Today, Vera Bradley Inc. (Nasdaq: VRA) ranks as the fourth largest handbag company in the U.S., with annual revenues of more than $540 million. But the Fort Wayne, Ind. manufacturer -- which trails only Coach (NYSE: COH), Michael Kors (NYSE: KORS) and Dooney & Bourke -- had modest beginnings, recalled co-founder Barbara Bradley Baekgaard. She highlighted some of the milestones of the company’s growth during a fireside chat conducted by Mergers & Acquisitions editor-in-chief Mary Kathleen Flynn at an ACG New York Women of Leadership conference at the Harmonie Club on March 27.
It all began when Baekgaard, a stay-at-home mom turned wallpaper-hanging entrepreneur walked through an airport 30-plus years ago and noticed the dearth of luggage designed for women. To fill the void, she and friend Patricia Miller decided the next day to launch a handbag company named after Baekgaard’s mother, Vera Bradley. The initial investment was $500, “borrowed” from their husbands, to purchase off-the-shelf materials from Jo-Ann Fabrics and Craft Stores.
Vera Bradley is known for bright, patterned and quilted bags, and is ingrained with the lessons that Baekgaard learned from her parents -- sell yourself first, your company second and your product third. Vera Bradley exudes positivity and honesty, much like Baekgaard herself.
Baekgaard’s friendship with Miller began before the handbags, when Baekgaard moved to Indiana and the two started a wallpapering business. “I just happen to like hanging wallpaper, I still do,” Baekgaard says.
On a trip to visit her parents, Baekgaard noticed women at the airport lacking fun, bright or feminine travel bags, so the next day she started a company to provide them.
The first bags were sent off to a college, where one of Baekgaard’s daughters and her friends fell in love with them. After that, Baekgaard decided she wanted to get a booth in the Chicago Gift Show. Her father had been in the gift industry and at one point owned a candle company.
Unconvinced that luggage was the right fit for a gift show, the conference organizers handicapped her by sticking her in a tiny booth in the basement of the McCormick Center, next to the purveyor of giant butterfly magnets, designed for trailers. Not knowing anyone at the conference, during a networking event she found herself chatting with a little girl and inviting the girl to play with some of the trinkets she had borrowed from her booth neighbor. Baekgaard’s kindness to the child led to an invitation from the girl’s mother to join them at their banquet table. As luck would have it, the entrepreneur was pleasantly surprised to find herself dining with William Little, chairman of George Little Management Inc. (who served as managing director of the Chicago Gift Show from 1957 until 1982) and his son William Little Jr., who turned out to be the girl’s grandfather and father. The next day, she found Baekgaard’s budding company was moved a premium booth on the show’s first floor. The chance meeting soon blossomed into a friendship with William Little Jr., who became an important mentor for Baekgaard.
In addition to the original $500 investment, early financing came in the form of a $2,500 loan from a bank and a $2,500 check from a friend who believed in the business and told her to consider the money “a loan if the company succeeds and a gift if the company fails.”
The only time Baekgaard seriously considered major outside investors was many years later, as Miller looked to retire. Baekgaard considered bringing in an investor because she could not afford to buy her partner out. Vera Bradley hired Goldman Sachs to explore the process, including a possible private equity deal.
“We just decided it would be better to take it public,” Baekgaard said.
In Vera Bradley’s initial public offering in October 2010, shares, initially priced at $16, closed up more than 55 percent. But going public didn’t change much for Baekgaard, who is still the creative force of the company.
Baekgaard said she has always believed in playing to her strengths, which include design and sales.
“I knew my weaknesses, which are finance and all the things you need to know about to run a business, so I just hired the right people,” Baekgaard says. Those people have at some point included most members of her family, including son-in-law Michael Ray, who until recently served as CEO.
Now, the company is moving towards leather goods and other products targeted at women who are starting their careers. The new look is plainer, sleeker and aimed at the “working gal,” Baekgaard said.
The company has also brought in new leadership as it makes the transition from wholesale channels to retail. Most significant is the addition of Robert Wallstrom, former president of Saks Fifth Avenue's Off Fifth division. Sue Fuller, formerly of Ralph Lauren Corp. (NYSE: RL), recently joined as chief merchandising officer.
“I think someone’s just pumping oxygen into our company right now, we’re just so excited about where it’s going,” Baekgaard enthused. Even with all of the changes, Baekgaard plans to remain at the helm “My retirement and my eulogy will be one speech.”