Analyst: Vera Bradley may face inventory issues
NEW YORK (AP) — Shares of Vera Bradley tumbled more than 7 percent Monday after an analyst started coverage of the handbag and accessories company with an "Underperform" rating, saying it may face inventory issues.
THE SPARK: Ike Boruchow of Sterne, Agee & Leach gave Vera Bradley a $22 price target along with the "Underperform" rating.
THE ANALYSIS: Vera Bradley had an order error in the third quarter that led to $15 million in excess inventory. Boruchow said in a note to clients that he expects inventory will grow at a faster pace than sales in the fourth quarter and in 2014's first quarter because of the error.
"Management believes the inventory consists of popular styles that will eventually sell through to customers; however, when looking back at Vera Bradley's last inventory slip-up (less than three years ago) we see reason for caution as a choppy selling environment to start 2013 could be difficult to navigate with heavy inventories," Boruchow wrote.
SHARE ACTION: Vera Bradley Inc.'s stock dropped $1.86, or 7.3 percent, to $23.51 in afternoon trading. Over the last year, the shares have traded between $18.91 and $38.49. The stock is down 2 percent so far this year.