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Kirkland's Reports Second Quarter 2013 Results

  Kirkland's Reports Second Quarter 2013 Results

Business Wire

NASHVILLE, Tenn. -- August 22, 2013

Kirkland's, Inc. (NASDAQ: KIRK) today reported financial results for the
13-week and 26-week periods ended August 3, 2013.

Net sales for the 13 weeks ended August 3, 2013, increased 6.7% to $97.1
million compared with $91.0million for the 13 weeks ended July 28, 2012.
Comparable store sales, including e-commerce sales, for the second quarter of
fiscal 2013 decreased 0.2% compared with a decrease of 3.6% in the prior-year
quarter. Kirkland’s opened 6 stores and closed 6 during the second quarter of
fiscal 2013, bringing the total number of stores to 317 at quarter end.

Net sales for the 26 weeks ended August 3, 2013, increased 5.1% to $198.4
million compared with $188.8 million for the 26 weeks ended July 28, 2012.
Comparable store sales, including e-commerce, for the 26 weeks ended August 3,
2013, decreased 1.3% compared with a decrease of 2.4% in the prior-year
period. The Company opened 7 stores and closed 13 stores during the 26-week
period.

The Company reported a net loss of $0.6 million, or $0.03 per diluted share,
for the second quarter of fiscal 2013 compared with a net loss of $2.0
million, or $0.11 per diluted share, for the second quarter of fiscal 2012.

For the 26-week period ended August 3, 2013, the Company reported net income
of $1.2 million, or $0.07 per diluted share, compared with a net loss of
$42,000, or $0.00 per diluted share, for the 26-week period ended July 28,
2012.

Robert Alderson, Kirkland's President and Chief Executive Officer, said,
“Consistent trends through the second quarter, combined with a stronger margin
from a less promotional stance, led to the in-line sales and
better-than-anticipated earnings results. We are well-positioned to deliver on
stronger second half performance with improving trends in our merchandise
margin, conversion and average ticket. While traffic remains a challenge, we
are encouraged by the initial test results from our branding initiatives and
will look to extend and expand our activities during the second half of 2013.”

Updated Fiscal 2013 Outlook

              For the 52-week period ending February 1, 2014 (“fiscal 2013”),
              the Company expects to open approximately 25 new stores and
Store Base:  close approximately 20 stores. The majority of new store
              openings will occur by Thanksgiving with the balance opening
              after the holiday period, while the remaining closings will
              primarily occur after the holiday period.

              Total sales for the 52-week fiscal 2013 are expected to increase
Sales:        approximately 3% to 4% compared with 53-week fiscal 2012. This
              level of total sales performance implies comparable store sales
              results of flat to a slight increase for fiscal 2013.
              
              Based on the current outlook, merchandise margin is expected to
              increase during the second half of fiscal 2013 on a
              year-over-year basis. Inbound freight costs, which are a
              component of the merchandise margin, are expected to contribute
              to the margin increase through lower year-over-year container
Margins:      rates. Continued strict focus on operating expense controls,
              combined with a conservative store opening plan, should position
              the Company to better leverage any upside to its current revenue
              projections. However, the Company expects investments in
              personnel, as well as increases in marketing, e-commerce
              expenses, and depreciation to offset some of the expense
              efficiencies.

              Based on the above assumptions, the Company expects fiscal 2013
Earnings:     earnings per share to be in the range of $0.80 to $0.90. 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 $19 million and $21 million. Based on the above
              assumptions, the Company expects to be cash flow positive in
              fiscal 2013.

Third Quarter Fiscal 2013 Outlook

For the third quarter ending November 2, 2013, the Company expects net income
of $0.00 to $0.03 per diluted share compared with a net loss of $0.02 per
share in the prior-year quarter. Net sales are expected to be $103 million to
$105 million, with a modest increase in comparable store sales. The Company
expects to open approximately 10 stores and close approximately 3 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 the
second 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, August 29, 2013, by dialing (402) 977-9140 and entering the
confirmation number, 21646259.

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=95243 on August 22, 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 18, 2013. 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
(dollars in thousands, except per share amounts)
                                                     
                                                        
                                           13-Week Period Ended
                                           August 3,    July 28,
                                            2013       2012   
                                                        
Net sales                                  $ 97,123     $ 91,004
Cost of sales                               61,480     61,010 
Gross profit                                 35,643       29,994
                                                        
Operating expenses:
Operating expenses                           32,767       30,741
Depreciation                                3,950      3,205  
Operating loss                               (1,074 )     (3,952 )
                                                        
Other expense, net                          19         22     
Loss before income taxes                     (1,093 )     (3,974 )
Income tax benefit                          (516   )    (1,977 )
Net loss                                   $ (577   )   $ (1,997 )
                                                        
Loss per share:
Basic                                      $ (0.03  )   $ (0.11  )
Diluted                                    $ (0.03  )   $ (0.11  )
                                                        
Shares used to calculate loss per share:
Basic                                       17,174     17,470 
Diluted                                     17,174     17,470 


KIRKLAND'S, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(numbers in thousands, except per share amounts)
                                                               
                                                                  
                                                      26-Week Period Ended
                                                      August 3,   July 28,
                                                       2013       2012    
                                                                  
Net sales                                             $ 198,356   $ 188,792
Cost of sales                                          123,307    120,329 
Gross profit                                            75,049      68,463
                                                                  
Operating expenses:
Operating expenses                                      65,546      63,025
Depreciation                                           7,741      6,220   
Operating income (loss)                                 1,762       (782    )
                                                                  
Other expense, net                                     25         19      
Income (loss) before income taxes                       1,737       (801    )
Income tax expense (benefit)                           541        (759    )
Net income (loss)                                     $ 1,196     $ (42     )
                                                                  
Earnings (loss) per share:
Basic                                                 $ 0.07      $ (0.00   )
Diluted                                               $ 0.07      $ (0.00   )
                                                                  
Shares used to calculate earnings (loss) per share:
Basic                                                  17,129     17,869  
Diluted                                                17,535     17,869  


KIRKLAND'S, INC.
UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS
(dollars in thousands)
                                                                 
                                                                     
                                           August 3,   February 2,   July 28,
                                            2013        2013        2012
ASSETS
                                                                     
Current assets:
Cash and cash equivalents                  $ 63,489    $  67,797     $ 49,614
Inventories, net                             53,979       49,577       49,773
Income taxes receivable                      4,164        -            3,727
Deferred income taxes                        1,630        1,602        1,635
Other current assets                        8,094       9,370       10,138
Total current assets                         131,356      128,346      114,887
                                                                     
Property and equipment, net                  77,537       78,499       68,840
Non-current deferred income taxes            -            -            1,086
Other assets                                1,757       1,559       1,425
                                                                     
Total assets                               $ 210,650   $  208,404    $ 186,238
                                                                     
                                                                     
LIABILITIES AND SHAREHOLDERS' EQUITY
                                                                     
Current liabilities:
Accounts payable                           $ 21,442    $  21,642     $ 22,583
Income taxes payable                         -            520          -
Other current liabilities                   21,470      21,009      20,772
Total current liabilities                    42,912       43,171       43,355
                                                                     
Non-current deferred income taxes            3,074        3,128        -
Deferred rent and other long-term           43,647      44,230      40,159
liabilities
Total liabilities                           89,633      90,529      83,514
                                                                     
Net shareholders' equity                    121,017     117,875     102,724
                                                                     
Total liabilities and shareholders'        $ 210,650   $  208,404    $ 186,238
equity


KIRKLAND'S, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(dollars in thousands)
                                             
                                    26-Week Period Ended
                                    August 3,   July 28,
                                    2013        2012
Net cash provided by (used in):
                                                
Operating activities                $ 1,979     $ (2,364)
Investing activities                (6,841)     (14,786)
Financing activities                554         (16,359)
                                                
Cash and cash equivalents:
Net decrease                        (4,308)     (33,509)
Beginning of the period             67,797      83,123
End of the period                   $ 63,489    $ 49,614

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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