Kirkland's Reports Fourth Quarter and Fiscal 2012 Results

  Kirkland's Reports Fourth Quarter and Fiscal 2012 Results

Business Wire

NASHVILLE, Tenn. -- March 14, 2013

Kirkland's, Inc. (NASDAQ: KIRK) today reported financial results for the
14-week and 53-week periods ended February 2, 2013.

Due to a shift in the Company’s retail calendar, the fourth quarter of fiscal
2012 contained 14 weeks compared with the typical 13 weeks in fiscal 2011. As
such, comparisons of total sales for the fourth quarter, as well as for the
full fiscal year, with the same periods in fiscal 2011 are affected by an
extra week of sales. Comparable store sales results for the fourth quarter
have been calculated using sales for the 13 weeks ended January 26, 2013,
compared with the 13 weeks ended January 28, 2012. Comparable store sales
results for the full fiscal year have been calculated using sales for the 52
weeks ended January 26, 2013, compared with the 52 weeks ended January 28,
2012.

Net sales, including gift card breakage revenue, for the 14 weeks ended
February 2, 2013, increased 9.2% to $162.9 million compared with
$149.1million for the 13 weeks ended January 28, 2012. On a 13-week basis,
comparable store sales, including e-commerce sales, for the fourth quarter of
fiscal 2012 decreased 2.6% compared with an increase of 1.4% in the prior-year
quarter. Kirkland’s opened 17 stores and closed 2 during the fourth quarter,
bringing the total number of stores to 323 at quarter end.

Net sales, including gift card breakage revenue, for the 53 weeks ended
February 2, 2013, increased 4.2% to $448.4 million compared with
$430.3million for the 52 weeks ended January 28, 2012. On a 52-week basis,
comparable store sales for fiscal 2012, including e-commerce sales, decreased
3.0% compared with a 4.0% decrease in fiscal 2011. The Company opened 42
stores and closed 28 during fiscal 2012.

The Company reported net income of $14.3 million, or $0.82 per diluted share,
for the 14 weeks ended February 2, 2013, compared with net income of $15.2
million, or $0.78 per diluted share, for the 13 weeks ended January 28, 2012.
Results for the fourth quarter of fiscal 2012 included a year-over-year
after-tax benefit of approximately $0.03 per diluted share resulting from a
positive change in the actuarial estimate of the Company’s general liability
and workers’ compensation reserves. For comparative purposes, during the
fourth quarter of fiscal 2011, the Company recorded an after-tax benefit of
approximately $0.04 per diluted share related to a change in the estimate of
its loyalty program accrual due to the termination of the agreement with its
prior private-label credit card service provider.

For the 53 weeks ended February 2, 2013, the Company reported net income of
$13.8 million, or $0.77 per diluted share, compared with net income of $19.1
million, or $0.95 per diluted share, for the 52 weeks ended January 28, 2012.

Robert Alderson, Kirkland's President and Chief Executive Officer, noted, “The
fourth quarter results were slightly better than our expectations with sales
at the higher end of our guidance and margin on plan. We still have some work
ahead of us to return some key categories to their previous levels, but our
core merchandise assortment is improving. Consistent with broader retail
trends to date, we have started the year off on a more cautious note and
expect that outlook to continue in the first half of fiscal 2013. As the year
progresses, we expect to see more improvement due to better merchandising, a
more productive and better scheduled real estate plan and continued focus on
tight expense controls.”

Fiscal 2013 Outlook

                    For the 52-week period ending February 1, 2014 (“fiscal
                    2013”), the Company expects to open 25 to 35 new stores
Store Base:     and close approximately 10 to 15 stores. New store
                    openings will be weighted more toward the second and third
                    quarters of the year, while closings will be weighted more
                    toward the first half of the year.
                    
                    Total sales for fiscal 2013 are expected to increase
                    approximately 5% to 7% compared with fiscal 2012. This
Sales:              level of sales performance would imply a nominal decrease
                    to a nominal increase in comparable store sales for fiscal
                    2013.
                    
                    Based on the current outlook, inbound freight costs should
                    be steadier for the full year, with higher year-over-year
                    costs in the first half of fiscal 2013 pressuring
                    merchandise margin comparisons and a moderation in these
                    costs in the second half of the year lessening the margin
Margins:            impact. A strict focus on operating expense controls,
                    combined with a more conservative store opening plan,
                    should position the Company to better leverage any upside
                    to its current revenue projections. However, the Company
                    expects investments in key merchandising personnel, as
                    well as modest increases in marketing and e-commerce
                    expenses to offset some of the expense efficiencies.
                    
                    Based on the above assumptions, the Company expects fiscal
Earnings:           2013 earnings per share to be in the range of $0.70 to
                    $0.85. The Company expects its full year effective tax
                    rate to be approximately 38.5%.
                    
                    Capital expenditures in fiscal 2013 are estimated to range
Cash Flow:          between $22 million and $25 million. Based on the above
                    assumptions, the Company expects to be cash flow positive
                    in fiscal 2013.

First Quarter Fiscal 2013 Outlook

The Company issued guidance for the first quarter ending May 4, 2013, of net
income of $0.02 to $0.05 per diluted share. Net sales are expected to be in
the range of $99 to $101 million with comparable store sales declining 3% to
5%. The Company expects to open approximately 1 store and close approximately
7 stores during the quarter.

Investor Conference Call and Web Simulcast

Kirkland’s will host a conference call at 11:00a.m.ET today to discuss
fourth quarter results. The number to call for the interactive teleconference
is (212) 231-2919. A replay of the conference call will be available through
Thursday, March 21, 2013, by dialing (402) 977-9140 and entering the
confirmation number, 21646219.

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=92067 on March 14, 2013, 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 317 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 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
developments.

                                                          
KIRKLAND'S, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(dollars in thousands, except per share amounts)
                                                                             
                                                                             
                                             14-Week            13-Week
                                                            
                                             Period Ended       Period Ended
                                             February 2,        January 28,
                                                2013              2012
                                                                             
Net sales                                    $   162,885        $   149,110
Cost of sales                                   96,751            84,982
Gross profit                                     66,134             64,128
                                                                             
Operating expenses:
Operating expenses                               39,245             36,551
Depreciation                                    3,833             3,522
Operating income                                 23,056             24,055
                                                                             
Other income, net                               4                 64
Income before income taxes                       23,060             24,119
Income tax expense                              8,807             8,941
Net income                                   $   14,253         $   15,178
                                                                             
Earnings per share:
Basic                                        $   0.83           $   0.80
Diluted                                      $   0.82           $   0.78
                                                                             
Shares used to calculate earnings per
share:
Basic                                           17,076            19,037
Diluted                                         17,440            19,413

                                                          
KIRKLAND'S, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(dollars in thousands, except per share amounts)
                                                                             
                                                                             
                                             53-Week            52-Week
                                                           
                                             Period Ended       Period Ended
                                             February 2,        January 28,
                                             2013               2012
                                                                             
Net sales                                    $  448,365         $   430,285
Cost of sales                                  279,749           261,091
Gross profit                                    168,616             169,194
                                                                             
Operating expenses:
Operating expenses                              133,913             126,279
Depreciation                                   13,175            12,410
Operating income                                21,528              30,505
                                                                             
Other income (expense), net                    (34     )          65
Income before income taxes                      21,494              30,570
Income tax expense                             7,699             11,455
Net income                                   $  13,795         $   19,115
                                                                             
Earnings per share:
Basic                                        $  0.79           $   0.97
Diluted                                      $  0.77           $   0.95
                                                                             
Shares used to calculate earnings per
share:
Basic                                          17,463            19,707
Diluted                                        17,856            20,227

                                                            
KIRKLAND'S, INC.
UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS
(dollars in thousands)
                                                                             
                                                                             
                                                 February 2,     January 28,
                                                 2013            2012
ASSETS
                                                                             
Current assets:
Cash and cash equivalents                        $  67,797       $  83,123
Inventories, net                                    49,577          47,306
Deferred income taxes                               1,602           1,657
Other current assets                               9,370          7,784
Total current assets                                128,346         139,870
                                                                             
Property and equipment, net                         78,499          60,315
Non-current deferred income taxes                   -               1,108
Other assets                                       1,559          1,296
                                                                             
Total assets                                     $  208,404      $  202,589
                                                                             
                                                                             
LIABILITIES AND SHAREHOLDERS' EQUITY
                                                                             
Current liabilities:
Accounts payable                                 $  21,642       $  21,592
Income taxes payable                                520             3,146
Other current liabilities                          21,009         21,805
Total current liabilities                           43,171          46,543
                                                                             
Non-current deferred income taxes                   3,128           -
Deferred rent and other long-term                  44,230         38,384
liabilities
Total liabilities                                  90,529         84,927
                                                                             
Net shareholders' equity                           117,875        117,662
                                                                             
Total liabilities and shareholders' equity       $  208,404      $  202,589

                                             
KIRKLAND'S, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(dollars in thousands)

                                53-Week        52-Week
                                             
                                Period Ended   Period Ended
                                February 2,    January 28,
                                2013           2012
Net cash provided by (used in):
                                               
     Operating activities       $  32,347      $  41,765
     Investing activities          (31,373 )      (26,652 )
     Financing activities         (16,300 )     (23,212 )
                                               
Cash and cash equivalents:
     Net decrease                  (15,326 )      (8,099  )
     Beginning of the period      83,123       91,222  
     End of the period          $  67,797     $  83,123  

Contact:

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