Vera Bradley Inc (VRA) Q4 2021 Earnings Call Transcript

Vera Bradley Inc  (NASDAQ: VRA) Q4 2021 earnings call dated Mar. 10, 2021

Corporate Participants:

Mark Dely — Chief Administrative Officer

Robert Wallstrom — President, Chief Executive Officer and Director

John Enwright — Executive Vice President and Chief Financial Officer

Analysts:

Mark Altschwager — Robert W. Baird — Analyst

Oliver Chen — Cowen and Company — Analyst

Eric Beder — SCC Research — Analyst

Steve Marotta — C.L. King & Associates — Analyst

Dana Telsey — Telsey Advisory Group — Analyst

Presentation:

Operator

Good morning, ladies and gentlemen, thank you for standing by. Welcome to the Vera Bradley Fourth Quarter and Fiscal Year End Conference Call. [Operator Instructions]

I would now like to turn the call over to Mark Dely, Vera Bradley’s Chief Administrative Officer. Please go ahead, sir.

Mark Dely — Chief Administrative Officer

Good morning and welcome, everyone. I’d like to thank you for joining us for Vera Bradley’s earnings call. Some of the statements made 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 most recent Form 10-K 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. We undertake no obligation to update any information discussed on the call.

I will now turn it over to Vera Bradley’s CEO, Rob Wallstrom. Rob?

Robert Wallstrom — President, Chief Executive Officer and Director

Thank you, Mark. Good morning, everyone and thank you for joining us on today’s call. John Enwright, our CFO also joins me today. I am proud of how our organization navigated through the last year. Our extraordinary culture and our loyal customers allowed our two lifestyle brands to not only persevere through the crisis, but the changes we made to respond to rapidly changing consumer needs during the pandemic made us stronger as we look to the future. Our brands were able to bring brightness to our customers during a very challenging year.

Despite an extremely challenging overall retail environment and a very difficult handbag and accessory market in particular, we delivered some best-in-class operating results. On a non-GAAP basis, our fiscal year operating income was nearly 90% of last year’s results, which was a strong performance in light of the unprecedented pandemic related headwinds. This performance was due to the strength of our two lifestyle brands and strong execution. Despite significant sales disruption, we had several financial successes during the year. Our e-commerce sales comprise nearly half of our total Company revenues for the fiscal year and our Vera Bradley brand e-commerce sales grew by nearly 50%. We expanded our annual consolidated gross margin rate primarily through product innovation, cotton masks and product collaborations and more full price selling.

We diligently managed our expenses and we ended the fiscal year with a solid balance sheet with ample cash and no debt. We are in a strong position to drive growth by continuing to invest in our two brands and to take advantage of additional acquisition opportunities over time.

Let me make a couple of comments on our fourth quarter performance. Our Vera Bradley segment fourth quarter revenue trends were similar to the third quarter excluding our mask business, which declined over 6 percentage points in the quarter to just over 5% to total sales and the fact that our stores were closed on Thanksgiving Day this year, which negatively impacted our sales performance by an estimated $3 million.

Additionally our Vera Bradley, e-commerce business grew over 30% for the quarter. Our Pura Vida segment non-GAAP operating income grew over last year’s fourth quarter while revenues were just below last year’s fourth quarter. We made the strategic decision to reduce discounting during the Black Friday period, which we estimate negatively impacted sales by about $6 million, but substantially improved gross margin performance and profitability and established a much healthier foundation for the future. And outside of the five-day period, Pura Vida’s e-commerce sales grew well over 40% for the quarter.

In fiscal 2021, we concluded the final year of Vision 20/20, our aggressive three-year plan to restore the business to a healthy foundation and we completed the first full year consolidated operations of Pura Vida. Despite the pandemic challenges, we strengthened our infrastructure and better positioned both the Pura Vida and Vera Bradley brands for the future. Let me highlight some of our major achievements for the year. For Pura Vida, Pura Vida’s e-commerce revenues increased nearly 15% for the fiscal year despite the pandemic and significant supply chains disruptions during the lockdown. Without these disruptions, we are confident we would have exceeded our 20% plus revenue growth target.

Average order values and conversion rates continue to grow year-over-year. Fiscal 2021 was focused on building a strong foundation of growth for Pura Vida. Using Vera Bradley’s global sourcing expertise, we significantly strengthened Pura Vida supply chain diversifying raw material sourcing and adding three additional production facilities in countries outside of El Salvador. We reexamined promotional activity and eliminated deep discounting, particularly around Black Friday, which led to gross margin rate improvement. We laid the groundwork for growth initiatives beyond jewelry to further expand Pura Vida’s lifestyle brand reach.

In the product area, Pura Vida continued to show strength as a lifestyle brand by successfully expanding into new product categories. Nearly 50% of our e-commerce business is now comprised of jewelry categories other than traditional string bracelets, such as metal, semi-precious stones, charms, and the engravable collection, underscoring the brand’s lifestyle appeal which will continue to be a key driver of growth.

Charity bracelets continue to be an important element of the Pura Vida lifestyle and a big draw for our cause-minded customers. To date, Pura Vida has donated over $3 million to more than 200 charities.

On the distribution front. We expanded on the distribution front by launching fulfillment capabilities in Canada and entering into a third-party agreement for the wholesale distribution of our products in Europe to complement our existing e-commerce business and fulfillment operations there. We added Pura Vida shop-in-shops to six full-line Vera Bradley stores and expanded our presence in wholesale partners with larger in-store presentations.

In the marketing area, our social media engagement is exceptional, remaining one of the most highly-engaged brands in the accessories space on social media, with over 2 million Instagram followers. We are consistently listed as one of the most, if not the most engaged jewelry brands on Instagram. TikTok has taken off with well over 200,000 followers, and a team of brand ambassadors and close to 150,000 micro influencers are an active part of the brand and a key part of our marketing strategy. We entered into an exciting agreement with Charli D’Amelio, the reigning queen of TikTok, which I will update you on in a few minutes. Earned media was strong with healthy returns on spend, and we doubled our SMS list from fiscal 2020 to well over 1 million active subscribers, which drove meaningful revenue.

Now for Vera Bradley. In the product area, we accelerated our robust fabric innovation pipeline to develop new offerings and build on our platform of sustainable fabrics. We quickly reacted to the consumer demand for personal protective equipment producing and selling millions of cotton face masks generating meaningful revenue and gross margin dollars. We continued another year of collaborations with several iconic brands including Crocs, Disney and Gillette Venus, introduced our signature mask and 1982 backpacks with Target and entered into a collaboration with Warner Brothers consumer products for the creation of our extremely successful Harry Potter plus Vera Bradley collection.

On the distribution front, we continued to strengthen and rationalize our store base. We opened six new factory stores and closed 13 underperforming full-line stores, ending the fiscal year was 75 full-line and 69 factory locations. We expanded and strengthened our partnerships with key online retailers, such as Amazon.

In the marketing area our loyal customer retention improved year-over-year, which was a testament to our customers loyalty and our enhanced digital and data analytics programs. Our customer service model and voice of customer program continue to drive industry-leading customer satisfaction scores despite pandemic-related disruptions. We successfully launched our new verabradley.com site, which allowed us to improve our customers online buying experience and offer enhanced content to guide purchasing. We added a number of key site capabilities to support customers who shifted to online purchasing during the pandemic. Our well-timed investments in customer data science and business analytics positioned us well as we navigated through the pandemic, allowing us to collect and analyze data and respond to customer changes and adjust marketing spend in an agile way.

Our targeted digital media efforts drove increased brand awareness and improved earned media with total media impressions up more than 170% to almost 10 billion for the year. We reinforced our commitment to be an ESG-driven organization. We continue to strengthen our community support and charitable efforts for the umbrella of VB Cares, particularly through the organizations that can profoundly improve the lives of women and children, including $1.4 million to the Vera Bradley Foundation Center for breast cancer research, over $630,000 of the Coronavirus Response Fund for nurses and donations to New Hope Girls, Blessings in a Backpack, and other causes.

Another aspect of our VB Cares focus is caring for our associates, and we were able to pay over $800,000 in bonuses to those serving on the front line during the pandemic. Our associate engagement scores also continue to be best-in-class, underscoring the engagement and commitment from our talented teams. We launched our Company-wide diversity and inclusion initiative, Project Quilt, to continue to enhance diversity, equality, and inclusion, focusing on three key areas, The Associate Experience, the Customer Experience, and the Community Experience.

In the information technology area, we completed Project Novus, our information technology platform conversion, migrating our e-commerce site to best-in-class-broad based solution and replacing our existing ERP POS business intelligence in order management systems with a cloud-based Microsoft D365. This conversion not only less than the complexity of our IT systems, but also provided us with a more efficient technology platform enabling our entire enterprise to make quick database informed decisions further enhance our customer experience and achieve our long-term growth objectives. Today, we are also announcing changes to the leadership structure of our Company and the Vera Bradley brand to position us for an exciting future.

As we conclude Vision 2020, we are embarking on the next important phase of our Company’s growth by enhancing our multi-brand portfolio, further expanding our ESG initiatives and driving additional value for all of our stakeholders. In order to strengthen our position and strategic vision as a purpose-driven, multi-brand, high-growth Company, we are realigning our organizational and leadership structure. Vera Bradley and Pura Vida are the two lifestyle brands currently under the Vera Bradley, Inc., umbrella. We intend to nurture and grow both of these brands and also look for other lifestyle brands that could strengthen our capabilities and diversify our revenue streams. While I will continue as CEO of Vera Bradley, Inc., each brand will have their own leadership team that will focus on building customer engagement and expanding revenue, while protecting and cultivating the distinct ethos and entrepreneurial spirit of each brand.

With the retail industry continuing its rapid transformation into a customer-centric, data-driven, technology-enabled, and digitally-driven industry, Vera Bradley will double down on these focus areas. Serving as Vera Bradley’s Chief Customer Officer for the past two and a half years, Daren Hull and his team have already radically strengthened the way we engage with our customers. With that I am excited to announce that Darren has been appointed as the Vera Bradley brand President. In his new role Darren is is being supported by a new streamlined leadership structure focused on three critical areas, what we bring to market, how to sell the market, and how we raise customer engagement and interest in the brand.

On the corporate level, we will offer consolidated back-office support and an efficient and lean corporate platform to enhance the growth of each brand and we will continue our technology and customer insights evolution to build an integrated ecosystem of capabilities for the enterprise that will allow our brands to respond more quickly to our customers’ wants and needs. These changes will better prepare us to adapt to the ever-changing retail landscape, allow us to better react to customer needs, strengthen our positioning and propel us towards more profitable growth. Looking ahead, our enterprises vision is to be a purpose-driven, multi-brand, high-growth Company and we are just beginning the journey. As I noted, we will focus on enhancing our purpose-driven efforts, while seeking out appropriate acquisitions of other comfortable affordable purpose-driven brands similar to our successful Pura Vida acquisition over time. Our strong cash position, debt-free balance sheet and the ability to generate free cash flow will allow us to pursue these acquisitions. We will also expand our reach by adding adjacent product categories and geographies.

For fiscal 2022, our Company’s four key growth drivers are, one, driving our digital first strategy, by evolving the digital distribution of our products and further refining and utilizing digital experiences to serve our customers. This will be supported by continuously refining our technology developing business processes and technology platforms to improve agility, database decision-making, customers centricity and speed-to-market. Number 2, enhancing our product innovation pipeline collaborations and category extensions to attract new customers and increase share of wallet with existing customers. Number 3, expanding our community, through marketing and by creating an impactful positive brand movement that nominally changes lives, but deepens our brand loyalty. Number 4, evolving our distribution channels. By focusing on future growth opportunities and addressing the drastically change in retail environment and the consumer marketplace.

We have a long-term vision for the Company — we have a long-term vision for the future of our Company and a clear path to achieve our goals. We are excited about the possibilities for Vera Bradley, Inc., and I am so proud of all the teams have accomplished over the past year. And I am confident that we have an exciting future ahead as we are poised to take advantage of additional acquisition opportunities and to evolve into an even more modern and relevant multi-brand retailer.

Now let me turn the call over to John to review the financial results. John?

John Enwright — Executive Vice President and Chief Financial Officer

Thanks, Rob and good morning. Let me go over a few highlights for the fourth quarter and the full year. As a reminder, financial results have been consolidated to include the Pura Vida acquisition after the July 2019 acquisition bid. The numbers I will discuss today are all non-GAAP. For a complete detail of items excluded from the non-GAAP numbers I will discuss and a complete reconciliation of GAAP to non-GAAP numbers, please reference today’s press release.

Consolidated net revenues totaled $142.4 million for the current year fourth quarter compared to $156.9 million for the prior year fourth quarter. Excluding charges, Vera Bradley Incorporated non-GAAP consolidated fourth quarter net income was $10.5 million or $0.31 per diluted share compared to $14.3 million or $0.42 per diluted share last year. Current year fourth quarter Vera Bradley Direct segment revenues totaled $93 million, a 10.2% decrease from $103.6 million in the prior year fourth quarter. Comparable sales decreased 10.6% for the quarter, reflecting a 27.4% decrease in comparable store sales and a 31% increase in e-commerce sales.

Store traffic continues to be negatively impacted by the pandemic. We closed 13 full-line stores and opened six factory outlet stores in the last 12 months. Vera Bradley Indirect segment revenues totaled $15.2 million at 14.7% decrease from $17.8 million in the prior year fourth quarter, reflecting a reduction in orders primarily related to the pandemic and in the number of specialty and department store counts. Pura Vida segment revenues totaled $34.1 million, a 3.9% decrease from $35.5 million in the prior year fourth quarter. Growth in e-commerce sales were more than offset by the decline in sales to wholesale accounts, which were negatively affected by the pandemic. As Rob noted, we made a strategic decision to reduce discounting during the Black Card — Black Friday period, which we estimate negatively impacted sales by about $6 million and improved gross margin performance.

Fourth quarter consolidated gross margin totaled $77.9 million or 54.7% of net revenues, compared to $87.2 million or 55.6% of net revenues in the prior year fourth quarter on a non-GAAP basis. The Company’s current year fourth quarter gross margin was lower than the prior year, primarily due to surcharges associated outbound shipping and incremental shipping costs associated with higher e-commerce sales. On a non-GAAP basis, consolidated SG&A fourth quarter expense totaled $63.3 million or 44.5% of net revenues compared to $67.2 million or 42.8% of net revenues for the prior year fourth quarter. Current year SG&A expenses were lower than the prior year, due both temporary and permanent expense reductions, related to the pandemic. On a non-GAAP basis. Current year fourth quarter, consolidated operating income totaled $146 million or 10.3% of net revenues compared to $20.1 million or 12.8% of net revenues in the prior year.

Looking at the fiscal year, consolidated net revenues totaled $468.3 million for fiscal ’21, which was — which included $112.5 million of net revenues from Pura Vida compared to $495.2 million for fiscal ’20, which included $65.9 million of net revenues from Pura Vida, which represented a partial year from the date of acquisition. Excluding Pura Vida, Vera Bradley net revenues totaled $355.8 million compared to $429.3 million in the prior year. And as you know, revenues were adversely impacted by the pandemic. Excluding charges for Pura Vida incorporating non-GAAP consolidated net income for the current fiscal year totaled $21.4 million or $0.63 per diluted share, which included $0.23 attributable to Pura Vida.

For the prior year excluding charges, Vera Bradley Incorporation, non-GAAP consolidated net income totaled $28.2 million or $0.82 per diluted share, which included $0.16 attributable to Pura Vida for the partial year. Vera Bradley Direct segment revenues for the current fiscal year totaled $289.3 million, a 16.8% decrease from $347.5 million in the prior year. The decline primarily resulted from our stores that were closed as a result of the pandemic for approximately half of the first and second quarters, partially offset by a 49% increase in e-commerce sales during the fiscal year. Vera Bradley Indirect segment revenues for the fiscal year totaled $66.5 million and 18.7% decrease from $81.8 million in the prior year, reflecting a reduction in orders primarily primarily related to the pandemic and in the number of specialty and department store accounts.

Pura Vida segment revenues totaled $112.5 million compared to $65.9 million in the prior year, which represented a partial year from the date of acquisition. On a non-GAAP basis, gross margin for the fiscal — for the current fiscal year totaled $266.8 million or 57% of net revenues compared to last year’s non-GAAP gross margin of $280.1 million or 56.6% of net revenues. We expanded our year-over-year consolidated gross margin primarily through sales of cotton masks and product collaborations despite incremental shipping costs. On a non-GAAP basis, SG&A expense totaled $233 million or 49.7% of net revenues in the current year, compared to $242.4 million or 49% of net revenues in the prior year. Expense control was strong while absorbing incremental Pura Vida SG&A for nearly an additional six months in fiscal 2021. On a non-GAAP basis, consolidated operating income was $34 million or 7.3% of net revenues in the current year compared to $38.8 million or 7.8% of net revenues in the prior year. As Rob said, a pretty remarkable performance in light of the pandemic headwinds we faced the entire year.

Now let’s talk about our outlook for the fiscal year. The continued uncertainty surrounding the continuing effect of COVID-19 on the retail environment make future financial performance extremely difficult to predict. However, we are providing our best estimates for fiscal 2022 based on our current expectations. We expect store traffic and revenues to improve in the second half of the year as vaccines become more widely available and we — as we anticipate a bounce back in our important back-to-school and travel businesses. All the numbers, I will discuss are non-GAAP. The prior year numbers referenced exclude charges we have outlined today and the guidance number excludes similar charges. For fiscal ’22, our expectation are as follows, consolidated net revenues of $550 to $575 million, net revenues totaled $468.3 million in fiscal ’21. Year-over-year Pura Vida revenues are expected to grow between 20% and 30% and Vera Bradley revenues are expected to grow between 15% and 20%. Free cash flow between $50 million to $55 million compared to $15 million in the prior year. Consolidated gross margin of 56% to 57% compared to 57% in fiscal ’21. The potential rate decline relates to an abatement in mass penetration in fiscal ’22 coupled with incremental cost for inbound and outbound freight expense.

Consolidated SG&A expense of $270 million to $276 million compared to $233 million in fiscal ’21. The expected SG&A increase is primarily related to Vera Bradley stores being open for the full year, non-comparable compensation and Cares Act savings in fiscal ’21, and general variable increases associated with higher sales expectations. Consolidated operating income of $44 million to $49 million compared to $34 million in fiscal ’21. Consolidated diluted earnings per share of $0.80 to $0.90, diluted earnings per share are based on diluted weighted shares outstanding of $34.6 million and an effective tax rate of 22% to 24%. Diluted earnings per share totaled $0.63 last year. Net capital spending of approximately $8 million to $10 million compared to $5.7 million in the prior year, reflecting investments associated with new factory locations and technology and logistics enhancements.

Now let me turn to the balance sheet, net capital spending for fiscal year totaled $5.7 million compared to $13.3 million in the prior year. Cash, cash equivalents and investments at year-end totaled $55.5 million compared to $73.8 million last year. We repaid the $30 million balance of our $75 million ABL facility in the fourth quarter, leaving no borrowings at fiscal year-end. Total fiscal year-end inventory was $141.4 million compared to $123.6 million at last fiscal year end. Year-end inventory was higher than prior year primarily due to the acceleration of certain Vera Bradley receipts into the fourth quarter to mitigate industry-wide port and shipping delays and the pull-forward of Pura Vida receipts into the fourth quarter related to the Charli D’Amelio product launch. We expect year-over-year inventory will be down by approximately 5% by the end of fiscal ’22. Rob?

Robert Wallstrom — President, Chief Executive Officer and Director

Thanks, John. Fiscal 2022 promises to be another challenging, but exciting year as we enter the next stage of our Company’s growth journey, both of our lifestyle brands have enormous growth opportunities ahead, we beyond their core product categories, driven by a focus on digital-first innovation and community engagement. The Pura Vida, let me start with our high growth potential Pura Vida business. We expect pure Vida to grow by over 20% in revenue and operating profit in fiscal 2022. In order to drive this growth, we are continuing to strengthen the infrastructure of Pura Vida. Our Project Novus ERP integrations is scheduled for this fall for Pura Vida and at that point, our entire VRA enterprise will be on the unified technology platform. This will allow for enhanced capabilities in sourcing customer served at CRM and data analytics among other areas. In addition, we are strengthening key merchandising inventory planning in customer analytic functions of Pura Vida.

On the supply chain side, we have a three-year plan to further our supply — supplier diversification for both string and non-string products. Pura Vida continues to innovate at a rapid pace. We continually expand our offerings of traditional signature core bracelets and style packs and we have continued to add our popular non-string collections, which were at a higher price points than our traditional bracelets. This category expansion in product diversification is working. As I noted earlier, nearly 50% of our e-commerce business is now comprised of non-string jewelry categories underscoring our brands broad lifestyle appeal. Our Pura Vida spring launch is off to a strong start and feature several fine new jewelry items like metal, semi-precious stones, shells and beads. In addition to traditional bracelets, rings, earrings and necklaces are gaining in popularity.

Pura Vida’s signature charity bracelets, continue to be an integral and growing part of the Pura Vida lifestyle. Our customers are passionate about supporting cause-minded programs through their purchases. Recent charity additions include Racial Justice Awareness in Project CAT in support of World Wildlife Fund effort to double the number of tigers in the wild. We have several exciting launches coming up this spring. In April, we will launch our Pura Vida Twill collection of shirts and hoodies, a perfect extension of the Pura Vida lifestyle. While we will start with a limited collection, we believe there is significant revenue opportunity. All of the products are Fair Trade Certified and cause-related tie-ins, similar to our charity bracelet program. In May, we will continue our backpack collection. You may recall Pura Vida and Vera Bradley collaborated on the special backpack last year and it sold out in just a few hours. So we know there is a lot of interest and demand for a backpack with the Pura Vida twist.

Later in the year, we will announce some exciting product collaborations and licensing partnerships, more to come on that front. So our core product growth coupled with apparel backpacks and our licensing collaborations are expected to drive meaningful top-line growth this year. Pura Vida has demonstrated expertise in engaging customers, building loyalty and introducing new devotees into the Vera — I mean into the Pura Vida lifestyle. This year we expect continued growth on all digital platforms including e-mail, SMS and social media. We are also focused on driving even more efficiency in paid media and website performance in fiscal 2022. As I noted TikTok has taken off with well over 200,000 Pura Vida followers TikTok clips feature influencers, unveiling boxes, showing sneak-peeks of new items, promoting giveaways and give-in tutorials. TikTok generates interest and followers with creative engaging content to drive sales by linking to the Pura Vida online store and occasionally offering special promotions.

And speaking of TikTok, just last week, we launched our much anticipated influencers style pack with Charli D’Amelio. Charlie now has an outstanding — an astounding 150 million plus followers across all social platforms. For target demographic fits perfectly with the Pura Vida brand and with the hashtag, show you’re happy that right in with our lifestyle and esthetic. This partnership is delivering strong PR and customer engagement. Since our Charli announcement, we have nearly doubled our TikTok followers and head over 27 million views of us our show us you’re happy challenge, and in five days sinice launch, we have garnered nearly 600 million media impressions.

We expect outsized e-commerce — e-commerce growth of Pura Vida this year, particularly as we have strengthened the supply chain infrastructure. On the retail front, we are excited about opening our first Pura Vida lab store in San Diego’s Westfield UTC Mall in June. This will allow us to showcase existing products as well as new product innovations and to get direct customer feedback. The location will also create Instagram [Phonetic] moments and allow us to host influencer events. We will evaluate the stores performance for possible future expansion. We will continue to look for additional shop and shop opportunities to showcase a full array of Pura Vida products and Vera Bradley stores and we’ll be rolling out our Vera Bradley plus Pura Vida charity bracelet program and all Vera Bradley full-line stores this spring.

As the world returns to more normalcy, we expect a steady return of wholesale growth as we have already begun to experience this quarter. Additionally, we are planning on continued expanded presence in key wholesale partners with larger in-store floor displays and presentation this year and beyond. We will continue to grow internationally in Canada and Europe, particularly if the pandemic related locked down ease and look for other international distribution partners. We already have many Pura Vida fans around the world and this global expansion is not only allowing us to serve those customers, but to extend our reach to others. Although we are early in our international expansion, we believe there are more opportunities ahead.

Now let’s shift to Vera Bradley, we have planned a robust calendar of exciting product launches and marketing initiatives for the year. As the vaccine rollout expands and COVID restrictions begin to ease, we expect to see outsized growth occur in our two core pillars of campus and travel, particularly in the back half of the year. On the product front, we have ramped up our innovation pipeline to continue to develop new fabric offerings and to build on our platform of sustainable fabrics. This pipeline is important to not only increased share of wallet with our existing customers, but also to attract new customers to the brand.

Our newest amendment starts at our core. We have reinvented the iconic fabric that made us since 1982 and we are thrilled to be introduced in our new recycled cotton product later this spring. The softness, comfort and vibrancy our customers love has been evolved. We will be introducing new style and new solids to our iconic collection. We are consciously reimagining our designs, our materials and how our products are made with the goal of updating 100% of our fabrics to more sustainable alternatives by 2025. So stay tuned. We are continuing to expand our collection of performance in Twil and our recycled reactive collection in our full-line stores, which will continue to gain traction and are highly-rated by our customers, and we are further expanding our ultra light collection that was just introduced last year and has been popular with our factory stores.

We also continue to introduce differentiated styles and silhouettes providing our customers beautiful solutions and all facets of our lives. Our long-term focus continues to be on building on our dominance in our three core franchise areas of youth campus, every day and travel. We especially look forward to the recovery of our campus and travel segments of the business and we believe we are poised to take market share when the pandemic-related consumer pause lifts later this year. Our collaborations and strategic alliances remain an important element of our strategy. These partnerships excite and engage existing and new customers, increase brand awareness, generate media attention and provide opportunities for Vera Bradley to strategically test and ultimately enter new product categories. We are continually approached by outside partners about potential collaborations, which speaks to the power and wide appeal of our brand. Tomorrow we are launching our latest Disney collection on a much broader scale than ever before and we look forward to another year of high-profile product collaborations with brands like Harry Potter, Crocs and Venus.

We are working with several other iconic internationally known brands and exciting future collaborations and character licensing programs that will be rolled out over the next 18 months. On the masks front, in the fourth quarter, mask sales dropped to about 5% of our total sales. As we move into fiscal ’22, we expect the mask business to become smaller as COVID precautions begin to ease, but we also anticipate store traffic will naturally improve during this time. As I noted earlier, one of our key goals this year is strengthening our customer community through marketing and an impactful positive brand movement that not only changes lives, but deepens our brand loyalty. We certainly saw the value of our brand provided in connecting our customers and brightening their life during the pandemic. We will continue to capitalize and build upon the investments we have made in data science, business analytics and customer data over the next few years. We utilize more user generated content, drive more engagement, social media, expand our influencer program, strengthen our customer journey centered activations and continue to enhance our social storytelling.

We’re in the process of revamping our longstanding brand ambassador program patterning it after Pura Vida’s highly successful one. We are expanding our social media program by continuing to analyze the data to focus on the most engaging content creation and improving the connection with our followers. As an extension of that, we will also expand social selling. We are amplifying our VB Cares mission, working with fewer partners to make bigger impact and oftentimes combined with product collaborations. Our mission of supporting women and children continues. In February, in honor of Black History Month, we celebrated with the introduction of our Unity Tote and we were honored to donate $20,000 to women who create a non-profit organization dedicated to providing scholarships and mentorships to young creatives identifying as women of color in the fields of fashion, advertising, music and tech.

Just this week, we announced our third annual collaboration with New Hope Girls, a non-profit organization that provides jobs for vulnerable women and refuge and education for girls in the Dominican Republic. The limited edition mini collection features a hobo [Phonetic] bags and travel pouch with designed and sewn by the New Hope artisans. Like last year, the collection launched on March 8 in celebration of International Women’s Day and generated enormous media attention and we couldn’t be happier to continue to support New Hope Girls and bring awareness to their organization. We will continue with our pride collection in June in honor of pride month and as always this back-to-school season, we will once again support blessings in a backpack and their commitment to end childhood hunger across America and of course activities supporting the Vera Bradley Foundation for Breast Cancer go on all year long.

Over the last 18 months, we have prioritized digital as the primary revenue growth driver for Vera Bradley, making major strategic shifts in investments to pivot us to a digital first company. We are enabling her to shop in a seamless manner and allow her to shop where and how she wants to shop. We will continue to expand the capabilities introduced for Project Novus further enabling revenue growth through the expansion of the digital channel and enhancing the customer experience through customer analytics.

We expect to drive the third year substantial e-commerce growth and later this year we are preparing to launch our Canadian website, although our digital business is becoming a larger portion of our revenues, stores continue to be an important part of our omnichannel strategy. Digital sales are typically higher in markets where we have a retail presence in the average omnichannel customer spends over three times more than the single-channel customer.

So our store and wholesale teams continue to work to drive results through innovation and creativity. We continue to focus on enhancing and reinventing the customer experience in our full-line stores, while the pandemic and mandated capacity limits that challenge store traffic, we have further integrated digital and customer data enhancements into our physical store footprint to strengthen relationships by offering appointment selling, face time and social selling, buy online, pickup in store and curbside pickup if possible.

Appointment selling was very successful, generating a high single-digit percentage of our full-line revenues in the fourth quarter. Customers have permanently change the way they shop and many of these features and programs will continue post pandemic. We connected closely with our loyal customers and customer retention at the end of the fourth quarter was improved further over last year. We are improving the profitability of our full-line portfolio by rationalizing our existing fleet through select closures. We will continue to focus on our highest potential stores, enhancing the customer experience and further localizing our assortments. We expect to close up to 10 additional full line stores during fiscal 2022, which will bring our total full line closings to 49 since the beginning of fiscal 2018.

This year, we will continue to maximize our factory performance by adding five new locations and expanding three additional high performing stores. Technology enhancements also come into play in the factory stores with the expansion of mobile POS. The ability to customize the shopping experience in line queue and the use of virtual catalog. On the wholesale part of the business, we will continue to expand our digital marketplaces like Amazon, needing customers where they are in the shopping.

Operator, we will now open the call to questions.

Questions and Answers:

Operator

Thank you. [Operator Instructions] We take our first question from Mark Altschwager of Baird. Please go ahead.

Mark Altschwager — Robert W. Baird — Analyst

Great, thank you. Good morning. Thanks for taking my questions. I think a lot of exciting initiatives underway here. Just first question, with regards to the — the revenue outlook, can you just talk a little bit more about how you’re thinking about the shape of the year in terms of year-on-year growth versus fiscal 2020 or the calendar ’19? I guess I’m just trying to think through the core demand recovery versus the impact of lapping some of the mask sales or just any other considerations there? And on that point, specifically annual outlet sale, should we — what should we be assuming from a contribution there in the early part of the year?

John Enwright — Executive Vice President and Chief Financial Officer

Sure Mark, I’ll kick it off and Rob you can add, if you need any details. In regards to the Annual Outlet Sale, for this year, we have canceled that sales, so it won’t be in that number of the $550 million to $575 million. In regards to shape up kind of the sales as we compared to fiscal ’20 or calendar ’19, as we said, we anticipate the back half being stronger this year than the front half, i.e., the first quarter going to be a little bit more challenge given store traffic that you like we’ve seen in other retailers in other reports. So we think the first quarter can be a little bit more challenge, but we think as we move into the summer and move into the fall period we’ll actually seek some kind of benefit in regards to kind of people coming back on traffic.

Robert Wallstrom — President, Chief Executive Officer and Director

And just a couple of things that we’ve seen so far in the quarter, which has been encouraging to at least see some of this more positive behavior is, vaccines are beginning to roll out. We’re seeing a little bit of improvement particularly with the older customer coming back to the first ones to get the vaccine, which was an interesting data points, so we are seeing some positivity, it’s not overly material yet, but it’s the beginning, which is a good sign. I mean, the other thing that we’ve seen particularly with Pura Vida wholesale business is nice kind of growth early with the wholesale business and their partners really expecting a return to a higher level of performance as they enter the summer period and so we’re seeing increased revenue there. So there is some encouraging sign, but overall, we do expect obviously for the first half of the year to be more challenged kind of more of a — some level of continuation at the end of last year, but the second half of the year to really see a pickup kind of starting with back-to-school and moving on from there.

Mark Altschwager — Robert W. Baird — Analyst

Thank you. And then with regards to the earnings outlook, some unpack that a bit, I think the midpoint of the guide implies operating profit that’s above fiscal 2020 level, but if I back out Pura Vida, it would seem to imply the expectations for Vera Bradley, operating earnings are still below pre-pandemic levels, but maybe just help us understand some of the puts and takes there? Bigger picture, how you’re thinking about the normalized level of operating margin that Vera Bradley if at all this shift in channel mix and the plan marketing investments?

John Enwright — Executive Vice President and Chief Financial Officer

Yeah, so that’s accurate. it’s kind of unpack it, ultimately to Vera Bradley brand is going to be a little bit more challenge in fiscal ’20 and we’re getting a benefit from the annualization of Pura Vida. Some of the challenges in the Vera Bradley when you compare it to ’20, there will be some sales, it won’t be back to the full level of ’20, it’ll be very close, but it won’t be necessarily back to the full level, depending on kind of where we hit. Margin will be somewhat challenged given all the costs associated with inbound and outbound shipping and with the port delays, it brings in a little bit differently, so that may cost us a little bit more so margin will be challenged. From an SG&A perspective, there’ll be some savings associated with kind of 2020 results for some of the permanent savings, but as you can imagine, compared to ’21, the fact that we have all of our stores open and we don’t have the same benefits that we saw in ’21 in regards to some compensation reduction for the organization tick, you’ll see some kind of challenges against ’21 there. So I’m not sure if that answered your question, but it definitely is fair value will probably take toll — it will not be back to ’20 levels this year.

Robert Wallstrom — President, Chief Executive Officer and Director

Yeah, I think what we’re targeting is the following year to get Vera Bradley back to that 2020 level, but we believe it will at least take us next year to get there.

Mark Altschwager — Robert W. Baird — Analyst

Yeah. That’s helpful. And I appreciate you willing — your willingness to provide a detailed earnings outlooks. I know it’s tough right now. And then maybe just finally Rob, again bigger picture, with respect to the new management structure, it would seem to open up some capacity for you to dedicate to M&A. Maybe just talk about your approach there, what the landscape looks like for brands and venture profile, just any sense of the potential size range you would consider from an acquisition standpoint?

Robert Wallstrom — President, Chief Executive Officer and Director

Yeah, in terms of giving a lot of detail on M&A activity, we usually don’t do that, but I can give you a little bit because I think you’re right, part of the reason why we did do the structure as we do believe that there will be opportunity in the future. We think that we’ve been very happy with the Pura Vida acquisition. We believe that there is real growth in that brand. We think that being able to walk in digitally native companies that are kind of in that mid-part of their growth cycle and helping them scale get larger and kind of work through that transition and maximize the potential is a real opportunity and so we’re out there looking for other ones and obviously this has been a time where there is a lot of brands that are starting, which is encouraging, but we want to make sure that we’re diligent in the process. We want to make sure that we really are looking for the right opportunity at the right time and kind of the right valuation. So what we’re going to make sure we’re very prudent in that approach, but we will be looking and we’ll see what opportunities present themselves.

Mark Altschwager — Robert W. Baird — Analyst

Great, thank you and best of luck.

Robert Wallstrom — President, Chief Executive Officer and Director

Thank you.

Operator

Thank you. Next question comes from Oliver Chen of Cowen. Please go ahead.

Oliver Chen — Cowen and Company — Analyst

Hi, thank you and good morning. So as we think about inventory, things have bit elevated at the end of this quarter, but they were — there was rationale, why? I mean, how are you planning inventory relative to sales as the year progresses and also the potential that bounce back-to-school as well as travel, how might you assess that as well as pending inventory given the dynamic nature of what we’re seeing?

John Enwright — Executive Vice President and Chief Financial Officer

I’ll handle the inventory part of that. Yeah, I think at the end of the year it was a little bit elevated that what we had guided towards or we talked of towards. At the end of the third quarter the rationale, while we put some stuff forward in regards to just portray to make sure we had it for launches was a part of it, also when we cut back and at the promotionality for the Pura Vida, we still had some inventory associated with that. So as we think about next year, as we’ve kind of indicated in our guidance, we believe we have an opportunity to shrink inventory year-over-year, call it in the 5% range.

So call it out between $5 million and $10 million. So what we are working through inventory in both brands to make sure we are well positioned to hit the sales targets that we have, we want to make sure, as we’ve enter into new categories for the pure value — Pura Vida brand, that we have the right assortment and right value from the inventory perspective to make sure the sales hit, but we will be mindful of taking out, reducing inventory year-over-year.

Robert Wallstrom — President, Chief Executive Officer and Director

And then I think I’m not quite — you can clarify the question a little bit around back-to-school to make sure I answer it correctly, if they don’t, Oliver. But as we look at back-to-school, we’re obviously hopeful that we’ll see school openings as we get back in the fall and with a lack of back-to-school purchasing last year, we think there’s going to be some pent-up demand. From an inventory standpoint we — we feel like we’re in pretty good shape. We’re hopeful that as back-to-school bounces back to, there is an opportunity to drive even more full price selling, which is in the past that aren’t filled for the last couple of years. So we feel like we’re set up pretty well for the back half of the year.

Oliver Chen — Cowen and Company — Analyst

Thanks. And Rob with discounting at both brands Pura Vida and Vera Bradley, what’s the outlook as you think about merchandise margins versus this year and what’s incorporated in your guidance and also the merchant margin profile versus 2020?

John Enwright — Executive Vice President and Chief Financial Officer

I can take some of that. So, in regards to kind of merchandise margin, as we think about the guidance, we don’t anticipate to be significantly different from a discounting perspective. So we can look at kind of merchandise marketing for kind of like categories to be fairly consistent, with masks being a smaller part of the business, next year — this upcoming year versus what it was last year, we’re going to see some challenges. Mask was a very high margin category for us and with that being a smaller part of the business on a go-forward basis, you’ll see some pressure, if you look at the aggregate merchandise margins, but generally speaking, in total, we expect not to be significantly more promotional to answer.

Robert Wallstrom — President, Chief Executive Officer and Director

Yeah, we have made a lot of progress last year in terms of reducing promotional activity of Pura Vida as we are looking at the kind of penetration of retirement to full price selling, we were seeing nice growth in our full price business last year. So we really looking at kind of hold on to those gains as we go into the next year and not increasing, but discounting activity.

Oliver Chen — Cowen and Company — Analyst

And the organizational changes some quite innovative and congrats to Darren. What are your thoughts on why now is the right time for that, and also what will be some of the parameters in terms of making these changes and the framework you’re thinking about and timing and managing both opportunity and risk?

Robert Wallstrom — President, Chief Executive Officer and Director

Yeah, I think, a few things. I think, one, Daren did a very nice job since he has come in have really help into put more focus on our digital business or e-commerce business, or analytics, our marketing analytics and really played an instrumental role over the last couple of years. And we just believe that as we move forward, that’s becoming more and more important and is surrounded by a really talented team and Beatrice, Mary Beth and the team that can really support the growth initiatives going forward.

And we think that by having Daren really focused in purely on Vera Bradley, singular brand that, that can bring even additional focus to the Vera Bradley brand. I think that there is a lot of opportunity of Pura Vida to continue to expand. So I want to make sure that we have enough support from the corporate team to really support the Pura Vida expansion.

Second of all, I do believe that there is opportunity to continue to enhanced our brand portfolio and so making sure that we’re spending sufficient time on that, there’s also another piece of it. As we look at the corporate platform, what we really wanted to do with that over time, is just really build an efficient support structure, so that as we [Indecipherable] are kind of pop that we have the expertise that can really help them grow from a logistics standpoint, from an IT standpoint, from a human resource standpoint, legal finance standpoint and we found a lot of that has been helpful to Pura Vida. We think we can provide a lot of help for the next brand that comes in the portfolio.

Oliver Chen — Cowen and Company — Analyst

Rob, on that point, what would you highlight of synergies as an acquirer you might bring to the table? And what’s your impression of valuations in the marketplace as well as you think about M&A? And then when you think about in M&A, do you have a general framework for lifestyle brands or categories, which may be more conducive to your profile?

Robert Wallstrom — President, Chief Executive Officer and Director

Yeah, I think a couple of things. I think one in terms of what we’re looking for, I think one of your key words lifestyle, we really understand the kind of casual, comfortable, affordable space lifestyle brands is really kind of our key target areas with the digital first perspective. We think that all of that is really important. I think valuations in the marketplace, there’s a lot of — there is a lot of [Indecipherable] valuations right now. So but we think that one of the things that’s unique about the opportunity with Vera Bradley as an acquirer and I talked about some of the synergy we bring, but is also some of the cultural synergy.

Let’s say, the place where and speaking with, Paul and Griffin from Pura Vida, they plugged in their brand, it’s a good corporation company culture that’s really supporting their growth, supporting their unique ethos and how they approach their business and having that freedom to keep their company culture alive and strong. I think is really important for these direct consumer brands and have been a real commitments kind of purpose-driven initiatives that they put in place. I think that makes us more appealing from a some partner standpoint.

In addition to that, I think that there’s a lot of — there’s a lot of things that we’ve offered Pura Vida can offer other companies, whether it’s just working through scaling, at these companies go from early growth to the higher growth phase become more complicated and obviously we can provide a lot of expertise working through the legal and financial challenges and HR challenges of doing that, as well as we’ve been through, we have a lot of partnerships that we can introduce people to whether it’s through our licensing agreements, whether it’s through categories and just a lot of general talent and expertise that it really allows these smaller brands with smaller teams to plug into a larger company and take advantage of building a network. And so we think all of that were some of the advantages we bring to the Company that we acquire.

John Enwright — Executive Vice President and Chief Financial Officer

[Indecipherable] Go ahead Oliver.

Oliver Chen — Cowen and Company — Analyst

My final question was about the cotton refresh, which sounds like a big opportunity. How is that incorporated in the guidance and timing? And how might you manage the rollout of that and you’ve also had a really good string of partnerships with different brands, as we anniversary that what should we now in terms of your Vera Bradley revenue guidance?

Robert Wallstrom — President, Chief Executive Officer and Director

Well, a couple of things, the cotton re-launch that’s happening in the second quarter, so from — that’s when we expect that to happen and we’ll have a lot more details coming on that, but we’re — we’re really excited by that. For a few reasons, right, one, we saw a really good customer response to our reactive launch, the sustainability initiatives, consumers were really reacting to bring in new consumers. So we take that as well residents in addition to the sustainability aspect of it to be the first time we’re launching solid cotton, which we had a real uptick in our solid business. So we think that’s another opportunity plus a third leg of that as we have some new more updated styling that’s going to be part of it. And then we’re working on an exciting marketing launch to really cost and buzz, there’ll be more details coming around that, but all that happens in the second quarter.

In regards to partnerships, you are right that we’ve had a nice kind of robust pipeline of partnerships and those will kind of continuing into this year and we have more on path, some more will be rolling out this year as we anniversary. So we feel good about anniversary and these partnerships and in actually expanding them. We think there’s a lot of opportunity and we think this whole [Indecipherable] concept of great brands coming together really it’s bringing in new customers and so we plan on continuing on that path.

Oliver Chen — Cowen and Company — Analyst

Thank you very much. Best regards.

Robert Wallstrom — President, Chief Executive Officer and Director

Thanks, Oliver.

John Enwright — Executive Vice President and Chief Financial Officer

Thanks, Oliver.

Operator

Thank you. [Operator instructions] Next question comes from Eric Beder of SCC Research. Please go ahead.

Eric Beder — SCC Research — Analyst

Good morning.

Robert Wallstrom — President, Chief Executive Officer and Director

Hi, Eric.

John Enwright — Executive Vice President and Chief Financial Officer

Hi, Eric.

Eric Beder — SCC Research — Analyst

Hi. Well, my questions have been answered, but I have a few on here. Could you talk a little bit, last two kind of major rollouts at your revenue source for holiday and to lesser extent, but they’re still there for February, you don’t have lot more products this year than last, they’re much more larger in terms of SKUs and other pieces and I think it worked. Do you see that as kind of a trend becoming much like more focused on kind of these kind of events and being a little bit deeper in them as your customers give you permission to buy more beyond just handbags?

Robert Wallstrom — President, Chief Executive Officer and Director

So let me try to answer, make sure I get it right, Eric. I think, one, we definitely do believe that there is an opportunity beyond just the bag category. We saw that in the fourth quarter with the real great success with cozy’s, some of the apparel that we launched. We think our customer definitely see this as really kind of a pattern house and likes to buy into the brand across multiple categories. So we do think long-term, there is some real opportunity there. We also do find that the customer is responding even stronger to things that are novelty and that driven.

I think with everything that’s happened in this last year people are looking for opportunities to be happy. We saw a huge uptick in Valentine’s purchasing this year, which I think spoke a lot too customer safety and we saw that at Vera Bradley and Pura Vida, the kind of anything with the hearts Valentine’s type of novelty was selling extremely well. So we do believe that that’s going to be important as we continue to go forward.

Eric Beder — SCC Research — Analyst

Okay. Harry Potter you kept that, there is a full section for a long time now, almost since July. Is Harry Potter more than just a collaboration, is it’s something that we going to see for multiple periods going forward or multiple seasons, because it just not happened with your collaborations?

Robert Wallstrom — President, Chief Executive Officer and Director

Yeah, I think that’s a great — a great question and you’re right that we see the Harry partner — partnership is more than just a once or twice. We do have another launch that will be coming out with Harry Potter, so we do see that as a partnership and we will evaluate that and we’re looking at other character licensing opportunities as we go forward, because as I mentioned earlier, the customers really responding to novelty, really responding to character license, responding to novelty in our core Vera Bradley brands. But you will see that some of these do go on for a little while. Our collaborations with Crocs has been, if you season now, our collaboration with Venus has been a couple of years now, and we see Harry Potter more similar to that.

Eric Beder — SCC Research — Analyst

Great. Good luck with the spring season.

Robert Wallstrom — President, Chief Executive Officer and Director

Thanks, Eric.

John Enwright — Executive Vice President and Chief Financial Officer

Thanks, Eric.

Operator

Thank you. The next question comes from Steve Marotta of C.L. King & Associates. Please go ahead.

Steve Marotta — C.L. King & Associates — Analyst

Rob and John, good morning. Rob, I think you mentioned earlier in the call and if you didn’t — if you could just clarify, the Southeast is outperforming a bit compared to other regions, correct?

Robert Wallstrom — President, Chief Executive Officer and Director

I’m sorry I didn’t hear what you said?

John Enwright — Executive Vice President and Chief Financial Officer

Southeast outperforming other regions.

Robert Wallstrom — President, Chief Executive Officer and Director

Slightly, yes.

Steve Marotta — C.L. King & Associates — Analyst

Great. Is there anything within that might be looking glass to what will be working six to nine months from now and the balance of the country, hoping to that extent, or do you think it’s just such a unique point in time that there is nothing really the Green from it on a product basis?

Robert Wallstrom — President, Chief Executive Officer and Director

I think from a product basis, we’re definitely as you get more customers into store, obviously you’re learning more in terms of what the customer really wants. But I would say that the Southeast customer, right, in other words, it’s really changing in a major way the — the product that’s selling. I mean there is obviously a regional differences, but been regional differences over time. Obviously with picking up, down, there is the idea of each and in all of that and I think as domestic travel begins to open up, we do definitely expect to see the travel business, potentially one of the first day way to bounce back if this vaccine rollout really accelerate as strictly as people are expecting it to, then we could see a good domestic travel season in the summer and that could be very helpful. And then hopefully, followed by a real strong bounce back in the back to school business that would kind of be the ideal scenario.

Steve Marotta — C.L. King & Associates — Analyst

Sure, I understand. I have a couple of other little questions, but I’ll take it offline and chime in later.

Robert Wallstrom — President, Chief Executive Officer and Director

Thanks, Steve.

Operator

Thank you. Next question comes from Dana Telsey of Telsey Advisory Group. Please go ahead.

Dana Telsey — Telsey Advisory Group — Analyst

Good morning, everyone. And I could tell you, you know it’s Pura Vida bracelets collaboration is a huge hit from everything I’ve been hearing, so congratulations on that. As you think about supply chain and incremental freight expense is going through this upcoming fiscal year, how do you see it playing out and what are you planning for? And then lastly, how do you think about promotions and planning promotions going forward, given the elimination of Black Friday, the elimination of the outlet sale? How do you — how do you — how do you characterize it going forward is how you plan to — to promote and maybe in a more effective manner? Thank you.

John Enwright — Executive Vice President and Chief Financial Officer

Yes, so I can hit on kind of the supply chain and freight expense. What we’re hearing and I think we are seeing and you’re probably hearing from a lot of other retailers as the first half of the year is going to be fairly challenged from an inbound freight expense. The ports are fairly congested throughout the world and we anticipate seeing an uptick in costs, just to get a container as well as an uptick interest rates, generally speaking in the first half of the year and then to be a little bit going into the second half of the year and that’s how we’ve thought about it when we put our plan together, to move also thought about kind of outbound shipping so costs associated with getting the product to the consumer. We anticipate that, that’s going to increase our year-over-year, call in the high single-digit area. So, that’s how we’ve built that into our guidance.

And in regards to kind of promotionality in further kind of how we built that in, from — we don’t anticipate as I said earlier that we expect a significant reduction or increase in promotionality. We are losing kind of for the second year in event where we had people coming into Fort Wayne in regards to kind of our ability to kind of utilize that to work through some product, but we still believe there is an opportunity to work through product in our factory locations to that point, just a few minutes ago, if domestic tourism opens up and it is a significant, if it increases significant, we are well positioned in certain domestic tourist — domestic tourist hotspots, where we think we could see some M&A sales and the ability to work through product there.

Dana Telsey — Telsey Advisory Group — Analyst

Thank you.

Robert Wallstrom — President, Chief Executive Officer and Director

Thank you.

Operator

Thank you. This concludes our Q&A session. I would like to turn the call back over to Rob Wallstrom for any closing remarks. Thank you.

Robert Wallstrom — President, Chief Executive Officer and Director

I could not be prouder of how our team has responded to the challenges we had faced during the last year. We have truly emerged a stronger organization. We have an extraordinary culture, two powerful brands with unique growth opportunities, devoted customers, a strong balance sheet, ample liquidity and a robust strategic plan to propel us forward as a purpose-driven, multi-brand, high-growth company.

As I noted earlier, both of our lifestyle brands have significant growth opportunities ahead, well beyond their core product categories driven by a focus on digital-first, innovation and community engagement. And we are excited about exploring potential acquisition opportunities that will strengthen our capabilities and further diversify our revenue streams. We have an exciting future ahead and we look forward to creating value for all of our stakeholders in fiscal ’22. We expect to deliver double-digit revenue in operating income growth over both fiscal ’21 and fiscal 2020 performance. Thank you for your time and interest in Vera Bradley, Inc. We hope you can join us for our fourth — our first quarter call on June 9. Thank you.

Operator

[Operator Closing Remarks]