Kirkland's Reports Second Quarter 2013 Results

Kirkland's Reports Second Quarter 2013 Results

NASHVILLE, Tenn.--(BUSINESS WIRE)-- Kirkland's, Inc. (NAS: KIRK) today reported financial results for the 13-week and 26-week periods ended August 3, 2013.

Net sales for the 13 weeks ended August 3, 2013, increased 6.7% to $97.1 million compared with $91.0 million for the 13 weeks ended July 28, 2012. Comparable store sales, including e-commerce sales, for the second quarter of fiscal 2013 decreased 0.2% compared with a decrease of 3.6% in the prior-year quarter. Kirkland's opened 6 stores and closed 6 during the second quarter of fiscal 2013, bringing the total number of stores to 317 at quarter end.


Net sales for the 26 weeks ended August 3, 2013, increased 5.1% to $198.4 million compared with $188.8 million for the 26 weeks ended July 28, 2012. Comparable store sales, including e-commerce, for the 26 weeks ended August 3, 2013, decreased 1.3% compared with a decrease of 2.4% in the prior-year period. The Company opened 7 stores and closed 13 stores during the 26-week period.

The Company reported a net loss of $0.6 million, or $0.03 per diluted share, for the second quarter of fiscal 2013 compared with a net loss of $2.0 million, or $0.11 per diluted share, for the second quarter of fiscal 2012.

For the 26-week period ended August 3, 2013, the Company reported net income of $1.2 million, or $0.07 per diluted share, compared with a net loss of $42,000, or $0.00 per diluted share, for the 26-week period ended July 28, 2012.

Robert Alderson, Kirkland's President and Chief Executive Officer, said, "Consistent trends through the second quarter, combined with a stronger margin from a less promotional stance, led to the in-line sales and better-than-anticipated earnings results. We are well-positioned to deliver on stronger second half performance with improving trends in our merchandise margin, conversion and average ticket. While traffic remains a challenge, we are encouraged by the initial test results from our branding initiatives and will look to extend and expand our activities during the second half of 2013."

Updated Fiscal 2013 Outlook

Store Base:

  For the 52-week period ending February 1, 2014 ("fiscal 2013"), the Company expects to open approximately 25 new stores and close approximately 20 stores. The majority of new store openings will occur by Thanksgiving with the balance opening after the holiday period, while the remaining closings will primarily occur after the holiday period.
 

Sales:

Total sales for the 52-week fiscal 2013 are expected to increase approximately 3% to 4% compared with 53-week fiscal 2012. This level of total sales performance implies comparable store sales results of flat to a slight increase for fiscal 2013.
 

Margins:

Based on the current outlook, merchandise margin is expected to increase during the second half of fiscal 2013 on a year-over-year basis. Inbound freight costs, which are a component of the merchandise margin, are expected to contribute to the margin increase through lower year-over-year container rates. Continued strict focus on operating expense controls, combined with a conservative store opening plan, should position the Company to better leverage any upside to its current revenue projections. However, the Company expects investments in personnel, as well as increases in marketing, e-commerce expenses, and depreciation to offset some of the expense efficiencies.
 

Earnings:

Based on the above assumptions, the Company expects fiscal 2013 earnings per share to be in the range of $0.80 to $0.90. The Company expects its full year effective tax rate to be approximately 38.5%.
 

Cash Flow:

Capital expenditures in fiscal 2013 are estimated to range between $19 million and $21 million. Based on the above assumptions, the Company expects to be cash flow positive in fiscal 2013.

Third Quarter Fiscal 2013 Outlook

For the third quarter ending November 2, 2013, the Company expects net income of $0.00 to $0.03 per diluted share compared with a net loss of $0.02 per share in the prior-year quarter. Net sales are expected to be $103 million to $105 million, with a modest increase in comparable store sales. The Company expects to open approximately 10 stores and close approximately 3 stores during the quarter.

Investor Conference Call and Web Simulcast

Kirkland's will host a conference call at 11:00 a.m. ET today to discuss the second quarter results. The number to call for the interactive teleconference is (212) 231-2919. A replay of the conference call will be available through Thursday, August 29, 2013, by dialing (402) 977-9140 and entering the confirmation number, 21646259.

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=95243 on August 22, 2013, beginning at 11:00 a.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 317 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 18, 2013. 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
(dollars in thousands, except per share amounts)
   
 
13-Week Period Ended
August 3, July 28,
  2013     2012  
 
Net sales $ 97,123 $ 91,004
Cost of sales   61,480     61,010  
Gross profit 35,643 29,994
 
Operating expenses:
Operating expenses 32,767 30,741
Depreciation   3,950     3,205  
Operating loss (1,074 ) (3,952 )
 
Other expense, net   19     22  
Loss before income taxes (1,093 ) (3,974 )
Income tax benefit   (516 )   (1,977 )
Net loss $ (577 ) $ (1,997 )
 
Loss per share:
Basic $ (0.03 ) $ (0.11 )
Diluted $ (0.03 ) $ (0.11 )
 
Shares used to calculate loss per share:
Basic   17,174     17,470  
Diluted   17,174     17,470  
 
KIRKLAND'S, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(numbers in thousands, except per share amounts)
   
 
26-Week Period Ended
August 3,

July 28,

  2013   2012  
 
Net sales $ 198,356 $ 188,792
Cost of sales   123,307   120,329  
Gross profit 75,049 68,463
 
Operating expenses:
Operating expenses 65,546 63,025
Depreciation   7,741   6,220  
Operating income (loss) 1,762 (782 )
 
Other expense, net   25   19  
Income (loss) before income taxes 1,737 (801 )
Income tax expense (benefit)   541   (759 )
Net income (loss) $ 1,196 $ (42 )
 
Earnings (loss) per share:
Basic $ 0.07 $ (0.00 )
Diluted $ 0.07 $ (0.00 )
 
Shares used to calculate earnings (loss) per share:
Basic   17,129   17,869  
Diluted   17,535   17,869  
 
KIRKLAND'S, INC.
UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS
(dollars in thousands)
     
 
August 3, February 2, July 28,
  2013   2013   2012
ASSETS
 
Current assets:
Cash and cash equivalents $ 63,489 $ 67,797 $ 49,614
Inventories, net 53,979 49,577 49,773
Income taxes receivable 4,164 - 3,727
Deferred income taxes 1,630 1,602 1,635
Other current assets   8,094   9,370   10,138
Total current assets 131,356 128,346 114,887
 
Property and equipment, net 77,537 78,499 68,840
Non-current deferred income taxes - - 1,086
Other assets   1,757   1,559   1,425
 
Total assets $ 210,650 $ 208,404 $ 186,238
 
 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
Current liabilities:
Accounts payable $ 21,442 $ 21,642 $ 22,583
Income taxes payable - 520 -
Other current liabilities   21,470   21,009   20,772
Total current liabilities 42,912 43,171 43,355
 
Non-current deferred income taxes 3,074 3,128 -
Deferred rent and other long-term liabilities   43,647   44,230   40,159
Total liabilities   89,633   90,529   83,514
 
Net shareholders' equity   121,017   117,875   102,724
 
Total liabilities and shareholders' equity $ 210,650 $ 208,404 $ 186,238
 
KIRKLAND'S, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(dollars in thousands)
   
26-Week Period Ended
August 3, July 28,
2013 2012
Net cash provided by (used in):
 
Operating activities $ 1,979 $ (2,364)
Investing activities (6,841) (14,786)
Financing activities 554 (16,359)
 
Cash and cash equivalents:
Net decrease (4,308) (33,509)
Beginning of the period 67,797 83,123
End of the period $ 63,489 $ 49,614

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Kirkland's, Inc.
W. Michael Madden, 615-872-4800
Senior Vice President & CFO
or
Corporate Communications, Inc.
Tripp Sullivan, 615-324-7335

KEYWORDS:   United States  North America  Tennessee

INDUSTRY KEYWORDS:

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