KIRK - Earnings call transcript Q1 2025

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Operator

Good morning, everyone, and thank you for participating in today's conference call to discuss Kirkland's Financial Results for the First Quarter ended May 4, 2024.Joining us today are Kirkland's Home CEO, Amy Sullivan; EVP and CFO, Mike Madden; and the company's External Director of Investor Relations, Caitlin Churchill.

Following their remarks, we'll open the call for your questions.Before we go further, I would like to turn the call over to Ms. Churchill. She will read the company's safe harbor statement within the meaning of the Private Securities Litigation Reform Act of 1995 that provides important cautions regarding forward-looking statements.Caitlin, please go ahead.

Caitlin Churchill

Thank you. the discussed management conference pursuant are safe provision information made the to historical Reform harbor company Litigation by forward-looking of for during XXXX. call, this statements the Act Except of Securities Private and made

be website will and periods in Securities to today's Forward-looking to call future uncertainties uncertainties, via I which results differ today's are risks the well Kirkland's and materially in the of replay from more risks call Kirkland's may statements webcast unknown Exchange and described Kirkland's filings cause like provided with available and press Amy? Sullivan. as link Commission.A over would involve actual Amy the turn Those on fully at as CEO, release known to the company's in forecasted results. kirklands.com.Now,

Amy A. Sullivan

Thank morning, and good you, Caitlin, everyone.

we communicated, As we with to our -- been results Difficulty]Our strong has year, sales dedicated by we environment, [Technical are value a improving comparable past reflect core heritage line have quarter the down returning customer, with our first challenging and and incredibly reengaging industry loyal continued performance Kirkland's total our previously X.X%. to a top well over customer. an have history

are see that early we However, to continued our gaining strategic indicators initiatives traction.

channel and a driven merchandising Our increase, store marketing delivered X.X% strategies. our by sales comparable

demand gross last expense In $X.X year, driven goods.With fact, higher-priced improved to in and to XX% margin as last year overall adjusted the of expansion disciplined compared units profitability, sold QX growth lower was decor almost compared almost -- was by respect management. in up million EBITDA value to offset

million cost cost initiatives deployed expense release, these savings this the following business structure year. to we environment. deliver a our fiscal inside further in number quarter the noted $X our to press end, expect we actions, current in Through with align we savings of As

potential the customer our and experience. impact on We strategic any to initiatives are focused minimizing most importantly,

the take investment firm to as advisor believe focused improving they as companies have an serve easy, consumer-facing drive our initiatives. to We must of growth, where on strategic actions in are liquidity.We While we profitability the our potential deliver and to banking you and plans. right is strategic know efforts are refresh we support the the specializing in never financial and success, this keenly assist Consensus, Board sales opportunities organization and pursuit we these on a decisions entire to focused.Let me remain retained evaluation our is to also

customer; our and product second, First, strengthening our reengaging assortment; capabilities. third, omnichannel refocusing core our

into each Let me one. deeper dive

core reengaging First, our customer.

responds. furnishing to call previously, that brand have largely a of customers, XX% where have as meaningful gifts, wallet, competitors on are discussed we we promotion, know efficient the We a her driven seen shift strategy. we on sense start results.Since and to QX, have type our recently our to she our seen by focused home have compared many intently of urgency keeping leveraging decor our of back action consistent reactivation of But marketing category we a we to customer pressure As voice reported. a we tactics while to or continues drive dominance provide when feel of lapsed

best news drove year.We in program, positive Friends from XX% highlighting the April both positive conversion drove with offers. both which our in example, event ultimately to channels sales this increases revenue by continue traffic see last event timed and Family our conversion same SMS and in For and our to events resulting quarter compared comp positive

in in in a to our maximize recently traffic stock expanding and drive to continue We help customers our to campaigns triggered we our or reintroduced our award frequency both are e-mail loyalty addition, file, stock. channels. back to items searched notify if the birthday e-mail low In customer

SMS trends the months our these believe newness, made in the historical reactivated e-mail introduce from the of We and to seasonal next reducing to our our as strides into And by XX penetration seasonally a furniture customers.Turning over time, our expect the core rebalance and constantly as curated our through to continue to the are at more and Xx.Our we refocus to in our assortment great inventory campaigns we million capitalize home above engage return year social and market love. price. second merchant to frequent decor of balance continue we benefit moment past relevant teams customers strategic on will delivering continue We to our trend several bringing and new we media product category. assortment analyzing in turns initiatives lean on back and mindset always and something to

particularly quarter, example our company in are furniture, reacting to loves.Again, see leaning by be delivered the ended items and core of continue challenges in are high-ticket and strength we $X the remain we into key religious for Mother's our accessories, pleased increase which reintroduced businesses holiday for million how sales themes. these customer QX a up with soft. and with sentiment, while been from being We in by which as driven year-over-year has we the an to appropriately as XX% assortment, beach customer, such in win as moments the which item total our floral the a Day in Within rugs, QX. has tote, and a continues gifts, to tested revenue, brand. mirrors which is demand a planned and maximize bright decorative and of incremental did quickly competitors, down continue spot our power our This item reported #X we on-trend Gifts, in great the teams

we price our gifts.Finally, strengthen continue to sensitivity our monitor demand omnichannel third of holiday, categories to floral, to ahead, and look capabilities. these in we initiative let will the As turn and me decor

we discussed, have improve to our business. we opportunity e-commerce ample As see

and addressing is areas to to identifying We strategy, actively additional leadership have and recently retained oversee improve e-commerce our results. help she

categories the ticket e-commerce of softness overall while continued dominant of weighs quarter.We As for such decor these the maintaining greater our our remainder a business in key of as in we the assortment And on conversion the to categories. reminder, to are see given optimize and results categories pleased we planning are our SKUs are floral in a voice conservatively art, the e-commerce, for year and has peers. actions the rationalize of AOV, high penetration a compared share said, channel positive That are to to taking value. holiday,

are continuing are sales as on to customer mentioned we comparable to a with growth X.X% the for a stores, which XXXX efficiencies.With will we in In opening my channel. drove seamless plans addition, respect we while in improving more deliver replatform, work this experience pleased comments,

are believe conversion There to see and Our value previously store growth reenter delivered maximizing the of into the the teams clear in discussions. are quarter. front it and We as we exited, opportunity double-digit our our to in many markets opportunity actively increases a of transactions creation. store and is overall new potential first accelerant in us we in new engaging in assortment and

to driving timing adjusted improved $XXX X to turn the on revenue investment return and over confident on in be enable long-term directly I liquidity margin million disciplined would of is and journey years, mid- associates, which thank confident in to X the our in and However, these operational the initiatives, with return honor this our you, over will we EBITDA Mike, initiative next your effectiveness to an focused depend coupled in It's growth should to range.Before in want our us brand turn initiatives results. to our you. single-digit us path maintaining our to high I'm to all and a believe to our each collective of capital our tied give profitable to our ability to for future, growth. with We sales on shareholders.Mike, look needs.As I in call to customers strategic our priorities to remain we to dedication the commitment

W. Madden

you, Thank morning everybody. good and Amy, to

we Amy a to As year. softer reviewed, saw start the

positive year-over-year in pleased delivered improvement reflected EBITDA.Turning in initiatives for we results were sales our adjusted against we channel the store our period in growth more as we However, ongoing the detail. comparable the and in with the progress our to delivered

comparable $XX.X count partly The April. XX.X% year were comps and the the improvements in offset sales quarter prior for conversion million sales compared ticket, quarter. The the to store and and quarter, by X.X% X.X% versus the quarter, prior year down sales comparable traffic.Breaking down $XX.X by down store average X% decline decreased was in driven a quarter. in in net in For down the were March decrease February, first within average the was up sales million X.X% in in

As we the in discussed, drove positive X.X% quarter. Amy

XX% from seasonal for merchandise saw shift and sales e-commerce reflecting XX.X% to in turning results. total quarter.From of point the lower than year and in sales store prior However, accessories, versus accounted decorative quarter, positive decline emphasis perspective, offset prior the gift down faster in floral, the the price XX% of year items. the we increases our a E-commerce more

compared were expenses increases costs, areas along decrease. not the route or geographic decreased freight routes ticket an margin.Second, in sales, offset number lower over store in XXX and consistent of rates with to in Gross the declines increase was which whole. the with of sales the year with along with particular higher XX.X% increased merchandise enough basis outdoor.Sales including costs, rugs in and components to the of the drivers in to points were versus prior primary basis store e-commerce mirrors were as overall XX.X% categories both these higher to year-over-year of to XX quarter. shipping points furniture percentage prior compared sales underperformance to margin, quarter. increase reduction across However, this performance per no first, the points Lower a merchandise freight of profit The increased basis of in prior to combined margin margin the year to carry led to XX.X% year penetration follows: XXX X a and as X.X% quarter. change A outbound outbound XX.X% the relative the

X.X% million million and due year the of period. of the is management expense million gross expense Included outstanding under borrowings our primarily XX.X% the and $X.X or in end operating was revolving dollars quarter driven credit disciplined expenditures cost under to pretax decreased $X.X by the delivery profit occupancy We FILO improvements at X.X% deleverage ended with X.X% in at reminder, included total decreased in distribution in to increase of and was prior increase loss line year. for compared at $XX $XX.X working lower the our points of million line and capital or prior sales net inventory in costs for the Fourth, the prior the X.X% million to year the continued $X.X to and $X.X pretax million the compared This of million, our $XX.X a was borrowing in loss minor a from an inventories versus plan. first operating XX year expense also X.X%. prior began $X.X prior comprised expansion inventory sales quarter during higher excluding given of contract to decrease corporate quarter. was in about million the which year percentage interest $XX.X quarter to end with depreciation quarter senior expenses decrease and by lower income compared to due points, year XXX in in loss had cost the capital was million of the on as efficiency led operating quarter From a the compared sales higher in balance in tax prior last an million million within compensation seasonal previous control the of was of margin This Increased under quarter. and the We term compared at overhead in quarter, million.As $XX.X of be increase in margin offsetting borrowings to improvement of lower the to these $XX.X compared the primarily loss previous year quarter. from quarter the revenue in way to centers. sales line EBITDA, increase business, loss of $XX.X levels senior with end amounts, $XX.X gross $X.X to levels a the lows points The an late store basis growth decline.Total from million an the prior the expense XX.X%. parcel partially these XX.X% continue the to Operating and expense rates.Our XX quarter end million the of and other XX was QX. to compared of our costs negative in Adjusted parcel the operational lower to quarter.We reduction million rates.Third, decreased was $XX.X distribution loan. and of interest second due credit costs sales million $XX of sheet And result to prior impairment seasonality of by of control.Operating result along lower year. expenses of overall a XX.X% e-commerce reflects perspective, the the during performance million tight $X.X $X.X the basis inventory, rate the points of benefited for improved first QX, negative a of lastly, in basis quarter to our to sales from our million, peak stock labor basis This costs to central quarter. revolving at quarter. and are our levels under compares year of early The to build negative of

to are capacity borrowing guidance visibility. through inventory our our continuing in peak we holiday increase not providing of and the as expect position use our We of our to forecasting specific expect given we expand facility.We season, credit generated cash difficulty policy the our ahead

areas. key color However, expectations around in want our to provide we some do

year, that by the For the driven e-commerce May throughout improvement our the turning we April, for faster a year-over-year aggressive saw on of at the in improvement [ categories we were toward holiday our build in driven the assortment easier an down comparison performance, an in expect of improvement sales by primarily shift given season, year.Overall, channel. to in to performance as focus X.X% comps slight month ] balance the and we

As this capacity it we that as June extend we the And hold shipping we we The QX. rates our spring, the to in particularly into the half promotional relates of way driving take seen fall back to for shipping, from have to Southeast and seen ocean May tightening our have we in gross to as Asia. addition, resulting into intensify -- began the reduction promotional level margin, continue offerings July compared clear expect to impacting and we ocean around imports year.In season. in is conditions peak see higher China approach

to centers of supply in the frames.That particularly distribution activity from promotional said, we our our freight transportation early While better rates flow market the and outbound expect increased and some improvements the ongoing seasonal we using to selectively our level spot the to it is determine inbound support the still costs time of impact, balance critical higher many for of for chain offset costs, year, are to trend costs. the merchandise labor management of in we expect with and the

the for business. managing deliver reducing of saw expect in in tightly we are very margin operating we expenses, profit below expansion We QX, and expansion albeit QX.As level across costs gross the to them

savings as million reduction As marketing of the well third-party initiatives of $X overhead ongoing and pretax for Amy in savings. and IT $X These expenses. rest in fiscal discussed, approximately store a as XXXX cost annual million include corporate payroll, savings approximately

EBITDA necessary minimizing profitability softer improving 'XX are initiatives performance, as priorities positive capital on disruption customer losses. actions for have X With we these now to the right top in our are our believe with believe year, is we overall business strategic a allocation start to positioned for decisions, years line after #X priority XXXX focus liquidity and and our seen flow. we to trajectory we still these to respect actions positive fiscal difficult this adjusted experience.While returning the of while While in part achieve place, our cash of to

of crucial reestablishing implemented liquidity we progress we with to borrowings our savings cost As credit we a more closed recently business and execute us make enable the flexibility.The were steps our level strategy. we expanded reducing on ability focus end, actions continue and January toward in the to that to that operate facility allows to

support pursue potential we evaluate plans. have strategic our engaged consensus of In addition, in to and opportunities

strategic stabilize ahead, we targeted business with in e-commerce the we further and initiatives, technology financial believe and by we of revenue as $XXX million combined also our our Amy operational As with reinvesting us liquidity and are enhancements a store goal on relocations.Looking long-term end to the should focused XXXX. fiscal position, the discipline continuation of openings achieve of outlined, improvements our in in enable

$X.X marketing historical facilities. that costs cost comp supply have volume fixed full technology assumes store us efficiencies of channel e-commerce million potential goal to to already sales new from growth distribution store targeted we to our and return through growth.On to side, the average steps and to and enhancements levels improve taken the merchandising unlock initiatives, our Our of chain remove

these to management we're path expect remarks. concludes factors, margin with that expenses, adjusted high back the to We over to of provide And ready mid- single-digit time now prepared get our a operating along our tight frame.That operator, take to EBITDA Q&A. X-year

Operator

Instructions] of is [Operator Jeremy first Craig-Hallum question Group. Our Hamblin from today Capital

Jeremy Hamblin

the seeing to start wanted could if trends. I Great. I clarify commentary by around just

assume than maybe kind albeit is -- of or April? if -- May bit May slightly can that flat So better so a negative, we little

W. Madden

Yes, fair yes. that's a Jeremy, assumption,

Jeremy Hamblin

the that And then to I typical seasonality we wanted of just understood make business. sure

clarify margin. sales pattern as that the to I down commentary out then wanted play of to from just year? gross expect back QX. if I I to understand the that is you look see again And I So QX basis could historically, this absolute dollar think if an from around kind is

both expecting Are kind well like margin aggressive QX? bit type XXs it's Kirk's for gross So as like a you business it on of more low as sounds the promotions, a in industry.

W. Madden

Yes.

that's ballpark you're think in I there, -- Jeremy. the

I the this been, the seasonal has be has quarter I the of asked, QX long been. that that that and the think on has that's it you business case to lowest mean the going sales -- yes, volume question as pattern we is year have, been

are kind So kind been promotional of yes, mean, season to got I lower impact plans heavier think some QX the the in itself our be quarter over line, promotional is QX developments through sales out. manage think that Far QX what's here hit bit start changed the keeping coming to near historically our eye from inventory has will certainly, as a more we to the levels expanded and the starting we've these to remains freight of the capture has affecting the activity what quarter, holiday but in do used versus of but it volume.And speaking are little that, But is in on of term. East. a little then terms And I we're bit of everyone

Jeremy Hamblin

it. then the just online Got let's And on business. your portion touch of

some has skews, that of a making of revamp? understand towards And in looking online on the business. offering item. stores. at the number could versus your it's something business struggled Is decor online wanted type is portion your more for of on go-forward accessories that And that a now what that the towards the that terms So ticket an you bit obviously a I core Is adjustment peers how a bit I product I of little basis? potentially space you're a higher slant home you're indicated that it you more in their just in assortment time. of you kind think have portion mean, that little slanted to online bit

Amy A. Sullivan

take that Jeremy, I'll one.

of old been years. the categories, of and drop-ship, where you our assortment a those curated. And new at has exclusivity. drop-ship of value of high-ticket SKUs been the is go very SKUs Part of and of over to we growth the with if less have those area larger factor Kirkland we've that of our sort point, owned carry, strategy, we reevaluate majority strategy, to the sort is look what your of total. the have compound percent historically, is So But got assortment, Kirkland through the business that Kirkland always because many opportunity proposition to exclusive the recent it's how

pure So for better there's operate go-forward other we e-commerce of doing lower ensure who margins in competitors that merchandising on are really we to process the who it SKU assortment more our there comparisons an do.So absolutely overall channels. more entire rationalization both out strategy are the matches play to of than

online. Now that said, white space opportunity there's I that being exist think will always

limitations on impact gift as we these in and there tool I little working the but far and to down new bundling mentioned, with as platform to for are stores, expect little move the to white shipping well deploying I help category, too shipping ticket fringe is are the channel, more platform, bit opportunities more the going competitors forward of to items. higher, should we then almost for scrub about we profitable So in figure merchant actively team our that's I example, out to the other those path because like the of categories that and don't items space really a in ways a with to online be comparison that want where think go the make think got we've main to move that our through I pricing our website it and things ensure a line have, be.As our new in profitability lower a we current

capabilities one, next bundle better platform So unlock of cleanup to step step baskets year. create it's on platform, a little as and the new to we current a to hopefully, assortment sort and move of current

Jeremy Hamblin

best wishes. And Understood.

Operator

question Lawrence Benchmark. next is The John from of

John Lawrence

hear you Can me?

W. Madden

Yes.

John Lawrence

a might the was the Was have variability average of across versus a up? that still been little of strong? and bit sort comp. positive positive talk lot over really that Can several We've the And were the there you you last base store where bit? step and stores certainly X% then seeing stores on and many were the the struggling about it weeks X. country built few a seen traffic Congrats and of that is how of Yes. little fleet

Amy A. Sullivan

I across was it base, largely the consistent. think

category, certainly have of categories across we the the types you how and example, we seeing within assortment look regionally gift are the are about we If business products as and we think that for allocating product some of there particularly allocating some of we're that thinking are chain, reintroduction, of different product But we consistent if line the in sort at regions in weather handful our base, pretty through but board, localize minor revamp assortment. how just largely, consistent. results, strength categories pretty of a you as largely part across was we look our of top it impacts

John Lawrence

Great. And Mike, as e-commerce to the across road? that profitability out would an increased what look opportunity the et able down do the reasonably are or metric of shipping for at you the for talk country? platform, we What's cetera, the what for What be should about you systems, an and order better possibilities the ideally channel? see saving

W. Madden

with is order goes, As -- to these just the on to where what as I far I is get do way maybe capabilities And profitability what the we'll we it we owned is our last I The better not that today than a a of as that e-commerce growth wouldn't that. kind online itself, orders opportunity have we think look a It's balancing enhance as few her right, I that as this would bit response impact to probably think, in think there. in back I think years. moved metered of optimized we've in have our technology we driver, drop-ship program some over margin, Amy negative shipping as the think seen at, our Jeremy covered getting be bigger growth much this, of had that quickly assortment though. more we

a optimization as we believe get maintain we technology, and think to business in business number million-ish business haul business $XXX certainly XX%, us e-commerce step and for makes over the can a believe long the that XX% be we that's So that. have money, that of one.And I we through profitable the and

need assortment, bit just So is invest the to and think a priorities. those fine-tune are we I the

John Lawrence

I Where sure relocating those and was? understood markets stand? does to want I what and to stores you of question, Yes. some make but the spoke me know And I next of that remind it, and that and it, process to replacing some just you And spoke stores. some proven

W. Madden

ready fire when period like to to those encouraged faster stores of to shifts we've those Well, is started historic But early do that that and we're And strong primarily to the it's early prioritized catching outside turnaround, terms it we in some We're of on, of to time. sitting that than as are prioritizing And Kirkland's going of of active cost are and customer in that locations. a looking that liquidity to we'll a merchandise markets and going markets at these been while have see act historic here the need be of and those maybe some we're capital been historically be of the where we've that in strength made are feel have the with some we we Southeast we've market, do Sunbelt, core over more a and those building enough some aggressively. the are wherewithal by we're fruits have locations, Texas. today, customer, lower these lot aggressively. we long

encouraging But that's we've those. it find certainly us, got we are and it measured be to how more and do to of So today, responsibly. we where want about to we've we do got

Operator

you This attending session the presentation. concludes and for Thank today's conference. our question-and-answer

now You disconnect. may

Kirkland's (KIRK) 6 Jun 242025 Q1 Earnings call transcript