2014 Annual Report company information SHAREHOLDER INFORMATION Annual Meeting of Shareholders The Annual Meeting of Shareholders is scheduled to be held at 11:00 am Eastern Time on Thursday, May 22, 2014, at our offices located at 11222 Stonebridge Road, Roanoke, Indiana. Shareholders of record at the close of business on March 25, 2014, will receive a formal notice of the annual meeting and a proxy statement. Form 10-K Annual Report A copy of the Vera Bradley, Inc. Annual Report on Form 10-K, filed with the U.S. Securities and Exchange Commission, is available to shareholders upon written request to the corporate secretary of the company or by visiting our website at verabradley.com. Common Stock The common stock of the company is listed on the Nasdaq Global Select Market under the symbol VRA. Investor Relations Shareholders and members of the financial community may direct questions or requests to: Julia Bentley, Vice President of Investor Relations and Communications Vera Bradley, Inc. 5620 Industrial Road Fort Wayne, IN 46825 (260) 207-5116 [email protected] Additional investor information can be found at investors.verabradley.com. 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Forward-Looking Statements This annual report contains forward-looking statements that are subject to risks and uncertainties. All statements other than statements of historical or current fact included in this report are forward-looking statements. Forward-looking statements refer to our current expectations and projections relating to our financial condition, results of operations, plans, objectives, strategies, future performance, and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “plan,” “intend,” “believe,” “may,” “might,” “will,” “should,” “can have,” and “likely” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. For example, all statements we make relating to our estimated and projected earnings, revenues, costs, expenditures, cash flows, growth rates, and financial results, our plans and objectives for future operations, growth, initiatives, or strategies, or the expected outcome or impact of pending or threatened litigation are forward-looking statements. All forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that we expected, including: • possible adverse changes in general economic conditions and their impact on consumer confidence and consumer spending; • possible inability to predict and respond in a timely manner to changes in consumer demand; • possible loss of key management or design associates or inability to attract and retain the talent required for our business; • possible inability to maintain and enhance our brand; • possible inability to successfully implement our growth strategies or manage our growing business; • possible inability to successfully open and operate new stores as planned We derive many of our forward-looking statements from our operating plans and forecasts, which are based upon detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect our actual results. For a discussion of these risks and other risks and uncertainties that could cause actual results to differ materially from those contained in our forward-looking statements, please refer to “Risk Factors” in Item 1A of this report. We caution you that the risks and uncertainties identified by us may not be all of the factors that are important to you. Furthermore, the forward-looking statements included in this report are made only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events, or otherwise, except as required by law. 2 TABLE OF CONTENTS PART I. 4 Item 1. Business 4 Item 1A. Risk Factors 15 Item 1B. Unresolved Staff Comments 25 Item 2. Properties 25 Item 3. Legal Proceedings 26 Item 4. Mine Safety Disclosure 26 PART II. 27 Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 27 Item 6. Selected Financial Data 29 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 31 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 41 Item 8. Financial Statements and Supplementary Data 42 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 63 Item 9A. Controls and Procedures 63 Item 9B. Other Information 63 PART III. 64 Item 10. Directors, Executive Officers and Corporate Governance 64 Item 11. Executive Compensation 64 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 64 Item 13. Certain Relationships and Related Transactions, and Director Independence 64 Item 14. Principal Accounting Fees and Services 64 PART IV. 65 Item 15. Exhibits, Financial Statement Schedules 65 3 PART I In this Form 10-K, references to “Vera Bradley,” “we,” “our,” “us” and the “Company” refer to Vera Bradley, Inc. and its subsidiaries, including Vera Bradley Designs, Inc. The fiscal years ended February 1, 2014 (“fiscal 2014”) and January 28, 2012 (“fiscal 2012”) were each 52-week periods. The fiscal year ending February 2, 2013 ("fiscal 2013") was a 53-week period. The fiscal year ending January 31, 2015 (“fiscal 2015”) will be also be a 52-week period. Item 1. Business Our Company Vera Bradley is a leading designer, producer, marketer, and retailer of stylish and highly functional accessories for women. Our products include a wide offering of handbags, accessories, and travel and leisure items. Over our 30-year history, Vera Bradley has become a true lifestyle brand that appeals to a broad range of consumers. Our brand positioning emphasizes the high quality, distinctive and vibrant styling, and functional design of our products. New designs help keep the brand fresh and our customers continually engaged. We generate revenues by selling products through two reportable segments: Direct and Indirect. As of February 1, 2014, our Direct segment consisted of sales of Vera Bradley products through our 84 full-price and 15 outlet stores in the United States; 13 department store locations in Japan; our websites, verabradley.com and verabradley.co.jp; and our annual outlet sale in Fort Wayne, Indiana.