Le Lézard
Classified in: Business, Covid-19 virus
Subjects: ERN, ERP

Kirkland's Reports Third Quarter 2021 Results


NASHVILLE, Tenn., Dec. 2, 2021 /PRNewswire/ -- Kirkland's, Inc. (Nasdaq: KIRK) ("Kirkland's" or the "Company"), a specialty retailer of home décor and furnishings, announced financial results for the 13 and 39-week periods ended October 30, 2021.

Third Quarter 2021 Financial Summary vs. Prior Year Quarter

Management Commentary

"While the third quarter had its challenges, we remain confident in our overall position as we continue executing upon our long-term transformation strategy," said Steve "Woody" Woodward, president and CEO of Kirkland's. "We experienced softer than expected sales in the final weeks of the quarter but ended with an 8.4% two-year comparable sales increase. We continue to navigate the broader macro issues related to supply chain and labor constraints, which affected year-over-year profitability. Stripping away the incremental freight costs in our supply chain, we continued to achieve gross margin expansion.

"Looking at our results through the end of November, we were impacted by inconsistent traffic patterns and broader supply chain constraints. During Black Friday, we saw in-store traffic remain relatively flat on a year-over-year basis, but there was a meaningful decline in e-commerce traffic, which led to a total sales comp decline for the first month of the fiscal fourth quarter. Given our third quarter results, along with continued supply chain headwinds and choppy sales patterns, we are revising our outlook for the remainder of the year.

"Despite these headwinds, we are excited about the progress we've been making as we enter 2022. We've started a brand awareness campaign ahead of our rebranding launch to Kirkland's Home, which we expect to take place in the first quarter of 2022. Additionally, we are working to strengthen our digital capabilities within the e-commerce site to further enhance the omnichannel experience for our customers. We are also prioritizing our in-store floor layouts for new furniture and outdoor product assortments that we are rolling out in the first half of the year. We believe having a strong furniture and outdoor merchandise mix will help mitigate our seasonal reliance on holiday shopping and help drive new customer growth going forward.

"Overall, we remain on track to achieve our long-term financial targets and are firmly committed to the strategic initiatives we've set forth. Our commitment to optimizing our merchandising assortment, stabilizing margins and driving profitable growth has not wavered, and we firmly believe we are on track to become a high-performance specialty home furnishing retailer with quality products at affordable price points. Although we don't have a clear indication of when supply chain constraints will subside, we are experiencing strong sell-through with the new product assortments that we are able to get to our floor, which gives us further confidence that our merchandise transformation is working and resonating with consumers. We believe we have the necessary infrastructure and team in place to continue executing upon our strategy, ultimately driving long-term shareholder value."

Revised Fourth Quarter 2021 Outlook

The Company now expects a mid-to-high-single-digit same-store sales decrease for the fourth quarter of fiscal 2021 and a mid-single digit same-store sales increase for fiscal 2021. With the expected sales decline and freight impact, the Company anticipates earnings in the fourth quarter to be lower than the prior-year period, while still expecting year-over-year earnings growth of approximately 50% for fiscal 2021.

Strategic Initiatives and Financial Targets

Kirkland's key strategic initiatives include:

Kirkland's annual financial targets include:

The key strategic initiatives and financial targets are based on current information as of December 2, 2021, and are dependent on, among other things, consumer preferences, economic conditions and Kirkland's own successful execution of these initiatives. The information on which these initiatives and financial targets is based is subject to change, and investors are cautioned that the Company may update the initiatives and targets, or any portion thereof, at any time for any reason.

Investor Conference Call and Web Simulcast

Kirkland's management will host a conference call to discuss its financial results for the third quarter ended October 30, 2021, followed by a question and answer period with Steve Woodward, president and CEO, and Nicole Strain, CFO.

Date: Thursday, December 2, 2021
Time: 9:00 a.m. Eastern time
Toll-free dial-in number: (855) 560-2577
International dial-in number: (412) 542-4163
Conference ID: 10162053

Please call the conference telephone number 10-15 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Gateway Investor Relations at (949) 574-3860.

The conference call will be broadcast live and available for replay here and via the investor relations section of the Company's website at www.kirklands.com. The online replay will follow shortly after the call and continue for one year.

A telephonic replay of the conference call will be available after the conference call through December 9, 2021.

Toll-free replay number: (877) 344-7529
International replay number: (412) 317-0088
Replay ID: 10162053

About Kirkland's, Inc.

Kirkland's, Inc. is a specialty retailer of home décor in the United States, currently operating 369 stores in 35 states as well as an e-commerce website, www.kirklands.com. The Company's stores present a curated selection of distinctive merchandise, including holiday décor, furniture, textiles, wall décor, decorative accessories, art, mirrors, fragrances, and other home decorating items. The Company's stores offer an extensive assortment of holiday merchandise during seasonal periods. The Company provides its customers an engaging shopping experience characterized by affordable home décor and inspirational design ideas. This combination of quality and stylish merchandise, value pricing and a stimulating online and store experience allows customers to furnish their home on a budget. More information can be found at www.kirklands.com.

Forward-Looking Statements 

Except for historical information contained herein, the statements in this release, including all statements related to future initiatives, financial goals and expectations or beliefs regarding any future period, 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, risks associated with the Company's progress and anticipated progress towards its long-term objective and the success of its plans in response to the novel coronavirus ("COVID-19") pandemic, the spread of COVID-19 and its impact on the Company's revenues and supply chain, risks associated with COVID-19 and the governments responses to it, the impact of store closures, the effectiveness of the Company's marketing campaigns, risks related to changes in U.S. policy related to imported merchandise, particularly with regard to the impact of tariffs on goods imported from China and strategies undertaken to mitigate such impact, the Company's ability to retain its senior management team, continued volatility in the price of the Company's common stock, the competitive environment in the home décor industry in general and in Kirkland's specific market areas, inflation, fluctuations in cost and availability of inventory, 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 26, 2021 and subsequent reports. Forward-looking statements included in this release are made as of the date of this release. Any changes in assumptions or factors on which such statements are based could produce materially different results. 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.

Contact:

Kirkland's

Gateway Investor Relations             


Nicole Strain

Cody Slach and Cody Cree


(615) 872-4800

[email protected]



(949) 574-3860

 

KIRKLAND'S, INC.

UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF INCOME

(In thousands, except per share data)




13-Week Period Ended




October 30,



October 31,




2021



2020


Net sales


$

143,630



$

146,609


Cost of sales



93,817




93,738


Gross profit



49,813




52,871


Operating expenses:









Compensation and benefits



19,549




21,343


Other operating expenses



19,145




16,682


Depreciation (exclusive of depreciation included in cost of sales)



1,655




1,613


Asset impairment



444




177


Total operating expenses



40,793




39,815


Operating income



9,020




13,056


Other (income) expense, net



(9)




9


Income before income taxes



9,029




13,047


Income tax expense



1,800




691


Net income


$

7,229



$

12,356


Earnings per share:









Basic


$

0.54



$

0.87


Diluted


$

0.51



$

0.82


Weighted average shares outstanding:









Basic



13,405




14,249


Diluted



14,268




15,075


 

KIRKLAND'S, INC.

UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(In thousands, except per share data)




39-Week Period Ended




October 30,



October 31,




2021



2020


Net sales


$

381,989



$

348,578


Cost of sales



252,223




249,751


Gross profit



129,766




98,827


Operating expenses:









Compensation and benefits



60,326




60,157


Other operating expenses



52,491




44,843


Depreciation (exclusive of depreciation included in cost of sales)



4,898




4,683


Asset impairment



754




9,027


Total operating expenses



118,469




118,710


Operating income (loss)



11,297




(19,883)


Other (income) expense, net



(3)




212


Income (loss) before income taxes



11,300




(20,095)


Income tax benefit (expense)



1,726




(15,650)


Net income (loss)


$

9,574



$

(4,445)


Earnings (loss) per share:









Basic


$

0.69



$

(0.31)


Diluted


$

0.64



$

(0.31)


Weighted average shares outstanding:









Basic



13,955




14,121


Diluted



14,953




14,121


 

KIRKLAND'S, INC.

UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS

(In thousands)




October 30,



January 30,



October 31,




2021



2021



2020


ASSETS













Current assets:













Cash and cash equivalents


$

26,475



$

100,337



$

37,189


Inventories, net



115,671




62,083




83,874


Income taxes receivable



523




162




5,441


Prepaid expenses and other current assets



9,647




8,116




9,586


Total current assets



152,316




170,698




136,090


Property and equipment, net



52,850




63,410




68,140


Operating lease right-of-use assets



128,169




147,334




156,924


Other assets



6,548




5,670




5,831


Total assets


$

339,883



$

387,112



$

366,985


LIABILITIES AND SHAREHOLDERS' EQUITY













Current liabilities:













Accounts payable


$

68,349



$

55,173



$

53,339


Accrued expenses



28,593




37,454




27,037


Operating lease liabilities



41,763




44,973




46,015


Total current liabilities



138,705




137,600




126,391


Operating lease liabilities



120,095




148,976




159,030


Other liabilities



5,320




5,614




8,147


Total liabilities



264,120




292,190




293,568


Net shareholders' equity



75,763




94,922




73,417


Total liabilities and shareholders' equity


$

339,883



$

387,112



$

366,985


 

KIRKLAND'S, INC.

UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(In thousands)




39-Week Period Ended




October 30,



October 31,




2021



2020


Cash flows from operating activities:









Net income (loss)


$

9,574



$

(4,445)


Adjustments to reconcile net income (loss) to net cash (used in) provided by operating
activities:









Depreciation and amortization of property and equipment



15,535




17,810


Amortization of debt issue costs



69




70


Asset impairment



754




9,027


(Gain) loss on disposal of property and equipment



(23)




104


Stock-based compensation expense



1,321




912


Deferred income taxes



?




1,525


Changes in assets and liabilities:









Inventories, net



(53,588)




10,800


Prepaid expenses and other current assets



(1,531)




(3,124)


Accounts payable



12,588




(4,735)


Accrued expenses



(8,373)




(1,704)


Income taxes receivable



(849)




(5,230)


Operating lease assets and liabilities



(12,876)




(7,091)


Other assets and liabilities



(1,291)




570


Net cash (used in) provided by operating activities



(38,690)




14,489











Cash flows from investing activities:









Proceeds from sale of property and equipment



44




168


Capital expenditures



(5,162)




(7,580)


Net cash used in investing activities



(5,118)




(7,412)











Cash flows from financing activities:









Borrowings on revolving line of credit



?




40,000


Repayments on revolving line of credit



?




(40,000)


Refinancing costs



?




(15)


Cash used in net share settlement of stock options and restricted stock units



(379)




(52)


Proceeds received from employee stock option exercises



146




12


Employee stock purchases



?




35


Repurchase and retirement of common stock



(29,821)




?


Net cash used in financing activities



(30,054)




(20)











Cash and cash equivalents:









Net (decrease) increase



(73,862)




7,057


Beginning of the period



100,337




30,132


End of the period


$

26,475



$

37,189











Supplemental schedule of non-cash activities:









Non-cash accruals for purchases of property and equipment


$

984



$

414


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 operating income (loss), adjusted net income (loss) and adjusted diluted earnings (loss) per share. These measures are not in accordance with, and are not intended as alternatives to, GAAP financial measures. 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 financial 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, adjusted EBITDA as EBITDA with non-GAAP adjustments and adjusted operating income (loss) as operating income (loss) with non-GAAP adjustments. The Company defines adjusted net income (loss) and adjusted diluted earnings (loss) per share by adjusting the applicable GAAP financial measures for non-GAAP adjustments.

Non-GAAP financial 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 financial 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 income (loss) to EBITDA, adjusted EBITDA and adjusted operating income (loss) for the 13 week and 39 week periods ended October 30, 2021 and October 31, 2020 and a reconciliation of net income (loss) and diluted earnings (loss) per share to adjusted net income (loss) and adjusted diluted earnings (loss) per share for the 13 week and 39 week periods ended October 30, 2021 and October 31, 2020:

KIRKLAND'S, INC.

UNAUDITED NON-GAAP MEASURE RECONCILIATION

(In thousands, except per share data)




13-Week Period Ended



39-Week Period Ended




October 30,
2021



October 31,
2020



October 30,
2021



October 31,
2020


Operating income (loss)


$

9,020



$

13,056



$

11,297



$

(19,883)


Depreciation and amortization



5,049




5,824




15,535




17,810


EBITDA



14,069




18,880




26,832




(2,073)


Non-GAAP adjustments:

















Closed store and lease termination costs in cost of sales(1)



(126)




(752)




(1,632)




(695)


Asset impairment(2)



444




177




754




9,027


Stock-based compensation expense(3)



438




276




1,321




912


Severance charges(4)



2




10




293




890


Other costs included in operating expenses(5)



?




70




?




204


Total adjustments in operating expenses



884




533




2,368




11,033


Total non-GAAP adjustments



758




(219)




736




10,338


Adjusted EBITDA



14,827




18,661




27,568




8,265


Depreciation and amortization



5,049




5,824




15,535




17,810


Adjusted operating income (loss)


$

9,778



$

12,837



$

12,033



$

(9,545)



















Net income (loss)


$

7,229



$

12,356



$

9,574



$

(4,445)


Non-GAAP adjustments, net of tax:

















Closed store and lease termination costs in cost of sales(1)



(90)




(577)




(1,229)




(533)


Asset impairment(2)



334




121




568




6,927


Stock-based compensation expense, including tax impact(3)



277




196




427




1,082


Severance charges(4)



?




6




220




683


Other costs included in operating expenses(5)



?




54




?




155


Total adjustments in operating expenses



611




377




1,215




8,847


Tax valuation allowance(6)



(409)




(2,431)




(519)




3,040


CARES Act - net operating loss carry back(7)



?




268




?




(14,328)


Total non-GAAP adjustments, net of tax



112




(2,363)




(533)




(2,974)


Adjusted net income (loss)


$

7,341



$

9,993



$

9,041



$

(7,419)



















Diluted earnings (loss) per share


$

0.51



$

0.82



$

0.64



$

(0.31)


Adjusted diluted earnings (loss) per share


$

0.51



$

0.66



$

0.60



$

(0.53)



















Diluted weighted average shares outstanding



14,268




15,075




14,953




14,121




(1)

Costs associated with closed stores and lease termination costs, including gains on lease terminations, amounts paid to third parties for rent reduction negotiations and lease termination fees paid to landlords for store closings.

(2)

Impairment charges include both right-of-use asset and property and equipment impairment charges.

(3)

Stock-based compensation expense includes amounts expensed related to equity incentive plans.

(4)

Severance charges include expenses related to severance agreements. This also includes permanent store closure compensation costs.

(5)

Other costs include lease negotiation fees associated with corporate rent reduction.

(6)

To remove the impact of the change in the Company's valuation allowance against deferred tax assets.

(7)

To remove the impact of the income tax benefit recorded in fiscal 2020 related to the carry back of fiscal 2019 and estimated fiscal 2020 federal net operating losses to prior periods as permitted under the Coronavirus Aid, Relief and Economic Security Act.

 

SOURCE Kirkland's, Inc.


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