VRA
#Let me start with the wholesale channel.
We still saw softness in the specialty channel so their orders are still below what our expectations are so I wouldn't say we have stabilized that channel as of yet.
You will see in Q3 the Indirect segment we are expecting to be around flat.
Now we will expect that to come down in Q4 so that really relates to timing of our release for winter so there will be a little more sales in October than there will be in November.
So really if you think about the Indirect channel I would look at it Q1 and Q2 combined and then you will have to look at it Q3 and Q4 combined as well.
So we haven't stabilized that.
Though we are seeing some good progress with some of our big accounts on the wholesale side so we are very happy with that.
As it relates to factory, what we have seen out there with the competitive set is there is a lot of competition and the discounts have gotten really high in the factory channel and we expect that to continue over the course of the year.
So we have baked that into our gross margin guidance as it relates to factory being a little less than what we would have anticipated from a margin perspective.
As it relates to operating margin, <UNK>, on the Direct side of the business, we need to get the web growing again obviously and we're going to be able to leverage SG&A expenses when we get the web growing again in Q4.
As it relates to stores, really the same thing.
As we see positive comps in the stores, we will be able to leverage SG&A.
That is really where we can improve our operating margin.
On the Indirect side, you will see that it came down a little bit in the quarter but that was really because of the shipments in Q1 having about $2.5 million more sales in Q1 due to timing than Q2 on the specialty side.
So that impacted that operating margin on the Indirect side for Q2, so a little lower than what we would expect on a yearly basis.
But on the Indirect side, we don't expect huge gains from an operating margin percentage.
I think what we will be doing is trying to keep that relatively flat especially as we move into department stores where you have a little more challenges as it relates to chargebacks and returns and things like that.
So expect flat from the Indirect side generally speaking and improvement on the Direct side as we get sales going again.
In terms of our total campus business overall, generally about 30% of our business is in campus.
We were encouraged with the back to school performance, we had a lot of new product innovation that was brought in backpacks this year.
So as we added a lot more solutions into our backpacks, brought the laptop functionality and other functionality into the backpacks, we saw nice improvements.
So it is encouraging to see that category for us continue to be strong.
Sure.
So we do expect that number to be relatively flat this year but what we did do is we took some marketing dollars from Q1, Q2 and Q4 and we really put that into Q3 really to center around all the great marketing that is occurring in Q3 as it relates to the new marketing campaign, etc.
So there is about almost $2 million of additional spend as it relates to marketing going into Q3 versus last year.
And then you see a reduction really across the board in Q1, Q2 and Q4 related to that $2 million.
Also what you have in Q3 is the renovations so there is a lot of stores that we are redoing.
As <UNK> mentioned, about 16 of them in Q3 so a lot of, there is about a little over $1 million going into those renovations that will be expensed as well in Q3.
So that is really the $3 million of additional spend in Q3 versus Q3 last year.
I will have to look at that and get that to you, <UNK>.
But we spend about $38 million in total in marketing but I will have to get that to you if you want that.
But it is about $1.9 million of additional spend in Q3 but I'm not sure as a percentage what that represents offhand.
It varies across the store base.
There will be some stores that don't need as much work and we may not have to close much and then there will be some stores that will have to be closed a few weeks to get the work done.
But part of the reason we are doing it in September, October, <UNK>, is October is the smallest month of the year for us.
So that is a lot of the reason for the timing is just so we don't impact sales too dramatically.
That is why we have timed that to redo the stores in September and October versus doing them earlier during back to school period.
As you can tell, we are really excited about all of our rebranding initiatives that touch product, distribution and especially marketing.
Our team has been diligently and collaboratively working on these efforts for many months and we are all focused on superb execution as we finish out this year.
In the nearly three years since I've been at Vera Bradley, I believe we have never been better positioned to generate long-term growth.
Thank you for joining us today and for your interest, time and questions and we look forward to speaking to you on our third-quarter call in December.
