KIRKLAND’S REPORTS FOURTH QUARTER AND FISCAL 2014 RESULTS
NASHVILLE, Tenn. (March 12, 2015) — Kirkland’s, Inc. (NASDAQ: KIRK) today reported financial results for the 13-week and 52-week periods ended January 31, 2015.
Net sales for the 13 weeks ended January 31, 2015, increased 14.5% to $178.7 million compared with $156.1 million for the 13 weeks ended February 1, 2014. Comparable store sales for the fourth quarter of fiscal 2014, including e-commerce sales, increased 8.2% compared with flat comparable store sales in the prior-year quarter. Kirkland’s opened 11 stores and closed 4 during the fourth quarter, bringing the total number of stores to 344 at quarter end.
Net sales for the 52 weeks ended January 31, 2015, increased 10.2% to $507.6 million compared with $460.6 million for the 52 weeks ended February 1, 2014. Comparable store sales for fiscal 2014, including e-commerce sales, increased 6.1% compared with a 0.5% increase in fiscal 2013. The Company opened 34 stores and closed 14 during fiscal 2014.
Net income for the 13 weeks ended January 31, 2015, increased 26.2% to $15.6 million, or $0.87 per diluted share, compared with net income of $12.3 million, or $0.69 per diluted share, for the 13 weeks ended February 1, 2014.
Net income for the 52 weeks ended January 31, 2015, increased 22.6% to $17.8 million, or $1.00 per diluted share, compared with net income of $14.5 million, or $0.82 per diluted share, for the 52 weeks ended February 1, 2014.
Mike Madden, Kirkland’s President and Chief Executive Officer, said, “Earnings for the quarter and year came in at the top of our recently increased guidance. Traffic and conversion were both strong, and our profit margin improved for the second year in a row. Underlying business trends are encouraging thus far in 2015, despite the impact from difficult winter weather. We are confident that we can build on recent gains as we continue to leverage investments in people and technology.
“As we look to the longer term, our goal is to grow sales at a double-digit rate and return our operating margin to the high-single-digit range. To achieve these targets and deliver the returns we expect for our shareholders, we will be executing initiatives over the coming quarters to increase in-store productivity, optimize real estate growth, improve our e-commerce channel and tighten the focus on capital allocation.”
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KIRK Reports Fourth Quarter and Fiscal 2014 Results Page 2 March 12, 2015
Fiscal 2015 Outlook
Store Growth:
For the 52-week period ending January 30, 2016 (“fiscal 2015”), the Company expects to achieve approximately 8% to 10% square footage growth with 35 to 40 new store openings and 10 to 15 store closings. New store openings are expected to be weighted toward the second and third quarters of the year, and store closings are expected to be spread evenly throughout the year.
Sales:
Total sales for fiscal 2015 are expected to increase approximately 10% to 12% compared with fiscal 2014. This level of sales performance would imply a comparable store sales increase of approximately 3% to 5% for fiscal 2015.
Margin & Expenses:
The Company expects gross profit margin to remain relatively flat year-over-year as a slight improvement in the merchandise margin is offset by increases in e-commerce outbound transportation and distribution center costs. Operating expenses are expected to decrease as a percent of sales.
Earnings:
Based on the above assumptions, the Company expects fiscal 2015 earnings per share to be in the range of $1.15 to $1.20, excluding a $0.02 per diluted share charge related to the retirement of the Company’s previous CEO. The Company expects its full year tax rate to be approximately 39%.
Cash Flow:
Capital expenditures in fiscal 2015 are estimated to range between $27 million and $29 million compared with $30 million in fiscal 2014. Based on the above assumptions, the Company expects to generate positive cash flow in fiscal 2015.
First Quarter Fiscal 2015 Outlook The Company issued guidance for the first quarter ending May 2, 2015, of net income of $0.09 to $0.12 per diluted share, excluding a $0.02 per diluted share charge related to the retirement of the Company’s previous CEO. Net sales are expected to be in the range of $117 million to $118 million with a comparable store sales increase in the range of 2% to 3%. To date in the first quarter, the Company had 558 store days closed or shortened due to severe winter weather compared with 315 store days in the prior year period. The Company expects to open 1 store and close approximately 3 stores during the quarter.
Investor Conference Call and Web Simulcast Kirkland’s will host a conference call today, March 12, 2015, at 11:00 a.m. ET. The number to call for the interactive teleconference is (412) 317-0790. A replay of the conference call will be available through Thursday, March 19, 2015, by dialing (412) 317-0088 and entering the confirmation number, 10060347.
A live broadcast of Kirkland’s quarterly conference call will be available online at the Company’s websitewww.kirklands.com under Investor Relations orhttp://www.videonewswire.com/event.asp?id=101545 on March 12, 2015, beginning at 11:00 a.m. Eastern time. The online replay will follow shortly after the call and continue for one year.
About Kirkland’s, Inc. Kirkland’s, Inc. was founded in 1966 and is a specialty retailer of home décor in the United States. Although originally focused in the Southeast, the Company has grown beyond that region and currently operates 344 stores in 35 states. The Company’s stores present a broad selection of distinctive merchandise, including framed art, mirrors, candles, lamps, picture frames, accent rugs, garden
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KIRK Reports Fourth Quarter and Fiscal 2014 Results Page 3 March 12, 2015
accessories and artificial floral products. The Company’s stores also offer an extensive assortment of gifts, as well as seasonal merchandise. More information can be found atwww.kirklands.com.
Forward-Looking Statements Except for historical information contained herein, the statements in this release are forward-looking and made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties, which may cause Kirkland’s actual results to differ materially from forecasted results. Those risks and uncertainties include, among other things, the competitive environment in the home décor industry in general and in Kirkland’s specific market areas, inflation, product availability and growth opportunities, seasonal fluctuations, and economic conditions in general. Those and other risks are more fully described in Kirkland’s filings with the Securities and Exchange Commission, including the Company’s Annual Report onForm 10-K filed on April 17, 2014. Kirkland’s disclaims any obligation to update any such factors or to publicly announce results of any revisions to any of the forward-looking statements contained herein to reflect future events or developments.
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KIRK Reports Fourth Quarter and Fiscal 2014 Results Page 4 March 12, 2015
KIRKLAND’S, INC. UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF INCOME (In thousands, except per share data)
13-Week
13-Week
Period Ended
Period Ended
January 31,
February 1,
2015
2014
Net sales
$
178,683
$
156,073
Cost of sales
102,013
91,441
Gross profit
76,670
64,632
Operating expenses:
Operating expenses
46,250
39,939
Depreciation
5,238
4,157
Operating income
25,182
20,536
Other income, net
(8
)
(4
)
Income before income taxes
25,190
20,540
Income tax expense
9,636
8,214
Net income
$
15,554
$
12,326
Earnings per share:
Basic
$
0.91
$
0.71
Diluted
$
0.87
$
0.69
Shares used to calculate earnings per share:
Basic
17,146
17,297
Diluted
17,778
17,903
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KIRK Reports Fourth Quarter and Fiscal 2014 Results Page 5 March 12, 2015
KIRKLAND’S, INC. UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF INCOME (In thousands, except per share data)
52-Week
52-Week
Period Ended
Period Ended
January 31,
February 1,
2015
2014
Net sales
$
507,621
$
460,563
Cost of sales
304,724
279,747
Gross profit
202,897
180,816
Operating expenses:
Operating expenses
155,617
140,877
Depreciation
18,639
15,947
Operating income
28,641
23,992
Other (income) expense, net
(179
)
33
Income before income taxes
28,820
23,959
Income tax expense
11,006
9,429
Net income
$
17,814
$
14,530
Earnings per share:
Basic
$
1.03
$
0.84
Diluted
$
1.00
$
0.82
Shares used to calculate earnings per share:
Basic
17,262
17,207
Diluted
17,793
17,685
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KIRK Reports Fourth Quarter and Fiscal 2014 Results Page 6 March 12, 2015
KIRKLAND’S, INC. UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS (In thousands)
January 31,
February 1,
2015
2014
ASSETS
Current assets:
Cash and cash equivalents
$
99,138
$
89,050
Inventories, net
55,775
52,637
Deferred income taxes
3,538
2,777
Other current assets
8,878
8,817
Total current assets
167,329
153,281
Property and equipment, net
90,992
80,329
Other assets
2,166
1,838
Total assets
$
260,487
$
235,448
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable
$
24,705
$
23,102
Income taxes payable
5,648
5,875
Other current liabilities
27,027
23,670
Total current liabilities
57,380
52,647
Non-current deferred income taxes
4,138
3,337
Deferred rent and other long-term liabilities
47,907
44,235
Total liabilities
109,425
100,219
Net shareholders’ equity
151,062
135,229
Total liabilities and shareholders’ equity
$
260,487
$
235,448
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KIRK Reports Fourth Quarter and Fiscal 2014 Results Page 7 March 12, 2015
KIRKLAND’S, INC. UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (In thousands)
52-Week
52-Week
Period Ended
Period Ended
February 1,
January 31, 2015
2014
Net cash provided by (used in):
Operating activities
$
44,488
$
39,213
Investing activities
(29,647
)
(17,954
)
Financing activities
(4,753
)
(6
)
Cash and cash equivalents:
Net increase
10,088
21,253
Beginning of the period
89,050
67,797
End of the period
$
99,138
$
89,050
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