Price Drop
Shares of Vera Bradley dropped 13.82% due to lower than expected quarterly earnings. For a full article of the news release please click here.
What Now?
Don't panic and don't sell! Because we are investing in Vera Bradley for the long term, we are more concerned with how it is positioning itself for the future rather than how it is performing in the short run. Earnings were lower this quarter because the company has been investing in itself to grow. In order to pay for new stores in Japan, Vera used excess cash from its earnings. Looking at this through a long term investment lens, it is great that Vera can use its earnings to grow instead of taking out huge loans that it can't really afford. In addition, Vera grew its revenues by 19% and raised revenue expectations for next year.
Investor Psychology
Here's a fun fact: While the average investment returns about 10% per year, the average investor has a return of under 2% per year. Why is this? Because of the nature of human psychology, investors always want to sell when their stocks are losing money, and buy more when their stocks are making lots of money.
Although Vera shares dropped in value today, you haven't actually lost any money. You only lose money when you actually sell your shares. I still feel strongly that Vera will be a great investment over the long run, and I recommend to hold onto your shares. If you have enough cash to invest, I would recommend buying more. Buy low and sell high!
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