Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
May 02, 2020 | May 29, 2020 | |
Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | May 2, 2020 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q1 | |
Entity Registrant Name | KIRKLAND'S, INC | |
Entity Central Index Key | 0001056285 | |
Current Fiscal Year End Date | --01-30 | |
Entity Filer Category | Non-accelerated Filer | |
Entity Emerging Growth Company | false | |
Entity Small Business | true | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 14,014,503 | |
Entity Interactive Data Current | Yes |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands | May 02, 2020 | Feb. 01, 2020 | May 04, 2019 |
Current assets: | |||
Cash and cash equivalents | $ 30,140 | $ 30,132 | $ 32,523 |
Inventories, net | 99,075 | 94,674 | 90,406 |
Income taxes receivable | 22,014 | 243 | 220 |
Prepaid expenses and other current assets | 7,950 | 6,462 | 9,378 |
Total current assets | 159,179 | 131,511 | 132,527 |
Property and equipment: | |||
Equipment | 20,974 | 21,390 | 21,562 |
Furniture and fixtures | 76,892 | 80,622 | 81,405 |
Leasehold improvements | 116,311 | 123,022 | 126,673 |
Computer software and hardware | 81,038 | 73,984 | 70,622 |
Projects in progress | 2,316 | 6,862 | 9,925 |
Property and equipment, gross | 297,531 | 305,880 | 310,187 |
Accumulated depreciation | (220,156) | (223,017) | (203,861) |
Property and equipment, net | 77,375 | 82,863 | 106,326 |
Operating lease right-of-use assets | 183,789 | 200,067 | 225,100 |
Deferred income taxes | 0 | 1,525 | 5,326 |
Other assets | 5,621 | 6,476 | 6,144 |
Total assets | 425,964 | 422,442 | 475,423 |
Current liabilities: | |||
Accounts payable | 45,876 | 59,513 | 33,081 |
Accounts payable to related party vendor | 0 | 0 | 9,736 |
Accrued expenses | 24,403 | 28,773 | 24,011 |
Operating lease liabilities | 50,792 | 53,154 | 52,090 |
Total current liabilities | 121,071 | 141,440 | 118,918 |
Operating lease liabilities | 188,221 | 195,736 | 228,345 |
Revolving line of credit | 40,000 | 0 | 0 |
Other liabilities | 6,821 | 8,311 | 8,352 |
Total liabilities | 356,113 | 345,487 | 355,615 |
Shareholders’ equity: | |||
Preferred stock, no par value, 10,000,000 shares authorized; no shares issued or outstanding at May 2, 2020, February 1, 2020, or May 4, 2019, respectively | 0 | 0 | 0 |
Common stock, no par value; 100,000,000 shares authorized; 14,014,503; 13,955,826; and 14,224,648 shares issued and outstanding at May 2, 2020, February 1, 2020, and May 4, 2019, respectively | 173,219 | 172,885 | 170,105 |
Accumulated deficit | (103,368) | (95,930) | (50,297) |
Total shareholders’ equity | 69,851 | 76,955 | 119,808 |
Total liabilities and shareholders’ equity | $ 425,964 | $ 422,442 | $ 475,423 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares | May 02, 2020 | Feb. 01, 2020 | May 04, 2019 |
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) | 14,014,503 | 13,955,826 | 14,224,648 |
Common stock, shares outstanding (in shares) | 14,014,503 | 13,955,826 | 14,224,648 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
May 02, 2020 | May 04, 2019 | |
Income Statement [Abstract] | ||
Net sales | $ 77,247 | $ 129,648 |
Cost of sales | 67,011 | 83,456 |
Cost of sales related to merchandise purchased from related party vendor | 0 | 9,973 |
Cost of sales | 67,011 | 93,429 |
Gross profit | 10,236 | 36,219 |
Operating expenses: | ||
Compensation and benefits | 18,578 | 27,056 |
Other operating expenses | 14,567 | 18,134 |
Depreciation (exclusive of depreciation included in cost of sales) | 1,501 | 1,839 |
Asset impairment charges | 3,184 | 1,878 |
Total operating expenses | 37,830 | 48,907 |
Operating loss | (27,594) | (12,688) |
Interest expense | 220 | 70 |
Other income | (120) | (328) |
Loss before income taxes | (27,694) | (12,430) |
Income tax benefit | (20,256) | (3,509) |
Net loss | $ (7,438) | $ (8,921) |
Loss per share: | ||
Basic (usd per share) | $ (0.53) | $ (0.62) |
Diluted (usd per share) | $ (0.53) | $ (0.62) |
Weighted average shares outstanding: | ||
Basic (in shares) | 13,990 | 14,372 |
Diluted (in shares) | 13,990 | 14,372 |
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. 02, 2019 | $ 130,800 | $ 169,477 | $ (38,677) |
Balance, beginning of period (in shares) at Feb. 02, 2019 | 14,504,824 | ||
Increase (Decrease) in Stockholders Equity [Roll Forward] | |||
Cumulative effect of change in accounting principle | (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 | |
Balance, beginning of period at Feb. 01, 2020 | $ 76,955 | $ 172,885 | (95,930) |
Balance, beginning of period (in shares) at Feb. 01, 2020 | 13,955,826 | 13,955,826 | |
Increase (Decrease) in Stockholders Equity [Roll Forward] | |||
Cumulative effect of change in accounting principle | $ 0 | ||
Employee stock purchases (in shares) | 34,999 | ||
Employee stock purchases | 35 | $ 35 | |
Restricted stock units vested | 32,341 | ||
Net share settlement of restricted stock units, Shares | (8,663) | ||
Net share settlement of restricted stock units | (8) | $ (8) | |
Stock-based compensation expense | $ 307 | 307 | |
Repurchase and retirement of common stock (in shares) | 0 | ||
Net loss | $ (7,438) | (7,438) | |
Balance, end of period at May. 02, 2020 | $ 69,851 | $ 173,219 | $ (103,368) |
Balance, end of period (in shares) at May. 02, 2020 | 14,014,503 | 14,014,503 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | |
May 02, 2020 | May 04, 2019 | |
Cash flows from operating activities: | ||
Net loss | $ (7,438) | $ (8,921) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation of property and equipment | 6,053 | 7,244 |
Amortization of debt issue costs | 24 | 14 |
Asset impairment charges | 3,184 | 1,878 |
Cumulative effect of change in accounting principle | 0 | (331) |
Loss on disposal of property and equipment | 9 | 126 |
Stock-based compensation expense | 307 | 560 |
Deferred income taxes | 1,525 | (3,623) |
Changes in assets and liabilities: | ||
Inventories, net | (4,401) | (5,972) |
Prepaid expenses and other current assets | (1,488) | 935 |
Accounts payable | (14,001) | (7,748) |
Accounts payable to related party vendor | 0 | 1,570 |
Accrued expenses | (4,361) | (3,764) |
Income taxes receivable | (21,780) | (13) |
Operating lease assets and liabilities | 5,627 | (2,086) |
Other assets and liabilities | (925) | 934 |
Net cash used in operating activities | (37,665) | (19,197) |
Cash flows from investing activities: | ||
Proceeds from sale of property and equipment | 98 | 0 |
Capital expenditures | (2,452) | (3,926) |
Net cash used in investing activities | (2,354) | (3,926) |
Cash flows from financing activities: | ||
Borrowings on revolving line of credit | 40,000 | 0 |
Cash used in net share settlement of restricted stock | (8) | 0 |
Employee stock purchases | 35 | 68 |
Repurchase and retirement of common stock | 0 | (2,368) |
Net cash used in financing activities | 40,027 | (2,300) |
Cash and cash equivalents: | ||
Net increase (decrease) | 8 | (25,423) |
Beginning of the period | 30,132 | 57,946 |
End of the period | 30,140 | 32,523 |
Supplemental schedule of non-cash activities: | ||
Non-cash accruals for purchases of property and equipment | 2,217 | 2,097 |
Operating lease assets and liabilities recognized upon adoption of ASC 842 | 0 | 295,240 |
(Decrease) increase of operating lease liabilities from new or modified leases | $ (1,106) | $ 3,389 |
Basis of Presentation
Basis of Presentation | 3 Months Ended |
May 02, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | Description of Business and Basis of Presentation Nature of Business - Kirkland’s, Inc. (the “Company”) is a specialty retailer of home décor in the United States operating 405 stores in 36 states as of May 2, 2020 , as well as an e-commerce enabled website, www.kirklands.com. Principles of consolidation - 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. Basis of presentation - 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 April 10, 2020 . Novel coronavirus (“COVID-19”) - The COVID-19 pandemic has created significant public health concerns as well as economic disruption, uncertainty, and volatility which has negatively affected the Company’s business operations. As a result, if the pandemic persists or worsens, accounting estimates and assumptions could be impacted in subsequent interim reports and upon final determination at year-end, and it is reasonably possible such changes could be significant, although the potential effects cannot be estimated at this time. On March 19, 2020, the Company closed all of its retail store locations in response to the COVID-19 pandemic. The Company took a number of actions to mitigate the impact of the decreased sales due to the COVID-19 related store closures including: • Cancelled orders and delayed merchandise receipts to manage inventory levels, and extended payment terms with product and non-product vendors to improve working capital. • After paying all store team members during the first two weeks of the closure, furloughed all part-time store employees and temporarily reduced the pay of full-time managers and key employees. • The Company permanently reduced corporate costs including permanent labor reductions, reduced marketing spend and lower corporate headquarters rent. • Permanently reduced distribution center indirect labor and furloughed a portion of direct distribution center labor, while further reducing hours to match demand. • Significantly reduced transportation expenses with limited deliveries to stores and the delay/reduction of inbound freight receipts. • The Company borrowed $40 million on its $75 million revolving credit facility. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted in response to the COVID-19 pandemic. The CARES Act, among other things, permits net operating loss carry backs to offset 100% of taxable income for taxable years beginning before 2021. The CARES Act allows net operating losses incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. The CARES Act also provides for an employee retention payroll tax credit for employers subject to closures due to COVID-19. In addition, the CARES Act permits delayed payment of the employer-portion of social security taxes. The delay applies to social security taxes due on wages paid between the date of enactment of the CARES Act and January 1, 2021 with half of the delayed payroll taxes due by December 31, 2021 and the other half due by December 31, 2022. The Company pursued all relevant measures under the CARES Act during the 13-week period ended May 2, 2020 , including net operating loss carry backs, wage credits and payroll tax deferrals in order to improve liquidity. We will continue to assess our treatment of the CARES Act to the extent additional guidance and regulations are issued. As of June 4, 2020, 357 of the Company’s stores have reopened to customer traffic and another 43 of the Company’s stores are offering contactless curbside pickup only. The impact of COVID-19 and the related CARES Act have materially impacted the Company’s results of operations for the 13-week period ended May 2, 2020 . The extent of the impact of COVID-19 on our business and financial results will depend on future developments, including the duration and spread of the outbreak within the markets in which we operate and the related impact on customer confidence and spending, all of which are highly uncertain. Seasonality - The results of the Company’s operations for the 13-week period ended May 2, 2020 are not indicative of the results to be expected for any other interim period or for the entire fiscal year due to seasonality factors. Fiscal year - The Company’s fiscal year ends on the Saturday closest to January 31, resulting in years of either 52 or 53 weeks. Accordingly, fiscal 2020 represents the 52 weeks ending on January 30, 2021 and fiscal 2019 represented the 52 weeks ended on February 1, 2020. Use of estimates - 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. It should be understood that accounting measurements at interim dates inherently involve greater reliance on estimates than those at fiscal year-end. 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 of long-lived assets, inventory reserves, self-insurance reserves and income taxes. Gift cards - 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 condensed consolidated statements of operations as a component of net sales. The table below sets forth selected gift card liability information (in thousands) included in accrued expenses in the condensed consolidated balance sheets for the periods indicated: May 2, 2020 February 1, 2020 May 4, 2019 Gift card liability, net of estimated breakage $ 12,374 $ 13,128 $ 11,962 The table below sets forth selected gift card breakage and redemption information (in thousands) for the periods indicated: 13-Week Period Ended May 2, 2020 May 4, 2019 Gift card breakage revenue $ 157 $ 279 Gift card redemptions recognized in the current period related to amounts included in the gift card contract liability balance as of the prior period 1,679 2,691 Nasdaq Delisting Notice – On April 24, 2020, the Company received a deficiency letter from the Listing Qualifications Department of the Nasdaq Stock Market LLC (“Nasdaq”) notifying it that, for the last 30 consecutive business days, the bid price for the Company’s common stock had closed below the minimum $1.00 per share requirement for continued inclusion on the Nasdaq Global Select Market, referred to as the minimum bid price rule. In accordance with Nasdaq Listing Rules, the Company has an initial period of 180 calendar days to regain compliance. On April 16, 2020, the Nasdaq announced it was providing temporary relief from continued listing bid price requirements through June 30, 2020. Under the relief the Company will have additional time to regain compliance with the listing bid price requirements with the compliance period beginning July 1, 2020. As such, the compliance period for the Company will expire on December 28, 2020. The Company is actively monitoring its stock price and will consider any and all options available to the Company to maintain compliance. The alternatives to trading on the Nasdaq Capital Market or another national securities exchange are generally considered to be less efficient and less broad-based than the national securities exchanges and the liquidity of the Company’s common stock will likely be reduced if we fail to regain compliance with the minimum bid price rule. |
Income Taxes
Income Taxes | 3 Months Ended |
May 02, 2020 | |
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. However, for the 13-week period ended May 2, 2020 , the Company determined that the annual effective tax rate could not be reliably estimated due to operational uncertainties related to COVID-19; therefore, the actual effective tax rate for the year-to-date period was deemed to be the best estimate of the annual effective tax rate. For the 13-week periods ended May 2, 2020 and May 4, 2019 , the Company recorded an income tax benefit of 73.1% and 28.2% of the loss before income taxes , respectively. The increase in the tax rate, for the 13-week period ended May 2, 2020 , was primarily due to recording a $12.3 million income tax benefit related to the carry back of fiscal 2019 federal net operating losses to prior periods pursuant to the CARES Act. In addition, the Company can also carry back the projected fiscal 2020 loss to years with a 35% statutory tax rate, for an additional income tax benefit of $3.8 million for the 13-week period ended May 2, 2020 . These benefits were partially offset by a $2.2 million increase in the Company’s valuation allowance against deferred tax assets, primarily related to state net operating loss carry forwards, due to uncertainty regarding their realization. The Company recognizes deferred tax assets and liabilities using estimated future tax rates for the effect of temporary differences between the book and tax basis of recorded assets and liabilities, including net operating loss carry forwards. Management assesses the realizability of deferred tax assets and records a valuation allowance if it is more likely than not that all or a portion of the deferred tax assets will not be realized. The Company considers the probability of future taxable income and our historical profitability, among other factors, in assessing the amount of the valuation allowance. Adjustments could be required in the future if the Company estimates that the amount of deferred tax assets to be realized is more than the net amount recorded. Any change in the valuation allowance could have the effect of increasing or decreasing the income tax provision in the statement of operations based on the nature of the deferred tax asset deemed realizable in the period in which such determination is made. |
Loss Per Share
Loss Per Share | 3 Months Ended |
May 02, 2020 | |
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 1.2 million shares and 1.5 million shares for the 13-week periods ended May 2, 2020 and May 4, 2019 , respectively. |
Fair Value of Financial Instrum
Fair Value of Financial Instruments | 3 Months Ended |
May 02, 2020 | |
Fair Value of Financial Instruments [Abstract] | |
Fair Value of Financial Instruments, Policy | Fair Value Measurements 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 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. The Board of Directors approved the termination of the Deferred Compensation Plan effective September 6, 2019. Any remaining balances in the Deferred Compensation Plan will be paid out one year from the effective date. Deferred Compensation Plan assets and liabilities were approximately $1.6 million , $1.9 million and $1.8 million as of May 2, 2020 , February 1, 2020 and May 4, 2019 , respectively, and were recorded in other assets and other liabilities in the condensed consolidated balance sheets as of February 1, 2020 and May 4, 2019 and in prepaid expenses and other current assets and accrued expenses as of May 2, 2020 . The Company measures certain assets at fair value on a non-recurring basis, including the evaluation of long-lived assets for impairment using Company-specific assumptions that would fall within Level 3 of the fair value hierarchy. The Company uses market participant rents to calculate the fair value of right-of-use assets and discounted future cash flows of the asset or asset group using a discount rate that approximates the cost of capital of a market participant to quantify fair value for other long-lived assets. See Note 10 to the condensed consolidated financial statements for further discussion. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
May 02, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies The Company was named as a defendant in a putative class action filed in April 2017 in the United States District Court for the Western District of Pennsylvania, Gennock v. Kirkland’s, Inc. The complaint alleged that the Company, in violation of federal law, published more than the last five digits of a credit or debit card number on customers’ receipts. On October 21, 2019, the District Court dismissed the matter and ruled that the Plaintiffs did not have standing based on the Third Circuit’s recent decision in Kamal v. J. Crew Group, Inc., 918 F.3d 102 (3d. Cir. 2019). Following the dismissal in federal court, on October 25, 2019, the Plaintiffs filed a Praecipe to Transfer the case to Pennsylvania state court. The Company continues to believe that the case is without merit and intends to continue to vigorously defend itself against the allegations. The matter is covered by insurance, and the Company does not believe that the case will have a material adverse effect on its consolidated financial condition, operating results or cash flows. 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. The parties are currently engaging in discovery, and the Plaintiff has until November 9, 2020, to file for class certification. 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 its consolidated financial condition, operating results or cash flows. |
Stock-Based Compensation
Stock-Based Compensation | 3 Months Ended |
May 02, 2020 | |
Share-based Payment Arrangement [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 year. The table below sets forth selected stock-based compensation information (in thousands, except share amounts) for the periods indicated: 13-Week Period Ended May 2, 2020 May 4, 2019 Stock-based compensation expense (included in compensation and benefits on the condensed consolidated statements of operations) $ 307 $ 560 Stock options granted — 430,493 Restricted stock units granted 980,421 215,245 |
Related Party Transactions
Related Party Transactions | 3 Months Ended |
May 02, 2020 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Related Party Transactions The Company had an agreement with a related party vendor to purchase merchandise inventory. The vendor was considered a related party for financial reporting purposes because its principal owner is the spouse of the Company’s former Vice President of Product Development and Trend. As of June 14, 2019, the vendor is no longer a related party. The table below sets forth selected results related to this vendor, for the time period that the vendor was a related party, in dollars (in thousands) and percentages for the periods indicated: 13-Week Period Ended May 2, 2020 May 4, 2019 Related Party Vendor: Purchases $ — $ 13,400 Purchases as a percent of total merchandise purchases — % 24.1 % |
Stock Repurchase Program
Stock Repurchase Program | 3 Months Ended |
May 02, 2020 | |
Treasury Stock Transactions [Abstract] | |
Treasury Stock | Stock Repurchase Plan On September 24, 2018, 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. 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 2, 2020 , the Company had approximately $21,000 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-Week Period Ended May 2, 2020 May 4, 2019 Shares repurchased and retired — 287,056 Share repurchase cost $ — $ 2,368 |
Senior Credit Facility
Senior Credit Facility | 3 Months Ended |
May 02, 2020 | |
Debt Disclosure [Abstract] | |
Senior Credit Facility | Senior Credit Facility On December 6, 2019, the Company entered into a Second Amended and Restated Credit Agreement (the “2019 Credit Agreement”) with Bank of America, N.A. as administrative agent and collateral agent, and lender. The 2019 Credit Agreement replaces the Company’s Amended and Restated Credit Agreement dated as of August 19, 2011, as amended by that Joinder and First Amendment to Amended and Restated Credit Agreement dates as of February 26, 2016 (the “2016 Credit Agreement”) and, together with the 2019 Credit Agreement, the (“Credit Agreements”). Like the 2016 Credit Agreement, the 2019 Credit Agreement contains a $75 million senior secured revolving credit facility, a swingline availability of $10 million and a $25 million incremental accordion feature. The 2019 Credit Agreement contains substantially similar terms and conditions as the 2016 Credit Agreement, and extends its maturity date to December 2024. The 2016 Credit Agreement was scheduled to expire in February 2021. Advances under the Credit Agreements 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 lender on the unused portion of the credit facility is 25 basis points per annum. Borrowings under the Credit Agreements 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 Agreements 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 a Second Amended and Restated Security Agreement (the “Security Agreement”) with its lender. 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 Agreements. As of May 2, 2020 , the Company was in compliance with the covenants in the 2019 Credit Agreement. Under the 2019 Credit Agreement, there was $40 million of outstanding borrowings and a $500,000 letter of credit outstanding, with approximately $22.6 million available for borrowing, as of May 2, 2020 . |
New Accounting Pronouncements
New Accounting Pronouncements | 3 Months Ended |
May 02, 2020 | |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
New Accounting Pronouncements | New Accounting Pronouncements New Accounting Pronouncements Recently Adopted In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement,” which amends the disclosure requirements for fair value measurements by removing, modifying and adding certain disclosures. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019, with early adoption permitted. The Company adopted this guidance in the first quarter of fiscal 2020. The adoption of this guidance did not have a material impact on the Company’s condensed consolidated financial statements and related disclosures. New Accounting Pronouncements Not Yet Adopted In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” This guidance is in response to accounting concerns regarding contract modifications and hedge accounting because of impending rate reform associated with structural risks of interbank offered rates (IBORs), and, particularly, the risk of cessation of the London Interbank Offered Rate (LIBOR) related to regulators in several jurisdictions around the world having undertaken reference rate reform initiatives to identify alternative reference rates. The guidance provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The adoption of this guidance is effective for all entities as of March 12, 2020 through December 31, 2022. The Company does not expect the adoption of this guidance to have a material impact on its condensed consolidated financial statements and related disclosures. |
Subsequent Events
Subsequent Events | 3 Months Ended |
May 02, 2020 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events On June 3, 2020 the Company repaid $20 million of the $40 million of borrowings that were outstanding under the 2019 Credit Agreement as of May 2, 2020 . |
New Accounting Pronouncements (
New Accounting Pronouncements (Policies) | 3 Months Ended |
May 02, 2020 | |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
New accounting pronouncements recently adopted and new accounting proncouncements not yet adopted | New Accounting Pronouncements Recently Adopted In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement,” which amends the disclosure requirements for fair value measurements by removing, modifying and adding certain disclosures. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019, with early adoption permitted. The Company adopted this guidance in the first quarter of fiscal 2020. The adoption of this guidance did not have a material impact on the Company’s condensed consolidated financial statements and related disclosures. New Accounting Pronouncements Not Yet Adopted In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” This guidance is in response to accounting concerns regarding contract modifications and hedge accounting because of impending rate reform associated with structural risks of interbank offered rates (IBORs), and, particularly, the risk of cessation of the London Interbank Offered Rate (LIBOR) related to regulators in several jurisdictions around the world having undertaken reference rate reform initiatives to identify alternative reference rates. The guidance provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The adoption of this guidance is effective for all entities as of March 12, 2020 through December 31, 2022. The Company does not expect the adoption of this guidance to have a material impact on its condensed consolidated financial statements and related disclosures. |
Basis of Presentation Gift Card
Basis of Presentation Gift Card Redemption Recognition (Tables) | 3 Months Ended |
May 02, 2020 | |
Payables and Accruals [Abstract] | |
Gift Card Liability, Net of Estimated Breakage | The table below sets forth selected gift card liability information (in thousands) included in accrued expenses in the condensed consolidated balance sheets for the periods indicated: May 2, 2020 February 1, 2020 May 4, 2019 Gift card liability, net of estimated breakage $ 12,374 $ 13,128 $ 11,962 The table below sets forth selected gift card breakage and redemption information (in thousands) for the periods indicated: 13-Week Period Ended May 2, 2020 May 4, 2019 Gift card breakage revenue $ 157 $ 279 Gift card redemptions recognized in the current period related to amounts included in the gift card contract liability balance as of the prior period 1,679 2,691 |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 3 Months Ended |
May 02, 2020 | |
Share-based Payment Arrangement [Abstract] | |
Stock-Based Compensation | The table below sets forth selected stock-based compensation information (in thousands, except share amounts) for the periods indicated: 13-Week Period Ended May 2, 2020 May 4, 2019 Stock-based compensation expense (included in compensation and benefits on the condensed consolidated statements of operations) $ 307 $ 560 Stock options granted — 430,493 Restricted stock units granted 980,421 215,245 |
Related Party Transactions (Tab
Related Party Transactions (Tables) | 3 Months Ended |
May 02, 2020 | |
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, for the time period that the vendor was a related party, in dollars (in thousands) and percentages for the periods indicated: 13-Week Period Ended May 2, 2020 May 4, 2019 Related Party Vendor: Purchases $ — $ 13,400 Purchases as a percent of total merchandise purchases — % 24.1 % |
Stock Repurchase Program (Table
Stock Repurchase Program (Tables) | 3 Months Ended |
May 02, 2020 | |
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-Week Period Ended May 2, 2020 May 4, 2019 Shares repurchased and retired — 287,056 Share repurchase cost $ — $ 2,368 |
Basis of Presentation (Details)
Basis of Presentation (Details) $ in Thousands | Jun. 04, 2020store | May 02, 2020USD ($)storestate | Feb. 01, 2020USD ($) | May 04, 2019USD ($) |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||
Number of home decor and gifts store | 405 | |||
Number of states | state | 36 | |||
Revolving line of credit | $ | $ 40,000 | $ 0 | $ 0 | |
Line of credit facility maximum borrowing capacity | $ | $ 75,000 | |||
Subsequent Event [Member] | ||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||
Number of Open Stores | 357 | |||
Number of Stores Open for Curbside Pickup Only | 43 |
Gift Card Breakage and Redempti
Gift Card Breakage and Redemption (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
May 02, 2020 | May 04, 2019 | Feb. 01, 2020 | |
Gift Card Breakage and Redemption [Abstract] | |||
Gift card liability, net of estimated breakage | $ 12,374 | $ 11,962 | $ 13,128 |
Gift card breakage revenue | 157 | 279 | |
Gift card redemptions recognized | $ 1,679 | $ 2,691 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Millions | 3 Months Ended | |
May 02, 2020 | May 04, 2019 | |
Valuation Allowance [Line Items] | ||
Increase in valuation allowance for deferred tax assets | $ 2.2 | |
Effective tax rate | 73.10% | 28.20% |
Income tax benefit related to the carry back of fiscal 2019 federal net operating losses to prior periods pursuant to the CARES Act | $ 12.3 | |
The additional income tax benefit due to the carry back of the project fiscal 2020 loss to years with a 35% statutory tax rate | $ 3.8 |
Loss Per Share (Details)
Loss Per Share (Details) - shares shares in Millions | 3 Months Ended | |
May 02, 2020 | May 04, 2019 | |
Earnings Per Share [Abstract] | ||
Stock options and restricted stock units not included in the computation of diluted earnings per share (in shares) | 1.2 | 1.5 |
Fair Value of Financial Instr_2
Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands | May 02, 2020 | Feb. 01, 2020 | May 04, 2019 |
Fair Value of Financial Instruments [Abstract] | |||
Deferred Compensation Plan Assets | $ 1,600 | $ 1,900 | $ 1,800 |
Deferred Compensation Liability, Current | $ 1,600 | ||
Deferred Compensation Liability, Non-Current | $ 1,900 | $ 1,800 |
Stock-Based Compensation (Detai
Stock-Based Compensation (Details) - USD ($) $ in Thousands | 3 Months Ended | |
May 02, 2020 | May 04, 2019 | |
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) | $ 307 | $ 560 |
Stock options granted (in shares) | 0 | 430,493 |
Restricted stock units granted (in shares) | 980,421 | 215,245 |
Related Party Transactions (Det
Related Party Transactions (Details) - USD ($) $ in Thousands | 3 Months Ended | |
May 02, 2020 | May 04, 2019 | |
Related Party Transactions [Abstract] | ||
Purchases | $ 0 | $ 13,400 |
Purchases as a percent of total merchandise purchases | 0.00% | 24.10% |
Stock Repurchase Program (Detai
Stock Repurchase Program (Details) - USD ($) | 3 Months Ended | ||
May 02, 2020 | May 04, 2019 | Sep. 24, 2018 | |
Treasury Stock Transactions [Abstract] | |||
Stock Repurchase Program, Authorized Amount | $ 10,000,000 | ||
Repurchase and retirement of common stock (in shares) | 0 | 287,056 | |
Repurchase and retirement of common stock | $ 0 | $ 2,368,000 | |
Stock Repurchase Program, Remaining Authorized Repurchase Amount | $ 21,000 |
Senior Credit Facility (Details
Senior Credit Facility (Details) - USD ($) | 3 Months Ended | ||
May 02, 2020 | Feb. 01, 2020 | May 04, 2019 | |
Line of Credit Facility [Line Items] | |||
Line of credit facility maximum borrowing capacity | $ 75,000,000 | ||
Revolving line of credit | $ 40,000,000 | $ 0 | $ 0 |
Revolving credit facility | |||
Line of Credit Facility [Line Items] | |||
Percentage of fee on unused portion of the facility | 0.25% | ||
Letters of Credit Outstanding, Amount | $ 500,000 | ||
Revolving credit facility | Minimum | |||
Line of Credit Facility [Line Items] | |||
Interest at an annual rate equal to LIBOR plus a margin range | 1.25% | ||
Revolving credit facility | Maximum | |||
Line of Credit Facility [Line Items] | |||
Interest at an annual rate equal to LIBOR plus a margin range | 1.75% | ||
Secured credit facility | Revolving credit facility | |||
Line of Credit Facility [Line Items] | |||
Line of credit facility maximum borrowing capacity | $ 75,000,000 | ||
Swingline availability | 10,000,000 | ||
Revolving line of credit | 40,000,000 | ||
Incremental accordion feature | 25,000,000 | ||
Available borrowing capacity of line of credit facility | $ 22,600,000 |
Impairments (Details)
Impairments (Details) $ in Thousands | 3 Months Ended | |
May 02, 2020USD ($) | May 04, 2019USD ($) | |
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 under-performing 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 at the beginning of fiscal 2019, the Company reviewed its store portfolio for possible impairment, as the new right-of-use assets were included as part of the long-lived asset group that was evaluated for impairment. As of the beginning of fiscal 2019, 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. During the 13-week period ended May 2, 2020 , the Company recorded an impairment charge of approximately $1.0 million for right-of-use asset impairment at six stores. The Company also recorded an impairment charge totaling approximately $2.2 million and $1.9 million for the 13-week periods ended May 2, 2020 and May 4, 2019 , respectively, for leasehold improvements, fixtures and equipment at 16 stores and 8 stores, respectively, for which the carrying values exceed the respective fair values for these assets. The total impairment charge, net of tax, for the 13-week periods ended May 2, 2020 and May 4, 2019 was $2.4 million and $1.4 million , respectively. | |
Impaired Long-Lived Assets Held and Used [Line Items] | ||
Cumulative effect of change in accounting principle | $ 0 | $ 331 |
Impairment of operating lease right-of-use assets | 1,000 | |
Impairment of leasehold improvements, fixtures, and equipment | 2,200 | 1,900 |
impairment net of tax | $ 2,400 | $ 1,400 |
Right of Use Asset [Member] | ||
Impaired Long-Lived Assets Held and Used [Line Items] | ||
Number of Store Locations with Impairment | 6 | |
Property and Equipment [Member] | ||
Impaired Long-Lived Assets Held and Used [Line Items] | ||
Number of Store Locations with Impairment | 16 | 8 |
Subsequent Events (Details)
Subsequent Events (Details) - USD ($) $ in Thousands | Jun. 03, 2020 | May 02, 2020 | Feb. 01, 2020 | May 04, 2019 |
Subsequent Event [Line Items] | ||||
Revolving line of credit | $ 40,000 | $ 0 | $ 0 | |
Subsequent Event [Member] | ||||
Subsequent Event [Line Items] | ||||
Repayments of Lines of Credit | $ 20,000 | |||
Revolving credit facility | Secured credit facility | ||||
Subsequent Event [Line Items] | ||||
Revolving line of credit | $ 40,000 |