Kirkland's Reports First Quarter 2012 Results

  Kirkland's Reports First Quarter 2012 Results

Business Wire

NASHVILLE, Tenn. -- May 18, 2012

Kirkland's, Inc. (NASDAQ: KIRK) today reported financial results for the
13-week period ended April 28, 2012.

Net sales for the 13 weeks ended April 28, 2012, increased 3.6% to $97.8
million compared with $94.4million for the prior-year quarter. Comparable
store sales for the first quarter of fiscal 2012 decreased 1.2% compared with
a decrease of 8.4% in the prior-year quarter. Kirkland’s opened 5 stores and
closed 17 during the first quarter of 2012, bringing the total number of
stores to 297 at quarter end.

The Company reported net income of $2.0 million, or $0.10 per diluted share,
for the first quarter of fiscal 2012 compared with net income of $3.2 million,
or $0.15 per diluted share, for the first quarter of fiscal 2011.

Robert Alderson, Kirkland's President and Chief Executive Officer, said, “We
entered the first quarter with positive momentum and confidence that the
substantial effort to address Spring merchandising and marketing opportunities
would sustain those trends, but we noticed a distinct change in customer
sentiment in the latter half of the quarter that we addressed with promotional
activity. As a result, we experienced weaker margin and comparable store sales
trends that have continued into early second quarter.

“Our second quarter outlook reflects the current environment in retail, but
does not overshadow the continued investments we are making to support steady
store growth, complete the four-year program to upgrade our information
systems, deliver a consistent store experience and maintain the growth and
momentum in our e-commerce effort. The opportunity for Kirkland’s is to
deliver consistent and reasonable sales and earnings growth, and these
investments are bringing us closer to achieving that goal. We are focusing
intently on merchandising improvement to better leverage our industry
leadership in inventory productivity and a loyal customer base.”

Stock Repurchase Plan

During the first quarter of fiscal 2012, the Company repurchased 219,434
shares of common stock for a total of $3.2 million, or an average price of
$14.60 per share. The Company has $13.4 million remaining under its repurchase

Updated Fiscal 2012 Performance Goals

                    For the 53-week period ending February 2, 2013 (“fiscal
                    2012”), the Company expects to open 40 to 45 new stores
                    and close approximately 30 stores. This expected unit
Store Growth:       growth of approximately 3% to 5% would represent an
                    increase in square footage of approximately 8% to 10%. New
                    store openings will be weighted more toward the second
                    half of the year, while closings are weighted more toward
                    the first half.
                    The Company expects total sales for fiscal 2012 to
                    increase in the range of 7% to 9% compared with fiscal
                    2011. This expectation for total sales growth reflects the
Sales:              additional week in the retail calendar for Fiscal 2012.
                    This level of sales growth would imply comparable store
                    sales of slightly negative to flat for the fiscal year,
                    excluding the impact of the additional week of sales.
                    Based on the current outlook, the Company expects
                    operating margin in fiscal 2012 to be 90 to 140 basis
                    points below fiscal 2011 due to higher fuel costs and
Margins:            expected increases in container rates in the back-half of
                    the year combined with a planned increase in marketing
                    expenses, as well as investments in additional personnel
                    in key areas of the business to support the Company’s
                    growth plans and technology investments.
                    Based on the above assumptions, the Company expects
Earnings:           earnings per share for fiscal 2012 to be in the range of
                    $0.87 to $0.97. The Company expects its effective tax rate
                    for fiscal 2012 to range between 38% and 38.5%.
                    Excluding activity under the Company’s share repurchase
                    program, the Company expects to again generate positive
Cash Flow:          cash flow in fiscal 2012. Capital expenditures in fiscal
                    2012 are estimated to range between $29 million and $32

Second Quarter Fiscal 2012 Outlook

For the second quarter ending July 28, 2012, the Company expects a net loss of
$0.07 to $0.11 per diluted share compared with a net loss of $0.02 per share
in the prior year quarter. Net sales are expected to be $94 million to $96
million, with comparable store sales flat to down 3%. The Company expects to
open approximately 10 to 12 stores and close approximately 5 stores during the

Investor Conference Call and Web Simulcast

Kirkland’s will host a conference call at 11:00a.m.ET today to discuss the
first quarter results. The number to call for the interactive teleconference
is (212) 231-2919. A replay of the conference call will be available through
Friday, May 25, 2012, by dialing (402) 977-9140 and entering the confirmation
number, 21575898.

A live broadcast of Kirkland's quarterly conference call will be available
online at the Company's website under Investor Relations or on May 18, 2012, beginning at
11:00a.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 297 stores in 30
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

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 12, 2012.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

(dollars in thousands, except per share amounts)
                                               13-Week Period Ended
                                               April 28,    April 30,
                                               2012         2011
Net sales                                      $ 97,788     $  94,403
Cost of sales                                   59,319      56,315
Gross profit                                     38,469        38,088
Operating expenses:
Operating expenses                               32,284        29,681
Depreciation                                    3,015       3,241
Operating income                                 3,170         5,166
Other (income) expense, net                     (3     )     37
Income before income taxes                       3,173         5,129
Income tax expense                              1,218       1,959
Net income                                     $ 1,955     $  3,170
Earnings per share:
Basic                                          $ 0.11      $  0.16
Diluted                                        $ 0.10      $  0.15
Shares used to calculate earnings per share:
Basic                                           18,269      19,915
Diluted                                         18,772      20,660

(dollars in thousands)
                                           April 28,   January 28,   April 30,
                                           2012        2012          2011
Current assets:
Cash and cash equivalents                  $ 73,162    $  83,123     $ 90,254
Inventories, net                             47,484       47,306       44,620
Deferred income taxes                        1,725        1,657        3,571
Other current assets                        8,118       7,784       6,810
Total current assets                         130,489      139,870      145,255
Property and equipment, net                  61,414       60,315       46,013
Non-current deferred income taxes            1,150        1,108        1,456
Other assets                                1,496       1,296       879
Total assets                               $ 194,549   $  202,589    $ 193,603
Current liabilities:
Accounts payable                           $ 18,050    $  21,592     $ 19,824
Income taxes payable                         1,931        3,146        601
Other current liabilities                   18,637      21,805      20,287
Total current liabilities                    38,618       46,543       40,712
Deferred rent and other long-term           38,633      38,384      30,615
Total liabilities                           77,251      84,927      71,327
Net shareholders' equity                    117,298     117,662     122,276
Total liabilities and shareholders'        $ 194,549   $  202,589    $ 193,603

(dollars in thousands)
                                  13-Week Period Ended
                                  April 28,    April 30,
                                  2012         2011
Net cash provided by (used in):
     Operating activities         $ (2,733 )   $ 2,060
     Investing activities           (4,109 )     (3,096 )
     Financing activities          (3,119 )    68     
Cash and cash equivalents:
     Net decrease                   (9,961 )     (968   )
     Beginning of the period       83,123     91,222 
     End of the period            $ 73,162    $ 90,254 


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