KIRK - Earnings call transcript Q2 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 second quarter ended August 3, 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 as she reads 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. ahead. go please Caitlin,

Caitlin Churchill

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

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

Amy Sullivan. Now Amy? call would I to CEO, turn like the Kirkland's over to

Amy A. Sullivan

and progress will with I against Caitlin, are you, in review and begin from second our everyone. more the morning, financial review results our a initiatives over then turning quarter good on we to discussion will update our the Mike performance highlights detail. call of before to making strategic an today's provide Thank

sales omnichannel quarter improvement refocusing continue product Our customer, from strengthening our comparable quarter as second a we reflects the reengaging and assortment our capabilities. core performance our first sequential

declined For was store sales X.X% decline offset sales X.X%, the growth, by comparable quarter, increase total sales e-commerce. in which a reflecting in comparable a XX.X%

assortment last year expense to penetration margin declines XX% see a drove profitability, management. adjusted reduced units year-over-year activity work disciplined ticket, and our approximately EBITDA approach to $X.X expansion were by overall given last rebalance average turning compared up promotional to gross compared improved in to continued we we year. With While higher to and maintaining sold million ticket, as cost categories, despite increased respect ongoing to in slower our

by May, million Through in the number of reminder, savings a deliver in to actions, we profitability $X liquidity. we these savings fiscal XXXX. and initiatives expect improve to expense to executed our end a of continue cost As

While is a smallest historically quarter season. prepare quarter perspective, profit it important the an as peak is we from second our our transition sales and for

Within events such and Memorial the holiday July. Xth quarter, of key Day strategically advantage we shopping took as of

reintroduced also months. gifting back-to-campus Mother's our consumer and the improving decor, such collections within Day trend as relevance seasonally-relevant We micro summer

Our the in Halloween assortments strategies Harvest in us confidence are have important arrived giving early and by year. and reads July the as we stores the half we seen, of our back in enter pleased we

me While by This the challenging repositioning. remain backdrop the our discussion on we our initiatives. strategic sector, brand now in to home leads remains consumer response our to encouraged the

First, reengaging and our reactivation rates core are customer remain relationship keenly our of with customers. and focused customer. an authentic another quarter strengthening of by core lapsed We pleased positive our on retaining

lapsed seasonally-relevant, have Over by on customers, focus decor. of XX% XX continued last months, reactivation high-value a the seen we driven

maximize our the As cost-efficient our With spend marketing of is profiles and has we have and mind, the peers, maximized impact from year. volume allow marketing in cost acquisition to this election increased reach you heard marketing customer to lowest customer in focused our an our half. strategies in the high data overall quarter and the of cost us building our of within on back

QX redemptions in Our at XX,XXX by was K end a in QX. resulting enhanced the birthday Club loyalty of reintroduction program reward, the of

The at account the is date grow file to leads her to to birth touch have throughout obtaining continues drive profile text kicked focused K X.X her and continued within enabling also size with We off subscribers. campaign Club even points cell year. This SMS us phone number, currently and on to our completion the success me more her an in million incentive program.

e-mail presence channels, when we seasonally-relevant in seen enhancing all triggered quarter, on categories. Last, drive price-drop messaging, media launched million improved platforms. our the In social engagement match are continually we reach triggered SMS success have expanding product with to we increase followers both our to and across we continue back-in-stock while conversion through SMS, the and e-mail focused our particularly over to campaigns X During campaigns.

overall During across brand the these and the have platforms. now greater holiday viral, consistent an reel on with we customer believe in-store traffic We all by we are improvement encouraged Halloween X learnings grow plans enhancements to focused engagement, back over in quarter, Overall, thrilled views will in reactivation, were we half. during our and presence impact the in-store the and video shopping TikTok to our upcoming content million go season. see with

winner into categories the to driving our furniture, and continues and continue product highly to engaged, items our rugs. the accessories, the in mirrors quarter. categories carry-all our challenges Now expectations, respect tote visits of as the seasonal The and throughout floral our decorative exceed furnishings frequency always-something-new increased such and in to Halloween to year-over-year, believe more customers With newness high-ticket our collections increases sales we to increased categories holiday are reintroduction box. With our ultimately refocusing on drove launches competitors, such key norm. Diving keeping We driven jewelry in our as key product with key improving by inventory of see frequent as in our sector highly and details, as micro quarter. second monogrammed assortment. to standout such well the strategic gift with as floral items, our line double-digit being turns we historic mindset, delivered and impulse initiative, and

demand for appropriately these While the we overall plan soft. businesses quarter, remains down

demands evolve style value sacrificing quality. to the without continue or wallet meet her the customer to and will of these We categories

the floral, continue monitor growth sensitivity categories we and growth remain half, contributors to of the demand optimistic the price back success are in these seasonally-relevant assortments. look we high-ticket we and driving categories the As substantial of decor while These more gifts. ahead, will on and to significant holiday, continued

strategic about our third talk our me initiative, capabilities. omnichannel Finally, strengthening let

channel, the opportunities of business planning business channel, most reviewing replatform. future are map been and discussed our actively we for we prudently improvements, challenges have case our importantly, road working but have for leadership As our e-commerce and With strategy. digital our we finding our long-term previously, given in developing on all e-commerce the new aspects

While by largely ship the our our e-commerce in marketplace, we near we categories. the successes the help did analyze assortments. channel product merchants in declines by drop year-over-year our pricing to particularly are driven tool rugs better and in wall that and see a term, offset for our actively conversion the floral new holiday In the improvement categories, was implementing furniture,

holiday to our metrics our encouraged recognize see to store the respect this increased of to the driven leadership new the we our transaction. positive talent and teams. by X all remain further field through expect within channel, impact store the the conversion initial We organization. items within the peak Throughout organization we by to positive, our store traffic, and per that continue quarter, We tool and results us before season. With highly-engaged leadership unify quarter, remained the realigned exists drive allowing

wants will our allocation many exited, the With on in-store experience within and store deep shopping the stores with the their Our shop. new understanding syncing depend new and and launches product especially holiday promotions have product their unique capitalized and meets Modernizing customer. markets of our seasonal to and for shopper. priorities. experiences, whenever new market ultimately personalized gift create half. Longer can previously of we we the timing our later the for that space on stores clearly shared white omnichannel the we term, remain a back see we capital ultimately meeting e-commerce her arriving remain in we of unified to remains results this in it that experience she drive wherever committed channel to this demands have our key to We month, experience locations, in optimistic our in

progress wrap our success. to ongoing thank I so initiatives. we to team position that our for is It is to As as long-term this customer part brand I driving up, and want are I towards making Kirkland's be am of associates. our we our strategic for proud dedication passion their the

in the and ongoing, potential evaluation the keep to but and turn to value sharing the our as Mike, opportunities of laser over time. And focused be call forward we our strategic in pursuit that business create company now when for Mike. I shareholders. release, is process look we This Before to remain engaged over continue initiatives. path noted and a both and to our we to do footing at our appropriate, this intend comment not pursuing on on more solid We further will to support

W. Madden

good Thank you, Amy, everybody. and morning,

against our we store in progress As delivered Amy channel we delivered year-over-year to as reflected comparable the in and sales in for the with be our ongoing the pleased continue period, initiatives improvement EBITDA. reviewed, growth the adjusted we positive

results more our in to Turning detail.

The average e-commerce decrease quarter, respect quarter, to July. comparable We July. With to our channel. and period driven by with channel the decorative the easier positive POS June the increase was offset items. quarter. From year XX% count business, continues comparable X.X% holiday, a sales prior our sales in and to trends in $XX.X gift, and X.X% net of an compared For the sales year-over-year the million the traffic, versus prior partly down XX.X% categories. in reflecting by store the prior prior increases our and merchandise in sales quarter. relative $XX.X point sequential as were QX by the the million ticket year from The decline faster-turning, for to driven quarter. e-commerce June quarter, average for its driven compared down in July channel results respect May, shift e-commerce store perspective, was prior down one period, year and our improvement quarter, in and the vendors. of in related a in we in within total the in X.X% of comparisons decreased by by accounted in to e-commerce at store sales second in outage lower tougher declined from disruptions X.X% in down floral, headwinds largely X.X% to and comps was of impacted with saw were sales conversion. Breaking year an year comparisons sales start in offsetting the XX% comparable in traffic fragrance, positive emphasis drove omnichannel the E-commerce X.X% higher-ticket price versus quarter, of was the up face strength the The accessories in The down to IT month our store

basis points categories decreased with largely shrinkage during quarter. increase to increased freight the and declines inventory underperformance were by expenses margin to The both costs, enough shipping not of or higher the decrease. prior no increased was as offset slightly as helped XX.X% lower as consistent both Merchandise including decor mirrors, compared with XX.X% period. Outbound whole. Gross offset store to XX of to year, this basis the across in follows. were e-commerce geographic primary sales increases rates store particular to art. XXX outbound basis The Sales ticket X.X% year the in the route the driven favorability furniture, points Improved performance freight XX.X% quarter. these relative to was the and margin promotional to along well XX which in percentage prior as of lower to the the drivers in year components to management the versus costs, prior per of were sales points compared year-over-year to activity of compared change prior routes, XX.X% year quarter. However, over of profit wall increased a areas

cost contract parcel XX quarter X.X% points central X.X%, benefited the parcel lower to We to were sales lower and delivery due decreased of reduction costs sales. distribution by from at of in about flat compared basis and e-commerce in rates. Depreciation to year costs included also prior revenue

of sales million benefits of advertising of XX.X%. decline. Total basis cost these $XX.X cost corporate asset was expenses. $X.X or decreased The improvements year quarter. expenses XXX $XX reduced largely the to salaries an in prior primarily in of was from increase in to to compared due the This impairment million offsetting and was overall result costs, decrease million sales XX.X% partially deleverage to points store Lastly, sales the increase dollars operating or and occupancy XX.X% charges

negative to in loss tax a the loss EBITDA, operating $XX.X margin in from refund in law with and $X.X million other tax levels charges, income, loss quarter year prior net million the the an result quarter. to Included a This $X.X was of to interest improvement. Operating year. benefited improved Tennessee we change Operating $XX.X million XXX interest million negative the year higher in borrowing along $X.X million received percentage an compared $XXX,XXX largely of quarter. was tight expense severance points. in other million last compared addition, due by excludes is higher comprised $X.X quarter as stock sales expense in In basis that versus year offset continued interest $XX.X to control, state resulted expense, these quarter, prior in $XX.X the prior primarily is Net expense million was amounts, was in compensation which compared of gross for the of million rates. which the quarter. Adjusted the and

the of of borrowings $XX.X prepare increase end quarter We a from million of performance our credit the of the as $XX.X expense our million $XX.X of capital at end a X.X% million of line with quarter, decrease income credit $XX loss at we compares million loan. and working $XX.X senior prior Our This The $XX.X $XX tax under be million operating quarter. million. of FILO loan the season. was prior at had the and quarter borrowings growth of an seasonal which ended million under comprised previous quarter. We and in fall to of for holiday the end inventory, $XX.X to revolving was XX.X% our levels outstanding for reflects term and the pretax the year of senior our under for quarter increase X.X% our in to total of revolving FILO of the our previous X.X% $X.X compared under of sheet perspective, balance the quarter, the million at inventory expenditures the capital control and the from line under term million end in a a rate in period. From year benefit loss pretax continue negative

and during the reminder, peak to QX, late quarter of a As our QX. early given lows begin are business, the quarter the at the way seasonality second inventories build first on in during to

last our our that borrowing As expected, increase continue quarter, as holiday inventory expect to ahead expanded position from capacity season. we and we of peak our

reduce We third the fourth our and the expect credit to quarters to under use during facility. the cash senior generated borrowings

continuing difficulty ongoing of to due are alternatives. visibility guidance the review policy our and We providing not given specific forecasting in of strategic the

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

fiscal year First, XX-week calendar compared approximately to last as this year's reminder, calendar. weeks includes last in extra in fiscal XX a $X.X resulted The revenue. year's million week

timing week shifts balance calculated more impact other meaningfully anticipate While associated year. comparable a are results reported our sales the with on the XXrd like-for-like results the of we calendar, to the quarterly for

by by faster-turning assortments in have benefit continue Specifically, in the our earnest the benefit will seen we believe into with We in results from at sales pulled are to year, relatively turn expect encouraged assortment began into expect as the of fall to freshness smaller larger the as Amy aggressive inventory first move the holiday as also we calendar week in effectiveness thus QX, said, end shift year reads the the beginning the and a we impacted on improvement shift categories, will we early end far. shift year, will well prior and to by the the quarter. the at promotional to of a And quarter the is September to our week. That our compared of continue the to year. QX clearance XXrd This fourth focus half which the reviewed, ensure as comparisons throughout week of of loss negatively replaced negatively and the to quarter year. second we of last impact as half be we

began to see to more see the related the Southeast we conditions expect imports related to pressure saw environment QX, around shipping, late relatively and ocean freight tightening slightly impacting we what the given be to promotional with impact particularly in QX expect China do Asia. QX While consistent we we to in from in our

manage them actions across as As have for tightly, taken we announced operating expenses, reduce last we to the continue quarter, and business. to very costs

to cash to we allocation, right after With While in respect to achieve years our for still losses. the are we environment believe is of flow. challenging, business positioned adjusted EBITDA returning priority remains positive #X positive now X the economic capital XXXX

toward more level us and we As that we make reducing liquidity to of the focus progress business flexibility. allows continue on borrowings a with reestablishing to that operate end,

As and technology in on business e-commerce financial focused also store stabilize are reinvesting relocations. the we our openings enhancements targeted we with position, and

We goal prepared ready our by in million to of continue believe margin operator, adjusted discipline And end Q&A. the EBITDA single-digit opportunities take ahead in still ongoing long-term and and we're we of revenue long-term liquidity, on our and improvements now operational to fiscal in with deliver XXXX. That high believe range concludes to remarks. in the will the mid- $XXX we

Operator

The Instructions] Craig-Hallum today Hamblin Capital Group. from comes question first Jeremy with [Operator

Jeremy Hamblin

Congrats to started pleased give or And your your little you're sounds I quarter. to about of I'm compares expect see on of sorry, are compares -- you positive split just terms to I in wanted on quarter-to-date, might to It e-comm a more that is business e-comm QX? just if here in know the what wanted remainder your between the with of improved up in for easier able or this whether results. bit continue. business you bit how comping a you're that of little little kind trends. get tougher in actually how not doing the retail versus that a then terms clarity stack the like initial the saw start. store, bit you versus on QX I the talking in if be

Amy A. Sullivan

finished and the strong. some Mike and perspective, start, I'll to comp more jump in From color that. August month seeing quarter-to-date we're or on QX can with then trends Jeremy, similar really

of know, fall and season, holiday accelerate. over brand starts from build really to strength true as us the So we time, when that's the as the following you into

really shared, I with Halloween, this in Oftentimes, Christmas pleased arriving perform. week. that stores, actually first we're of the wave as particular. Christmas an indicator is is it of how so And will in

continue in where of say to strong those us more that winning the we are textiles, higher feel promotions and requiring would into the incentivize for overnight. gift optimistic part and the of really just particularly more see ticket But we again, her So meaningful of as I sort to back about areas historically back become the certainly move half. categories, even and necessarily environment penetration consumer half. I is categories improving it holiday so the don't we're and

thinking the those e-commerce, as of then balance where business, we've furniture, year. And sort heavy terms versus past, miss So that's about which wall, very the think high-ticket in shared coming e-commerce, I of kind rug, of of biggest really the we're our drop categories. in is ship from the brick-and-mortar of in part is the

And year. to think control, we those that we discounts there's would I incremental we've But will so little further stimulate that as seen then to closer definitely about with sort some about e-comm be think will as shared, we this that as that things a but sales The can surgical demand, year replatform. we we've driving as upside I into get be. And a sales say we the challenge in and future, control. can and as continue they profitable can the channel to making think we about that we of I sure are also balance can expect next

Jeremy Hamblin

more about half color. margin comment as of so thinking up just to and back on both a for here were in forth, should as QX you into QX margin expecting following a requiring of look terms be and and not promotion had You to the Good momentum gross And consumer wanted the same of the we it. about and how bit she's year-over-year, have that gross we continue type in the or Got well. sense improved QX in get QX, whether guys year? then

W. Madden

the Yes, Jeremy. those callouts the made are think Yes, I related to environment. that we promotional

continue. We to that expect

called margin. out So pressure And I the that's then freight. a also little on

will freight on Some endured half. back we that costs the of those be higher second goods in through the the inbound in selling quarter,

feel still on and all pressure on we will that said certainly we've line So we opportunity experienced. we've merchandise margin, items well. cost Having got create have the that, like opportunity some that as the other

that year-to-date Solid the back potential the that half. to profit, so reductions still our see expand in gross we

we promotional half. we've still with and little -- in experienced what the aside place we pressure, into So put that all can from we've bit some and a first overcome the year think that pressure this more other we freight things

Jeremy Hamblin

in to more Just clarify, up in the second half or likely up in you of terms QX? gross see to of QX margin gross are margin seeing 'XX,

W. Madden

and QX week quarter that this -- we in replacing my I that you're calendar that called taking and quarter. the get bit sales an the the would -- type a week week in the say prepared given out you're early a third because on I shift remarks. year, shift, third it in just with More earlier more or November-ish from

So create the that's to some leverage fixed of costs. more more going some on

than So both. see we bit I just in third more third little opportunities quarter than the opportunity have the heavier in think I fourth. but weigh I fourth, a the the would

Operator

question next with from John comes Benchmark. The Lawrence

John Lawrence

about talk a into like a and lately, been -- seems did in earlier get bit, you some just remind stores Halloween -- Could this it little year? stores little the us we've

Amy A. Sullivan

year a year, big strong probably trend Halloween as in season last it's really Yes. you'll had a last We and -- market recall overall. well, we from the

early brought set good was as and say as a a I right got that in well of full date the But there's as opportunity gate even we definitely out about year. years. got further an move we it price selling definitely we this would set. of benefit out to maybe accelerate strong So week early really really future of that it some into

John Lawrence

the was a And of for lot up you this maybe -- transactions you shopping, fleet positive early fleet would the point? comps, whether et cetera, talk talk -- give they of at what just of reactivation that you're percentage window can doing sense traffic of time, about of positive it like but It stuff. Halloween you visits sort stores? is during if from appeared a store about of that about you talked can XX% that Can period And seems rates.

W. Madden

part, stores we in store and slightly we are locations. seeing much across pretty positive were We're year-to-date, On John, Yes. board second in the quarter. positive traffic that the in the our

-- think out is, up, but always we're are mix called consistent I I down across it a we the think it's chain. as geographically, some some of seeing it's are performance and

And slightly so it's pretty positive, places, but would kind most -- say. out we're to different. of slightly always if positive there's call really that is in we're nothing There's I outliers,

John Lawrence

So in still that area -- what's of these there some or in you your base be region, anything I waiting stores you your successful? for might on think it, for missed have maybe capital new Has plan in mentioned that started it but and the trade that? really could

W. Madden

we're actively Well, to pursued. need more aggressively. are do know identified And a a that lot capital we us some we go the of do give we kind But we of that being have to waiting locations there that largely couple for would room have we to.

we're more back tuned into excited build but some on stores. in we're ability to customers key we're I So get missing get and for markets some the stay and markets. to back that, those anxious about some mean

John Lawrence

Last stuff a I items. goes assume little question same the different, fourth at freshness for when looks with in. set coming type Amy, look some to holiday Halloween new -- quarter that of the me. you

Amy A. Sullivan

the was we say newness a if first gift assortment QX. time well would I Yes. in good we reintroduced as you'll the last in amount year holiday as of have recall, --

on investment that so that, in that down doubled category we And as the we in really saw success well. the

significant improving feel week a lot will the we October fall So said I starting But the move which the give December, new of to there on of this holiday as sort inventory turns. as is customer newness, throughout before, of arriving, momentum think us balance I positive particularly continued traffic, will season.

Operator

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

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Kirkland's (KIRK) 5 Sep 242025 Q2 Earnings call transcript