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Kirkland's Reports First Quarter 2014 Results

  Kirkland's Reports First Quarter 2014 Results               Announces $30 Million Share Repurchase Authorization  Business Wire  NASHVILLE, Tenn. -- May 22, 2014  Kirkland's, Inc. (NASDAQ: KIRK) today reported financial results for the 13-week period ended May 3, 2014.  Net sales for the 13 weeks ended May 3, 2014, increased 6.9% to $108.3 million compared with $101.2million for the 13 weeks ended May 4, 2013. Comparable store sales for the first quarter of fiscal 2014, including e-commerce sales, increased 5.0% compared with a decrease of 2.3% in the prior-year quarter. Kirkland’s opened 7 stores and closed 7 during the first quarter, leaving the total number of stores at 324 at quarter end.  The Company reported net income of $2.1 million, or $0.12 per diluted share, for the 13 weeks ended May 3, 2014, compared with net income of $1.8 million, or $0.10 per diluted share, for the 13 weeks ended May 4, 2013.  Robert Alderson, Kirkland's President and Chief Executive Officer, said, “We are pleased with the sales momentum during the quarter in our stores and online after the slower start related to adverse weather events. Despite a somewhat more promotional environment late in the quarter, sales remained strong leading to earnings performance at the high end of our guidance. The year thus far is proceeding according to our plan, and we continue to expect benefits for the balance of the year from our investments in store growth, merchandise systems, e-commerce and branding initiatives.”  Stock Repurchase Authorization of $30 Million  The Company also announced that its Board of Directors authorized a stock repurchase plan providing for the purchase in the aggregate of up to $30 million of the Company’s outstanding common stock over the next 24 months. The shares may be repurchased from time to time in open market or negotiated transactions, and the amount and timing of those purchases will be based on a variety of factors, including stock acquisition price, regulatory limitations and other market and economic factors. The stock repurchase program does not require the Company to repurchase any specific number of shares, and the Company may terminate the repurchase program at any time. As of May 21, 2014, the Company had 17.3 million common shares outstanding.  Mr. Alderson added, “We maintain a strong balance sheet, and our unique store model continues to suggest future cash flow generation. As we opportunistically increase the growth rate of the business, the Board’s decision to authorize another round of share repurchases signals our confidence in the future of Kirkland’s.”  Fiscal 2014 Outlook                                              For the 52-week period ending January 31, 2015 (“fiscal                        2014”), the Company expects to achieve approximately                        10% square footage growth with 35 to 40 new store Store Growth:          openings and 10 to 15 store closings. New store                        openings will be weighted more toward the second half                        of the year, and store closings will be weighted more                        toward the first half of the year.                                                Total sales for fiscal 2014 are expected to increase                        approximately 8% to 10% compared with fiscal 2013. This Sales:                 level of sales performance would imply a comparable                        store sales increase of approximately 3% to 5% for                        fiscal 2014.                                                The Company expects year-over-year improvement in                        merchandise and gross profit margins that is expected                        to result from a lower markdown rate, lower inbound                        freight costs, and sales leverage. Operating expenses                        are expected to increase on a dollar basis due to the Margin & Expenses:     increase in stores and incremental investments in                        corporate headcount to support our growth initiatives.                        The Company is also anticipating approximately $0.03 to                        $0.04 per diluted share in additional costs associated                        with its second half lease expiration and transition to                        replacement corporate headquarters space.                                                Based on the above assumptions, without regard to share                        repurchase activity, the Company expects fiscal 2014 Earnings:              earnings per share to be in the range of $0.90 to                        $1.00. The Company expects its full year tax rate to be                        approximately 39%.                                                Capital expenditures in fiscal 2014 are estimated to                        range between $33 million and $36 million. Based on the Cash Flow:             above assumptions, the Company expects to generate                        positive cash flow in fiscal 2014, excluding potential                        share repurchases.                          Second Quarter Fiscal 2014 Outlook  The Company issued guidance for the second quarter ending August 2, 2014, of a net loss of $0.03 to $0.06 per diluted share. Net sales are expected to be in the range of $104 million to $105 million with a comparable store sales increase in the range of 3% to 4%. The Company expects to open approximately 8 stores and close approximately 2 stores during the quarter.  Investor Conference Call and Web Simulcast  Kirkland’s will issue its earnings release for the first quarter before the market opens on Thursday, May 22, 2014, and will host a conference call on the same day at 11:00a.m.ET. The number to call for the interactive teleconference is (212) 231-2918. A replay of the conference call will be available through Thursday, May 29, 2014, by dialing (402) 977-9140 and entering the confirmation number, 21706373.  A live broadcast of Kirkland's quarterly conference call will be available online at the Company's website under Investor Relations or on May 22, 2014, 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 326 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  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 17, 2014. 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 (In thousands, except per share data)                                                                                                                                                                                   13-Week          13-Week                                                   Period Ended     Period Ended                                                  May 3,           May 4,                                                  2014             2013 Net sales                                        $  108,255       $   101,233 Cost of sales                                      65,653          61,827 Gross profit                                        42,602            39,406                                                                    Operating expenses: Operating expenses                                  34,943            32,779 Depreciation                                       4,300           3,791 Operating income                                    3,359             2,836                                                                    Other (income) expense, net                        (13     )        6 Income before income taxes                          3,372             2,830 Income tax expense                                 1,317           1,057 Net income                                       $  2,055        $   1,773                                                                    Earnings per share: Basic                                            $  0.12         $   0.10 Diluted                                          $  0.12         $   0.10                                                                    Shares used to calculate earnings per share: Basic                                              17,308          17,083 Diluted                                            17,825          17,433                                                                KIRKLAND'S, INC. UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS (In thousands)                                                                                                                                                                                    May 3,        February 1,     May 4,                                        2014          2014            2013 ASSETS                                                                       Current assets: Cash and cash equivalents              $ 82,418      $  89,050       $ 74,111 Inventories, net                         50,702         52,637         47,889 Deferred income taxes                    2,857          2,777          1,638 Other current assets                    8,595         8,817         7,591 Total current assets                     144,572        153,281        131,229                                                                       Property and equipment, net              82,768         80,329         76,964 Other assets                            2,028         1,838         1,680                                                                       Total assets                           $ 229,368     $  235,448      $ 209,873                                                                                                                                             LIABILITIES AND SHAREHOLDERS' EQUITY                                                                       Current liabilities: Accounts payable                       $ 19,465      $  23,102       $ 20,933 Income taxes payable                     866            5,875          - Other current liabilities               22,870        23,670        21,719 Total current liabilities                43,201         52,647         42,652                                                                       Non-current deferred income              3,239          3,337          3,057 taxes Deferred rent and other                 44,930        44,235        43,778 long-term liabilities Total liabilities                       91,370        100,219       89,487                                                                       Net shareholders' equity                137,998       135,229       120,386                                                                       Total liabilities and                  $ 229,368     $  235,448      $ 209,873 shareholders' equity                                                   KIRKLAND'S, INC. UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (In thousands)                                      13-Week          13-Week                                      Period Ended     Period Ended                                     May 3,           May 4,                                     2014             2013 Net cash provided by (used in):                                                            Operating activities           $  221           $  8,561      Investing activities              (6,930  )        (2,322  )      Financing activities             77             75                                                             Cash and cash equivalents:      Net increase (decrease)           (6,632  )        6,314      Beginning of the period          89,050         67,797        End of the period              $  82,418       $  74,111    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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