UPDATE 1-Vera Bradley prices IPO at top of range

Handbag maker Vera Bradley Inc (VRA.O) priced shares in its initial public offering at the top of the expected range on Wednesday, according to an underwriter. The company sold 11 million shares for $16 each, raising about $176 million. It had estimated in a prospectus it would sell 11 million shares for $14 to $16 each. Fort Wayne, Indiana-based Vera Bradley sells handbags and accessories. As of July 31, it sold its products through 3,300 independent retailers, 31 full-price stores, two outlets, a website, and an annual outlet sale. Same store sales, or sales at stores open at least a year, at Vera Bradley's full-price stores rose 26 percent in the six months ended July 31 compared with a year earlier. The company said in its prospectus that the U.S. market can support 300 stores. It said it will open nine full-price stores and three outlet stores in the 2011 fiscal year; 14 to 16 new stores in 2012 and 14 to 20 new stores annually in the next five fiscal years. New full-price stores are expected to break even in less than 18 months, the company said. Morningstar analyst Pete Wahlstrom said in a note earlier this week that the 18-month breakeven time for new stores is "impressive." "Importantly, we believe that the firm can internally fund its new store openings and other growth initiatives," he said. Net revenue grew 25.9 percent to $165.1 million in the six months ended July 31 compared with a year earlier. Net income nearly doubled to $26 million in the same period. Only proceeds of four million of the 11 million shares being sold in the IPO are going to the company, with the rest going to selling shareholders. Vera Bradley said it would use proceeds from the offering, together with a loan, to pay distributions to existing shareholders. The company said it did not expect to pay any further distributions after the IPO. Underwriters on the offering were led by Baird and Piper Jaffray. Shares are expected to begin trading on the Nasdaq on Thursday under the symbol "VRA." (Reporting by Clare Baldwin and Phil Wahba; Editing by Dhara Ranasinghe)