Kirkland's Reports Second Quarter 2018 Results

NASHVILLE, Tenn., Aug. 30, 2018 /PRNewswire/ -- Kirkland's, Inc. (NASDAQ: KIRK) today reported financial results for the 13-week and 26-week periods ended August 4, 2018.

"Consistent with our previous expectations, we had a challenging quarter that was impacted by a lack of newness," said Mike Cairnes, Acting CEO. "At the same time, the quarter reflects investments to profitably grow the business. We remained disciplined with promotional activity, and operating expenses were well managed."

"We are very pleased with the sales trends to start the third quarter," continued Mr. Cairnes. "We are on track to achieve our financial projections for 2018 as the merchandise assortment for the second half is rebalanced to play to Kirkland's strengths, along with a tighter supply chain structure and the imminent roll out of buy online and pick up in store.

"As we look forward, we are focused on high-return projects to improve the customer experience, drive growth and increase profitability. I am confident our team will continue to drive our strategy to optimize the omni-channel experience."

Financial Performance

Net sales for the 13 weeks ended August 4, 2018 increased 1.7% to $133.9 million compared with $131.7 million for the 13 weeks ended July 29, 2017. Net sales for the second quarter were driven by an increase in both store count and e-commerce revenue. Kirkland's opened six stores and closed five during the second quarter, bringing the total number of stores to 426 at quarter-end. Comparable store sales, including e-commerce sales, decreased 3.9% compared with an increase of 1.2% in the prior-year quarter. Brick-and-mortar traffic was challenging, which resulted in a decrease in transactions that was slightly offset by a higher average ticket. E-commerce sales were driven by gains in traffic and average ticket.

Net loss for the 13 weeks ended August 4, 2018 was $6.7 million, or ($0.43) per diluted share compared with a net loss of $3.8 million, or ($0.24) per diluted share, for the 13 weeks ended July 29, 2017. Adjusted loss, excluding transition charges associated with the resignation of the Company's former Chief Executive Officer, for the 13 weeks ended August 4, 2018 was $6.4 million, or ($0.40) per diluted share. An improvement in the merchandise margin in the second quarter, excluding a one-time adjustment in the prior year, was offset by deleverage on store occupancy costs and rate pressure on transportation costs. Operating expenses as a percentage of sales declined versus the prior-year period.

Net sales for the 26 weeks ended August 4, 2018 increased 4.5% to $276.4 million compared with $264.5 million for the 26 weeks ended July 29, 2017. Comparable store sales for the 26 weeks ended August 4, 2018, including e-commerce sales, decreased 1.2% compared with a decrease of 1.4% in the prior-year period. Kirkland's opened 16 stores and closed eight during the 26-week period ended August 4, 2018.

Net loss for the 26 weeks ended August 4, 2018 was $7.6 million, or ($0.48) per diluted share compared with a net loss of $5.2 million, or ($0.33) per diluted share, for the 26 weeks ended July 29, 2017. Adjusted loss, excluding severance and transition charges associated with the resignation of the Company's former Chief Executive Officer, for the 26 weeks ended August 4, 2018 was $6.4 million, or ($0.40) per diluted share.

Fiscal 2018 Outlook

Kirkland's is reaffirming its fiscal 2018 outlook and all other assumptions provided on March 16, 2018 for diluted earnings per share on a GAAP basis in the range of $0.50 to $0.60, inclusive of CEO transition charges.

This performance outlook is based on current information as of August 30, 2018. The information on which this outlook is based is subject to change, and the Company may update its full year business outlook or any portion thereof at any time for any reason.

Investor Conference Call and Web Simulcast

Kirkland's will hold its earnings call for the second quarter later today at 11:00 a.m. ET. Participating on the call will be Mike Cairnes, Acting Chief Executive Officer, and Nicole Strain, Interim Chief Financial Officer. The number to call for the interactive teleconference is (412) 542-4163. A replay of the conference call will be available through Thursday, September 6, 2018 by dialing (412) 317-0088 and entering the confirmation number 10123188.

A live webcast of Kirkland's quarterly conference call will be available online on the Company's Investor Relations Page on August 30, 2018, 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 430 stores in 37 states as well as an e-commerce enabled website, www.kirklands.com.  The Company's stores present a broad selection of distinctive merchandise, including holiday décor, framed art, furniture, ornamental wall décor, fragrance and accessories, mirrors, lamps, decorative accessories, textiles, housewares, gifts, artificial floral products, frames, clocks and outdoor living items.  The Company's stores offer an extensive assortment of holiday merchandise during seasonal periods as well as items carried throughout the year suitable for gift-giving.  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 and are subject to the finalization of the Company's quarterly financial and accounting procedures. 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, fluctuations in cost and availability of products, interruptions in supply chain and distribution systems, 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 Kirkland's or its customers' information, seasonal fluctuations in consumer spending, 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 3, 2018 and subsequent reports. 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.

SOURCE Kirkland's, Inc.