Kirkland's Reports Second Quarter 2014 Results

NASHVILLE, Tenn.--()--Kirkland's, Inc. (NASDAQ: KIRK) today reported financial results for the 13-week and 26-week periods ended August 2, 2014.

Net sales for the 13 weeks ended August 2, 2014, increased 6.6% to $103.5 million compared with $97.1 million for the 13 weeks ended August 3, 2013. Comparable store sales for the 13 weeks ended August 2, 2014, including e-commerce sales, increased 3.6% compared with a decrease of 0.2% in the prior-year quarter. Kirkland’s opened 6 stores and closed 2 during the second quarter, bringing the total number of stores to 328 at quarter end.

Net sales for the 26 weeks ended August 2, 2014, increased 6.7% to $211.7 million compared with $198.4 million for the 26 weeks ended August 3, 2013. Comparable store sales, including e-commerce, for the 26 weeks ended August 2, 2014, increased 4.3% compared with a decrease of 1.3% in the prior-year period. Kirkland’s opened 13 stores and closed 9 during the 26-week period.

The Company reported a net loss of $1.1 million, or $0.06 per diluted share, for the 13 weeks ended August 2, 2014, compared with a net loss of $0.6 million, or $0.03 per diluted share, for the 13 weeks ended August 3, 2013.

For the 26 weeks ended August 2, 2014, the Company reported net income of $1.0 million, or $0.06 per diluted share compared with net income of $1.2 million, or $0.07 per diluted share, for the 26 weeks ended August 3, 2013.

Robert Alderson, Kirkland's Chief Executive Officer, said, “We experienced a strong start and a strong finish to the quarter with comparable sales and margins in line with our expectations. Slower traffic experienced in June and some delays in new store openings related to the timing of space availability affected an otherwise solid second quarter. Early sales and margin trends in August are encouraging, and we will look to build on that momentum through the second half of the year. Seasonal product has also been introduced in the stores and has been well received.”

Stock Repurchase Plan

During the quarter, the Company repurchased 68,000 shares of common stock for a total expenditure of $1.2 million, or an average price of $18.20 per share. As of the end of the second quarter, the Company had $28.8 million remaining under its current share repurchase authorization.

Updated Fiscal 2014 Outlook

Store Growth:

  For the 52-week period ending January 31, 2015 (“fiscal 2014”), the Company expects to open approximately 35 new stores and close approximately 15 stores.
 

Sales:

Total sales for fiscal 2014 are expected to increase approximately 7% to 8.5% compared with fiscal 2013. This level of sales performance would imply a comparable store sales increase of approximately 3% to 4.5% 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 $0.04 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 diluted share to be in the range of $0.87 to $0.97. The Company expects its full year tax rate to be approximately 39%.
 

Cash Flow:

Capital expenditures in fiscal 2014 are estimated to range between $31 million and $34 million. Based on the above assumptions, the Company expects to generate positive cash flow in fiscal 2014, excluding potential share repurchases.

Third Quarter Fiscal 2014 Outlook

The Company issued guidance for the third quarter ending November 1, 2014, of net income of $0.02 to $0.04 per diluted share. Net sales are expected to be in the range of $113 million to $115 million with a comparable store sales increase in the range of 3% to 4.5%. The Company expects to open approximately 13 stores and close approximately 2 stores during the quarter. Costs associated with the Company’s move to a replacement headquarters building will amount to approximately $0.02 per diluted share in the third quarter.

Investor Conference Call and Web Simulcast

Kirkland’s will host a conference call on August 21, 2014, 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, August 28, 2014, by dialing (402) 977-9140 and entering the confirmation number, 21706374.

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=100164 on August 21, 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 328 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 OPERATIONS
(In thousands, except per share data)
   
 

13-Week
Period Ended

13-Week
Period Ended

August 2, August 3,
  2014     2013  
Net sales $ 103,485 $ 97,123
Cost of sales   65,612     61,480  
Gross profit 37,873 35,643
 
Operating expenses:
Operating expenses 35,313 32,767
Depreciation   4,431     3,950  
Operating loss (1,871 ) (1,074 )
 
Other (income) expense, net   (159 )   19  
Loss before income taxes (1,712 ) (1,093 )
Income tax benefit   (657 )   (516 )
Net loss $ (1,055 ) $ (577 )
 
Loss per share:
Basic $ (0.06 ) $ (0.03 )
Diluted $ (0.06 ) $ (0.03 )
 
Shares used to calculate loss per share:
Basic   17,335     17,174  
Diluted   17,335     17,174  
 
KIRKLAND'S, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(In thousands, except per share data)
   
 

26-Week
Period Ended

26-Week
Period Ended

August 2, August 3,
  2014     2013
Net sales $ 211,740 $ 198,356
Cost of sales   131,265     123,307
Gross profit 80,475 75,049
 
Operating expenses:
Operating expenses 70,256 65,546
Depreciation   8,731     7,741
Operating income 1,488 1,762
 
Other (income) expense, net   (172 )   25
Income before income taxes 1,660 1,737
Income tax expense   660     541
Net income $ 1,000   $ 1,196
 
Earnings per share:
Basic $ 0.06   $ 0.07
Diluted $ 0.06   $ 0.07
 
Shares used to calculate earnings per share:
Basic   17,321     17,129
Diluted   17,831     17,535
 
KIRKLAND'S, INC.
UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands)
     
 
August 2, February 1, August 3,
  2014   2014   2013
ASSETS
 
Current assets:
Cash and cash equivalents $ 68,468 $ 89,050 $ 63,489
Inventories, net 57,364 52,637 53,979
Deferred income taxes 2,828 2,777 1,630
Other current assets   12,534   8,817   12,258
Total current assets 141,194 153,281 131,356
 
Property and equipment, net 86,201 80,329 77,537
Other assets   2,065   1,838   1,757
 
Total assets $ 229,460 $ 235,448 $ 210,650
 
 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
Current liabilities:
Accounts payable $ 22,434 $ 23,102 $ 21,442
Income taxes payable - 5,875 -
Other current liabilities   22,440   23,670   21,470
Total current liabilities 44,874 52,647 42,912
 
Non-current deferred income taxes 3,274 3,337 3,074
Deferred rent and other long-term liabilities   44,935   44,235   43,647
Total liabilities   93,083   100,219   89,633
 
Net shareholders' equity   136,377   135,229   121,017
 
Total liabilities and shareholders' equity $ 229,460 $ 235,448 $ 210,650
 
KIRKLAND'S, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
   

26-Week
Period Ended

26-Week
Period Ended

August 2, August 3,
  2014     2013  
Net cash provided by (used in):
 
Operating activities $ (4,518 ) $ 1,979
Investing activities (14,827 ) (6,841 )
Financing activities   (1,237 )   554  
 
Cash and cash equivalents:
Net decrease (20,582 ) (4,308 )
Beginning of the period   89,050     67,797  
End of the period $ 68,468   $ 63,489  

Contacts

Kirkland's, Inc.
W. Michael Madden, 615-872-4898
President & COO
IR@Kirklands.com
or
SCR Partners
Tripp Sullivan, 615-760-1104

Sharing

Contacts

Kirkland's, Inc.
W. Michael Madden, 615-872-4898
President & COO
IR@Kirklands.com
or
SCR Partners
Tripp Sullivan, 615-760-1104