NASHVILLE, Tenn. (November 19, 2015) — Kirkland’s, Inc. (NASDAQ: KIRK) today reported financial results for the 13-week and 39-week periods ended October 31, 2015.
Net sales for the 13 weeks ended October 31, 2015, increased 10.3% to $129.2 million compared with $117.2 million for the 13 weeks ended November 1, 2014. Comparable store sales for the third quarter of fiscal 2015, including e-commerce sales, increased 1.8% compared with a comparable store sales increase of 6.3% in the prior-year quarter. Kirkland’s opened 21 stores and closed two during the third quarter of 2015, bringing the total number of stores to 370 at quarter end.
Net sales for the 39 weeks ended October 31, 2015, increased 10.3% to $362.8 million compared with $328.9 million for the 39 weeks ended November 1, 2014. Comparable store sales, including e-commerce sales, increased 3.7% for the 39 weeks ended October 31, 2015 compared with an increase of 5.0% in the prior-year period. Kirkland’s opened 31 stores and closed five during the 39-week period.
For the 13 weeks ended October 31, 2015, the Company reported a net loss of $0.3 million, or ($0.02) per diluted share. The loss includes a tax benefit of $0.02 per diluted share relating to state employment and investment credits. The Company reported net income of $1.3 million, or $0.07 per diluted share, for the 13 weeks ended November 1, 2014.
For the 39 weeks ended October 31, 2015, the Company reported a net loss of $0.03 million, or ($0.00) per diluted share, compared with net income of $2.3 million, or $0.13 per diluted share, for the 39 weeks ended November 1, 2014. Adjusted net income for the 39 weeks ended October 31, 2015 was $0.3 million, or $0.02 per diluted share. Adjusted net income for the 39 weeks ended October 31, 2015 excludes a $0.02 per diluted share charge in the first quarter of 2015 related to the retirement of the Company’s previous CEO.
Mike Madden, Kirkland’s President and Chief Executive Officer, said, “While our fall seasonal merchandise performed well and e-commerce revenues exceeded our expectations, we were disappointed with our third quarter results. Comparable sales were impacted by soft traffic including weakness in Texas, where we have our highest concentration of stores. Merchandise margins were lower due primarily to an increase in promotional activity to stimulate traffic and manage inventory levels, as well as higher supply chain costs.”
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KIRK Reports Third Fiscal Quarter 2015 Results Page 2 November 19, 2015
Mr. Madden continued, “Our revised guidance assumes traffic challenges persist. Yet the bulk of the holiday selling season is ahead of us and we believe we have a strong and engaging holiday assortment as evidenced by our continued strength in conversion. We’re also encouraged by the performance of our 2015 class of stores and will enter Thanksgiving with 11% more stores open versus last year.”
Updated Fiscal 2015 Outlook
Earnings:
Based on the Company’s sales and earnings performance to date in fiscal 2015, the Company now expects adjusted fiscal 2015 earnings per diluted share to be in the range of $0.89 to $0.96, excluding a $0.02 per diluted share charge related to the retirement of the Company’s previous CEO. This full year guidance implies an earnings expectation in the range of $0.88 to $0.95 per diluted share for the 13 weeks ending January 30, 2016 (the “fourth quarter”). The Company expects its full year tax rate to be approximately 38.5%.
Store Growth:
For the fourth quarter, the Company expects to open 11 stores and close six stores. This represents an 11% increase in total stores open by Thanksgiving compared with last year. For fiscal 2015, this totals 42 new store openings and 11 store closings.
Sales:
The Company expects total sales for the fourth quarter to range between $197 and $200 million. This implies a comparable store sales increase of flat to up 2%. Total sales for fiscal 2015 are expected to increase approximately 10% to 11% compared with fiscal 2014. This level of sales performance would imply a comparable store sales increase in the range of 2% to 3% for fiscal 2015.
Margin & Expenses:
The fourth quarter earnings forecast implies a decline in year-over-year gross profit margin. Operating expenses are expected to increase on a dollar basis due to the increase in stores, but decline as a percentage of sales for the fourth quarter. For the full year, the Company expects a modest decline in its operating margin due to lower merchandise margins and higher supply chain costs.
Cash Flow:
Capital expenditures in fiscal 2015 are estimated to range between $32 million and $34 million compared with $30 million in fiscal 2014.
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KIRK Reports Third Fiscal Quarter 2015 Results Page 3 November 19, 2015
Investor Conference Call and Web Simulcast
Kirkland’s will host a conference call today, November 19, 2015, at 11:00 a.m. ET. The number to call for the interactive teleconference is (412) 542-4163. A replay of the conference call will be available through Friday, November 27, 2015, by dialing (412) 317-0088 and entering the confirmation number, 10075182.
A live broadcast of Kirkland’s quarterly conference call will be available online at the Company’s website www.kirklands.com under Investor Relations or https://www.webcaster4.com/Webcast/Page/957/11331 on November 19, 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 379 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 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 14, 2015. 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 Third Fiscal Quarter 2015 Results Page 4 November 19, 2015
KIRKLAND’S, INC. UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (In thousands, except per share data)
13-Week
13-Week
Period Ended
Period Ended
October 31,
November 1,
2015
2014
Net sales
$
129,238
$
117,198
Cost of sales
81,137
71,446
Gross profit
48,101
45,752
Operating expenses:
Operating expenses
43,476
39,111
Depreciation
5,557
4,670
Operating income (loss)
(932
)
1,971
Other expense, net
12
1
Income (loss) before income taxes
(944
)
1,970
Income tax expense (benefit)
(674
)
710
Net income (loss)
$
(270
)
$
1,260
Earnings (loss) per share:
Basic
$
(0.02
)
$
0.07
Diluted
$
(0.02
)
$
0.07
Shares used to calculate earnings (loss) per share:
Basic
17,243
17,258
Diluted
17,243
17,734
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KIRK Reports Third Fiscal Quarter Fiscal 2015 Results Page 5 November 19, 2015
KIRKLAND’S, INC. UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (In thousands, except per share data)
39-Week
39-Week
Period Ended
Period Ended
October 31,
November 1,
2015
2014
Net sales
$
362,837
$
328,938
Cost of sales
224,561
202,711
Gross profit
138,276
126,227
Operating expenses:
Operating expenses
122,717
109,367
Depreciation
16,096
13,401
Operating income (loss)
(537
)
3,459
Other expense (income), net
41
(171
)
Income (loss) before income taxes
(578
)
3,630
Income tax expense (benefit)
(549
)
1,370
Net income (loss)
$
(29
)
$
2,260
Earnings (loss) per share:
Basic
$
(0.00
)
$
0.13
Diluted
$
(0.00
)
$
0.13
Shares used to calculate earnings (loss) per share:
Basic
17,252
17,300
Diluted
17,252
17,799
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KIRK Reports Third Fiscal Quarter 2015 Results Page 6 November 19, 2015
KIRKLAND’S, INC. UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS (In thousands)
October 31, 2015
January 31, 2015
November 1, 2014
ASSETS
Current assets:
Cash and cash equivalents
$
32,358
$
99,138
$
56,642
Inventories, net
95,460
55,775
77,456
Deferred income taxes
3,522
3,538
2,969
Other current assets
18,056
8,878
12,549
Total current assets
149,396
167,329
149,616
Property and equipment, net
107,000
90,992
90,683
Other assets
2,107
2,166
2,125
Total assets
$
258,503
$
260,487
$
242,424
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable
$
53,962
$
24,705
$
32,049
Income taxes payable
—
5,648
—
Other current liabilities
26,927
27,027
25,296
Total current liabilities
80,889
57,380
57,345
Non-current deferred income taxes
4,279
4,138
3,116
Deferred rent and other long-term liabilities
51,896
47,907
46,305
Total liabilities
137,064
109,425
106,766
Net shareholders’ equity
121,439
151,062
135,658
Total liabilities and shareholders’ equity
$
258,503
$
260,487
$
242,424
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KIRK Reports Third Fiscal Quarter 2015 Results Page 7 November 19, 2015
KIRKLAND’S, INC. UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (In thousands)
39-Week
39-Week
Period Ended
Period Ended
October 31, 2015
November 1, 2014
Net cash used in:
Operating activities
$
(8,584
)
$
(4,473
)
Investing activities
(25,721
)
(24,049
)
Financing activities
(32,475
)
(3,886
)
Cash and cash equivalents:
Net decrease
(66,780
)
(32,408
)
Beginning of the period
99,138
89,050
End of the period
$
32,358
$
56,642
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