Chapter 2, Problem 2.3MAD

Analyze Vera Bradley. Inc.

 Vera Bradley, Inc. (VRA) is a leading designer, producer, and retailer of fashion handbags, accessories, and travel items for women. Income statements for two recent years for Vera Bradley are as follows:

Vera Bradley, Inc Income Statements For the Years Ended January 31 (in millions)
	Year 2	Year 1
Revenue	$502.6	$509.0
Expenses: Cost of merchandise sold	$(221.4)	$(240.0)
Selling, general, admin, expenses	(236.8)	(208.7)
Other expenses	(16.8)	(21.9)
Total expenses	$(475.0)	$(470.6)
Operating income	$ 27.6	$ 38.4

a. Prepare a horizontal analysis of the two income statements.

b. Assume you are a stockholder of Vera Bradley. Would you be inclined to view Vera Bradley’s change in operating income favorably or unfavorably?