Le Lézard
Classified in: Business
Subjects: ERN, CCA, ERP

Kirkland's Reports Third Quarter 2019 Results


NASHVILLE, Tenn., Dec. 5, 2019 /PRNewswire/ -- Kirkland's, Inc. (NASDAQ: KIRK) today reported financial results for the 13-week and 39-week periods ended November 2, 2019.

(PRNewsfoto/Kirkland's, Inc.)

Net sales for the 13 weeks ended November 2, 2019 decreased 6.2% to $144.9 million compared to $154.6 million for the 13 weeks ended November 3, 2018. Kirkland's opened one store and closed no stores during the third quarter, bringing the total number of stores to 432 at quarter-end. Comparable store sales, including e-commerce sales, decreased 6.4% compared to an increase of 1.4% in the prior-year quarter. The decline in comparable store 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, which was partially offset by an improvement in conversion. E-commerce sales were driven by gains in traffic and conversion, partially offset by a decline in average ticket.

Gross profit declined from 30.2% to 27.7% of net sales for the 13 weeks ended November 2, 2019, driven by a decline in product margin. Total operating expenses, excluding depreciation and impairment charges, increased from 31.3% to 34.1% of net sales for the 13 weeks ended November 2, 2019, primarily due to increased advertising spend and the deleverage of payroll costs.

Net loss for the 13 weeks ended November 2, 2019 was $22.3 million, or $1.61 per diluted share, compared to a net loss of $2.8 million, or $0.18 per diluted share, for the 13 weeks ended November 3, 2018. Excluding asset impairment of $3.4 million, a tax valuation allowance of $11.3 million and severance charges, the adjusted loss for the 13 weeks ended November 2, 2019 was $8.1 million, or $0.58 per share (see unaudited non-GAAP measure reconciliation for details). For the 13 weeks ended November 3, 2018 adjusted net loss, excluding CEO transition costs and severance charges, was $2.0 million or $0.13 per share.

Net sales for the 39 weeks ended November 2, 2019 decreased 8.5% to $394.5 million compared to $430.9 million for the 39 weeks ended November 3, 2018. Kirkland's opened five stores and closed one store during the first 39 weeks of fiscal 2019. Comparable store sales, including e-commerce sales, decreased 9.3% compared to a decrease of 0.3% in the prior-year period.

Net loss for the 39 weeks ended November 2, 2019 was $48.3 million, or $3.42 per diluted share, compared to a net loss of $10.4 million, or $0.66 per diluted share, for the 39 weeks ended November 3, 2018. Adjusted net loss, excluding asset impairment, severance charges and the establishment of a tax valuation allowance, for the 39 weeks ended November 2, 2019 was $30.3 million, or $2.15 per share. For the 39 weeks ended November 3, 2018 adjusted net loss, excluding CEO transition costs and severance charges, was $8.4 million or $0.54 per share.

"We are focused on strengthening the balance sheet and executing  merchandising initiatives that we believe have the best potential to rejuvenate the top line and improve financial results," said Woody Woodward, Chief Executive Officer. "We effectively managed the seasonal investments in the business during the third quarter, our traditional low point for cash, and we expect to end 2019 with lower inventory levels and positive net cash."

"Trends remain challenging," continued Mr. Woodward. "We are pleased with elements of our new assortments, and we are encouraged by e-commerce trends, which accelerated in the quarter, but there is clearly more work to do to address weak store traffic. We have adjusted our outlook to account for these trends, and we are working aggressively to address infrastructure, manage operating expenses and improve product costs."

Forward Outlook

The Company now expects fiscal 2019 diluted earnings per share, on an adjusted basis, to be in the range of a loss of $1.75 to $2.00. Adjusted earnings exclude asset impairments, severance charges and the establishment of a tax valuation allowance. The range reflects continued pressure on revenue and gross margin as the Company moves forward on its various business improvement initiatives.

The Company's strategic priorities include, but are not limited to, the following areas:

Merchandising:

Kirkland's upgraded the quality of its assortment and added the new product categories tabletop, rugs and bedding. We will continue to evolve our merchandising and marketing to improve relevance and reinforce our value proposition with new and existing customers.



Omni-channel:

Growth in e-commerce revenue accelerated to an increase of 25.9% in the third quarter, and BOPIS now accounts for 27% of e-commerce revenues.  We are working to elevate the online experience to drive top line sales growth, while improving overall profitability.



Infrastructure:

Kirkland's has made progress working with landlords to achieve rent reductions across the store base that are expected to reduce lease costs in 2020 and beyond. In addition, the Company is continuing to review its store base and infrastructure to further align costs to a more profitable omni-channel model. The results of these initiatives may result in future store closures.



Capital:

Kirkland's ended the third quarter of 2019 with approximately $4 million in cash and $25 million of borrowings on its $75 million revolving credit facility. We expect to end fiscal 2019 in a net positive cash position.

This performance outlook is based on current information as of December 5, 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.

The Company's expected range for adjusted diluted earnings per share set forth above is a non-GAAP financial measure and does not include certain charges and costs. Any adjustments to net loss in future periods are generally expected to be similar to the kinds of charges and costs excluded from adjusted net loss reported for prior periods. The exclusion of these charges and costs in future periods could have a significant impact on the Company's adjusted net loss and adjusted diluted earnings per share. The Company is not able to provide a reconciliation of the Company's non-GAAP financial guidance to the corresponding GAAP measures without unreasonable effort because of the uncertainty and variability of the nature and amount of these future charges and costs.

Investor Conference Call and Web Simulcast

Kirkland's will hold its earnings call for the third 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, 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, December 12, 2019 by dialing (412) 317-0088 and entering the confirmation number 10137102.

A live webcast of Kirkland's quarterly conference call will be available online on the Company's Investor Relations Page on December 5, 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


November 2,
2019


November 3,
2018

Net sales

$

144,936



$

154,571


Cost of sales

104,800



107,918


Gross profit

40,136



46,653


Operating expenses:




Compensation and benefits

29,115



29,621


Other operating expenses

20,208



18,783


Depreciation (exclusive of depreciation included in cost of sales)

1,602



1,867


Asset impairment

3,392



?


Total operating expenses

54,317



50,271


Operating loss

(14,181)



(3,618)


Other expense (income), net

11



(155)


Loss before income taxes

(14,192)



(3,463)


Income tax expense (benefit)

8,114



(683)


Net loss

$

(22,306)



$

(2,780)


Loss per share:




Basic

$

(1.61)



$

(0.18)


Diluted

$

(1.61)



$

(0.18)


Shares used to calculate loss per share:




Basic

13,867



15,486


Diluted

13,867



15,486


 

KIRKLAND'S, INC.

UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(In thousands, except per share data)



39-Week
Period Ended


39-Week
Period Ended


November 2,
2019


November 3,
2018

Net sales

$

394,469



$

430,924


Cost of sales

291,541



302,161


Gross profit

102,928



128,763


Operating expenses:




Compensation and benefits

83,333



83,490


Other operating expenses

54,998



54,067


Depreciation (exclusive of depreciation included in cost of sales)

5,177



5,405


Asset impairment

7,251



?


Total operating expenses

150,759



142,962


Operating loss

(47,831)



(14,199)


Other income, net

(405)



(625)


Loss before income taxes

(47,426)



(13,574)


Income tax expense (benefit)

921



(3,197)


Net loss

$

(48,347)



$

(10,377)


Loss per share:




Basic

$

(3.42)



$

(0.66)


Diluted

$

(3.42)



$

(0.66)


Shares used to calculate loss per share:




Basic

14,116



15,673


Diluted

14,116



15,673


 

KIRKLAND'S, INC.

UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS

(In thousands)



November 2,
2019


February 2,
2019


November 3,
2018

ASSETS






Current assets:






Cash and cash equivalents

$

4,202



$

57,946



$

23,837


Inventories, net

140,222



84,434



113,759


Prepaid expenses and other current assets

8,417



15,561



23,314


Total current assets

152,841



157,941



160,910


Property and equipment, net

96,096



110,823



115,275


Operating lease right-of-use assets

210,213



?



?


Deferred income taxes

944



1,703



1,255


Other assets

6,283



6,681



7,201


Total assets

$

466,377



$

277,148



$

284,641








LIABILITIES AND SHAREHOLDERS' EQUITY






Current liabilities:






Accounts payable

$

68,395



$

48,170



$

66,262


Income taxes payable

?



701



?


Accrued expenses

23,527



37,665



34,466


Operating lease liabilities

53,210



?



?


Total current liabilities

145,132



86,536



100,728


Deferred rent

?



51,871



53,944


Operating lease liabilities

206,789



?



?


Revolving line of credit

25,000



?



?


Deferred income taxes

?



?



27


Other liabilities

8,883



7,941



8,692


Total liabilities

385,804



146,348



163,391


Net shareholders' equity

80,573



130,800



121,250


Total liabilities and shareholders' equity

$

466,377



$

277,148



$

284,641


 

KIRKLAND'S, INC.

UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(In thousands)



39-Week
Period Ended


39-Week
Period Ended


November 2,
2019


November 3,
2018

Net cash (used in) provided by:




Operating activities

$

(62,441)



$

(20,819)


Investing activities

(12,759)



(25,025)


Financing activities

21,456



(10,475)


Cash and cash equivalents:




Net decrease

(53,744)



(56,319)


Beginning of the period

57,946



80,156


End of the period

$

4,202



$

23,837


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 13 weeks and 39 weeks ended November 2, 2019 and November 3, 2018 and a reconciliation of net loss and diluted loss per share to adjusted net loss and adjusted diluted loss per share for the 13 weeks and 39 weeks ended November 2, 2019 and November 3, 2018:

KIRKLAND'S, INC.

UNAUDITED NON-GAAP MEASURE RECONCILIATION

(In thousands, except per share data)



13-Week Period Ended


39-Week Period Ended


November 2,
2019


November 3,
2018


November 2,
2019


November 3,
2018

Operating loss

$

(14,181)



$

(3,618)



$

(47,831)



$

(14,199)


Depreciation and amortization

6,861



7,602



21,156



21,992


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

(7,320)



3,984



(26,675)



7,793


Special Items:








CEO transition costs

?



726



?



2,095


Severance charges

120



100



763



100


Asset impairment (1)

3,392



?



7,251



?


Total special items, pre-tax

3,512



826



8,014



2,195


Adjusted EBITDA

$

(3,808)



$

4,810



$

(18,661)



$

9,988










Net loss

$

(22,306)



$

(2,780)



$

(48,347)



$

(10,377)


Special Items:








CEO transition costs, net of tax

?



755



?



1,909


Severance charges, net of tax

329



72



1,142



72


Tax valuation allowance (2)

11,336



?



11,336



?


Asset impairment, net of tax (1)

2,548



?



5,526



?


Total special items, net of tax

14,213



827



18,004



1,981


Adjusted net loss

$

(8,093)



$

(1,953)



$

(30,343)



$

(8,396)










Diluted loss per share

$

(1.61)



$

(0.18)



$

(3.42)



$

(0.66)


Adjusted diluted loss per share

$

(0.58)



$

(0.13)



$

(2.15)



$

(0.54)










Diluted weighted average shares outstanding

13,867



15,486



14,116



15,673



(1)

During the 13-week and 39-week periods ended November 2, 2019, the Company recorded an impairment charge of approximately $41,000 for right-of-use asset impairment at one store and $525,000 for right-of-use asset impairment at three stores, respectively. The Company also recorded an impairment charge totaling approximately $3.4 million and $6.7 million for the 13-week and 39-week periods ended November 2, 2019, respectively, for leasehold improvements, fixtures and equipment at 17 stores and 22 stores, respectively, for which the carrying value exceed the fair value of these assets. The total impairment charge, net of tax, for the 13-week and 39-week periods ended November 2, 2019 was $2.5 million and $5.5 million, respectively.

(2)

The Company established a full valuation allowance against deferred tax assets of $11.3 million as of November 2, 2019, as the Company is estimated to have a three year cumulative pretax loss.

 

Contact:

Kirkland's

SCR Partners


Nicole Strain

Jeff Black: (615) 760-3679


(615) 872-4800

Tripp Sullivan: (615) 760-1104



[email protected]

 

SOURCE Kirkland's, Inc.


These press releases may also interest you

at 06:17
NEI Global Relocation's latest whitepaper, "2024 Relocation Trends | Manufacturing," provides a compelling look into how innovative relocation strategies are crucial for the manufacturing sector's talent acquisition and retention efforts. This comes...

at 06:13
JinkoSolar Holding Co., Ltd. ("JinkoSolar" or the "Company") , one of the largest and most innovative solar module manufacturers in the world, today announced that since March 20, 2024, the Company has repurchased 788,178 American depositary shares...

at 06:08
ConTemporary Locums, a physician-focused medical staffing company, is ushering in a new era with a bold rebrand: Era Locums. This brand evolution marks a commitment to continued innovation and a deeper connection with the company's physician and...

at 06:00
G-P (Globalization Partners), the recognized leader in the global employment market, and standard bearer for industry compliance, today announced it was awarded 50 leader badges in G2's 2024 Spring Report, including Employer of Record Leader, Global...

at 05:45
The Gross Law Firm issues the following notice to shareholders of New York Community Bancorp, Inc. . Shareholders who purchased...

at 05:30
Cato Networks, the SASE leader, announced a new SASE throughput record here at the Porsche Studio Ginza ahead of the 2024 Tokyo E-Prix, achieving 10 Gbps without hardware upgrades. At 10 Gbps, Cato became the first SASE platform to compete not only...



News published on and distributed by: