would expect expansion as we go forward. The second part of your question is, are we going to stop with Macy’s and Dillard’s and the answer to that will be no, we will continue to look for the appropriate department store partners. As we look at what type of department stores we want to expand into with the type the department stores that carry really competitive brands. So, when we look at people like where is Michael Kors, where is Coach, where is Kate Spade, those are the type of department stores that we would be looking for additional relationships. We just want to make sure that we do the department store expansion in a prudent manner making sure that our existing partners grow, while we are expanding our distribution, but we are doing that. In terms of timing – in…

Got it, okay. That’s super helpful. Thank you.

Thanks, Randy.

And we will take our next question from Mark Altschwager with Robert W. Baird.

Hi, thank you. This is Blair Pearson in for Mark. I had a follow-up question on the indirect fall EOP. Last quarter, you had talked about testing a new timing or reversing the order for these indirect accounts, does that have an impact on the fall EOP for those accounts, you could comment on that?

Yes, no, it didn’t. We did not change the order cycle yet. We are putting conversations with them about changing the order cycle. There has been a lot of receptivity, but one of the reasons we can change it yet is Sue and her team are making such dramatic improvements in our whole sourcing timeline. And when we have to get orders into the system, we are trying to kind of lock in all of those changes first, before we would reset the indirect order cycle. So, we expect to reset that order cycle sometime late this year going into the beginning of next year.

Okay. And then any other color, you could provide on commentary you are getting back from them as to why that fall EOP is so weak or is it macro pressure is on them or is it just their desire for the particular product offering that you have currently?

Okay, great question. First of all, what we are hearing from our indirect partners is that they have been oversaturated with patterns. They have – they are working through retired product and some of the product that has been marked down and therefore they are reducing some of their future orders just to keep their inventory balance. So, we have been working with them through that process. What’s been very encouraging is we just brought in almost 20 of our top indirect partners into Fort Wayne in the last couple of weeks and had them really walk through the strategic plan and walk through the merchandise assortment and we continue to get very, very positive comments about the new merchandise that’s coming through. Some of the new product that we talked about in terms of the faux-leather wasn’t available during our EOP. It’s really post this current EOP process. And so we are expecting as we get the new product in stores that it will begin to turnaround from what we saw in our current EOP.

Okay, great. Thanks so much.

And next we will hear from Steve Marotta with CL King & Associates. Steve Marotta - CL King & Associates: Good morning everybody. Thanks for taking my question. I heard during the prepared remarks the shortening of the product lifecycle, there were two 30-day segments in there I believe. So, it’s been shortened to 60 days, can you confirm that? Can you talk a little bit about where the product lifecycle is right now and where you think it can go? Where it’s been? Where it is now? And where you think it can go?

Yes. We were very pleased that we found two areas immediately to reduce our cycle time. First one was 30 days internally and that was really from streamlining processes and handoffs. And then from an external perspective, it was really working with the vendors to understand the visibility to their timelines from both the printing and manufacturing lead times and it was the other 30 days are split about 50:50 between where we found the lead time reduction. As we look forward, we are looking – we are anticipating another 30 days actually to take out of the cycle by early next year. Last time, when we spoke, we discussed the vendor portal that will be up and running by the end of this year, which will provide visibility, a two-way visibility between Fort Wayne, our China office and also to the vendor communities that we are anticipating big pickups there as well as raw material positioning and planning. And we think that there is additional time to be picked up. We have not quantified exactly what that looks like.

Just a couple of things that I would add to those statements, you talked a little bit about how will the overall process change? And there is actually a lot of things that are changing part of what Sue just articulated. But in the past since really we produced was pattern driven that when you looked at from the pattern development cycle all the way through the in-store, you were looking at a process that could take up to 18 months. So, part of what happened is we have been – as we introduced new fabrications, we are able to do things much quicker. So, what does that mean? What we have been able to do without print development, particularly as we get into faux and leather and some of these other fabrications that we already have kind of raw materials in the pipeline that we can develop new product much quicker though it could be six to nine months in terms of new product development in those categories as well as we are able now to chase much better than we were before as we are starting to get early reads. So, Sue and the team have really been working very hard to take significant timeout, but our different product categories will have very different lead times, because if we have to develop a pattern, the pattern development in and of itself add significantly to the lifecycle, which is another exciting part of our rebalancing going to about 40% solids. That product cycle will be significantly shorter. Steve Marotta - CL King & Associates: That’s very helpful. Two follow-up questions, more housekeeping, you are expecting low double digit comps in Q2 is that accurate in your direct channel. And the second is what is the actual average, your initial SKU per Macy’s store? Thanks.

Yes, so it’s correct in terms of low-double digits from a comp perspective in our own doors. And then from a SKU perspective in Macy’s is that what you are asking? The square footage will be much lower than Dillard’s stores to start, but we are still working on the number of SKUs that we are going to actually put in Macy’s. But we expect to only have about 100 square feet to start, but obviously that’s something we have build on over time. Steve Marotta - CL King & Associates: And what is your average currently in Dillard’s?

It’s between 300 and 400. Steve Marotta - CL King & Associates: It’s very helpful. Thank you much.

And next we will hear from Dana Telsey with Telsey Advisory.

Good morning everyone. Can you talk a little bit about as you have been seeing outlet business and you talked about liquidation I think it was originally supposed to be $12 million now its $5 million to $10 million, is the balance carried into next year, how do you see the positioning of the outlet stores going forward. And then in terms of the new products where will you be in terms of getting the product to where you want as you think for holiday and as you think through next year and how the difference in margin is on the new products versus the older product? Thank you.

Let me start with the liquidation, we do expect to liquidate somewhat less inventory this year. Keep in mind we did liquidate about $2.5 million though in Q1 through our own channel. So we moved about $1.5 million through our outlet sale which was a big success in terms of just moving liquidation products and then we moved a small amount on the web as well as in our outlet stores. We will continue as we look forward to have a clearance section with a high percentage off in our outlet stores. And we will move some liquidation products there. We are also planning on opening a few three or four popup outlet stores that will really be a test for us to be able to move the liquidation products in that manner as opposed to selling it to third party liquidators. As far as the margin profile when we did testing of our MFO products we had great success in realizing the higher margin on the MFO products. That will start to hit the stores in a big way anyway in Q3 and also in Q4, so that will help our margin profile. We expect that to be about 15% in the back half of the year. And then that will grow as we look into the following year. And then as it relates to product maybe Sue or Rob, do you guys want to touch on products.

We expect our new products I am sorry I just want to follow-up Dana you are talking about overall products or MFO specifically?

Overall products? Thank you.

Yes, right. So we expect to start to see the new products in a more substantial way towards the end of Q4. And obviously Q1 is when we are certainly ramping up our new product and making sure that it’s visible across all doors in all aspects. In terms of the products margin thus far on the new products that’s coming in relatively comparable to where we have been historically. And in some cases actually it’s slightly over our internal.

Thank you.

Thanks Dana.

And next we will hear from Neely Tamminga with Piper Jaffray.

Great. Good morning. This is Kayla Berg on for Neely. Just wondering if you could give us some more color on the inventory and how much of the Macy’s inventory is represented in your guidance. And then also for Sue just wondering if you talk about the new product initiatives for fall and the back half of this year, can you give us the sense of how the biometric testing is playing a role in this and whether it’s working, not working, any initial learnings you are seeing there? Thanks.

Sure. I can start with kind of – we look at retired products and we try to manage our retired products down. As you know especially Q3 of last year we kind of hit of our height of retired products as a percentage of total. Definitely not comfortable with where we are at, that’s the reason we are going to work to liquidate $5 million to $10 million this year. But nevertheless we continued to improve there. We have also because of the supply chain improvements, we have been able to reduce our orders this year and push our orders out closer to launch date which helps us a lot in terms of managing inventory risk. Specifically the Macy’s because we are going to be in 70 doors and the square footage will be only about 100 square feet. The inventory as it relates to Macy’s is a very small as a percentage of total. Obviously as we expand that relationship which we hope to do, the inventory related to that will grow.

Kayla, as it relates to the biometric testing and the way that we are continuing to utilize that, we did find that for our summer patterns that we did see a straight line trajectory in terms of the actual ranking of the patterns and according to the way that the biometric came out. One of the changes that we are making is we are actually testing, over-testing more patterns so that we can get a broader read and that will really start to take place in the second half of the year, but we will continue to utilize the information to inform. Obviously, it’s still an art and a science and the way that the patterns are picked, but we are in fact continuing to utilize the data as a reference point.

And we also utilized it in the fall season, we had a couple of patterns, one tested extremely well and one came in with a lower response that we really were able very quickly to reshuffle and bring the strong pattern forward and invest more in it as well as divest in the secondary pattern and move it out slightly. And that – those are the type of things that we can do with the biometric testing it really should impact our business positively as we move forward.

Great, thanks.

Our next question comes from Oliver Chen with Citigroup.

Hi, thanks. Regarding the way the cash flow statement is going to look this year, what does the guidance imply for free cash flow and is net working capital going to be neutral or source or use of cash? Also on all these initiatives, it sound quite exciting with respect to products, what is the timing from which quarter we will potentially return to positive comps and when will the materiality kick in, in terms of the mix impacts in which you can positive comp? Also regarding the comp situation, which comp lever do you anticipate having the most upside to as you inflect in the future? Thanks.

Let me start with cash flow and then we will get to those other ones, Oliver. But cash flow in the first quarter as you could see was very positive at $27 million, but if you look at the course of over the last couple of years, last year was a very high cash flow year for us namely because inventories came down fairly significantly in the back half of the year. But if you look over the year, it’s typically operating cash flow is right around $50 million. We typically have about $20 million of what I would say is normalized CapEx in the year, but this year it will be about double that because of the campus consolidation. So as much as we are not providing guidance for the cash flow for the full year, typically it’s around $50 million and we plan on spending about $40 million from a CapEx perspective, which would be free cash flow of about $10 million given how we pulled down results that could be a little bullish and maybe slightly lower than that, but we still feel pretty good about cash flow. Keep in mind, we have $81 million of cash sitting on our balance sheet as exited the quarter as well, so very liquid.

Yes. And as we look at the material input in terms of all the new product introductions, obviously we are very excited about the early test. The response from our retailers, the response from customers, it’s very encouraging as we look at fourth quarter, particularly late in fourth quarter we get up to almost 30% of our inventory investment as new. So that starts to become material and it’s able to begin to move on the performance of the company overall, but as we are looking at comps we are starting to move into next year to start to see more serious improvements, but so early it’s hard for us to determine exactly where that is. The other piece of our strategy that we are still in the midst of implementing is the marketing strategy. We are working on getting the CMO on board and really build out the marketing plan, because what we do know the number one metric we need to change is the new customer traffic into our stores. We have to get a new customer in. That will be the key one we are looking at. And then additionally, what we would expect is we get these new products in, in the higher price points then, that we will begin to see our average dollar sale increase. To-date, our UPT, our average unit retail, or ADS all that kind of stuff has remained relatively flat, that’s not been the issue, the issue has been getting a new customer in and that’s what we have to focus on and obviously of the new marketing strategy will be a key component of that. So, we need to get that ramped up. But we wanted to make sure we had great product first before we ramped up the marketing and we are excited about the product we have in the pipeline.

And specific to this year from a comp perspective, we do expect to be negative this year, but you can think about it as incremental improvement as we move throughout the year as we introduced the new product, Oliver.

Okay, thanks. Thanks for all the details. Best regards.

Thanks Oliver.

And next we will hear from Ike Boruchow with Sterne Agee.

Hi, everyone. Thanks for taking my question. I guess, Robert, you had said that 20 to 25 stores potentially as the run rate after we get out of this year, I just want to double check is that inclusive of 10 to 15 outlets or is that the total store number with outlets and full price?

That was just specifically the full price. And then the outlet stores were 10 to 15.

Okay, alright. And then just I guess from a high level I mean this business has been high teens, low 20s margins for – on average for several years, but there are some differences that are kind of taking place now as you look to ramp square footage growth and you kind of changed the mix of how your wholesale accounts look. How do – do you still think this is a high teens margin five years from now or do you think that the profitability will be a little bit less as you go into again more department stores and lay some more fixed costs into the retail base? Thanks guys.

We definitely believe that the operating margin the company should return to the high teens that’s what we have talked about in our five year plan and we feel very good about that. What’s been encouraging as we have identified areas that really help on that margin, for example the improvements in the sourcing and the production and our cost structure and we have been able to already get some wins there and starting through that process. We also believe that there is an opportunity to improve some of our existing expense base that we have been working to and making some nice progress again. So we do believe we will get there. The number one action we need to take in order to get there is to get the new products in, to get the comps going back in the positive direction but that’s most of the pressure right now, it has been on the declining comp base. So once we get that turned around in both our indirect and direct channels that will help us get back to those historical margins. I don’t believe there is anything in the model that would take us below long-term historical performance.

Yes, to Rob’s point we are deleveraging today because of our top line really and the opposite is true once we fix the comps and we expand distribution and then it will be pretty easy to start to leverage. So you will be able to see that once we turnaround the top line.

Okay, great. And then the comments about new customer acquisition is that broad based across all channels, are you seeing that more within the wholesale versus retail and is there anything you can add there?

What I would say I guess, its two ways. When you look at in the retail when you look at all of channels it is definitely a story across all three channels. New customer, so whether it’s in our full line stores or factory store or webs, all three of those have seen a decline in new customer acquisition. So from that standpoint if you look at our indirect channel, what I would say is two different things. One, if you look from a wholesale standpoint in our specialty gift channel we have been reducing more doors than we have been opening and so we haven’t been bringing the new there. We have heard from our indirect partners the same exact thing though that their existing Vera customer is still coming in but they are not attracting the new customer to the brand. And once it has been so exciting as we have been touring, been out there, going into our indirect partners showing them what we are doing with products they have things like the laser cut in store, they all are talking about that it’s bringing a new customer to the brand. And so I believe that the changes that we are making for the direct side are also going to positively impact the indirect side.

Got it. Thanks guys.

Thanks Ike.

That does end our Q&A session. I will turn the conference back over the Robert Wallstrom for any additional or closing remarks.

Thank you. Fiscal 2015 will no doubt continue to be very challenging year, but one of important transformation as we take the necessary actions to position us for the long-term. There is much to be done but we have made a lot of progress in just a few short months. The executive team is largely in place. We are seeing several green shoots in the product area that are making us even more optimistic about the future like the early success of the laser cut totes and customer reception to our smaller geometric patterns. And we are nearly ready to rollout our leather and faux leather collections. We are working on our new prototype store design, have an important new department store relationship with Macy’s and have made improvements on our ecommerce side. It will take time, but as we execute our product distribution and marketing strategies I believe we will improve our performance and enhance shareholder value over the long-term. In closing I want to say a special thank you to our associates. We have a great group of talented people, many of whom have been with us for a significant portion of the Vera Bradley growth cycle. I am so appreciative of the dedication, hard work, passion and collaboration of our team members as we go through this transformational period. Thanks to them I believe who we will emerge a much stronger company. Thank you for your interest and time.

That does conclude today’s presentation. Thank you for your participation.