KIRK - Earnings call transcript Q3 2017

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, and welcome to the Kirkland’s Third Quarter 2017 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Jeff Black with SCR Partners. Please go ahead, sir.

Jeff Black

Thank you. to third conference quarter welcome results to and the for of morning, the call Kirkland’s review Good fiscal XXXX.

this and Internet conference earlier the information call, Chief call distributed release the on media. call discussed to of Chief were company during notice of as announced historical the are morning listen-only this Private made Madden, the Mike On conference of President well this Executive provisions as Officer; XXXX. statements in looking a press Act Officer. the management basis Nicole the Except financial this Financial Litigation Interim by safe made a morning and for accessibility Reform of Securities Strain, The forward pursuant harbor results are and over the to

and cause are With including Forward-looking to periods Form on risks filings on the described XXXX. Mike. materially uncertainties March risks turn over unknown XX-K results filed with actual to statements in and and involve fully Those it Kirkland’s report results. future Company’s that which annual known Kirkland’s XX, uncertainties from forecasted differ in I’ll more the may SEC,

Mike Madden

and for this We third joining pleased to you, morning. overall thanks quarter with us our Thank were performance. Jeff, everyone

contribution initiatives Comparable up sales strong in merchandising merchandise Total benefited are despite momentum increased X%. modestly hold. approximately gain same in SKUs, the the year, the in and a chain. and over that from cost disruption time, from that driving X%, of with during e-commerce our operating And some impact improved and excluding disruption Our line prior increased were hurricanes. and sales we optimize increase assortment significant promotional Irma initiatives At Hurricanes rework Harvey expenses solid store to remained our are merchandise margin and the the and and performance top control activity targeted pressures controlled well reflecting stores. margin. and areas quarter new in achieved from taking inventory from supply sales The

and resulted of presented of challenges and Harvey As the and the I significant the the loss Hurricanes during stores quarter during mentioned, period. XXX Irma XXX selling closure days in

As we reopened. down but one locations that area, have other all in week, downtime store Houston of experienced are still last now

We Humble, expect store remaining to in this the open week. Texas

market, seeing the We’re our recovery favorable into factored sales. typical these of loss trends we net in events, is Houston and post which estimate that

flow due transportation in I’m quarter very part pleased dampened compressed as of caused our worked In labor a addition to attack and to inventory a the early we impressed in on of the also on constraints our key and store dealt West of Coast. the levels. our the costs Downtime we ahead issues sales one and resulted partners These through how we hurricanes, supply as lower logjam have through to likely cyber led managed distractions. a higher-than-anticipated related pressure faced logistics our season. affected teams temporary to third the that chain of inventory busy the attack with with by Overall,

better continue cross-functional improved strong tools blocking make a to doing we’re tackling, communication. and our and on the better and business much job We progress with day-to-day initiatives, strategic managing of

the by business heart of encouraged we season. the as We’re trajectory approach the the of holiday

floral the during we a our saw furniture, positive strong and Harvest categories gift – mid-single-digit well. contributions Our drive from comp October, fall Halloween QX as during in helped to assortment & and

is the QX. has of early the assortment the overall QX holiday. everyday we’re merchandising robust assortment core in and much part the a Seasonal of holiday statements got in and sales gifting offering and latter art, entertaining off also of November, and part about complements that thus in more gift. excited nice momentum Our refreshes strength textiles, for fragrance a of Kirkland’s, far, in well, completed year’s strong exceptionally to contributing performed start seasonal to in this We’ve

reliance to in our store and comforts fashion built to assortment, with and toys and candleholders For offerings removed upgrade cozy category from position reflecting pillows trends. example, to home. and round better shop, our in holiday showing geared expansion placed our is investment of been jar quality food, textiles and with candle current gift season apparel, our gadgets presentation also art has assortment of other and for items personal comfort our holiday reoriented diffusers. styles And the with enhanced updated care a Fragrance emphasize we year- increased esthetics anchor more an We’ve continue an and an on oil gourmet the throws. We’ve assortment and in refreshed accent activities. improvement

We as in learnings each of newness focused to head plan. mix on the of XXXX are and hope in price points optimizing numerous to our fourth the will we within apply our quarter We XXXX. into benefit from category categories these

beginning to some initiatives promotional are and bear pricing Our fruit.

us markup our initial while supporting product remained up margin. offsetting such to the merchandise traffic mix remain mix and year, higher decline were were with traffic. While mid-single-digit categories for over elastic and prior we alterations both price furniture. a achieved in as in That, We less quarter. challenge, from the the a brick-and-mortar ticket conversion our happy highly turn, sales in a adjustments Average enabled in competitive

we’ve made We’ve in In point-of-sale systems coupon evident. the limit redundant product. and managing on stacking double and eliminate activity, we to reduced our improvements clearance promotional offers and augmented are our discounting promotional addition, discounts

offset dynamics XXXX. weakness, can We continue strength improvements carry to into can believe growth conversion, believe in e-commerce these to benefits that traffic in we and well ticket and any in combine

continued test to success. rationalization indicate SKU Our

Across XX% the mix us SKU entire presentations and is and in- in category to control better winters, limit clarify invest down we’ve disciplines the such, store our to clearance As count creep. versus assortment, allowing SKU year, incorporated across manage last the deeper over margins.

acceleration during year prior strong growth the continued third approximately channel quarter very sales e-commerce its XX%, by the momentum performance. rate. our with the in We’re encouraged from representing Kirklands.com up

well fulfillment omni-channel this handle enhancing on was we the We operation. and focused online direct holiday address through as more higher A assortment, due We’re streamlining volume program driving improving of growth believe business our chain. additional to in the also effectively line marketing. portion profitability positioned our and our we’re top vendor drop-ship drive the supply to expect over to we year-over-year season, our effective time experience, more

driving response stores Our redemption is the to digital direct better on rates both and advertising generating strong, and traffic are kirklands.com mailers quarter. program during our incremental metrics,

and as message delivery output opportunity that going and see significant we creative a Our forward. continually is improving,

class is of new thus stores Our performing far. well

category. while reduction to limit a our higher our the square far. onslaught which third from the minimize don’t XXXX, cannibalization holiday the plans concerned favorable That of due approach The traffic a overall is right our on want selling overall improved in last channel comp due. to for season. move we as improved well track from as which merchandising better whitespace – complicated opportunities, footage by growth transition trends, with a year’s as closings achieve Thanksgiving and marketing had will leases firmly to advantage and we’re than recover the to our omni- able standpoint, the to season. more the year. terms also yet, sector hurricanes, selling reflect improvements anticipated stores to in that a strategy our next and to has as in The the benefit post- growing some guidance respond. trends updated track chain were assortment year the we We’ve believe offset presence. We we’ve higher to costs potential over we’re thus supply as to believe rate malaise on SKU about I much open of excluding moving year some quarter, see for we holiday is take we also accomplished I our like a ultimately coming potential challenges largely we This said, from largely from will somewhat year with art We’re design remain fewer tries the on stores direction. slightly of We’d of originally customer style performance

We’re decor value-priced as provider that, presence. optimistic and omni-channel growing And holiday a Kirkland’s is about home relevant of beyond a plan. looking our stylish with well positioned

gaining leverage around program the to Our initiatives activity evolve merchandise are from and assortments start much our executing benefit promotional and believe We discipline of we our initiatives, SKUs, traction. optimize our to full the continue control marketing overall and business. measuring as sustainable develop these is this to improve

operations store have encouraged sure, is measuring progress. customer implementing coming Nicole. We quarters. that, process look much ahead, our and team to improving our In up Overall, call but we’re on to improve service you to our we updating To be profitability. overall on the improvements focused about yet hungry addition, is our turn to over I’ll progress forward the in task. team With the while

Nicole Strain

for third sales X.X%, Net the quarter comparable Mike. compared e-commerce prior revenue. approximately which Thank XX% in store you, increased in to period Consolidated included the same increased a year. increase the sales X%

Hurricanes store and comparable X%. of Harvey impact Irma, increased the Excluding sales

increases average of XX to closed sales relatively quarter, XXX XXXX. was Again, We a positive were to units more the rate approximately X.X% the with XX of generated higher for offset of QX, Midwest. in Southeast than traffic and driven ticket. flat year opened during with by Excluding $XX.X order represents combination the the this and ending are stores value. able hurricane end impacted E-commerce XX% new revenue a strong store conversion state, which prior This the and with quarter the quarter we or strongest during and stores, revenue. million the total store being the which negative traffic website for accounted quarter, increase average in more regions one,

revenue ago. e-commerce in compared via a which in merchandise for this We to overhead limited also lower a initial during but derived healthy Sales portion a margin revenue third-party a year our initiative, higher accounted result of channel saw ship costs. from QX, increase drop- XXXX

profit. XX.X%. gross XXX Gross on points QX basis to for year prior profit the to Moving decreased from margin to

net West XX were and at Merchandise an Both as eliminate quarter sales, was shipping, points. margin the coupon supply drop-ship points of to to offers, higher stacking points central to sales third-party points Outbound e-commerce basis penetration. Store which components, during driven distribution Coast freight outbound in costs was in distribution benefited of which basis increased initiative XX partner. due Looking growing offset XX of percentage chain to by costs basis merchandise mix margin a due logistics by partially include our increase from costs freight XXX XX.X%. costs, the which central the increased by IMU part And occupancy a and deleverage. an sales. finally, e- impacted largely basis commerce increased increased bottlenecks

offset approximately to pretax in down on loss fees basis compensation quarter capitalization expense expense. share-based Moving compared of $X.XX a XX of rate as projects, compensation is for workers’ of higher which Depreciation share. was prior The change Operating associated diluted per flat benefit was rules to supply to an and percentage increase drivers period. quarter partially the expense relatively a XX.X% year loss were of with third the and XX.X% $X.XX year quarter million rate sales, to for of to in operating decrease reserve, this The insurance decrease primary the for store the for advertising net compensation. The amortization last this were year’s from corporate in XX.X% due due expenses. points sales. was prior payroll taxes the the by labor remained accounting for the and or to Much since prior tax of chain share-based professional which year. and equated

damage, QX. not hurricane any proceeds, of net loss we both impact particularly the interruption, share the we which and The finalized diluted have include had for for insurance $X.XX sales impact property does quarter. in lost will Excluding flow-through business hurricane per a

XX% million, line were on to balance of under statement. debt the cash approximately sheet revolving At approximately used million, Inventories increase and chain to systems QX that followed the and operating $XX.X an by or the stores had existing XX% working was improvements, year. approximately of changes store and cash new our capital. flow the $XX.X end credit. of of over our operations Year-to-date $XXX.X with the by and supply performance expenditures outstanding of were to X% investment. XXXX in of quarter, capital borrowings were relating we and IT end million Year-to-date QX at last hand, related Moving cash reflecting long-term no $XX.X

guidance. $XX.XX now the XX,XXX under share cost an our we During repurchased quarter, shares approximately at average repurchase a of to share turning program. our And

our of earnings our adjusted some today, in release mentioned press of we’ve QX this XXXX and annual March in was components our year release. fiscal which reiterated on As provided earlier guidance, XX

We sales growth with square store of sales stores, high approximating the end total footage which fiscal X%. represents of the projected the X.X% XXX flat a expect growth at end with over of comparable in full fiscal range year up increase original X% Total are of to XXXX the XXXX of year unit X%. to That to end to guidance implies the X%.

sales week As fiscal a the year million XXrd which to year-over- revenue. represents includes increase $XX in million the reminder, XXXX, approximately in $XX

Capital We per million million share, XX% of $X.XX of capital guidance of of are disruptions up guidance should $XX which business ready our a previous and new expect range now hurricanes, store due prior additional estimated $XX our an $X.XX supply rate range the compared share of the chain tax from $XX diluted from to hurricane-damaged our to of costs stores. of The million. our in we to negative incremental guidance for XX%. result and and are rebuilding $XX earnings Thank in the prior expenditures to narrows questions. per million be to you, impact an expenditures

Operator

question B. with Jeff Instructions] FBR. Please Riley Sinderen [Operator Van first go ahead. comes The from

Jeff Van Sinderen

comps stand? you chain the And out this a talk where way excluding I’m can if Good bit supply just also, you on of the sourcing of kind issue. that touch morning, those little and Is positive about great direct to hurricanes. your then, see the at Mike, could point? initiatives, wondering

Mike Madden

Yes. Sure.

out. most us. was behind It the part, played the It’s distraction. So is chain for unfortunate major that a disruption, the way supply

Our inventory. really The sets it’s seasonal turn turn we have – a fast flow, the for on on so depend us. important

of a there. kind out got of So bit whack us just little it

our and So the I through that run, is unabated our in chain long right for now, DC. the have the both still fresh make e-commerce more we we opportunities In side. products side efficient, supply the flowing have think coming to retail

this on to drive to won’t thing over margin. your big the But see question XXXX. of easing during much that. then you start with toward have direct had it working won’t And we’re kicked we a deal to several it’s – We’re It did you’ll impact on We we the of into initiative. that part that And quarter, that onetime and just in QX. that. was was a into our effect next And other as have we to has But when is the an the continue believe XXXX margin move years. opportunity that importing. merchandise

big So that’s initiative a for us.

Jeff Van Sinderen

where categories like this guess, most the other the Okay, have you color else feel in anything versus any see good feel last then, And can seasonal share the if wondered which you of do which on for hear. you to made year? categories there, in holiday feel you Just most I maybe progress? can you metrics you can improvement or And performance then, there’s merchandise add like November? year

Mike Madden

merchants not between and really helping big is it’s transitions the holiday during a it by is And outstanding great Harvest. of it’s that And category great been And had category. dominated That very We kind product. over execution It’s in this we that QX. quarter, seasonal a improving, as linkage product, the drivers, our – that but of again, performed our call into on Jeff, Halloween and QX, product, assortment. theme third the We Well, product. an fresh performance of moved category. well one out it’s only fall into our seasonal that’s marketing – start sell-through, the year.

us right it’s So for a now. driver big

in fourth there good last out move for performance of to filled more that core furniture, in driver. for as with get plan gifting, a this some But our Thanksgiving like up we products to bit that quarter, the We we’re we a all of then year season. gap we a that we categories, around buys strong seeing and the be areas And Christmas. will of name we layer like a little year. As as also been had year leading big balance has felt those one, entertaining the through holiday the us performer more we’ll

Jeff Van Sinderen

helpful. Thanks taking holiday. question. rest That’s best And the my of of for Okay. to luck

Mike Madden

Jeff. Thanks,

Operator

question Lawrence ahead. next from Coker comes The go with Please Palmer. John

John Lawrence

morning. good Hi,

Mike Madden

Hey John.

John Lawrence

or Mike, think a mentioned one disruption? value you Can Would quarter? our mean you third had little I you step cost, comment more the on impacted bit, you sales you was just a supply a in nickel. on assign the hurricane what time of spent you that think

Mike Madden

look quarter were attribute of the the Yes, the August, that part we of softer product. flow in to a a on mean, the new you sales we lack hard to I is softness and progressed, little quantify. how definitely at lot if

As had much stronger and, October. much a that started it script, I to come the think in, I stronger in a we said

the So lost how I that’s sales would piece. characterize

cost, the In probably labor between product turn somewhere it I we have terms to in million. $X.X And sets reliant that of on are the and of how and again, we the we on $X think out lay flow just, quickly. impact to stores, that’s the transportation the were

we sets to in on on throw floor as in a got all had we stores lot other product to new sets the time the the our into of So we effort rely season. Christmas that and the get

up of the had to what to disruptive So had do we cleared chain. that we now, do. are past supply we again, But and that’s part

John Lawrence

store the go or the and there go just is you far seeing Can some to as driving of little deeper the deeper you what’s sounds what you see the how change there and the It digital direct – a marketing? either you’re a dive maybe customers mail. like that’s platform? into really obviously, dive Could things Great. as little you like, of some

Mike Madden

improved just is we’ve is where past. been point I’ll creative in our much one make the overriding output from Yes,

is generating excellent team business, And connections an ways our of earlier, job those communicate kind have linkage this the with of to rest to our of I that. do we and much, it linkage, everything customers. So execution the cited the doing overall creative around – so the revolves of the improved

revamped. effort is has terms much this better digital in than marketing the has Kirkland’s. year, now So And it of been tactics, program our positioned for been

We’re Last our a digital, doing or issued announcing is very going. gift holiday. of site for have just that example, we’re The gifting a mode way gets. And of we’re focus push we And Very it, nice more the for high, our redemptions stores so have customers a them. better seeing our mail action that our are guide lot on that events to through to more sales direct traffic we branding good that and by mail, we from the which piece. that was in the rates communication. to getting we’re direct calling and year mail focus very then of do and the direct longer that on we encouraged it in

that last quarter. creative the are we’ve for place customers in still those have made to year didn’t we the So fourth just that improvements e-blast are effective. And that the and the on have two our vehicles do very in we that just addition that’s to we daily

John Lawrence

Will half would the it XXXX floor? Or then? direct follow direct of for Thanks last on the that. of on for second me be is before that sourcing. merchandise Great. to any And question before it is mix be the

Mike Madden

would I half. look impact at focus I to back way any half fair would John. first the assume on there. in a the it, not That’s real

John Lawrence

Great. Good luck. lot. Thanks a

Mike Madden

Thanks, John.

Operator

from ahead. next [Operator Anthony Please Company. & Instructions] question with Lebiedzinski Sidoti go comes The

Anthony Lebiedzinski

Good taking thank morning for question. the you and

be quantify perhaps, could first could up follow the you direct piece, the to sourcing those on just So what products? for differential margin Mike,

Mike Madden

process. But obviously, – depends, It item. the it’s long-term a and on

direct of up a basic the assortment, product we’re speed. our of to get So I And going first going more of a on our period to if at take any you of focus importing few component XXX% the look soon. time believe assortment. don’t this is our everyday, we’ll kind to be years to

in about a points, talking at I there, – several think next to hundreds hesitate not I of out the inside put firm XX%, tens. XX% the you’re over number And we’re basis years. that – talking it’s but the

Anthony Lebiedzinski

it. Got

stores. you was And Okay, helpful. that trends, us, you excluding well, that’s could perhaps if also, comment if share the hurricane have I your you wondering that? on Could affected traffic with

Mike Madden

improving, here. they’re Yes, we think, bigger takeaway mentioned is – I sequentially, the

the in that script. end we of exclude we mid-single-digit you in decline cited If lower hurricanes, probably that were the the

and offset improvement. So a little strong in we’re seeing a we’ve I little here and that a But as bit bit with earlier, average conversion stores. ticket mentioned some to It’s good there. able the been

Anthony Lebiedzinski

Right.

orders they people as as being And sales, if the of picked up up yes, when then, buying far are as e-commerce e-commerce order? rate in And most far sort to items still in of those additional as store? Okay. attachment what’s pick their come

Mike Madden

of would half say And of business, mix. the store. now, bit a approaching to been where the now which shipped I drop-ship is XX% that’s we’ve from given of the declined our Right overall about the advent revenue is

is pickup I about stores number, when occurs, key I it’s that very purchase, in-store still it’s be a with the purchase, half but attachment honest an It’s that that a those. part say to been time rates on get rely number, get strategy. a important high it while though. of wanted are it’s good able to since we that the to So traffic, of to on additional we looked that a we because you. at And and the

Anthony Lebiedzinski

All right, it. thanks best of and Got luck.

Mike Madden

Thanks, Anthony.

Operator

over Mike Madden would any This to turn concludes remarks. like question-and-answer back to our closing I conference the for session.

Mike Madden

you. our Well, and today we Thank and look appreciate season. March We to next great. report in everybody’s call attention participation, to the forward

Operator

for The Thank now concluded. you conference today’s attending presentation. has

You may now disconnect.

Kirkland's (KIRK) 21 Nov 172017 Q3 Earnings call transcript