Kirkland's Reports Second Quarter 2014 Results

  Kirkland's Reports Second Quarter 2014 Results  Business Wire  NASHVILLE, Tenn. -- August 21, 2014  Kirkland's, Inc. (NASDAQ: KIRK) today reported financial results for the 13-week and 26-week periods ended August 2, 2014.  Net sales for the 13 weeks ended August 2, 2014, increased 6.6% to $103.5 million compared with $97.1million for the 13 weeks ended August 3, 2013. Comparable store sales for the 13 weeks ended August 2, 2014, including e-commerce sales, increased 3.6% compared with a decrease of 0.2% in the prior-year quarter. Kirkland’s opened 6 stores and closed 2 during the second quarter, bringing the total number of stores to 328 at quarter end.  Net sales for the 26 weeks ended August 2, 2014, increased 6.7% to $211.7 million compared with $198.4 million for the 26 weeks ended August 3, 2013. Comparable store sales, including e-commerce, for the 26 weeks ended August 2, 2014, increased 4.3% compared with a decrease of 1.3% in the prior-year period. Kirkland’s opened 13 stores and closed 9 during the 26-week period.  The Company reported a net loss of $1.1 million, or $0.06 per diluted share, for the 13 weeks ended August 2, 2014, compared with a net loss of $0.6 million, or $0.03 per diluted share, for the 13 weeks ended August 3, 2013.  For the 26 weeks ended August 2, 2014, the Company reported net income of $1.0 million, or $0.06 per diluted share compared with net income of $1.2 million, or $0.07 per diluted share, for the 26 weeks ended August 3, 2013.  Robert Alderson, Kirkland's Chief Executive Officer, said, “We experienced a strong start and a strong finish to the quarter with comparable sales and margins in line with our expectations. Slower traffic experienced in June and some delays in new store openings related to the timing of space availability affected an otherwise solid second quarter. Early sales and margin trends in August are encouraging, and we will look to build on that momentum through the second half of the year. Seasonal product has also been introduced in the stores and has been well received.”  Stock Repurchase Plan  During the quarter, the Company repurchased 68,000 shares of common stock for a total expenditure of $1.2 million, or an average price of $18.20 per share. As of the end of the second quarter, the Company had $28.8 million remaining under its current share repurchase authorization.  Updated Fiscal 2014 Outlook                       For the 52-week period ending January 31, 2015 (“fiscal Store Growth:       2014”), the Company expects to open approximately 35 new                      stores and close approximately 15 stores.                                            Total sales for fiscal 2014 are expected to increase                      approximately 7% to 8.5% compared with fiscal 2013. This Sales:               level of sales performance would imply a comparable store                      sales increase of approximately 3% to 4.5% 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 $0.04 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 diluted share to be in the range of $0.87 to                      $0.97. The Company expects its full year tax rate to be                      approximately 39%.                                            Capital expenditures in fiscal 2014 are estimated to                      range between $31 million and $34 million. Based on the Cash Flow:           above assumptions, the Company expects to generate                      positive cash flow in fiscal 2014, excluding potential                      share repurchases.  Third Quarter Fiscal 2014 Outlook  The Company issued guidance for the third quarter ending November 1, 2014, of net income of $0.02 to $0.04 per diluted share. Net sales are expected to be in the range of $113 million to $115 million with a comparable store sales increase in the range of 3% to 4.5%. The Company expects to open approximately 13 stores and close approximately 2 stores during the quarter. Costs associated with the Company’s move to a replacement headquarters building will amount to approximately $0.02 per diluted share in the third quarter.  Investor Conference Call and Web Simulcast  Kirkland’s will host a conference call on August 21, 2014, 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, August 28, 2014, by dialing (402) 977-9140 and entering the confirmation number, 21706374.  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=100164 on August 21, 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 328 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 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 OPERATIONS (In thousands, except per share data)                                                                                                                                                               13-Week        13-Week                                            Period Ended   Period Ended                                            August 2,      August 3,                                              2014         2013     Net sales                                  $  103,485     $  97,123 Cost of sales                                65,612       61,480   Gross profit                                  37,873         35,643                                                            Operating expenses: Operating expenses                            35,313         32,767 Depreciation                                 4,431        3,950    Operating loss                                (1,871  )      (1,074  )                                                            Other (income) expense, net                  (159    )     19       Loss before income taxes                      (1,712  )      (1,093  ) Income tax benefit                           (657    )     (516    ) Net loss                                   $  (1,055  )   $  (577    )                                                            Loss per share: Basic                                      $  (0.06   )   $  (0.03   ) Diluted                                    $  (0.06   )   $  (0.03   )                                                            Shares used to calculate loss per share: Basic                                        17,335       17,174   Diluted                                      17,335       17,174     KIRKLAND'S, INC. UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF INCOME (In thousands, except per share data)                                                                                                                                                                           26-Week        26-Week                                                Period Ended   Period Ended                                                August 2,      August 3,                                                  2014          2013 Net sales                                      $  211,740     $   198,356 Cost of sales                                    131,265       123,307 Gross profit                                      80,475          75,049                                                                Operating expenses: Operating expenses                                70,256          65,546 Depreciation                                     8,731         7,741 Operating income                                  1,488           1,762                                                                Other (income) expense, net                      (172    )      25 Income before income taxes                        1,660           1,737 Income tax expense                               660           541 Net income                                     $  1,000      $   1,196                                                                Earnings per share: Basic                                          $  0.06       $   0.07 Diluted                                        $  0.06       $   0.07                                                                Shares used to calculate earnings per share: Basic                                            17,321        17,129 Diluted                                          17,831        17,535   KIRKLAND'S, INC. UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS (In thousands)                                                                                                                                                                                    August 2,   February 1,   August 3,                                             2014        2014        2013 ASSETS                                                                       Current assets: Cash and cash equivalents                  $ 68,468    $  89,050     $ 63,489 Inventories, net                             57,364       52,637       53,979 Deferred income taxes                        2,828        2,777        1,630 Other current assets                        12,534      8,817       12,258 Total current assets                         141,194      153,281      131,356                                                                       Property and equipment, net                  86,201       80,329       77,537 Other assets                                2,065       1,838       1,757                                                                       Total assets                               $ 229,460   $  235,448    $ 210,650                                                                                                                                             LIABILITIES AND SHAREHOLDERS' EQUITY                                                                       Current liabilities: Accounts payable                           $ 22,434    $  23,102     $ 21,442 Income taxes payable                         -            5,875        - Other current liabilities                   22,440      23,670      21,470 Total current liabilities                    44,874       52,647       42,912                                                                       Non-current deferred income taxes            3,274        3,337        3,074 Deferred rent and other long-term           44,935      44,235      43,647 liabilities Total liabilities                           93,083      100,219     89,633                                                                       Net shareholders' equity                    136,377     135,229     121,017                                                                       Total liabilities and shareholders'        $ 229,460   $  235,448    $ 210,650 equity   KIRKLAND'S, INC. UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (In thousands)                                                                                  26-Week        26-Week                                   Period Ended   Period Ended                                   August 2,      August 3,                                    2014          2013     Net cash provided by (used in):                                                   Operating activities              $ (4,518  )    $  1,979 Investing activities                (14,827 )       (6,841  ) Financing activities               (1,237  )      554                                                        Cash and cash equivalents: Net decrease                        (20,582 )       (4,308  ) Beginning of the period            89,050        67,797   End of the period                 $ 68,468      $  63,489    Contact:  Kirkland's, Inc. W. Michael Madden, 615-872-4898 President & COO IR@Kirklands.com or SCR Partners Tripp Sullivan, 615-760-1104  
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