Thu Jun 6, 2019 5:30am EST

NASHVILLE, Tenn., June 6, 2019 /PRNewswire/ -- Kirkland's, Inc. (NASDAQ: KIRK) today reported financial results for the 13-week period ended May 4, 2019.

Net sales for the 13 weeks ended May 4, 2019 decreased 9.0% to $129.6 million compared to $142.5 million for the 13 weeks ended May 5, 2018. Kirkland's opened 3 stores and closed no stores during the first quarter, bringing the total number of stores to 431 at quarter-end. Comparable store sales, including e-commerce sales, decreased 10.7% compared to an increase of 1.4% in the prior-year quarter. The decline in comparable stores sales for the quarter was driven by a decline in store sales partially offset by an increase in e-commerce sales. Store sales were impacted by negative store traffic and a decline in average ticket, which was partially offset by an improvement in conversion. E-commerce sales were driven by gains in traffic, partially offset by a decline in conversion and average ticket.

Net loss for the 13 weeks ended May 4, 2019 was $8.9 million, or $0.62 per diluted share, compared to a net loss of $0.9 million, or $0.06 per diluted share, for the 13 weeks ended May 5, 2018. Adjusted net loss, excluding asset impairment charges, for the 13 weeks ended May 4, 2019 was $7.6 million, or $0.53 per share compared to an adjusted net loss, excluding CEO transition costs, in the prior year period of $0.1 million or $0.00 per share. Gross profit declined from 31.8% to 27.9% of sales, primarily driven by deleverage of store occupancy costs and a decline in merchandise margin. Total operating expenses, excluding depreciation and impairment charges, increased from 31.7% to 34.9% of net sales primarily due to the deleverage of payroll costs and increased advertising expenses.

"The environment remains challenging, and slower-than-expected sales in the first quarter are evidence that we must continue to fast-track our strategy to improve the business," said Woody Woodward, Chief Executive Officer. "For example, continued pressure on brick and mortar traffic offset stronger seasonal performance and a double digit increase in e-commerce sales against last year's gain. To address these issues, we're taking additional steps to reduce operating costs by $10 million in 2019 as well as mitigate the potential impact of higher tariffs on home decor products."

"We're encouraged by progress on our strategic priorities as we approach the second half," continued Mr. Woodward. "Plans to add product categories that can significantly broaden our reach are on schedule, and we're expanding BOPIS to further differentiate Kirkland's in the home decor sector. Initiatives to improve supply chain efficiency and accelerate direct sourcing are also on track. We're in a strong financial position to execute our plan, and we're optimistic about prospects to improve performance in the second half of 2019."

Fiscal 2019 Outlook

The Company now expects fiscal 2019 diluted earnings per share to be in the range of flat to $0.15. The full year guidance includes a projection for additional tariffs, offset by the implementation of the cost reduction program.

This performance outlook is based on current information as of June 6, 2019. The information on which this outlook is based is subject to change, and the Company may update its full year business outlook or any portion thereof at any time for any reason.

Investor Conference Call and Web Simulcast

Kirkland's will hold its earnings call for the first quarter later today at 9:00 a.m. ET. Participating on the call will be Steve Woodward, Chief Executive Officer, Mike Cairnes, President and Chief Operating Officer, and Nicole Strain, Interim Chief Financial Officer. The number to call for the interactive teleconference is (412) 542-4163. A replay of the conference call will be available through Thursday, June 13, 2019 by dialing (412) 317-0088 and entering the confirmation number 10131715.

A live webcast of Kirkland's quarterly conference call will be available online on the Company's Investor Relations Page on June 6, 2019, beginning at 9:00 a.m. ET. The online replay will follow shortly after the call and continue for one year.

About Kirkland's, Inc.

Kirkland's, Inc. is a specialty retailer of home décor in the United States, currently operating 432 stores in 37 states as well as an e-Commerce enabled website, www.kirklands.com.  The Company's stores present a broad selection of distinctive merchandise, including holiday décor, furniture, art, fragrance and accessories, ornamental wall décor, decorative accessories, mirrors, lamps, textiles, artificial floral products, gifts, housewares, outdoor living items, frames and clocks.  The Company's stores offer an extensive assortment of holiday merchandise during seasonal periods as well as items carried throughout the year suitable for gift-giving.  More information can be found at www.kirklands.com.

Forward-Looking Statements

Except for historical information contained herein, the statements in this release are forward-looking and made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and are subject to the finalization of the Company's quarterly financial and accounting procedures. Forward-looking statements involve known and unknown risks and uncertainties, which may cause Kirkland's actual results to differ materially from forecasted results. Those risks and uncertainties include, among other things, the competitive environment in the home décor industry in general and in Kirkland's specific market areas, inflation, fluctuations in cost and availability of products, interruptions in supply chain and distribution systems, including our e-commerce systems and channels, the ability to control employment and other operating costs, availability of suitable retail locations and other growth opportunities, disruptions in information technology systems including the potential for security breaches of Kirkland's or its customers' information, seasonal fluctuations in consumer spending, and economic conditions in general. Those and other risks are more fully described in Kirkland's filings with the Securities and Exchange Commission, including the Company's Annual Report on Form 10-K filed on March 29, 2019 and subsequent reports. Kirkland's disclaims any obligation to update any such factors or to publicly announce results of any revisions to any of the forward-looking statements contained herein to reflect future events or developments.

 

 

KIRKLAND'S, INC.

UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(In thousands, except per share data)



13-Week
Period Ended


13-Week
Period Ended


May 4, 2019


May 5, 2018

Net sales

$

129,648



$

142,454


Cost of sales

93,429



97,142


    Gross profit

36,219



45,312


Operating expenses:




Compensation and benefits

27,056



27,849


Other operating expenses

18,134



17,319


Depreciation (exclusive of depreciation included in cost of sales)

1,839



1,764


  Asset impairment

1,878




    Total operating expenses

48,907



46,932


    Operating loss

(12,688)



(1,620)


Other income, net

(258)



(266)


      Loss before income taxes

(12,430)



(1,354)


Income tax benefit

(3,509)



(472)


      Net loss

$

(8,921)



$

(882)


Loss per share:




  Basic

$

(0.62)



$

(0.06)


  Diluted

$

(0.62)



$

(0.06)


Shares used to calculate loss per share:




  Basic

14,372



15,808


  Diluted

14,372



15,808


 

 

KIRKLAND'S, INC.

UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS

(In thousands)



May 4,
2019


February 2,
2019


May 5,
2018

ASSETS






Current assets:






Cash and cash equivalents

$

32,523



$

57,946



$

58,242


Inventories, net

90,406



84,434



83,164


Prepaid expenses and other current assets

9,598



15,561



15,848


Total current assets

132,527



157,941



157,254


Property and equipment, net

106,326



110,823



116,812


Operating lease right-of-use assets

225,100






Deferred income taxes

5,326



1,703



2,004


Other assets

6,144



6,681



6,531


Total assets

$

475,423



$

277,148



$

282,601








LIABILITIES AND SHAREHOLDERS' EQUITY






Current liabilities:






Accounts payable

$

42,817



$

48,170



$

43,162


Income taxes payable

701



701



4,362


Accrued expenses

23,310



37,665



35,021


Operating lease liabilities

52,090






Total current liabilities

118,918



86,536



82,545


Deferred rent



51,871



54,235


Operating lease liabilities

228,345






Other liabilities

8,352



7,941



8,416


      Total liabilities

355,615



146,348



145,196


Net shareholders' equity

119,808



130,800



137,405


Total liabilities and shareholders' equity

$

475,423



$

277,148



$

282,601


 

 

KIRKLAND'S, INC.

UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(In thousands)



13-Week
Period Ended


13-Week
Period Ended


May 4, 2019


May 5, 2018

Net cash used in:




Operating activities

$

(19,197)



$

(7,964)


Investing activities

(3,926)



(11,083)


Financing activities

(2,300)



(2,867)


Cash and cash equivalents:




Net decrease

(25,423)



(21,914)


Beginning of the period

57,946



80,156


End of the period

$

32,523



$

58,242


 

 

Non-GAAP Financial Measures

To supplement our unaudited consolidated condensed financial statements presented in accordance with generally accepted accounting principles ("GAAP"), this earnings release and the related earnings conference call contain certain non-GAAP financial measures, including EBITDA, adjusted EBITDA, adjusted loss and adjusted diluted loss per share. These measures are not in accordance with, and are not intended as alternatives to, GAAP. The Company uses these non-GAAP financial measures internally in analyzing our financial results and believes that they provide useful information to analysts and investors, as a supplement to GAAP measures, in evaluating our operational performance.

The Company defines EBITDA as net income or loss before interest, provision for income tax, and depreciation and amortization and adjusted EBITDA as EBITDA excluding the impact of special items. The Company defines adjusted net loss and adjusted diluted loss per share by adjusting the applicable GAAP measure to remove the impact of special items.

Non-GAAP measures are intended to provide additional information only and do not have any standard meanings prescribed by GAAP. Use of these terms may differ from similar measures reported by other companies. Each non-GAAP measure has its limitations as an analytical tool, and you should not consider them in isolation or as a substitute for analysis of the Company's results as reported under GAAP.

The following table shows a reconciliation of operating loss to EBITDA and adjusted EBITDA for the thirteen weeks ended May 4, 2019 and May 5, 2018 and a reconciliation of net loss and diluted loss per share to adjusted net loss and adjusted diluted loss per share for the thirteen weeks ended May 4, 2019 and May 5, 2018:

 

 

KIRKLAND'S, INC.

UNAUDITED NON-GAAP MEASURE RECONCILIATION

(In thousands, except per share data)



13 Weeks Ended


May 4, 2019


May 5, 2018

Operating loss

$

(12,688)



$

(1,620)


Depreciation and amortization

7,244



7,066


(Loss) earnings before interest, taxes, depreciation and amortization (EBITDA)

(5,444)



5,446


Special Items:




CEO transition costs



1,069


Asset impairment

1,878




Total special items, pre-tax

1,878



1,069


Adjusted EBITDA

$

(3,566)



$

6,515






Net loss

$

(8,921)



$

(882)


Special Items:




CEO transition costs, net of tax



810


Asset impairment, net of tax

1,350




Adjusted net loss

$

(7,571)



$

(72)






Diluted loss per share

$

(0.62)



$

(0.06)


Adjusted diluted loss per share

$

(0.53)



$

0.00






Diluted weighted average shares outstanding

14,372



15,808


 

 

Contact:   






Kirkland's  


SCR Partners  

Nicole Strain 


Jeff Black: (615) 760-3679

(615) 872-4800  


Tripp Sullivan: (615) 760-1104



IR@Kirklands.com

 

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SOURCE Kirkland's, Inc.



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