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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