NASHVILLE, Tenn., June 1, 2021 /PRNewswire/ -- Kirkland's, Inc.
(NASDAQ: KIRK) today announced financial results for the 13-week
period ended May 1, 2021.
"With continued momentum generated from our merchandise
assortments and strong operational execution, we reported a 75.3%
comparable sales increase and our most profitable first quarter in
over five years," noted Woody
Woodward, Chief Executive Officer. "Despite the substantial
ongoing disruptions in the global supply chain and resulting
pressures on freight costs and inventory availability, our team is
managing through each challenge. We are well positioned to deliver
on our profitability and direct sourcing targets in addition to the
continued improvement in merchandise that has been thoroughly
embraced by our customers."
Mr. Woodward continued, "The ongoing recovery in home
furnishings provides a number of catalysts for Kirkland's, but we
believe much of our success can be attributed to the path we have
charted. We are creating a formidable business model built on
sustainable cost and infrastructure changes, digital
transformation, a team that is excelling in innovation and
productivity and a merchandise assortment that is delivering a
distinct point of view as a value-oriented specialty retailer. Our
strategic priorities remain unchanged and will continue to guide
us, but our confidence in achieving our financial goals grows each
time we perform at the level we reached during the first
quarter."
Strategic Priorities and Financial Goals
Kirkland's key strategic initiatives include:
- Accelerating product development to reinforce quality and
relevancy as we continue the transformation of the Kirkland's brand
into a specialty retailer where customers are able to furnish their
entire home on a budget;
- Improving omni-channel via website enhancements, more focused
marketing spend, an expanded online assortment, and an in-store
experience that is aligned with our omni-channel capabilities;
- Improving the customer experience with our re-launched loyalty
program, extended credit options and broadened delivery options;
and
- Utilizing our leaner infrastructure to be nimbler in our
response to changes in consumer preference and buying
behaviors.
Kirkland's annual financial goals for the next two to three
years include:
- Improving comparable sales performance, driven by e-commerce
growth, merchandising, brick-and-mortar store productivity and
closure of underperforming stores. We expect e-commerce to
continue to grow as a percent of our total business, but also
intend to focus on improving the contribution of our remaining
store base, which is an integral part of our omni-channel strategy
and supports improved profitability of our e-commerce sales.
- Stabilizing gross margin by continuing with our current
discipline of limited promotional offers, expanding direct
sourcing, improving supply chain efficiency and reducing occupancy
costs. With improved merchandise quality and to support a
better customer experience, we will continue to move towards more
targeted promotions. Direct sourcing is expected to increase from
approximately 20% of purchases in 2020 to 40% to 50% over the next
two to three years. With these product margin improvements,
continued efficiencies in our supply chain and lower occupancy
costs, our goal is to improve our annual gross profit margin to a
mid-30% range over the next two to three years.
- Improving profitability by leveraging the leaner
infrastructure with comparable sales growth. We believe our
ideal store count should be in the range of 300 to 350 stores. We
believe there will be additional opportunities for more favorable
rent terms with ongoing lease renewals. With approximately
$45 million in annualized operating
expenses eliminated from the business, we expect to reach annual
EBITDA as a percent of sales in the high-single to low-double-digit
range and annual operating income in the mid to high-single-digit
range within two to three years.
- Maintaining adequate liquidity and generating free cash flow
while continuing to invest in key strategic initiatives of the
business and returning excess cash to our shareholders.
The key strategic initiatives and financial goals are based on
current information as of June 1,
2021, and are dependent on, among other things, consumer
preferences, economic conditions and our own successful execution
of these initiatives. The information on which these initiatives
and financial goals is based is subject to change, and investors
are cautioned that the Company may update the initiatives and
goals, 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 first quarter
later today at 9:00 a.m. ET. Participating on the call will be
Steve Woodward, Chief Executive
Officer, and Nicole Strain, 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 Tuesday, June 8, 2021 by
dialing (412) 317-0088 and entering the confirmation number
10156366.
A live webcast of Kirkland's quarterly conference call will be
available online on the Company's Investor Relations Page,
beginning at 9:00 a.m. ET. The online replay will follow
shortly after the call and continue for one year.
About Kirkland's, Inc.
Kirkland's, Inc. is a specialty retailer of home décor in
the United States, currently
operating 370 stores in 35 states as well as an e-commerce website,
www.kirklands.com. The Company's stores present a curated selection
of distinctive merchandise, including holiday décor, furniture,
textiles, wall décor, decorative accessories, art, mirrors,
fragrances, and other home decorating items. The Company's stores
offer an extensive assortment of holiday merchandise during
seasonal periods. The Company provides its customers an engaging
shopping experience characterized by affordable home décor and
inspirational design ideas. This combination of quality and stylish
merchandise, value pricing and a stimulating online and store
experience allow customers to furnish their home on a budget. More
information can be found at www.kirklands.com.
Forward-Looking Statements
Except for historical information contained herein, the
statements in this release, including all statements related to
future initiatives, financial goals and expectations or beliefs
regarding any future period, 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, risks associated with the Company's
progress and anticipated progress towards its long-term objective
and the success of its plans in response to the novel coronavirus
("COVID-19") pandemic, the spread of COVID-19 and its impact on the
Company's revenues and supply chain, risks associated with COVID-19
and the governments responses to it, the impact of store closures,
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 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 March 26, 2021 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. 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 Period
Ended
|
|
|
|
May
1,
|
|
|
May
2,
|
|
|
|
2021
|
|
|
2020
|
|
Net sales
|
|
$
|
123,569
|
|
|
$
|
77,247
|
|
Cost of
sales
|
|
|
83,314
|
|
|
|
67,011
|
|
Gross
profit
|
|
|
40,255
|
|
|
|
10,236
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
Compensation and
benefits
|
|
|
19,113
|
|
|
|
18,578
|
|
Other operating
expenses
|
|
|
17,165
|
|
|
|
14,567
|
|
Depreciation
(exclusive of depreciation included in cost of sales)
|
|
|
1,613
|
|
|
|
1,501
|
|
Asset
impairment
|
|
|
310
|
|
|
|
3,184
|
|
Total operating
expenses
|
|
|
38,201
|
|
|
|
37,830
|
|
Operating income
(loss)
|
|
|
2,054
|
|
|
|
(27,594)
|
|
Other expense,
net
|
|
|
5
|
|
|
|
100
|
|
Income (loss) before
income taxes
|
|
|
2,049
|
|
|
|
(27,694)
|
|
Income tax expense
(benefit)
|
|
|
330
|
|
|
|
(20,256)
|
|
Net income
(loss)
|
|
$
|
1,719
|
|
|
$
|
(7,438)
|
|
Earnings (loss) per
share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.12
|
|
|
$
|
(0.53)
|
|
Diluted
|
|
$
|
0.11
|
|
|
$
|
(0.53)
|
|
Weighted average
shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
14,295
|
|
|
|
13,990
|
|
Diluted
|
|
|
15,445
|
|
|
|
13,990
|
|
KIRKLAND'S,
INC. UNAUDITED CONSOLIDATED CONDENSED BALANCE
SHEETS (In thousands)
|
|
|
|
May
1,
|
|
|
January
30,
|
|
|
May
2,
|
|
|
|
2021
|
|
|
2021
|
|
|
2020
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
72,275
|
|
|
$
|
100,337
|
|
|
$
|
30,140
|
|
Inventories,
net
|
|
|
76,259
|
|
|
|
62,083
|
|
|
|
99,075
|
|
Income taxes
receivable
|
|
|
107
|
|
|
|
162
|
|
|
|
22,014
|
|
Prepaid expenses and
other current assets
|
|
|
8,638
|
|
|
|
8,116
|
|
|
|
7,950
|
|
Total current
assets
|
|
|
157,279
|
|
|
|
170,698
|
|
|
|
159,179
|
|
Property and
equipment, net
|
|
|
59,682
|
|
|
|
63,410
|
|
|
|
77,375
|
|
Operating lease
right-of-use assets
|
|
|
142,003
|
|
|
|
147,334
|
|
|
|
183,789
|
|
Other
assets
|
|
|
6,036
|
|
|
|
5,670
|
|
|
|
5,621
|
|
Total
assets
|
|
$
|
365,000
|
|
|
$
|
387,112
|
|
|
$
|
425,964
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
53,107
|
|
|
$
|
55,173
|
|
|
$
|
45,876
|
|
Accrued
expenses
|
|
|
31,142
|
|
|
|
37,454
|
|
|
|
24,403
|
|
Operating lease
liabilities
|
|
|
44,280
|
|
|
|
44,973
|
|
|
|
50,792
|
|
Total current
liabilities
|
|
|
128,529
|
|
|
|
137,600
|
|
|
|
121,071
|
|
Operating lease
liabilities
|
|
|
135,383
|
|
|
|
148,976
|
|
|
|
188,221
|
|
Revolving line of
credit
|
|
|
—
|
|
|
|
—
|
|
|
|
40,000
|
|
Other
liabilities
|
|
|
5,776
|
|
|
|
5,614
|
|
|
|
6,821
|
|
Total
liabilities
|
|
|
269,688
|
|
|
|
292,190
|
|
|
|
356,113
|
|
Net
shareholders' equity
|
|
|
95,312
|
|
|
|
94,922
|
|
|
|
69,851
|
|
Total liabilities and
shareholders' equity
|
|
$
|
365,000
|
|
|
$
|
387,112
|
|
|
$
|
425,964
|
|
KIRKLAND'S,
INC. UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH
FLOWS (In thousands)
|
|
|
|
13-Week Period
Ended
|
|
|
|
May
1,
|
|
|
May
2,
|
|
|
|
2021
|
|
|
2020
|
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
$
|
1,719
|
|
|
$
|
(7,438)
|
|
Adjustments to
reconcile net income (loss) to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation of
property and equipment
|
|
|
5,272
|
|
|
|
6,053
|
|
Amortization of debt
issue costs
|
|
|
23
|
|
|
|
24
|
|
Asset
impairment
|
|
|
310
|
|
|
|
3,184
|
|
(Gain) loss on
disposal of property and equipment
|
|
|
(4)
|
|
|
|
9
|
|
Stock-based
compensation expense
|
|
|
232
|
|
|
|
307
|
|
Deferred income
taxes
|
|
|
—
|
|
|
|
1,525
|
|
Changes in assets and
liabilities:
|
|
|
|
|
|
|
|
|
Inventories,
net
|
|
|
(14,176)
|
|
|
|
(4,401)
|
|
Prepaid expenses and
other current assets
|
|
|
(522)
|
|
|
|
(1,488)
|
|
Accounts
payable
|
|
|
(2,370)
|
|
|
|
(14,001)
|
|
Accrued
expenses
|
|
|
(6,634)
|
|
|
|
(4,361)
|
|
Income taxes payable
(receivable)
|
|
|
377
|
|
|
|
(21,780)
|
|
Operating lease assets
and liabilities
|
|
|
(8,736)
|
|
|
|
5,627
|
|
Other assets and
liabilities
|
|
|
(446)
|
|
|
|
(925)
|
|
Net cash used in
operating activities
|
|
|
(24,955)
|
|
|
|
(37,665)
|
|
|
|
|
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
|
|
Proceeds from sale of
property and equipment
|
|
|
13
|
|
|
|
98
|
|
Capital
expenditures
|
|
|
(1,559)
|
|
|
|
(2,452)
|
|
Net cash used in
investing activities
|
|
|
(1,546)
|
|
|
|
(2,354)
|
|
|
|
|
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
|
|
Borrowings on
revolving line of credit
|
|
|
—
|
|
|
|
40,000
|
|
Cash used in net
share settlement of stock options and restricted stock
|
|
|
(257)
|
|
|
|
(8)
|
|
Proceeds received
from employee stock option exercises
|
|
|
52
|
|
|
|
—
|
|
Employee stock
purchases
|
|
|
—
|
|
|
|
35
|
|
Repurchase and
retirement of common stock
|
|
|
(1,356)
|
|
|
|
—
|
|
Net cash (used in)
provided by financing activities
|
|
|
(1,561)
|
|
|
|
40,027
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents:
|
|
|
|
|
|
|
|
|
Net (decrease)
increase
|
|
|
(28,062)
|
|
|
|
8
|
|
Beginning of the
period
|
|
|
100,337
|
|
|
|
30,132
|
|
End of the
period
|
|
$
|
72,275
|
|
|
$
|
30,140
|
|
|
|
|
|
|
|
|
|
|
Supplemental
schedule of non-cash activities:
|
|
|
|
|
|
|
|
|
Non-cash accruals for
purchases of property and equipment
|
|
$
|
700
|
|
|
$
|
2,217
|
|
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, adjusted operating
income (loss), adjusted net income (loss) and adjusted diluted
earnings (loss) per share. 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 our
operational performance.
The Company defines EBITDA as net income or loss before
interest, provision for income tax, and depreciation and
amortization, adjusted EBITDA as EBITDA with non-GAAP adjustments
and adjusted operating income (loss) as operating income (loss)
with non-GAAP adjustments. The Company defines adjusted net income
(loss) and adjusted diluted earnings (loss) per share by adjusting
the applicable GAAP financial measures for 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 following table shows a reconciliation of operating income
(loss) to EBITDA, adjusted EBITDA and adjusted operating income
(loss) for the 13-week periods ended May 1,
2021 and May 2, 2020 and a
reconciliation of net income (loss) and diluted earnings (loss) per
share to adjusted net income (loss) and adjusted diluted earnings
(loss) per share for the 13-week periods ended May 1, 2021 and May 2,
2020:
KIRKLAND'S,
INC. UNAUDITED NON-GAAP MEASURE
RECONCILIATION (In thousands, except per share
data)
|
|
|
|
13-Week Period
Ended
|
|
|
|
May 1,
2021
|
|
|
May 2,
2020
|
|
Operating income
(loss)
|
|
$
|
2,054
|
|
|
$
|
(27,594)
|
|
Depreciation and
amortization
|
|
|
5,272
|
|
|
|
6,053
|
|
EBITDA
|
|
|
7,326
|
|
|
|
(21,541)
|
|
Non-GAAP
adjustments:
|
|
|
|
|
|
|
|
|
Closed store and lease
termination costs in cost of sales(1)
|
|
|
(489)
|
|
|
|
(37)
|
|
Asset
impairment(2)
|
|
|
310
|
|
|
|
3,184
|
|
Stock-based
compensation expense(3)
|
|
|
232
|
|
|
|
307
|
|
Severance
charges(4)
|
|
|
280
|
|
|
|
795
|
|
Other costs included
in operating expenses(5)
|
|
|
—
|
|
|
|
134
|
|
Total adjustments in
operating expenses
|
|
|
822
|
|
|
|
4,420
|
|
Total non-GAAP
adjustments
|
|
|
333
|
|
|
|
4,383
|
|
Adjusted
EBITDA
|
|
|
7,659
|
|
|
|
(17,158)
|
|
Depreciation and
amortization
|
|
|
5,272
|
|
|
|
6,053
|
|
Adjusted operating
income (loss)
|
|
$
|
2,387
|
|
|
$
|
(23,211)
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
$
|
1,719
|
|
|
$
|
(7,438)
|
|
Non-GAAP adjustments,
net of tax:
|
|
|
|
|
|
|
|
|
Closed store and lease
termination costs in cost of sales(1)
|
|
|
(368)
|
|
|
|
(28)
|
|
Asset
impairment(2)
|
|
|
234
|
|
|
|
2,427
|
|
Stock-based
compensation expense, including tax impact(3)
|
|
|
72
|
|
|
|
495
|
|
Severance
charges(4)
|
|
|
211
|
|
|
|
606
|
|
Other costs included
in operating expenses(5)
|
|
|
—
|
|
|
|
103
|
|
Total adjustments in
operating expenses
|
|
|
517
|
|
|
|
3,631
|
|
Tax valuation
allowance(6)
|
|
|
(74)
|
|
|
|
2,196
|
|
CARES Act - net
operating loss carry back(7)
|
|
|
—
|
|
|
|
(16,086)
|
|
Total non-GAAP
adjustments, net of tax
|
|
|
75
|
|
|
|
(10,287)
|
|
Adjusted net income
(loss)
|
|
$
|
1,794
|
|
|
$
|
(17,725)
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings
(loss) per share
|
|
$
|
0.11
|
|
|
$
|
(0.53)
|
|
Adjusted diluted
earnings (loss) per share
|
|
$
|
0.12
|
|
|
$
|
(1.27)
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted
average shares outstanding
|
|
|
15,445
|
|
|
|
13,990
|
|
Adjusted diluted
weighted average shares outstanding
|
|
|
15,445
|
|
|
|
13,990
|
|
|
|
(1)
|
Costs associated with
closed stores and lease termination costs, including gains on lease
terminations, amounts paid to third parties for rent reduction
negotiations and lease termination fees paid to landlords for store
closings.
|
(2)
|
Impairment charges
include both right-of-use asset and property and equipment
impairment charges.
|
(3)
|
Stock-based
compensation expense includes amounts expensed related to equity
incentive plans.
|
(4)
|
Severance charges
include expenses related to severance agreements. This also
includes permanent store closure compensation costs.
|
(5)
|
Other costs include
lease negotiation fees associated with corporate rent
reduction.
|
(6)
|
To remove the impact
of the change in the Company's valuation allowance against deferred
tax assets.
|
(7)
|
To remove the impact
of the income tax benefit recorded in fiscal 2020 related to the
carry back of fiscal 2019 and estimated fiscal 2020 federal net
operating losses to prior periods as permitted under the
Coronavirus Aid, Relief and Economic Security Act.
|
|
|
|
Contact:
|
Kirkland's
|
Kirkland's
|
|
Nicole
Strain
|
Investor
Relations
|
|
(615)
872-4800
|
IR@Kirklands.com
|
|
|
(615)
872-4898
|
View original content to download
multimedia:http://www.prnewswire.com/news-releases/kirklands-reports-first-quarter-2021-results-301301887.html
SOURCE Kirkland's, Inc.