NASHVILLE, Tenn., Nov. 30,
2023 /PRNewswire/ -- Kirkland's, Inc. (Nasdaq: KIRK)
("Kirkland's Home" or the "Company"), a specialty retailer of home
décor and furnishings, announced financial results for the 13-week
and 39-week periods ended October 28,
2023.
Third Quarter 2023 Summary
- Net sales were $116.4 million,
with comparable sales decreasing 9.2%.
- Gross profit margin improved 130 basis points year-over-year
to 26.3%.
- Operating loss was flat year-over-year at $6.7 million.
- Adjusted EBITDA loss of $3.2
million.
- Ended the period with a cash balance of $5.8 million and $62.0
million in outstanding debt.
- Closed one store and relocated one store to end the quarter
with 339 stores.
Management Commentary
"The third quarter demonstrated execution of our strategic
repositioning as we experienced sequential improvements in traffic
and comparable sales each month of the quarter, along with expanded
gross margins," said Ann Joyce,
interim CEO of Kirkland's Home. "Over the last six months, we have
spent a significant amount of time assessing every aspect of the
business and acted quickly to implement changes to better position
us going into our ever-important holiday selling season. During the
quarter, we saw promising indicators that our pivots are beginning
to work. We increased lapsed customer reactivations, drove improved
traffic and conversion with less promotional activity, reduced
operating expenses, and improved our inventory position for the
remainder of the year.
"While persistent challenges in the macro-economy continue to
weigh on consumers, we believe that our renewed emphasis on value
and seasonally relevant décor is beginning to resonate with our
customers. In fact, the trend continued into the fiscal fourth
quarter, which has started off with a low single-digit increase in
comparable sales for the month of November at a much-improved
merchandise margin as we continue to execute against our holiday
promotional strategy.
"Although there is still much work to be done, we are optimistic
and encouraged by our recent improvements. We expect solid
year-over-year improvement in profitability during the fourth
quarter as we continue to progress towards our goal of returning to
our historical average adjusted EBITDA margin in the mid-to-high
single-digit range. In fiscal 2024, we will look to build off this
recent momentum and continue to execute upon our strategy to return
the Company to profitable growth."
Third Quarter 2023 Financial Results
Net sales in the third quarter of 2023 were $116.4 million, compared to $131.0 million in the prior year quarter.
Comparable same-store sales decreased 9.2%, including an 8.5%
decline in e-commerce sales. The decrease was primarily driven by a
decline in traffic and a decrease in average ticket, partially
offset by increased conversion.
Gross profit in the third quarter of 2023 was $30.7 million, or 26.3% of net sales, compared to
$32.7 million, or 25.0% of net sales
in the prior year quarter. The improvement as a percentage of net
sales was primarily a result of improved merchandise margin,
partially offset by the deleverage of fixed cost components on the
lower sales base.
Operating loss in the third quarter of 2023 and 2022 remained
consistent at $6.7 million, as lower
operating costs, including reduced corporate compensation expense,
offset the decline in gross profit dollars.
EBITDA in the third quarter of 2023 was a loss of $3.9 million compared to a loss of $2.6 million in the prior year quarter. Adjusted
EBITDA in the third quarter of 2023 was a loss of $3.2 million compared to a loss of $1.7 million in the prior year quarter.
Net loss in the third quarter of 2023 improved to $6.4 million, or a loss of $0.50 per diluted share, compared to a net loss
of $7.3 million, or a loss of
$0.58 per diluted share in the prior
year quarter.
As of October 28, 2023, the
Company had a cash balance of $5.8
million, with $62.0 million of
outstanding debt under its $90.0
million senior secured revolving credit facility. As
of November 30, 2023, the Company had
$35.0 million of outstanding debt
under its senior secured revolving credit facility.
Investor Conference Call and Web Simulcast
Kirkland's Home management will host a conference call to
discuss its financial results for the third quarter ended
October 28, 2023, followed by a
question-and-answer period with Interim CEO Ann Joyce, President and COO Amy Sullivan, and EVP and CFO Mike Madden.
Date: Thursday, November 30,
2023
Time: 9:00 a.m. Eastern Time
Toll-free dial-in number: (855) 560-2577
International dial-in number: (412) 542-4163
Conference ID: 10184344
Please call the conference telephone number 10-15 minutes prior
to the start time. An operator will register your name and
organization. If you have any difficulty connecting with the
conference call, please contact Gateway Group at (949)
574-3860.
The conference call will be broadcast live and available for
replay here and via the investor relations section of the Company's
website at www.kirklands.com. The online replay will follow shortly
after the call and remain available for one year.
A telephonic replay of the conference call will be available
after the conference call through December
7, 2023.
Toll-free replay number: (877) 344-7529
International replay number: (412) 317-0088
Replay ID: 7702205
About Kirkland's, Inc.
Kirkland's, Inc. is a specialty retailer of home décor and
furnishings in the United States,
currently operating 339 stores in 35 states as well as an
e-commerce website, www.kirklands.com, under the Kirkland's Home
brand. The Company provides its customers with an engaging shopping
experience characterized by a curated, affordable selection of home
décor along with inspirational design ideas. This combination of
quality and stylish merchandise, value pricing and a stimulating
online and store experience allows the Company's customers to
furnish their home at a great value. More information can be found
at www.kirklands.com.
Forward-Looking Statements
Except for historical information contained herein, certain
statements in this release, constitute forward-looking statements
that are subject to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995 and are subject to the
finalization of the Company's quarterly financial and accounting
procedures. Forward-looking statements deal with potential future
circumstances and developments and are, accordingly,
forward-looking in nature. You are cautioned that such
forward-looking statements, which may be identified by words such
as "anticipate," "believe," "expect," "estimate," "intend," "plan,"
"seek," "may," "could," "strategy," and similar expressions,
involve known and unknown risks and uncertainties, many of which
are outside of the Company's control, which may cause the Company's
actual results to differ materially from forecasted results. Those
risks and uncertainties include, among other things, risks
associated with the Company's liquidity including cash flows from
operations and the amount of borrowings under the secured revolving
credit facility, the Company's actual and anticipated progress
towards its short-term and long-term objectives including its brand
strategy, the risk that natural disasters, pandemic outbreaks (such
as COVID-19), global political events, war and terrorism could
impact the Company's revenues, inventory and supply chain, the
continuing consumer impact of inflation and countermeasures,
including raising interest rates, the effectiveness of the
Company's marketing campaigns, risks related to changes in U.S.
policy related to imported merchandise, particularly with regard to
the impact of tariffs on goods imported from China and strategies undertaken to mitigate
such impact, the Company's ability to retain its senior management
team, continued volatility in the price of the Company's common
stock, the competitive environment in the home décor industry in
general and in the Company's specific market areas, inflation,
fluctuations in cost and availability of inventory, increased
transportation costs and potential interruptions in supply chain,
distribution systems and delivery network, including our e-commerce
systems and channels, the ability to control employment and other
operating costs, availability of suitable retail locations and
other growth opportunities, disruptions in information technology
systems including the potential for security breaches of the
Company's information or its customers' information, seasonal
fluctuations in consumer spending, and economic conditions in
general. Those and other risks are more fully described in the
Company's filings with the Securities and Exchange Commission,
including the Company's Annual Report on Form 10-K filed on
April 4, 2023 and subsequent reports.
Forward-looking statements included in this release are made as of
the date of this release. Any changes in assumptions or factors on
which such statements are based could produce materially different
results. Except as required by law, the Company 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.
Contact:
|
Kirkland's
Home
|
Gateway Group,
Inc.
|
|
Mike Madden
|
Cody Slach and Cody
Cree
|
|
(615)
872-4800
|
KIRK@gateway-grp.com
|
|
|
(949)
574-3860
|
KIRKLAND'S,
INC.
UNAUDITED
CONSOLIDATED CONDENSED STATEMENTS
OF OPERATIONS
(In thousands,
except per share data)
|
|
|
|
|
|
13-Week Period
Ended
|
|
|
|
October
28,
|
|
|
October
29,
|
|
|
|
2023
|
|
|
2022
|
|
Net sales
|
|
$
|
116,365
|
|
|
$
|
130,962
|
|
Cost of
sales
|
|
|
85,712
|
|
|
|
98,275
|
|
Gross
profit
|
|
|
30,653
|
|
|
|
32,687
|
|
Operating
expenses:
|
|
|
|
|
|
|
Compensation and
benefits
|
|
|
19,841
|
|
|
|
20,794
|
|
Other operating
expenses
|
|
|
16,104
|
|
|
|
16,757
|
|
Depreciation
(exclusive of depreciation included in cost of sales)
|
|
|
1,043
|
|
|
|
1,577
|
|
Asset
impairment
|
|
|
316
|
|
|
|
219
|
|
Total operating
expenses
|
|
|
37,304
|
|
|
|
39,347
|
|
Operating
loss
|
|
|
(6,651)
|
|
|
|
(6,660)
|
|
Other expense,
net
|
|
|
1,036
|
|
|
|
624
|
|
Loss before income
taxes
|
|
|
(7,687)
|
|
|
|
(7,284)
|
|
Income tax (benefit)
expense
|
|
|
(1,290)
|
|
|
|
57
|
|
Net loss
|
|
$
|
(6,397)
|
|
|
$
|
(7,341)
|
|
Loss per
share:
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.50)
|
|
|
$
|
(0.58)
|
|
Diluted
|
|
$
|
(0.50)
|
|
|
$
|
(0.58)
|
|
Weighted average shares
outstanding:
|
|
|
|
|
|
|
Basic
|
|
|
12,921
|
|
|
|
12,754
|
|
Diluted
|
|
|
12,921
|
|
|
|
12,754
|
|
KIRKLAND'S,
INC.
UNAUDITED
CONSOLIDATED CONDENSED STATEMENTS
OF OPERATIONS
(In thousands,
except per share data)
|
|
|
|
|
|
39-Week Period
Ended
|
|
|
|
October
28,
|
|
|
October
29,
|
|
|
|
2023
|
|
|
2022
|
|
Net sales
|
|
$
|
302,744
|
|
|
$
|
336,348
|
|
Cost of
sales
|
|
|
228,781
|
|
|
|
256,844
|
|
Gross
profit
|
|
|
73,963
|
|
|
|
79,504
|
|
Operating
expenses:
|
|
|
|
|
|
|
Compensation and
benefits
|
|
|
59,097
|
|
|
|
63,193
|
|
Other operating
expenses
|
|
|
44,932
|
|
|
|
50,549
|
|
Depreciation
(exclusive of depreciation included in cost of sales)
|
|
|
3,471
|
|
|
|
4,870
|
|
Asset
impairment
|
|
|
1,542
|
|
|
|
447
|
|
Total operating
expenses
|
|
|
109,042
|
|
|
|
119,059
|
|
Operating
loss
|
|
|
(35,079)
|
|
|
|
(39,555)
|
|
Other expense,
net
|
|
|
2,069
|
|
|
|
991
|
|
Loss before income
taxes
|
|
|
(37,148)
|
|
|
|
(40,546)
|
|
Income tax
expense
|
|
|
720
|
|
|
|
355
|
|
Net loss
|
|
$
|
(37,868)
|
|
|
$
|
(40,901)
|
|
Loss per
share:
|
|
|
|
|
|
|
Basic
|
|
$
|
(2.95)
|
|
|
$
|
(3.22)
|
|
Diluted
|
|
$
|
(2.95)
|
|
|
$
|
(3.22)
|
|
Weighted average shares
outstanding:
|
|
|
|
|
|
|
Basic
|
|
|
12,852
|
|
|
|
12,686
|
|
Diluted
|
|
|
12,852
|
|
|
|
12,686
|
|
KIRKLAND'S,
INC.
UNAUDITED
CONSOLIDATED CONDENSED BALANCE SHEETS
(In
thousands)
|
|
|
|
October
28,
|
|
|
January
28,
|
|
|
October
29,
|
|
|
|
2023
|
|
|
2023
|
|
|
2022
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
5,765
|
|
|
$
|
5,171
|
|
|
$
|
11,245
|
|
Inventories,
net
|
|
|
105,190
|
|
|
|
84,071
|
|
|
|
126,315
|
|
Prepaid expenses and
other current assets
|
|
|
5,863
|
|
|
|
5,089
|
|
|
|
7,126
|
|
Total current
assets
|
|
|
116,818
|
|
|
|
94,331
|
|
|
|
144,686
|
|
Property and equipment,
net
|
|
|
31,648
|
|
|
|
38,676
|
|
|
|
42,629
|
|
Operating lease
right-of-use assets
|
|
|
130,513
|
|
|
|
134,525
|
|
|
|
136,280
|
|
Other assets
|
|
|
6,848
|
|
|
|
6,714
|
|
|
|
7,979
|
|
Total
assets
|
|
$
|
285,827
|
|
|
$
|
274,246
|
|
|
$
|
331,574
|
|
LIABILITIES AND
SHAREHOLDERS' (DEFICIT) EQUITY
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
55,729
|
|
|
$
|
43,739
|
|
|
$
|
47,157
|
|
Accrued
expenses
|
|
|
23,484
|
|
|
|
26,069
|
|
|
|
27,027
|
|
Operating lease
liabilities
|
|
|
39,966
|
|
|
|
41,499
|
|
|
|
40,156
|
|
Total current
liabilities
|
|
|
119,179
|
|
|
|
111,307
|
|
|
|
114,340
|
|
Operating lease
liabilities
|
|
|
108,248
|
|
|
|
114,613
|
|
|
|
119,254
|
|
Revolving line of
credit
|
|
|
62,000
|
|
|
|
15,000
|
|
|
|
60,000
|
|
Other
liabilities
|
|
|
3,685
|
|
|
|
3,553
|
|
|
|
4,915
|
|
Total
liabilities
|
|
|
293,112
|
|
|
|
244,473
|
|
|
|
298,509
|
|
Shareholders' (deficit)
equity
|
|
|
(7,285)
|
|
|
|
29,773
|
|
|
|
33,065
|
|
Total liabilities and
shareholders' (deficit) equity
|
|
$
|
285,827
|
|
|
$
|
274,246
|
|
|
$
|
331,574
|
|
KIRKLAND'S,
INC.
UNAUDITED
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In
thousands)
|
|
|
|
|
|
39-Week Period
Ended
|
|
|
|
October
28,
|
|
|
October
29,
|
|
|
|
2023
|
|
|
2022
|
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
Net loss
|
|
$
|
(37,868)
|
|
|
$
|
(40,901)
|
|
Adjustments to
reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
Depreciation of
property and equipment
|
|
|
9,118
|
|
|
|
12,925
|
|
Amortization of debt
issue costs
|
|
|
80
|
|
|
|
69
|
|
Asset
impairment
|
|
|
1,542
|
|
|
|
447
|
|
(Gain) loss on disposal
of property and equipment
|
|
|
(20)
|
|
|
|
195
|
|
Stock-based
compensation expense
|
|
|
891
|
|
|
|
1,460
|
|
Changes in assets and
liabilities:
|
|
|
|
|
|
|
Inventories,
net
|
|
|
(21,119)
|
|
|
|
(12,286)
|
|
Prepaid expenses and
other current assets
|
|
|
(891)
|
|
|
|
3,184
|
|
Accounts
payable
|
|
|
11,885
|
|
|
|
(14,648)
|
|
Accrued
expenses
|
|
|
(2,775)
|
|
|
|
(1,873)
|
|
Income taxes payable
(refundable)
|
|
|
307
|
|
|
|
(1,684)
|
|
Operating lease assets
and liabilities
|
|
|
(3,933)
|
|
|
|
(4,670)
|
|
Other assets and
liabilities
|
|
|
97
|
|
|
|
(427)
|
|
Net cash used in
operating activities
|
|
|
(42,686)
|
|
|
|
(58,209)
|
|
|
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
Proceeds from sale of
property and equipment
|
|
|
130
|
|
|
|
35
|
|
Capital
expenditures
|
|
|
(3,313)
|
|
|
|
(6,964)
|
|
Net cash used in
investing activities
|
|
|
(3,183)
|
|
|
|
(6,929)
|
|
|
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
Borrowings on revolving
line of credit
|
|
|
52,000
|
|
|
|
60,000
|
|
Repayments on revolving
line of credit
|
|
|
(5,000)
|
|
|
|
—
|
|
Debt issuance
costs
|
|
|
(456)
|
|
|
|
—
|
|
Cash used in net share
settlement of stock options and restricted stock units
|
|
|
(81)
|
|
|
|
(2,383)
|
|
Proceeds received from
employee stock option exercises
|
|
|
—
|
|
|
|
16
|
|
Repurchase and
retirement of common stock
|
|
|
—
|
|
|
|
(6,253)
|
|
Net cash provided by
financing activities
|
|
|
46,463
|
|
|
|
51,380
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents:
|
|
|
|
|
|
|
Net increase
(decrease)
|
|
|
594
|
|
|
|
(13,758)
|
|
Beginning of the
period
|
|
|
5,171
|
|
|
|
25,003
|
|
End of the
period
|
|
$
|
5,765
|
|
|
$
|
11,245
|
|
|
|
|
|
|
|
|
Supplemental
schedule of non-cash activities:
|
|
|
|
|
|
|
Non-cash accruals for
purchases of property and equipment
|
|
$
|
804
|
|
|
$
|
573
|
|
Non-GAAP Financial Measures
To supplement our unaudited consolidated condensed financial
statements presented in accordance with generally accepted
accounting principles ("GAAP"), this earnings release and the
related earnings conference call contain certain non-GAAP financial
measures, including EBITDA, adjusted EBITDA and adjusted operating
loss. These measures are not in accordance with, and are not
intended as alternatives to, GAAP financial measures. The Company
uses these non-GAAP financial measures internally in analyzing our
financial results and believes that they provide useful information
to analysts and investors, as a supplement to GAAP financial
measures, in evaluating the Company's operational performance.
The Company defines EBITDA as net loss before interest and the
provision for income tax, which is equivalent to operating loss,
adjusted for depreciation, adjusted EBITDA as EBITDA with non-GAAP
adjustments and adjusted operating loss as operating loss with
non-GAAP adjustments.
Non-GAAP financial measures are intended to provide additional
information only and do not have any standard meanings prescribed
by GAAP. Use of these terms may differ from similar measures
reported by other companies. Each non-GAAP financial measure has
its limitations as an analytical tool, and you should not consider
them in isolation or as a substitute for analysis of the Company's
results as reported under GAAP. The Company's non-GAAP adjustments
remove asset impairment and stock-based compensation expense, due
to the non-cash nature of these expenses, and remove severance
charges and lease termination costs, as those expenses can
fluctuate based on the needs of the business and do not represent a
normal, recurring operating expense.
The following table shows a reconciliation of operating loss to
EBITDA and adjusted EBITDA (in thousands) for the 13-week and
39-week periods indicated:
|
|
13-Week Period
Ended
|
|
|
39-Week Period
Ended
|
|
|
|
October 28,
2023
|
|
|
October 29,
2022
|
|
|
October 28,
2023
|
|
|
October 29,
2022
|
|
Operating
loss
|
|
$
|
(6,651)
|
|
|
$
|
(6,660)
|
|
|
$
|
(35,079)
|
|
|
$
|
(39,555)
|
|
Depreciation
|
|
|
2,769
|
|
|
|
4,088
|
|
|
|
9,118
|
|
|
|
12,925
|
|
EBITDA
|
|
|
(3,882)
|
|
|
|
(2,572)
|
|
|
|
(25,961)
|
|
|
|
(26,630)
|
|
Non-GAAP
adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Closed store and lease
termination costs in cost of sales(1)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
46
|
|
Asset
impairment(2)
|
|
|
316
|
|
|
|
219
|
|
|
|
1,542
|
|
|
|
447
|
|
Stock-based
compensation expense(3)
|
|
|
277
|
|
|
|
295
|
|
|
|
891
|
|
|
|
1,460
|
|
Severance
charges(4)
|
|
|
50
|
|
|
|
397
|
|
|
|
957
|
|
|
|
776
|
|
Total adjustments in
operating expenses
|
|
|
643
|
|
|
|
911
|
|
|
|
3,390
|
|
|
|
2,683
|
|
Total non-GAAP
adjustments
|
|
|
643
|
|
|
|
911
|
|
|
|
3,390
|
|
|
|
2,729
|
|
Adjusted
EBITDA
|
|
|
(3,239)
|
|
|
|
(1,661)
|
|
|
|
(22,571)
|
|
|
|
(23,901)
|
|
Depreciation
|
|
|
2,769
|
|
|
|
4,088
|
|
|
|
9,118
|
|
|
|
12,925
|
|
Adjusted operating
loss
|
|
$
|
(6,008)
|
|
|
$
|
(5,749)
|
|
|
$
|
(31,689)
|
|
|
$
|
(36,826)
|
|
|
|
(1)
|
Costs associated with
asset disposals, closed store and lease termination
costs.
|
(2)
|
Asset impairment
charges are related to property and equipment, software costs and
cloud computing implementation costs.
|
(3)
|
Stock-based
compensation expense includes amounts amortized to expense related
to equity incentive plans.
|
(4)
|
Severance charges
include expenses related to severance agreements and permanent
store closure compensation costs.
|
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SOURCE Kirkland's, Inc.