Vera Bradley, Inc.VRA
Vera Bradley, Inc. Income Taxes Disclosure
Income Taxes
The components of the income tax expense were as follows (in thousands):
| January 31, 2026 | February 1, 2025 | February 3, 2024 | ||||||||||||||||||
| Current: | ||||||||||||||||||||
| Federal | $ | — | $ | 52 | $ | 522 | ||||||||||||||
| State | 285 | 373 | 457 | |||||||||||||||||
| Foreign | 18 | 19 | 337 | |||||||||||||||||
| 303 | 444 | 1,316 | ||||||||||||||||||
| Deferred: | ||||||||||||||||||||
| Federal | — | 2,533 | 1,893 | |||||||||||||||||
| State | — | 2,362 | 473 | |||||||||||||||||
| — | 4,895 | 2,366 | ||||||||||||||||||
| Total income tax expense | $ | 303 | $ | 5,339 | $ | 3,682 | ||||||||||||||
A breakdown of the Company’s (loss) income from continuing operations before income taxes is as follows (in thousands):
| January 31, 2026 | February 1, 2025 | February 3, 2024 | ||||||||||||||||||
| Domestic | $ | (32,545) | $ | (28,215) | $ | 10,105 | ||||||||||||||
| Foreign | 171 | 175 | 2,173 | |||||||||||||||||
| Total (loss) income from continuing operations before income taxes | $ | (32,374) | $ | (28,040) | $ | 12,278 | ||||||||||||||
A reconciliation of the income tax expense to the amount computed at the federal statutory rate is as follows (in thousands):
| January 31, 2026 | February 1, 2025 | February 3, 2024 | ||||||||||||||||||||||||||||||||||||
| Federal taxes at statutory rate | $ | (6,798) | 21.0 | % | $ | (5,888) | 21.0 | % | $ | 2,578 | 21.0 | % | ||||||||||||||||||||||||||
State and local income taxes, net of federal benefit(1) | 260 | (0.8) | 290 | (1.0) | 765 | 6.2 | ||||||||||||||||||||||||||||||||
| Changes in valuation allowances | 6,070 | (18.8) | 10,508 | (37.5) | — | — | ||||||||||||||||||||||||||||||||
| Foreign tax effects | 18 | (0.1) | 19 | (0.1) | (109) | (0.9) | ||||||||||||||||||||||||||||||||
Non-taxable and non-deductible items(2) | 763 | (2.4) | 297 | (1.1) | 442 | 3.6 | ||||||||||||||||||||||||||||||||
| Changes in unrecognized tax benefits | (35) | 0.1 | 3 | — | (30) | (0.2) | ||||||||||||||||||||||||||||||||
| Other permanent items | 25 | (0.1) | 110 | (0.4) | 36 | 0.3 | ||||||||||||||||||||||||||||||||
| Total income tax expense | $ | 303 | (1.1) | % | $ | 5,339 | (19.1) | % | $ | 3,682 | 30.0 | % | ||||||||||||||||||||||||||
| (1) The state and local jurisdictions that make up the majority (greater than 50%) of the tax effect in this category are North Carolina, Massachusetts, and Texas. | ||||||||||||||||||||||||||||||||||||||
| (2) Non-taxable and non-deductible items primarily relate to non-deductible executive compensation and stock-based compensation. | ||||||||||||||||||||||||||||||||||||||
Cash income taxes paid, net of refunds, were as follows for the fiscal year ended January 31, 2026 (in thousands):
| January 31, 2026 | ||||||||
| Jurisdiction: | ||||||||
| Federal | $ | — | ||||||
| State | (20) | |||||||
| Foreign | 85 | |||||||
| Total cash income taxes paid | $ | 65 | ||||||
Cash income taxes paid to individual jurisdictions that represent more than 5% of total cash income taxes paid are disclosed separately below:
| January 31, 2026 | ||||||||
| State: | ||||||||
| Alabama | $ | 15 | ||||||
| California | (100) | |||||||
| Florida | 7 | |||||||
| Louisiana | 14 | |||||||
| New York | 5 | |||||||
| North Carolina | 23 | |||||||
| Pennsylvania | (73) | |||||||
| Tennessee | 13 | |||||||
| Texas | 71 | |||||||
| Total | $ | (25) | ||||||
| Foreign: | ||||||||
| Hong Kong | 85 | |||||||
| Total | $ | 60 | ||||||
Deferred income taxes reflect the net tax effects of temporary differences between the book and tax bases of assets and liabilities. Significant components of deferred tax assets and liabilities were as follows (in thousands):
| January 31, 2026 | February 1, 2025 | |||||||||||||
| Deferred tax assets: | ||||||||||||||
| Operating lease liabilities | $ | 19,800 | $ | 23,790 | ||||||||||
| Compensation and benefits | 1,113 | 1,166 | ||||||||||||
| Inventories | 2,239 | 1,087 | ||||||||||||
| Net operating loss carryforwards | 35,281 | 7,211 | ||||||||||||
| Other | 1,379 | 1,733 | ||||||||||||
| Subtotal deferred tax assets | 59,812 | 34,987 | ||||||||||||
| Less: valuation allowance | (39,677) | (11,108) | ||||||||||||
| Total deferred tax assets | 20,135 | 23,879 | ||||||||||||
| Deferred tax liabilities: | ||||||||||||||
| Operating lease assets | (17,104) | (20,187) | ||||||||||||
| Property, plant, and equipment | (1,127) | (2,133) | ||||||||||||
| Other | (1,904) | (1,559) | ||||||||||||
| Total deferred tax liabilities | (20,135) | (23,879) | ||||||||||||
| Net deferred tax assets | $ | — | $ | — | ||||||||||
The Company considered both positive and negative evidence to determine whether it was more likely than not that some, or all, of the deferred tax assets would not be realized in its valuation allowance assessment. Based on this assessment, the Company recorded a full valuation allowance against its net deferred tax assets as of February 1, 2025. The Company continues to maintain a full valuation allowance as of January 31, 2026, based on the weight of available evidence.
Uncertain Tax Positions
There was an immaterial amount of total unrecognized tax benefits, net of federal benefit, for the fiscal years ended January 31, 2026, February 1, 2025, and February 3, 2024, respectively. Unrecognized tax benefits are included within other long-term liabilities in the Company's Consolidated Balance Sheets.
The Company files income tax returns in the U.S. federal jurisdiction and various U.S. state and foreign jurisdictions. The Company is subject to U.S. federal income tax examinations for fiscal years 2023 and forward. With a few exceptions, the Company is subject to audit by various state and foreign taxing authorities for fiscal 2022 through the current fiscal year.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2026 | Mar 27, 2026 | Showing above |
| 2025 | Mar 28, 2025 | |
| 2024 | Mar 29, 2024 | |
| 2023 | Mar 28, 2023 | |
| 2022 | Mar 29, 2022 | |
| 2021 | Mar 30, 2021 | |
| 2020 | Mar 31, 2020 | |
| 2019 | Apr 2, 2019 | |
| 2018 | Apr 3, 2018 | |
| 2017 | Mar 28, 2017 | |
| 2016 | Mar 29, 2016 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.