EXHIBIT 99.1
(KIRKLAND'S LOGO)
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News Release
Contact: Rennie Faulkner
Executive Vice President & CFO
(731) 668-2444
KIRKLAND'S REPORTS SECOND QUARTER RESULTS
JACKSON, Tenn. (August 26, 2004)-- Kirkland's, Inc. (NASDAQ/NM: KIRK) today
reported financial results for the 13-week and 26-week periods ended July 31,
2004.
Net sales for the 13 weeks ended July 31, 2004, increased 7.3% to $84.7
million from $79.0 million for the 13 weeks ended August 2, 2003. Comparable
store sales for the second quarter of fiscal 2004 decreased 3.4% compared with a
0.9% decrease for the second quarter of fiscal 2003. The Company reported a net
loss of $2.7 million, or $0.14 per diluted share, for the second quarter of
fiscal 2004 compared with net income of $764,000, or $0.04 per diluted share for
the second quarter of fiscal 2003.
Net sales for the 26 weeks ended July 31, 2004, increased 9.8% to
$167.3 million from $152.4 million for the 26 weeks ended August 2, 2003.
Comparable store sales for the first half of 2004 decreased 1.0% compared with a
1.9% increase in the prior-year period. The Company reported a net loss of $1.8
million, or $0.09 per diluted share, for the first half of 2004 compared with
net income of $1.9 million, or $0.10 per diluted share, for the prior-year
period.
Robert E. Alderson, Kirkland's President and Chief Executive Officer,
said, "Our final results for the quarter were in line with the revised
expectations we issued in July. Consistent with trends that began in late April,
the second quarter was characterized by weak customer traffic and lower
transaction volumes compared with a year ago. Such results point to the need for
new ideas and initiatives in merchandising and marketing. Recent additions to
our merchandising and marketing teams, along with our search for a senior
merchandising executive, are significant and positive steps in that direction.
Efforts are already underway to improve buying and planning practices and to
provide a more focused merchandise offering. We also will communicate more
frequently with our customers, as we seek to renew the excitement and enthusiasm
that has long made Kirkland's a favored destination for stylish home decor at
great prices."
Third Quarter and Fiscal 2004 Outlook
The Company issued guidance for the third quarter ending October 30,
2004, of a net loss of $0.10 to a net loss of $0.15 per diluted share, compared
with earnings of $0.10 per diluted share in the prior-year period. Net sales are
expected to be $82 million to $86 million, with a comparable store sales
decrease of 10% to 15% compared with an increase of 2.7% in the prior-year
period.
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805 N. Parkway - Jackson, Tennessee 38305 - (731) 668-2444
KIRK Reports Second Quarter Results
Page 2
August 26, 2004
Based on its third quarter guidance and current business outlook, the
Company now expects to report earnings for fiscal 2004 in a range of $0.45 to
$0.55 per diluted share and net sales of approximately $395 million to $405
million. Comparable store sales are estimated to be down 2% to 5% when compared
with the prior year. The Company's fiscal 2004 estimate includes 50 to 55 new
store openings and 10 to 15 store closings as well as the collective impact of
transition costs relating to the Company's new distribution center and the
implementation of a wide-area network linking the Company's stores and corporate
headquarters.
Mr. Alderson commented, "Sales thus far in August have slowed
considerably in comparison to the trends we experienced in the second quarter.
Customer traffic remains a concern, particularly in our mall stores, and our
current inventory mix does not position us well against strong merchandise
events that we ran during last year's third quarter. Accordingly, we are not
optimistic that we can produce positive comparable store sales in the near term.
On a more positive note, our aggressive markdown stance during June and July has
left our inventories in good shape, and the real estate team has kept our
development plan on track for a net increase of 40 stores during fiscal 2004.
"Our merchandising, marketing, store operations and logistics teams are
committed to reversing these business trends as rapidly as possible and
improving the productivity of our new distribution center to optimally support
our stores for the fourth quarter. While we hope to accomplish much over the
next several months, it is difficult to definitively predict at this point when
we will see tangible results. We have therefore adopted a cautious outlook for
the balance of the year.
"Looking ahead to fiscal 2005, Kirkland's continues to be a sound
concept with tremendous growth potential. We are confident in our real estate
strategy, and we expect significant benefits from the modernization of our
supply chain and other initiatives to address the inconsistent sales and margin
results that have characterized our business for the past 18 months."
Investor Conference Call and Web Simulcast
Kirkland's will conduct a conference call on August 26, 2004, at 10:00
a.m. EDT to discuss the second quarter earnings release and other Company
developments, including the outlook for fiscal 2004. The number to call for this
interactive teleconference is (913) 981-5508. A replay of the conference call
will be available until September 2, 2004, by dialing (719) 457-0820 and
entering the passcode, 530360.
Kirkland's will also host a live broadcast of its conference call on
August 26, 2004, 10:00 a.m. EDT online at the Company's website,
www.kirklands.com, as well as
http://phx.corporate-ir.net/playerlink.zhtml?c=131653&s=wm&e=922452. The webcast
replay will follow shortly after the call and will continue until September 9,
2004.
Kirkland's, Inc. was founded in 1966 and is a leading specialty
retailer of home decor in the United States. Although originally focused in the
Southeast, the Company has grown beyond that region and currently operates 290
stores in 36 states. The Company's stores present a broad selection of
distinctive merchandise, including framed art, mirrors, candles, lamps, picture
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KIRK Reports Second Quarter Results
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August 26, 2004
frames, accent rugs, garden accessories and artificial floral products. The
Company's stores also offer an extensive assortment of holiday merchandise, as
well as items carried throughout the year suitable for giving as gifts. More
information can be found at www.kirklands.com.
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 decor 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 on Form 10-K filed on April 15, 2004.
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 Second Quarter Results
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August 26, 2004
KIRKLAND'S, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share amounts)
13 WEEKS ENDED
JULY 31, AUGUST 2,
2004 2003
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Net sales $ 84,701 $ 78,951
Cost of sales 63,196 55,484
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Gross profit 21,505 23,467
Operating expenses:
Other operating expenses 23,473 20,232
Depreciation and amortization 2,253 1,767
Non-cash stock compensation charge 67 67
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Operating income (loss) (4,288) 1,401
Interest expense:
Revolving line of credit 127 132
Amortization of debt issue costs 53 52
Interest income (12) (7)
Other income (57) (39)
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Income (loss) before income taxes (4,399) 1,263
Income tax provision (benefit) (1,738) 499
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Net income (loss) $ (2,661) $ 764
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Earnings (loss) per share:
Basic $ (0.14) $ 0.04
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Diluted $ (0.14) $ 0.04
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Shares used to calculate earnings (loss) per share:
Basic 19,208 19,017
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Diluted 19,208 19,539
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KIRK Reports Second Quarter Results
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August 26, 2004
KIRKLAND'S, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share amounts)
26 WEEKS ENDED
JULY 31, AUGUST 2,
2004 2003
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Net sales $ 167,312 $ 152,388
Cost of sales 119,856 105,370
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Gross profit 47,456 47,018
Operating expenses:
Other operating expenses 45,820 39,997
Depreciation and amortization 4,331 3,500
Non-cash stock compensation charge 134 134
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Operating income (loss) (2,829) 3,387
Interest expense:
Revolving line of credit 190 224
Amortization of debt issue costs 105 105
Interest income (38) (11)
Other income (92) (75)
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Income (loss) before income taxes (2,994) 3,144
Income tax provision (benefit) (1,183) 1,242
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Net income (loss) $ (1,811) $ 1,902
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Earnings (loss) per share:
Basic $ (0.09) $ 0.10
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Diluted $ (0.09) $ 0.10
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Shares used to calculate earnings (loss) per share:
Basic 19,191 18,972
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Diluted 19,191 19,525
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KIRK Reports Second Quarter Results
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August 26, 2004
KIRKLAND'S, INC.
UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS
(dollars in thousands)
JULY 31, 2004 JANUARY 31, 2004
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ASSETS
Current assets:
Cash and cash equivalents $ 5,266 $ 17,423
Inventories, net 41,959 41,574
Other current assets 13,481 9,383
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Total current assets 60,706 68,380
Property and equipment, net 40,548 33,087
Other long-term assets 1,587 1,662
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Total Assets $102,841 $103,129
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LIABILITIES AND SHAREHOLDERS' EQUITY
Revolving line of credit $ 11,127 $ --
Accounts payable 17,794 19,995
Other current liabilities 12,491 20,572
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Total current liabilities 41,412 40,567
Other long-term liabilities 3,637 3,332
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Total liabilities 45,049 43,899
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Net shareholders' equity 57,792 59,230
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Total Liabilities and Shareholders' Equity $102,841 $103,129
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