Kirkland's Reports First Quarter 2014 Results

Announces $30 Million Share Repurchase Authorization

NASHVILLE, Tenn.--()--Kirkland's, Inc. (NASDAQ: KIRK) today reported financial results for the 13-week period ended May 3, 2014.

Net sales for the 13 weeks ended May 3, 2014, increased 6.9% to $108.3 million compared with $101.2 million for the 13 weeks ended May 4, 2013. Comparable store sales for the first quarter of fiscal 2014, including e-commerce sales, increased 5.0% compared with a decrease of 2.3% in the prior-year quarter. Kirkland’s opened 7 stores and closed 7 during the first quarter, leaving the total number of stores at 324 at quarter end.

The Company reported net income of $2.1 million, or $0.12 per diluted share, for the 13 weeks ended May 3, 2014, compared with net income of $1.8 million, or $0.10 per diluted share, for the 13 weeks ended May 4, 2013.

Robert Alderson, Kirkland's President and Chief Executive Officer, said, “We are pleased with the sales momentum during the quarter in our stores and online after the slower start related to adverse weather events. Despite a somewhat more promotional environment late in the quarter, sales remained strong leading to earnings performance at the high end of our guidance. The year thus far is proceeding according to our plan, and we continue to expect benefits for the balance of the year from our investments in store growth, merchandise systems, e-commerce and branding initiatives.”

Stock Repurchase Authorization of $30 Million

The Company also announced that its Board of Directors authorized a stock repurchase plan providing for the purchase in the aggregate of up to $30 million of the Company’s outstanding common stock over the next 24 months. The shares may be repurchased from time to time in open market or negotiated transactions, and the amount and timing of those purchases will be based on a variety of factors, including stock acquisition price, regulatory limitations and other market and economic factors. The stock repurchase program does not require the Company to repurchase any specific number of shares, and the Company may terminate the repurchase program at any time. As of May 21, 2014, the Company had 17.3 million common shares outstanding.

Mr. Alderson added, “We maintain a strong balance sheet, and our unique store model continues to suggest future cash flow generation. As we opportunistically increase the growth rate of the business, the Board’s decision to authorize another round of share repurchases signals our confidence in the future of Kirkland’s.”

Fiscal 2014 Outlook

   

Store Growth:

For the 52-week period ending January 31, 2015 (“fiscal 2014”), the Company expects to achieve approximately 10% square footage growth with 35 to 40 new store openings and 10 to 15 store closings. New store openings will be weighted more toward the second half of the year, and store closings will be weighted more toward the first half of the year.
 

Sales:

Total sales for fiscal 2014 are expected to increase approximately 8% to 10% compared with fiscal 2013. This level of sales performance would imply a comparable store sales increase of approximately 3% to 5% for fiscal 2014.
 

Margin & Expenses:

The Company expects year-over-year improvement in merchandise and gross profit margins that is expected to result from a lower markdown rate, lower inbound freight costs, and sales leverage. Operating expenses are expected to increase on a dollar basis due to the increase in stores and incremental investments in corporate headcount to support our growth initiatives. The Company is also anticipating approximately $0.03 to $0.04 per diluted share in additional costs associated with its second half lease expiration and transition to replacement corporate headquarters space.
 

Earnings:

Based on the above assumptions, without regard to share repurchase activity, the Company expects fiscal 2014 earnings per share to be in the range of $0.90 to $1.00. The Company expects its full year tax rate to be approximately 39%.

 

Cash Flow:

Capital expenditures in fiscal 2014 are estimated to range between $33 million and $36 million. Based on the above assumptions, the Company expects to generate positive cash flow in fiscal 2014, excluding potential share repurchases.
 

Second Quarter Fiscal 2014 Outlook

The Company issued guidance for the second quarter ending August 2, 2014, of a net loss of $0.03 to $0.06 per diluted share. Net sales are expected to be in the range of $104 million to $105 million with a comparable store sales increase in the range of 3% to 4%. The Company expects to open approximately 8 stores and close approximately 2 stores during the quarter.

Investor Conference Call and Web Simulcast

Kirkland’s will issue its earnings release for the first quarter before the market opens on Thursday, May 22, 2014, and will host a conference call on the same day at 11:00 a.m. ET. The number to call for the interactive teleconference is (212) 231-2918. A replay of the conference call will be available through Thursday, May 29, 2014, by dialing (402) 977-9140 and entering the confirmation number, 21706373.

A live broadcast of Kirkland's quarterly conference call will be available online at the Company's website www.kirklands.com under Investor Relations or http://www.videonewswire.com/event.asp?id=99176 on May 22, 2014, beginning at 11:00 a.m. ET. The online replay will follow shortly after the call and continue for one year.

About Kirkland’s, Inc.

Kirkland's, Inc. was founded in 1966 and is a specialty retailer of home décor in the United States. Although originally focused in the Southeast, the Company has grown beyond that region and currently operates 326 stores in 35 states. The Company's stores present a broad selection of distinctive merchandise, including framed art, mirrors, candles, lamps, picture frames, accent rugs, garden accessories and artificial floral products. The Company's stores also offer an extensive assortment of gifts, as well as seasonal merchandise. 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. 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, product availability and growth opportunities, seasonal fluctuations, 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 April 17, 2014. 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 INCOME
(In thousands, except per share data)
       
 

13-Week

Period Ended

13-Week

Period Ended

May 3, May 4,
2014 2013
Net sales $ 108,255 $ 101,233
Cost of sales   65,653     61,827
Gross profit 42,602 39,406
 
Operating expenses:
Operating expenses 34,943 32,779
Depreciation   4,300     3,791
Operating income 3,359 2,836
 
Other (income) expense, net   (13 )   6
Income before income taxes 3,372 2,830
Income tax expense   1,317     1,057
Net income $ 2,055   $ 1,773
 
Earnings per share:
Basic $ 0.12   $ 0.10
Diluted $ 0.12   $ 0.10
 
Shares used to calculate earnings per share:
Basic   17,308     17,083
Diluted   17,825     17,433
             
KIRKLAND'S, INC.
UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands)
 
 
May 3, February 1, May 4,
2014 2014 2013
ASSETS
 
Current assets:
Cash and cash equivalents $ 82,418 $ 89,050 $ 74,111
Inventories, net 50,702 52,637 47,889
Deferred income taxes 2,857 2,777 1,638
Other current assets   8,595   8,817   7,591
Total current assets 144,572 153,281 131,229
 
Property and equipment, net 82,768 80,329 76,964
Other assets   2,028   1,838   1,680
 
Total assets $ 229,368 $ 235,448 $ 209,873
 
 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
Current liabilities:
Accounts payable $ 19,465 $ 23,102 $ 20,933
Income taxes payable 866 5,875 -
Other current liabilities   22,870   23,670   21,719
Total current liabilities 43,201 52,647 42,652
 
Non-current deferred income taxes 3,239 3,337 3,057
Deferred rent and other long-term liabilities   44,930   44,235   43,778
Total liabilities   91,370   100,219   89,487
 
Net shareholders' equity   137,998   135,229   120,386
 
Total liabilities and shareholders' equity $ 229,368 $ 235,448 $ 209,873
       
KIRKLAND'S, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
 

13-Week

Period Ended

13-Week

Period Ended

May 3, May 4,
2014 2013
Net cash provided by (used in):
 
Operating activities $ 221 $ 8,561
Investing activities (6,930 ) (2,322 )
Financing activities   77     75  
 
Cash and cash equivalents:
Net increase (decrease) (6,632 ) 6,314
Beginning of the period   89,050     67,797  
End of the period $ 82,418   $ 74,111  

Contacts

Kirkland's, Inc.
W. Michael Madden, 615-872-4800
Senior Vice President & CFO
or
Corporate Communications, Inc.
Tripp Sullivan, 615-324-7335

Contacts

Kirkland's, Inc.
W. Michael Madden, 615-872-4800
Senior Vice President & CFO
or
Corporate Communications, Inc.
Tripp Sullivan, 615-324-7335