Tickers in this Article: VRA, COH, M, OSTK, LIZ
Handbag and accessories retailer Vera Bradley (NYSE:VRA) went public last October and has since reported four straight quarters of rapid sales growth. The second quarter results released on Tuesday were no exception. Overall, Vera's operating results have been impressive. The only thing not to like is the lofty share price valuation, though several more years of breakneck growth could greatly enhance Very Bradley's investment appeal.

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Second Quarter Recap
Sales jumped 29.6% to $103.8 million. Vera Bradley sells its handbags and accessories at company-owned stores as well as through other retailers. It refers to the first sales channel as direct, and reported a sales advance of 46% to $47.9 million, or 46.2% of total quarterly sales. The increase consisted of the opening of 12 namesake stores and four outlet locations as well as impressive same-store sales growth of 10.5% at existing stores. The indirect channel consists of sales to more than 3,000 independent retailers, such as Macy's (NYSE:M) and Overstock.com (Nasdaq:OSTK). It saw sales increase 18% to $55.9 million, or 53.8% of sales.

Operating income jumped 137% to $22.9 million as cost of sales increased nearly 33% but SG&A expenses grew only 1.1%. Vera Bradley is now paying income taxes as a public company and, as a result, net income advanced only 48.7%, though this was still quite strong. Net income came in at $13.6 million, or $0.34 per diluted share. This came in ahead of analyst projections. (For related reading, see The 4 Rs Of Investing In Retail.)

Full-Year Outlook
For all of fiscal 2012, management projects sales between $438 million and $443 million that would represent year-over-year growth of 20% to 21%. It expects earnings per diluted share in a range of $1.32 and $1.35 for annual growth in the high single digits.

The Bottom Line
At the current share price, Vera Bradley remain richly valued at a forward earnings multiple of about 26. Overall stock market volatility means the multiple is down from close to 40 back in May, but still discounts a significant amount of future sales and profit growth. Of course, a few more years of 20% or greater sales growth would likely flow through to the bottom line and help justify the current lofty valuation. Rival Coach (NYSE:COH) is more reasonably valued at 16.6 while Liz Claiborne (NYSE:LIZ) is projected to report a loss for 2011, but neither has as appealing growth prospects as Vera Bradley. (For more on the forward earnings multiple, see How To Use The P/E Ratio And PEG To Tell A Stock's Future.)

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