NASHVILLE, Tenn., Sept. 5, 2024 /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 26-week periods ended August 3, 2024.
Second Quarter 2024 Summary
Net sales of $86.3 million; Overall comparable sales decreased 1.7%, inclusive of 1.8% growth in comparable brick-and-mortar stores compared to Q2 2023.
Gross profit margin expanded 100 bps to 20.5% compared to Q2 2023.
Operating loss of $13.3 million, a $4.8 million improvement compared to Q2 2023.
Adjusted EBITDA loss of $10.2 million, a $3.3 million improvement compared to Q2 2023.
Closed 4 stores to end the quarter with 325 stores.
Ended the period with a cash balance of $4.5 million and $62.7 million in outstanding debt.
Management Commentary
Amy Sullivan, CEO of Kirkland's Home, said, "Our second quarter comparable sales results reflect a sequential improvement from the first quarter and continued progress against our strategic initiatives. Our merchandising and marketing plans have continued to drive traffic to our stores resulting in positive comparable sales performance in the channel helping to offset the headwinds we are experiencing with our e-commerce business. Toward the end of the quarter, we began to introduce our fall and holiday assortment, and we are encouraged by our early reads, giving us further confidence in our plans for the second half of the year and our peak selling season. Through our ongoing efforts to re-engage our core customer, refocus our product assortment, and strengthen our omnichannel capabilities, we are positioning Kirkland's for improved financial performance and long-term success."
Second Quarter 2024 Financial Results
Net sales in the second quarter of 2024 were $86.3 million, compared to $89.5 million in the prior year quarter. Comparable sales decreased 1.7%, including a 10.6% decline in e-commerce sales and a 1.8% increase in comparable store sales. The decrease was primarily driven by a decrease in consolidated average ticket and e-commerce traffic, partially offset by an increase in store traffic and conversion.
Gross profit in the second quarter of 2024 was $17.7 million, or 20.5% of net sales, compared to $17.4 million, or 19.5% of net sales in the prior year quarter. The improvement as a percentage of net sales was primarily a result of increased merchandise margin, largely due to favorable shrink results and lower outbound freight costs, partially offset by the deleverage of store occupancy costs.
Operating expenses in the second quarter of 2024 were $31.0 million, or 35.9% of net sales, compared to $35.5 million, or 39.7% of net sales in the prior year quarter. The decline in operating expenses was driven by reduced advertising costs, asset impairment charges and corporate salaries and benefits expenses. In addition, we received a state tax refund due to a recent change in state tax law that offset operating expenses in the quarter.
Operating loss in the second quarter of 2024 was $13.3 million compared to operating loss of $18.1 million in the prior year quarter. The improvement was primarily a result of the aforementioned lower operating expenses. Adjusted operating loss in the second quarter of 2024 was $12.7 million compared to adjusted operating loss of $16.6 million in the prior year quarter.
EBITDA in the second quarter of 2024 was a loss of $10.8 million compared to a loss of $14.0 million in the prior year quarter. Adjusted EBITDA in the second quarter of 2024 was a loss of $10.2 million compared to a loss of $13.5 million in the prior year quarter.
Net loss in the second quarter of 2024 was $14.5 million, or a loss of $1.11 per diluted share, compared to a net loss of $19.4 million, or a loss of $1.51 per diluted share in the prior year quarter.
Balance Sheet
As of August 3, 2024, inventory was $92.8 million, a 6.3% decrease compared to the prior year quarter, mainly due to a 4.4% decrease in store count as well as the closure of one e-commerce distribution location in the third quarter of fiscal 2023.
As of August 3, 2024, the Company had a cash balance of $4.5 million, with $52.7 million of outstanding debt under its $90.0 million senior secured revolving credit facility and $10.0 million of outstanding debt under its $12.0 million "first-in, last-out" asset-based term loan. As of August 3, 2024, the Company had approximately $7.9 million available for borrowing under the revolving credit facility and the term loan, after the minimum required excess availability covenant.
The Company's inventories are typically at seasonal lows during the first quarter of the fiscal year and begin to build as the second quarter progresses. Availability under the Company's revolving credit facility and term loan fluctuates largely based on eligible inventory levels, and as eligible inventory increases in the second and third fiscal quarters in support of the Company's back-half sales plans, the Company's borrowing capacity increases correspondingly. The Company anticipates that cash flow from seasonal sales in the third and fourth quarters of fiscal 2024 will be used to reduce borrowing levels and increase liquidity.
Subsequent to August 3, 2024, the Company borrowed an additional $5.7 million under the revolving credit facility, and as of September 5, 2024, the Company had $58.4 million of outstanding debt under its revolving credit facility and $10.0 million in borrowings under its term loan.
Cost Savings Initiatives and Review of Strategic Alternatives
As previously announced, during the second quarter, the Company implemented several cost savings initiatives to better align its cost structure with the current business environment. The Company believes these actions are necessary as part of improving its profitability and liquidity trajectory while minimizing disruption to the Company's focus on its strategic initiatives and the overall customer experience. The cost savings initiatives include a reduction in corporate overhead, store payroll, marketing and third-party technology expenses. In the second through fourth quarters of fiscal 2024, the Company expects to realize approximately $6 million of savings and estimates approximately $7 million in ongoing annual pre-tax savings from these initiatives.
As previously disclosed, the Company is currently engaged in the pursuit and evaluation of potential strategic opportunities to support the Company and its initiatives. This process is ongoing. The Company has not set a deadline or definitive timetable for the completion of the strategic alternatives review process, and there can be no assurance that this process will result in any particular outcome. The Company does not intend to comment further regarding the review of strategic alternatives until it determines disclosure is necessary or advisable.
Conference Call
Kirkland's Home management will host a conference call to discuss its financial results for the second quarter ended August 3, 2024, followed by a question-and-answer period with President and CEO, Amy Sullivan, and EVP and CFO, Mike Madden.
Date: Thursday, September 5, 2024Time: 9:00 a.m. Eastern TimeToll-free dial-in number: (855) 560-2577International dial-in number: (412) 542-4163Conference ID: 10191210
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 ICR at
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 continue for one year.
A telephonic replay of the conference call will be available after the conference call through September 12, 2024.
Toll-free replay number: (877) 344-7529International replay number: (412) 317-0088Replay ID: 3267325
About Kirkland's, Inc.
Kirkland's, Inc. is a specialty retailer of home décor and furnishings in the United States, currently operating 325 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 an engaging shopping experience characterized by a curated, affordable selection of home décor and furnishings along with inspirational design ideas. This combination of quality and stylish merchandise, value pricing and a stimulating in-store and online environment provides the Company's customers with a unique brand experience. 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 and term loan, the Company's ability to successfully implement cost savings and other strategic initiatives intended to improve operating results and liquidity positions, 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 on 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 March 29, 2024 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
Mike Madden
1-615-872-4800
ICR
Caitlin Churchill
1-203-682-8200
KIRKLAND'S, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
13-Week Period Ended
August 3,
July 29,
2024
2023
Net sales
$
86,289
$
89,504
Cost of sales
68,629
72,065
Gross profit
17,660
17,439
Operating expenses:
Compensation and benefits
18,653
19,217
Other operating expenses
11,384
14,090
Depreciation (exclusive of depreciation included in cost of sales)
925
1,222
Asset impairment
20
1,001
Total operating expenses
30,982
35,530
Operating loss
(13,322)
(18,091)
Other expense, net
1,300
623
Loss before income taxes
(14,622)
(18,714)
Income tax (benefit) expense
(118)
650
Net loss
$
(14,504)
$
(19,364)
Loss per share:
Basic
$
(1.11)
$
