Kirkland's (KIRK) 10-Q 6 Jun 19 2019 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	3 Months Ended
	May 04, 2019	May 22, 2019
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	May 4, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q1
Trading Symbol	KIRK
Entity Registrant Name	KIRKLAND'S, INC
Entity Central Index Key	0001056285
Current Fiscal Year End Date	--02-01
Entity Filer Category	Accelerated Filer
Entity Emerging Growth Company	false
Entity Small Business	true
Entity Common Stock, Shares Outstanding		14,164,148

Condensed Consolidated Balance

Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	May 04, 2019	Feb. 02, 2019	May 05, 2018
Current assets:
Cash and cash equivalents	$ 32,523	$ 57,946	$ 58,242
Inventories, net	90,406	84,434	83,164
Prepaid expenses and other current assets	9,598	15,561	15,848
Total current assets	132,527	157,941	157,254
Property and equipment:
Equipment	21,562	21,425	20,935
Furniture and fixtures	81,405	81,523	80,947
Leasehold improvements	126,673	126,784	122,282
Computer software and hardware	70,622	69,444	62,342
Projects in progress	9,925	8,344	10,460
Property and equipment, gross	310,187	307,520	296,966
Accumulated depreciation	(203,861)	(196,697)	(180,154)
Property and equipment, net	106,326	110,823	116,812
Operating lease right-of-use assets	225,100	0	0
Deferred income taxes	5,326	1,703	2,004
Other assets	6,144	6,681	6,531
Total assets	475,423	277,148	282,601
Current liabilities:
Accounts payable	33,081	40,004	35,362
Accounts payable to related party vendor	9,736	8,166	7,800
Income taxes payable	701	701	4,362
Accrued expenses	23,310	37,665	35,021
Operating lease liabilities	52,090	0	0
Total current liabilities	118,918	86,536	82,545
Deferred rent	0	51,871	54,235
Operating lease liabilities	228,345	0	0
Other liabilities	8,352	7,941	8,416
Total liabilities	355,615	146,348	145,196
Shareholders’ equity:
Preferred stock, no par value, 10,000,000 shares authorized; no shares issued or outstanding at May 4, 2019, February 2, 2019, or May 5, 2018, respectively	0	0	0
Common stock, no par value; 100,000,000 shares authorized; 14,224,648; 14,504,824; and 15,693,494 shares issued and outstanding at May 4, 2019, February 2, 2019, and May 5, 2018, respectively	170,105	169,477	167,999
Accumulated deficit	(50,297)	(38,677)	(30,594)
Total shareholders’ equity	119,808	130,800	137,405
Total liabilities and shareholders’ equity	$ 475,423	$ 277,148	$ 282,601

Condensed Consolidated Balanc_2

Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares	May 04, 2019	Feb. 02, 2019	May 05, 2018
Statement of Financial Position [Abstract]
Preferred stock, par value (usd per share)	$ 0	$ 0	$ 0
Preferred stock, shares authorized (in shares)	10,000,000	10,000,000	10,000,000
Preferred stock, shares issued (in shares)	0	0	0
Preferred stock, shares outstanding (in shares)	0	0	0
Common stock, par value (usd per share)	$ 0	$ 0	$ 0
Common stock, shares authorized (in shares)	100,000,000	100,000,000	100,000,000
Common stock, shares issued (in shares)	14,224,648	14,504,824	15,693,494
Common stock, shares outstanding (in shares)	14,224,648	14,504,824	15,693,494

Condensed Consolidated Statemen

Condensed Consolidated Statements of Operations (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	May 04, 2019	May 05, 2018
Income Statement [Abstract]
Net sales	$ 129,648	$ 142,454
Cost of sales	83,456	85,565
Cost of sales related to merchandise purchased from related party vendor	9,973	11,577
Cost of sales	93,429	97,142
Gross profit	36,219	45,312
Operating expenses:
Compensation and benefits	27,056	27,849
Other operating expenses	18,134	17,319
Depreciation (exclusive of depreciation included in cost of sales)	1,839	1,764
Asset impairment charges	1,878	0
Total operating expenses	48,907	46,932
Operating loss	(12,688)	(1,620)
Interest expense	70	65
Other income	(328)	(331)
Loss before income taxes	(12,430)	(1,354)
Income tax benefit	(3,509)	(472)
Net loss	$ (8,921)	$ (882)
Loss per share:
Basic (usd per share)	$ (0.62)	$ (0.06)
Diluted (usd per share)	$ (0.62)	$ (0.06)
Weighted average shares outstanding:
Basic (in shares)	14,372	15,808
Diluted (in shares)	14,372	15,808

Condensed Consolidated Statem_2

Condensed Consolidated Statement of Shareholders Equity (Unaudited) - USD ($) $ in Thousands	Total	Common Stock	Accumulated Deficit
Balance, beginning of period at Feb. 03, 2018	$ 140,761	$ 167,501	$ (26,740)
Balance, beginning of period (in shares) at Feb. 03, 2018		15,977,239
Increase (Decrease) in Stockholders Equity [Roll Forward]
Cumulative Effect of New Accounting Principle in Period of Adoption	0
Employee stock purchases (in shares)		10,969
Employee stock purchases	$ 82	$ 82
Exercise of stock options (in shares)	20,834
Exercise of stock options	$ 23	23
Stock-based compensation expense	$ 393	$ 393
Repurchase and retirement of common stock (in shares)	(315,548)	(315,548)
Repurchase and retirement of common stock	$ (2,972)		(2,972)
Net loss	(882)		(882)
Balance, end of period at May. 05, 2018	$ 137,405	$ 167,999	(30,594)
Balance, end of period (in shares) at May. 05, 2018	15,693,494	15,693,494
Balance, beginning of period at Feb. 02, 2019	$ 130,800	$ 169,477	(38,677)
Balance, beginning of period (in shares) at Feb. 02, 2019	14,504,824	14,504,824
Increase (Decrease) in Stockholders Equity [Roll Forward]
Cumulative Effect of New Accounting Principle in Period of Adoption	$ (331)		(331)
Employee stock purchases (in shares)		6,880
Employee stock purchases	68	$ 68
Stock-based compensation expense	$ 560	$ 560
Repurchase and retirement of common stock (in shares)	(287,056)	(287,056)
Repurchase and retirement of common stock	$ (2,368)		(2,368)
Net loss	(8,921)		(8,921)
Balance, end of period at May. 04, 2019	$ 119,808	$ 170,105	$ (50,297)
Balance, end of period (in shares) at May. 04, 2019	14,224,648	14,224,648

Condensed Consolidated Statem_3

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	May 04, 2019	May 05, 2018
Cash flows from operating activities:
Net loss	$ (8,921)	$ (882)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation of property and equipment	7,244	7,066
Amortization of debt issue costs	14	14
Asset impairment charges	1,878	0
Cumulative Effect of New Accounting Principle in Period of Adoption	(331)	0
Loss on disposal of property and equipment	126	29
Stock-based compensation expense	560	393
Deferred income taxes	(3,623)	212
Changes in assets and liabilities:
Inventories, net	(5,972)	(1,909)
Prepaid expenses and other current assets	935	244
Accounts payable	(7,748)	(10,025)
Accounts payable to related party vendor	1,570	277
Accrued expenses	(3,764)	(4,033)
Income taxes refundable	(13)	(685)
Operating lease assets and liabilities	(2,086)	1,114
Other assets and liabilities	934	221
Net cash used in operating activities	(19,197)	(7,964)
Net Cash Provided by (Used in) Investing Activities, Continuing Operations [Abstract]
Capital expenditures	(3,926)	(11,083)
Net cash used in investing activities	(3,926)	(11,083)
Cash flows from financing activities:
Proceeds from Stock Options Exercised	0	23
Employee stock purchases	68	82
Payments for Repurchase of Common Stock	(2,368)	(2,972)
Net cash used in financing activities	(2,300)	(2,867)
Cash and cash equivalents:
Net decrease	(25,423)	(21,914)
Beginning of the period	57,946	80,156
End of the period	32,523	58,242
Supplemental schedule of non-cash activities:
Non-cash accruals for purchases of property and equipment	2,097	2,212
Operating lease assets and liabilities recognized upon adoption of ASC 842	295,240	0
Increase of operating lease liabilities from new or modified leases	$ 3,389	$ 0

Basis of Presentation

Basis of Presentation	3 Months Ended
	May 04, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Basis of Presentation	Description of Business and Basis of Presentation Kirkland’s, Inc. (the “Company”) is a specialty retailer of home décor in the United States operating 431 stores in 37 states as of May 4, 2019 , as well as an e-commerce enabled website, www.kirklands.com. The condensed consolidated financial statements of the Company include the accounts of Kirkland’s, Inc. and its wholly-owned subsidiaries, Kirkland’s Stores, Inc., Kirkland’s DC, Inc., and Kirkland’s Texas, LLC. Significant intercompany accounts and transactions have been eliminated. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and are presented in accordance with the requirements of Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required for complete financial statements. In the opinion of management, all adjustments, including normal recurring accruals, considered necessary for a fair presentation have been included. These financial statements should be read in conjunction with the audited financial statements included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 29, 2019 . It should be understood that accounting measurements at interim dates inherently involve greater reliance on estimates than those at fiscal year-end. In addition, because of seasonality factors, the results of the Company’s operations for the 13-week period ended May 4, 2019 are not indicative of the results to be expected for any other interim period or for the entire fiscal year. The Company’s fiscal year ends on the Saturday closest to January 31, resulting in years of either 52 or 53 weeks. The preparation of the condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results could differ from the estimates and assumptions used. Changes in estimates are recognized in the period when new information becomes available to management. Areas where the nature of the estimate makes it reasonably possible that actual results could materially differ from amounts estimated include, but are not limited to, impairment assessments on long-lived assets, inventory reserves and self-insurance reserves. In the first 13 weeks of fiscal 2019, the Company adopted lease accounting guidance as discussed in Note 10 and Note 12 to the condensed consolidated financial statements. Adoption of the new lease accounting guidance had a material impact to the Company’s condensed consolidated balance sheets and related disclosures, and resulted in the recording of additional right-of-use assets and lease liabilities of approximately $295.2 million as of the date of adoption. This guidance was applied using the optional transition method, which allowed the Company to not recast comparative financial information but rather recognize a cumulative-effect adjustment to retained earnings as of the effective date in the period of adoption. An adjustment of $0.3 million was made to retained earnings as a result of right-of-use assets that were impaired upon the adoption of this guidance. See Note 11 to the condensed consolidated financial statements for further discussion. Consistent with the optional transition method, the financial information in the condensed consolidated balance sheets prior to the adoption of this new lease accounting guidance has not been adjusted and is therefore not comparable to the current period presented. The standard did not materially impact the Company’s condensed consolidated statements of operations or cash flows. For additional information, including the required disclosures, related to the impact of adopting this standard, see Note 10 and Note 12 to the condensed consolidated financial statements. Certain other amounts in the fiscal 2018 operating activities section of the condensed consolidated statement of cash flows have been reclassified to conform to the fiscal 2019 presentation. These reclassifications had no effect on reported net loss. The Company uses the redemption recognition method to account for breakage for unused gift card amounts where breakage is recognized as gift cards are redeemed for the purchase of goods based upon a historical breakage rate. In these circumstances, to the extent the Company determines there is no requirement for remitting card balances to government agencies under unclaimed property laws, such amounts are recognized in the consolidated statement of income as a component of net sales. The table below sets forth selected gift card liability information (in thousands) for the periods indicated: May 4, 2019 February 2, 2019 May 5, 2018 Gift card liability, net of estimated breakage $ 11,962 $ 13,032 $ 10,460 The table below sets forth selected gift card breakage and redemption information (in thousands) for the periods indicated: 13 Weeks Ended May 4, 2019 May 5, 2018 Gift card breakage revenue $ 279 $ 287 Gift card redemptions recognized in the current period related to amounts included in the gift card contract liability balance as of the prior period 2,691 2,586

Income Taxes

Income Taxes	3 Months Ended
	May 04, 2019
Income Tax Disclosure [Abstract]
Income Taxes	Income Taxes An estimate of the annual effective tax rate is used at each interim period based on the facts and circumstances available at that time, while the actual effective tax rate is calculated at year-end. For the 13-week periods ended May 4, 2019 and May 5, 2018 , the Company recorded an income tax benefit of 28.2% and 34.9% of the loss before income taxes , respectively. The decrease in the tax rate for the 13-week period ended May 4, 2019 was primarily due to the realization of discrete federal tax credits during the 13-week period ended May 5, 2018, which increased the tax rate in the prior year period.

Loss Per Share

Loss Per Share	3 Months Ended
	May 04, 2019
Earnings Per Share [Abstract]
Loss Per Share	Loss Per Share Basic loss per share is computed by dividing net loss by the weighted average number of shares outstanding during each period presented. Diluted loss per share is computed by dividing net loss by the weighted average number of shares outstanding plus the dilutive effect of stock equivalents outstanding during the applicable periods using the treasury stock method. Diluted loss per share reflects the potential dilution that could occur if options to purchase stock were exercised into common stock and if outstanding grants of restricted stock were vested. Stock options and restricted stock units that were not included in the computation of diluted loss per share, because to do so would have been antidilutive, were approximately 1.5 million and 1.4 million shares for the 13-week periods ended May 4, 2019 and May 5, 2018 , respectively.

Fair Value of Financial Instrum

Fair Value of Financial Instruments	3 Months Ended
	May 04, 2019
Fair Value of Financial Instruments [Abstract]
Fair Value of Financial Instruments, Policy	Fair Value of Financial Instruments Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants on the measurement date. The Company uses a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. The carrying amounts of cash and cash equivalents, accounts receivable, other current assets and accounts payable approximate fair value because of their short maturities. The Company also maintains The Executive Non-Qualified Excess Plan (the “Deferred Compensation Plan”). The Deferred Compensation Plan is funded, and the Company invests participant deferrals into trust assets, which are invested in a variety of mutual funds that are Level 1 inputs. The plan assets and plan liabilities are adjusted to fair value on a recurring basis. Deferred Compensation Plan assets and liabilities were approximately $1.8 million and $2.1 million as of May 4, 2019 and May 5, 2018 , respectively, and were recorded in other assets and other liabilities in the condensed consolidated balance sheets.

Commitments and Contingencies

Commitments and Contingencies	3 Months Ended
	May 04, 2019
Commitments and Contingencies Disclosure [Abstract]
Commitments and Contingencies	Commitments and Contingencies The Company has been named as a defendant in a putative class action filed in May 2018 in the Superior Court of California, Miles v. Kirkland’s Stores, Inc. The case has been removed to Federal Court, Central District of California, and trial is not yet set. The complaint alleges, on behalf of Miles and all other hourly Kirkland’s employees in California, various wage and hour violations. Kirkland’s denies the material allegations in the complaint and believes that its employment policies are generally compliant with California law. To date, the parties have exchanged the court mandated initial disclosures. The Company believes the case is without merit and intends to vigorously defend itself against the allegations. The Company is also party to other pending legal proceedings and claims that arise in the normal course of business. Although the outcome of such proceedings and claims cannot be determined with certainty, the Company’s management is of the opinion that it is unlikely that such proceedings and any claims in excess of insurance coverage will have a material effect on the Company’s consolidated financial condition, operating results or cash flows.

Stock-Based Compensation

Stock-Based Compensation	3 Months Ended
	May 04, 2019
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Stock-Based Compensation	Stock-Based Compensation The Company maintains equity incentive plans under which it may grant non-qualified stock options, incentive stock options, restricted stock, restricted stock units, or stock appreciation rights to employees, non-employee directors and consultants. Compensation expense is recognized on a straight-line basis over the vesting periods of each grant. There have been no material changes in the assumptions used to compute compensation expense during the current quarter. The table below sets forth selected stock-based compensation information (in thousands, except share amounts) for the periods indicated: 13 Weeks Ended May 4, 2019 May 5, 2018 Stock-based compensation expense (included in compensation and benefits on the condensed consolidated statements of operations) $ 560 $ 393 Stock options granted 430,493 — Restricted stock units granted 215,245 —

Related Party Transactions

Related Party Transactions	3 Months Ended
	May 04, 2019
Related Party Transactions [Abstract]
Related Party Transactions	Related Party Transactions The Company has an agreement with a related party vendor to purchase merchandise inventory. The vendor is considered a related party for financial reporting purposes because its principal owner is the spouse of the Company’s Vice President of Product Development and Trend. The table below sets forth selected results related to this vendor in dollars (in thousands) and percentages for the periods indicated: 13 Weeks Ended May 4, 2019 May 5, 2018 Related Party Vendor: Purchases $ 13,400 $ 11,436 Purchases as a percent of total merchandise purchases 24.1 % 20.5 %

Stock Repurchase Program

Stock Repurchase Program	3 Months Ended
	May 04, 2019
Treasury Stock Transactions [Abstract]
Treasury Stock	Stock Repurchase Plan On August 22, 2017, the Company announced that its Board of Directors authorized a stock repurchase plan providing for the purchase in the aggregate of up to $10 million of the Company’s outstanding common stock. This stock repurchase plan was completed during the third quarter of fiscal 2018. On September 24, 2018, the Company announced that its Board of Directors authorized a new stock repurchase plan providing for the purchase in the aggregate of up to $10 million of the Company’s outstanding common stock. Repurchases of shares will be made in accordance with applicable securities laws and may be made from time to time in the open market or by negotiated transactions. The amount and timing of repurchases will be based on a variety of factors, including stock acquisition price, regulatory limitations and other market and economic factors. The stock repurchase plan does not require the Company to repurchase any specific number of shares, and the Company may terminate the repurchase plan at any time. As of May 4, 2019 , the Company had approximately $1.3 million remaining under the current stock repurchase plan. The table below sets forth selected stock repurchase plan information (in thousands, except share amounts) for the periods indicated: 13 Weeks Ended May 4, 2019 May 5, 2018 Shares repurchased and retired 287,056 315,548 Share repurchase cost $ 2,368 $ 2,972

Senior Credit Facility

Senior Credit Facility	3 Months Ended
	May 04, 2019
Debt Disclosure [Abstract]
Senior Credit Facility	Senior Credit Facility The Company is party to a Joinder and First Amendment to Amended and Restated Credit Agreement (the “Credit Agreement”) with Bank of America, N.A. as administrative agent and collateral agent, and the lenders named therein (the “Lenders”). The Credit Agreement includes a senior secured revolving credit facility of $75 million , a swingline availability of $10 million , a $25 million incremental accordion feature and a maturity date of February 2021. Borrowings under the Credit Agreement bear interest at an annual rate equal to LIBOR plus a margin ranging from 125 to 175 basis points with no LIBOR floor, and the fee paid to the Lenders on the unused portion of the credit facility is 25 basis points per annum. Borrowings under the Credit Agreement are subject to certain conditions and contain customary events of default, including, without limitation, failure to make payments, a cross-default to certain other debt, breaches of covenants, breaches of representations and warranties, a change in control, certain monetary judgments and bankruptcy and ERISA events. Upon any such event of default, the principal amount of any unpaid loans and all other obligations under the Credit Agreement may be declared immediately due and payable. The maximum availability under the facility is limited by a borrowing base formula which consists of a percentage of eligible inventory and eligible credit card receivables, less reserves. The Company is subject to an Amended and Restated Security Agreement (the “Security Agreement”) with its Lenders. Pursuant to the Security Agreement, the Company pledged and granted to the administrative agent, for the benefit of itself and the secured parties specified therein, a lien on and security interest in all of the rights, title and interest in substantially all of the Company’s assets to secure the payment and performance of the obligations under the Credit Agreement. As of May 4, 2019 , the Company was in compliance with the covenants in the Credit Agreement, and there were no outstanding borrowings under the credit facility, with approximately $53.5 million available for borrowing.

Leases

Leases	3 Months Ended
	May 04, 2019
Leases [Abstract]
Lessee, Operating Leases	Leases The Company leases retail store facilities, corporate office space, warehouse facilities and certain vehicles and equipment under operating leases with terms generally ranging up to 10 years and expiring at various dates through 2029 . Most of the retail store lease agreements include an initial term with renewal options and provide for minimum fixed rental payments. The Company does not include lease renewal options in the lease term for calculations of its right-of-use assets and liabilities until it is reasonably certain that the Company plans to renew these leases. A few retail store lease agreements have only variable lease payments based on a percentage of sales, while other store leases contain contingent rentals based on sales performance in excess of specified minimums in addition to minimum fixed rentals. The majority of the Company’s leases have monthly fixed rent with variable components (e.g., real estate taxes and insurance costs) and variable non-lease components (e.g., common area maintenance). These variable payments are excluded from the calculation of the lease liability and right-of-use asset. For leases where the lease and non-lease components are fixed, the Company has elected an accounting policy to account for lease and non-lease components as a single component. The Company’s leases do not provide an implicit rate, so the incremental borrowing rate, based on the information available at commencement or modification date, is used in determining the present value of lease payments. For operating leases that commenced prior to the date of adoption of the new lease accounting guidance, the Company used the incremental borrowing rate that corresponded to the remaining lease term as of the date of adoption. The Company’s classification of lease cost on the Company’s condensed consolidated statements of operations is as follows (in thousands): 13 Weeks Ended (1) May 4, 2019 Cost of sales (2) Operating lease cost $ 13,588 Short-term lease cost 324 Variable lease cost 257 Total lease cost in cost of sales $ 14,169 Other operating expenses Operating lease cost $ 730 Short-term lease cost 46 Total lease cost in other operating expenses $ 776 (1) Total lease cost for the 13-week period ended May 4, 2019 excludes expense for variable non-lease components including common area maintenance and excludes costs that are not a component of the lease including real estate taxes, insurance, sales taxes and utilities for the Company’s leases. Short-term lease cost is immaterial. (2) Cost of sales includes all distribution center lease costs and store occupancy-related lease cost. As of May 4, 2019 , future minimum payments, by year and in the aggregate, under all operating leases with initial terms of one year or more consist of the following (in thousands): Operating Leases 2019 (excluding the 13 weeks ended May 4, 2019) $ 45,083 2020 62,907 2021 53,967 2022 44,890 2023 36,363 After 2023 93,196 Total lease payments (1) 336,406 Less: Interest (55,971 ) Present value of lease liabilities $ 280,435 (1) Operating lease payments exclude $21.3 million of legally binding minimum lease payments for leases signed but not yet commenced for four new store leases and a logistics agreement with a third-party for storage, distribution and inventory management services including the lease of 200,000 square feet of distribution center space and related equipment. The Company’s lease term and discount rate is as follows: May 4, 2019 Weighted-average remaining lease term (years) 6.5 Weighted-average discount rate 5.6 % Cash paid for amounts included in the measurement of lease liabilities is as follows (in thousands): 13 Weeks Ended May 4, 2019 Operating cash flows from operating leases $ 16,765 The Company adopted new lease accounting guidance as of the beginning of fiscal 2019 as discussed in Note 1 and Note 12, and as required, the following disclosure is provided for periods prior to adoption. As of February 2, 2019, future minimum payments, by year and in the aggregate, under all operating leases with initial terms of one year or more consist of the following (in thousands): Operating Leases 2019 $ 67,354 2020 62,102 2021 53,164 2022 44,087 2023 35,606 Thereafter 91,629 Total minimum lease payments $ 353,942

Impairments

Impairments	3 Months Ended
	May 04, 2019
Impairments [Abstract]
Asset Impairment Charges	Impairments The Company evaluates the recoverability of the carrying amounts of long-lived assets when events or changes in circumstances dictate that their carrying values may not be recoverable. This review includes the evaluation of individual underperforming retail stores and assessing the recoverability of the carrying value of the assets related to the stores. Future cash flows are projected for the remaining lease life. If the estimated future cash flows are less than the carrying value of the assets, the Company records an impairment charge equal to the difference between the assets’ fair value and carrying value. The fair value is estimated using a discounted cash flow approach considering such factors as future sales levels, gross margins, changes in rent and other expenses as well as the overall operating environment specific to that store. The amount of the impairment charge is allocated proportionately to all assets in the asset group with no asset written down below its individual fair value. In connection with the adoption of the new lease accounting standard, the Company reviewed its store portfolio for possible impairment, as right-of-use assets are now included as part of the long-lived asset group that is evaluated for impairment. As a result of this review, eight stores were identified for which the carrying amounts of the store assets were not expected to be recoverable. The Company recorded an adjustment to increase the opening balance of accumulated deficit by approximately $0.3 million for the cumulative effect of the adoption of ASC 842 for right-of-use assets at six of the impaired stores. The Company also recorded an impairment charge totaling approximately $1.9 million for the first 13 weeks of fiscal 2019 for leasehold improvements, fixtures and equipment at eight stores, for which the carrying value exceed the fair value of these assets. In the current quarter, the Company shifted to estimating the fair value of long-lived fixed assets based on orderly liquidation value as the Company believes this method better reflects the fair value of the assets. The Company previously used the age-life method for calculating the fair value of long-lived fixed assets.

New Accounting Pronouncements

New Accounting Pronouncements	3 Months Ended
	May 04, 2019
New Accounting Pronouncements and Changes in Accounting Principles [Abstract]
New Accounting Pronouncements	New Accounting Pronouncements New Accounting Pronouncements Recently Adopted In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, “Leases (Topic 842)”, which supersedes the existing guidance for lease accounting, Leases (Topic 840) (“ASU 2016-02”). ASU 2016-02 requires lessees to recognize a lease liability and a right-of-use asset for both operating leases and finance leases on the balance sheet at the lease commencement date. For operating leases, the lessee would recognize a straight-line total lease expense, while for finance leases, the lessee would recognize interest expense and amortization of the right-of-use asset. The Company currently only has operating leases. Lessor accounting remains largely unchanged, and the Company is not a lessor in any lease agreements. The guidance also requires certain qualitative and quantitative disclosures about the amount, timing and uncertainty of cash flows arising from leases. There have been multiple standard updates amending this guidance or providing corrections or improvements on issues in the guidance. In July 2018, the FASB issued ASU 2018-11, “Leases (Topic 842): Targeted Improvements,” which provides an optional transition method in addition to the existing modified retrospective transition method by allowing a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption. Under this transition method, companies may continue to report comparative periods under ASC 840, although they must also provide the required disclosures under ASC 840 for all periods presented under ASC 840. In January 2018, the FASB issued ASU 2018-01, “Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842.” This update permits an entity to elect an optional transition practical expedient to not evaluate land easements that exist or expired before the entity’s adoption of ASU 2016-02 and that were not accounted for as leases under previous lease guidance. The Company adopted this guidance as of the beginning of the first 13 weeks of fiscal 2019, and as a part of that process, made the following elections: • The Company elected the optional transition method, which allows for the lessee to not recast comparative financial information but rather recognize a cumulative-effect adjustment to retained earnings as of the effective date in the period of adoption. • The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which, among other things, allowed the Company to carry forward its prior lease classification under ASC 840, not reassess whether expired or existing contracts contain leases and not reevaluate initial direct costs for existing leases. • The Company did not elect the hindsight practical expedient for all leases. • The Company elected to make the accounting policy election for short-term leases resulting in lease payments being recorded as an expense on a straight-line basis over the lease term. • The majority of the Company’s leases have variable non-lease components. For leases where the non-lease components are fixed, the Company has elected an accounting policy to account for lease and non-lease components as a single component. • The Company elected the land easement practical expedient. Adoption of the new standard had a material impact on the Company’s condensed consolidated balance sheets, statement of shareholders’ equity and related disclosures, and resulted in the recording of additional right-of-use assets and lease liabilities of approximately $295.2 million as of the date of adoption. Right-of-use assets are recorded based upon the present value of remaining operating lease liabilities adjusted for prepaid and deferred rent, including deferred construction allowances from landlords and initial direct costs. The Company also recorded an adjustment to increase the opening balance of accumulated deficit by approximately $0.3 million for the cumulative effect of the adoption of ASC 842 for right-of-use assets for stores with impairment indicators at adoption. The standard did not materially impact the Company’s condensed consolidated statements of operations or cash flows. In August 2018, the FASB issued ASU 2018-15, “Intangibles–Goodwill and Other–Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is A Service Contract” (“ASU 2018-15”). This update clarifies the accounting treatment for fees paid by a customer in a cloud computing arrangement (hosting arrangement) by providing guidance for determining when the arrangement includes a software license. This guidance is effective for public business entities for fiscal years, and interim periods within those years, beginning after December 15, 2019, with early adoption permitted. The amendments may be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The Company adopted this guidance in the first 13 weeks of fiscal 2019 using the prospective adoption method. This guidance could have a material effect on future financial results depending on whether or not the Company implements new software as a service solutions with significant implementation costs, as they would be deferred and expensed over the term of the agreement. The adoption of this guidance did not have a material effect on the Company’s current consolidated financial statements and related disclosures.

New Accounting Pronouncements (

New Accounting Pronouncements (Policies)	3 Months Ended
	May 04, 2019
New Accounting Pronouncements and Changes in Accounting Principles [Abstract]
New Accounting Pronouncements Recently Adopted	New Accounting Pronouncements Recently Adopted In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, “Leases (Topic 842)”, which supersedes the existing guidance for lease accounting, Leases (Topic 840) (“ASU 2016-02”). ASU 2016-02 requires lessees to recognize a lease liability and a right-of-use asset for both operating leases and finance leases on the balance sheet at the lease commencement date. For operating leases, the lessee would recognize a straight-line total lease expense, while for finance leases, the lessee would recognize interest expense and amortization of the right-of-use asset. The Company currently only has operating leases. Lessor accounting remains largely unchanged, and the Company is not a lessor in any lease agreements. The guidance also requires certain qualitative and quantitative disclosures about the amount, timing and uncertainty of cash flows arising from leases. There have been multiple standard updates amending this guidance or providing corrections or improvements on issues in the guidance. In July 2018, the FASB issued ASU 2018-11, “Leases (Topic 842): Targeted Improvements,” which provides an optional transition method in addition to the existing modified retrospective transition method by allowing a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption. Under this transition method, companies may continue to report comparative periods under ASC 840, although they must also provide the required disclosures under ASC 840 for all periods presented under ASC 840. In January 2018, the FASB issued ASU 2018-01, “Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842.” This update permits an entity to elect an optional transition practical expedient to not evaluate land easements that exist or expired before the entity’s adoption of ASU 2016-02 and that were not accounted for as leases under previous lease guidance. The Company adopted this guidance as of the beginning of the first 13 weeks of fiscal 2019, and as a part of that process, made the following elections: • The Company elected the optional transition method, which allows for the lessee to not recast comparative financial information but rather recognize a cumulative-effect adjustment to retained earnings as of the effective date in the period of adoption. • The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which, among other things, allowed the Company to carry forward its prior lease classification under ASC 840, not reassess whether expired or existing contracts contain leases and not reevaluate initial direct costs for existing leases. • The Company did not elect the hindsight practical expedient for all leases. • The Company elected to make the accounting policy election for short-term leases resulting in lease payments being recorded as an expense on a straight-line basis over the lease term. • The majority of the Company’s leases have variable non-lease components. For leases where the non-lease components are fixed, the Company has elected an accounting policy to account for lease and non-lease components as a single component. • The Company elected the land easement practical expedient. Adoption of the new standard had a material impact on the Company’s condensed consolidated balance sheets, statement of shareholders’ equity and related disclosures, and resulted in the recording of additional right-of-use assets and lease liabilities of approximately $295.2 million as of the date of adoption. Right-of-use assets are recorded based upon the present value of remaining operating lease liabilities adjusted for prepaid and deferred rent, including deferred construction allowances from landlords and initial direct costs. The Company also recorded an adjustment to increase the opening balance of accumulated deficit by approximately $0.3 million for the cumulative effect of the adoption of ASC 842 for right-of-use assets for stores with impairment indicators at adoption. The standard did not materially impact the Company’s condensed consolidated statements of operations or cash flows. In August 2018, the FASB issued ASU 2018-15, “Intangibles–Goodwill and Other–Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is A Service Contract” (“ASU 2018-15”). This update clarifies the accounting treatment for fees paid by a customer in a cloud computing arrangement (hosting arrangement) by providing guidance for determining when the arrangement includes a software license. This guidance is effective for public business entities for fiscal years, and interim periods within those years, beginning after December 15, 2019, with early adoption permitted. The amendments may be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The Company adopted this guidance in the first 13 weeks of fiscal 2019 using the prospective adoption method. This guidance could have a material effect on future financial results depending on whether or not the Company implements new software as a service solutions with significant implementation costs, as they would be deferred and expensed over the term of the agreement. The adoption of this guidance did not have a material effect on the Company’s current consolidated financial statements and related disclosures.

Basis of Presentation Gift Card

Basis of Presentation Gift Card Redemption Recognition (Tables)	3 Months Ended
	May 04, 2019
Payables and Accruals [Abstract]
Gift Card Liability, Net of Estimated Breakage	The table below sets forth selected gift card liability information (in thousands) for the periods indicated: May 4, 2019 February 2, 2019 May 5, 2018 Gift card liability, net of estimated breakage $ 11,962 $ 13,032 $ 10,460
Gift Card Breakage and Redemptions Recognized	The table below sets forth selected gift card breakage and redemption information (in thousands) for the periods indicated: 13 Weeks Ended May 4, 2019 May 5, 2018 Gift card breakage revenue $ 279 $ 287 Gift card redemptions recognized in the current period related to amounts included in the gift card contract liability balance as of the prior period 2,691 2,586

Stock-Based Compensation (Table

Stock-Based Compensation (Tables)	3 Months Ended
	May 04, 2019
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Stock-Based Compensation	The table below sets forth selected stock-based compensation information (in thousands, except share amounts) for the periods indicated: 13 Weeks Ended May 4, 2019 May 5, 2018 Stock-based compensation expense (included in compensation and benefits on the condensed consolidated statements of operations) $ 560 $ 393 Stock options granted 430,493 — Restricted stock units granted 215,245 —

Related Party Transactions (Tab

Related Party Transactions (Tables)	3 Months Ended
	May 04, 2019
Related Party Transactions [Abstract]
Schedule of Selected Results to Vendor in Dollars and Percentages	The table below sets forth selected results related to this vendor in dollars (in thousands) and percentages for the periods indicated: 13 Weeks Ended May 4, 2019 May 5, 2018 Related Party Vendor: Purchases $ 13,400 $ 11,436 Purchases as a percent of total merchandise purchases 24.1 % 20.5 %

Stock Repurchase Program (Table

Stock Repurchase Program (Tables)	3 Months Ended
	May 04, 2019
Treasury Stock Transactions [Abstract]
Class of Treasury Stock	The table below sets forth selected stock repurchase plan information (in thousands, except share amounts) for the periods indicated: 13 Weeks Ended May 4, 2019 May 5, 2018 Shares repurchased and retired 287,056 315,548 Share repurchase cost $ 2,368 $ 2,972

Leases (Tables)

Leases (Tables)	3 Months Ended
	May 04, 2019
Leases [Abstract]
Lease, Cost	The Company’s classification of lease cost on the Company’s condensed consolidated statements of operations is as follows (in thousands): 13 Weeks Ended (1) May 4, 2019 Cost of sales (2) Operating lease cost $ 13,588 Short-term lease cost 324 Variable lease cost 257 Total lease cost in cost of sales $ 14,169 Other operating expenses Operating lease cost $ 730 Short-term lease cost 46 Total lease cost in other operating expenses $ 776 (1) Total lease cost for the 13-week period ended May 4, 2019 excludes expense for variable non-lease components including common area maintenance and excludes costs that are not a component of the lease including real estate taxes, insurance, sales taxes and utilities for the Company’s leases. Short-term lease cost is immaterial. (2) Cost of sales includes all distribution center lease costs and store occupancy-related lease cost.
Lessee, Operating Lease, Liability, Maturity	As of May 4, 2019 , future minimum payments, by year and in the aggregate, under all operating leases with initial terms of one year or more consist of the following (in thousands): Operating Leases 2019 (excluding the 13 weeks ended May 4, 2019) $ 45,083 2020 62,907 2021 53,967 2022 44,890 2023 36,363 After 2023 93,196 Total lease payments (1) 336,406 Less: Interest (55,971 ) Present value of lease liabilities $ 280,435 (1) Operating lease payments exclude $21.3 million of legally binding minimum lease payments for leases signed but not yet commenced for four new store leases and a logistics agreement with a third-party for storage, distribution and inventory management services including the lease of 200,000 square feet of distribution center space and related equipment.
Leases Term and Discount Rate	The Company’s lease term and discount rate is as follows: May 4, 2019 Weighted-average remaining lease term (years) 6.5 Weighted-average discount rate 5.6 %
Leases Cash Flow Supplemental Disclosure	Cash paid for amounts included in the measurement of lease liabilities is as follows (in thousands): 13 Weeks Ended May 4, 2019 Operating cash flows from operating leases $ 16,765
Schedule of Future Minimum Rental Payments for Operating Leases	The Company adopted new lease accounting guidance as of the beginning of fiscal 2019 as discussed in Note 1 and Note 12, and as required, the following disclosure is provided for periods prior to adoption. As of February 2, 2019, future minimum payments, by year and in the aggregate, under all operating leases with initial terms of one year or more consist of the following (in thousands): Operating Leases 2019 $ 67,354 2020 62,102 2021 53,164 2022 44,087 2023 35,606 Thereafter 91,629 Total minimum lease payments $ 353,942

Basis of Presentation (Details)

Basis of Presentation (Details) $ in Thousands	3 Months Ended
	May 04, 2019USD ($)storestate	May 05, 2018USD ($)	Feb. 02, 2019USD ($)
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Gift card breakage revenue	$ 279	$ 287
Gift card redemptions recognized	2,691	2,586
Gift card liability	$ 11,962	10,460	$ 13,032
Number of home decor and gifts store | store	431
Number of states | state	37
Operating lease assets and liabilities recognized upon adoption of ASC 842	$ 295,240	0
Cumulative Effect of New Accounting Principle in Period of Adoption	$ 331	$ 0

Income Taxes (Details)

Income Taxes (Details)	3 Months Ended
	May 04, 2019	May 05, 2018
Income Tax Disclosure [Abstract]
Effective tax rate	28.20%	34.90%

Loss Per Share (Details)

Loss Per Share (Details) - shares shares in Millions	3 Months Ended
	May 04, 2019	May 05, 2018
Earnings Per Share [Abstract]
Stock options and restricted stock units not included in the computation of diluted earnings per share (in shares)	1.5	1.4

Fair Value of Financial Instr_2

Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands	May 04, 2019	May 05, 2018
Fair Value of Financial Instruments [Abstract]
Deferred Compensation Plan Assets	$ 1,800	$ 2,100
Deferred Compensation Liability	$ 1,800	$ 2,100

Stock-Based Compensation (Detai

Stock-Based Compensation (Details) - USD ($) $ in Thousands	3 Months Ended
	May 04, 2019	May 05, 2018
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense (included in compensation and benefits on the condensed consolidated statements of operations)	$ 560	$ 393
Stock options granted (in shares)	430,493	0
Restricted stock units granted (in shares)	215,245	0

Related Party Transactions (Det

Related Party Transactions (Details) - USD ($) $ in Thousands	3 Months Ended
	May 04, 2019	May 05, 2018
Related Party Transactions [Abstract]
Purchases	$ 13,400	$ 11,436
Purchases as a percent of total merchandise purchases	24.10%	20.50%

Stock Repurchase Program (Detai

Stock Repurchase Program (Details) - USD ($) $ in Thousands	3 Months Ended
	May 04, 2019	May 05, 2018	Sep. 24, 2018	Aug. 22, 2017
Treasury Stock Transactions [Abstract]
Stock Repurchase Program, Authorized Amount			$ 10,000	$ 10,000
Stock Repurchased and Retired During Period, Shares	287,056	315,548
Payments for Repurchase of Common Stock	$ 2,368	$ 2,972
Stock Repurchase Program, Remaining Authorized Repurchase Amount	$ 1,300

Senior Credit Facility (Details

Senior Credit Facility (Details) - Secured credit facility - Revolving credit facility	3 Months Ended
	May 04, 2019USD ($)
Line of Credit Facility [Line Items]
Line of credit facility maximum borrowing capacity	$ 75,000,000
Swingline availability	$ 10,000,000
Percentage of fee on unused portion of the facility	0.25%
Incremental accordion feature	$ 25,000,000
Outstanding borrowings under the credit facility	0
Available borrowing capacity of line of credit facility	$ 53,500,000
Minimum
Line of Credit Facility [Line Items]
Interest at an annual rate equal to LIBOR plus a margin range	1.25%
Maximum
Line of Credit Facility [Line Items]
Interest at an annual rate equal to LIBOR plus a margin range	1.75%

Leases (Details)

Leases (Details) $ in Thousands	3 Months Ended
	May 04, 2019USD ($)
Leases [Abstract]
Weighted average remaining lease term	6 years 6 months
Weighted average discount rate	5.60%
Lease Cost [Line Items]
Lease term	10 years
Lease Expiration Date	2029
Other Operating Expense [Member]
Lease Cost [Line Items]
Operating lease cost	$ 730
Short-term lease cost	46
Lease cost	776	[1]
Cost of Sales [Member]
Lease Cost [Line Items]
Operating lease cost	13,588
Short-term lease cost	324
Variable lease cost	257
Lease cost	$ 14,169	[1],[2]
[1]	Total lease cost for the 13-week period ended May 4, 2019 excludes expense for variable non-lease components including common area maintenance and excludes costs that are not a component of the lease including real estate taxes, insurance, sales taxes and utilities for the Company’s leases. Short-term lease cost is immaterial.
[2]	Cost of sales includes all distribution center lease costs and store occupancy-related lease cost.

Leases Leases Maturity Liabilit

Leases Leases Maturity Liability (Details) - USD ($) $ in Thousands	May 04, 2019		Feb. 02, 2019
Leases Maturity Liability [Abstract]
2019	$ 45,083		$ 67,354
2020	62,907		62,102
2021	53,967		53,164
2022	44,890		44,087
2023	36,363		35,606
After 2023	93,196		91,629
Total lease payments	336,406	[1]	$ 353,942
Less: Interest	(55,971)
Present value of lease liabilities	280,435
Legally binding minimum lease payments for leases signed but not yet commenced that were excluded from operating lease payments	$ 21,300
[1]	Operating lease payments exclude $21.3 million of legally binding minimum lease payments for leases signed but not yet commenced for four new store leases and a logistics agreement with a third-party for storage, distribution and inventory management services including the lease of 200,000 square feet of distribution center space and related equipment.

Leases Leases Operating Cash Fl

Leases Leases Operating Cash Flows (Details) $ in Thousands	3 Months Ended
	May 04, 2019USD ($)
Leases Operating Cash Flows [Abstract]
Operating cash flows from operating leases	$ 16,765

Impairments (Details)

Impairments (Details) - USD ($) $ in Thousands	3 Months Ended
	May 04, 2019	May 05, 2018
Impairments [Abstract]
Cumulative Effect of New Accounting Principle in Period of Adoption	$ 331	$ 0
Asset impairment charges	$ 1,878	$ 0

New Accounting Pronouncements_2

New Accounting Pronouncements (Details) - USD ($) $ in Thousands	3 Months Ended
	May 04, 2019	May 05, 2018
New Accounting Pronouncements and Changes in Accounting Principles [Abstract]
Operating lease assets and liabilities recognized upon adoption of ASC 842	$ 295,240	$ 0
Cumulative Effect of New Accounting Principle in Period of Adoption	$ 331	$ 0