KIRKLAND'S HOME REPORTS FIRST QUARTER 2024 RESULTS
Kirkland's Home (Nasdaq: KIRK) reported Q1 2024 results for the period ending May 4, 2024. Net sales were $91.8 million, a decrease from $96.9 million in Q1 2023. Comparable sales dropped by 3.5%, including a significant 19.1% decline in e-commerce sales. However, brick-and-mortar stores saw a 2.8% increase in comparable sales. The gross profit margin improved by 280 basis points to 29.5%. Operating loss was $7.5 million, a $2.8 million improvement year-over-year. Adjusted EBITDA loss also improved to $4.5 million from $5.8 million. The company closed two stores, ending the quarter with 329 stores, and reported a cash balance of $3.8 million with $48.9 million in outstanding debt. Cost-saving initiatives are expected to save $6 million in 2024. Kirkland's retained Consensus to explore strategic alternatives but set no deadline for this review.
- Comparable sales in brick-and-mortar stores increased by 2.8%.
- Gross profit margin improved by 280 basis points to 29.5%.
- Operating loss improved to $7.5 million from $10.3 million in Q1 2023.
- Adjusted EBITDA loss improved to $4.5 million from $5.8 million in Q1 2023.
- Cost-saving initiatives expected to save $6 million in 2024.
- Retained Consensus to explore strategic alternatives for future growth.
- Net sales decreased to $91.8 million from $96.9 million year-over-year.
- Comparable sales decreased by 3.5%, including a 19.1% decline in e-commerce sales.
- Net loss was $8.8 million, or $0.68 per diluted share.
- Cash balance was only $3.8 million with $48.9 million in outstanding debt.
- Closed two stores, reducing the total to 329 stores.
Insights
Kirkland's Home's first quarter results for 2024 indicate a mixed performance with some positive trends and continuing challenges. The net sales of
The increase in gross profit margin to 29.5% from 26.7% is encouraging, driven by lower freight costs and better merchandise margins. This suggests improvements in supply chain efficiency and product profitability. Despite an operating loss of $7.5 million, this is an improvement from the previous year's $10.3 million loss, hinting at better cost management. The company’s efforts to reduce corporate expenses and other operational costs have yielded some savings, which is essential for stabilizing finances.
On the liquidity side, the cash balance of $3.8 million and outstanding debt of $48.9 million underlie the need for careful cash flow management. The seasonal nature of their inventory and sales cycles will be critical to monitor as they aim to increase liquidity in subsequent quarters.
In summary, the financials reflect progress in cost management and physical store sales, but significant challenges remain, particularly in the e-commerce segment and overall sales growth.
Kirkland's Home's strategic initiatives appear to be yielding early results, particularly in their brick-and-mortar channels. The 2.8% growth in comparable store sales is a positive indicator that in-store marketing and merchandising adjustments are resonating with customers. However, the 19.1% decline in e-commerce sales is concerning, suggesting a need for stronger digital strategies to capture online shoppers more effectively.
The announcement of cost savings initiatives and retaining a financial advisor to explore strategic alternatives show a proactive approach to addressing current market pressures. The expected $6 million savings in fiscal 2024 and $7 million ongoing annual savings are substantial and should contribute positively to the bottom line if executed as planned. However, investors should carefully watch how these cost-cutting measures affect operational efficiency and customer experience.
The company's focus on strengthening omni-channel capabilities is critical for future growth, given the increasing consumer preference for a seamless shopping experience across online and offline platforms. The management’s confidence in achieving
Overall, Kirkland’s Home is making strides in certain areas but needs to address significant challenges, particularly in its digital strategy, to ensure long-term profitable growth.
NASHVILLE, Tenn., June 6, 2024 /PRNewswire/ -- Kirkland's, Inc. (Nasdaq: KIRK) ("Kirkland's Home" or the "Company"), a specialty retailer of home décor and furnishings, announced financial results for the 13-week period ended May 4, 2024.
First Quarter 2024 Summary
- Net sales of
$91.8 million 3.5% , inclusive of2.8% growth in comparable brick-and-mortar stores compared to Q1 2023. - Gross profit margin expanded 280 bps to
29.5% compared to Q1 2023. - Operating loss of
$7.5 million $2.8 million - Adjusted EBITDA loss of
$4.5 million $1.3 million - Opened 1 store and closed 2 stores to end the quarter with 329 stores.
- Ended the period with a cash balance of
$3.8 million $48.9 million - Announces cost savings initiatives and retains financial advisor to review strategic alternatives.
Management Commentary
Amy Sullivan, CEO of Kirkland's Home, said, "We are continuing to see progress on our strategic initiatives as demonstrated by our comparable sales growth of
Ms. Sullivan continued, "Given the slower than anticipated start to the year and the continued headwinds associated with higher ticket categories, particularly with our value conscious customer, we are taking swift actions to better align our cost structure to current demand trends and are taking steps to improve our e-commerce business while remaining laser-focused on driving long-term, profitable growth. As we look to the future, we remain confident that our strategic initiatives that include re-engaging our core customer, refocusing our product assortment, and strengthening our omni-channel capabilities are key to driving sales growth. We believe these initiatives coupled with maintaining disciplined operational effectiveness and improvement in our liquidity position, should enable us to achieve
First Quarter 2024 Financial Results
Net sales in the first quarter of 2024 were
Gross profit in the first quarter of 2024 was
Operating expenses in the first quarter of 2024 were
Operating loss in the first quarter of 2024 was
EBITDA in the first quarter of 2024 was a loss of
Net loss in the first quarter of 2024 was
Balance Sheet
As of May 4, 2024, inventory was
As of May 4, 2024, the Company had a cash balance of
The Company's inventories are typically at seasonal lows during the first quarter of the fiscal year and begin to build as the second quarter progresses. Availability under the Company's revolving credit facility and term loan fluctuates largely based on eligible inventory levels, and as eligible inventory increases in the second and third fiscal quarters in support of the Company's back-half sales plans, the Company's borrowing capacity increases correspondingly. The Company anticipates that cash flow from seasonal sales in the third and fourth quarters of fiscal 2024 will be used to reduce borrowing levels and increase liquidity.
Subsequent to May 4, 2024, the Company borrowed an additional
Cost Savings Initiatives and Review of Strategic Alternatives
Following the end of the quarter, the Company implemented several cost savings initiatives to better align its cost structure with the current business environment. The Company believes these actions are necessary as part of improving its profitability and liquidity trajectory while minimizing disruption to the Company's focus on its strategic initiatives and the overall customer experience. The cost savings initiatives include a reduction in corporate overhead, store payroll, marketing and third-party technology expenses. The Company expects to realize approximately
In addition, on May 14, 2024, the Company retained Consensus, an investment banking firm specializing in consumer-facing companies, to serve as financial advisor to the Board of Directors in the pursuit and evaluation of potential strategic opportunities to support the Company and its initiatives.
The Company has not set a deadline or definitive timetable for the completion of the strategic alternatives review process, and there can be no assurance that this process will result in any particular outcome. The Company does not intend to comment further regarding the review of strategic alternatives until it determines disclosure is necessary or advisable.
Conference Call
Kirkland's Home management will host a conference call to discuss its financial results for the first quarter ended May 4, 2024, followed by a question-and-answer period with President and CEO, Amy Sullivan, and EVP and CFO, Mike Madden.
Date: Thursday, June 6, 2024
Time: 9:00 a.m. Eastern Time
Toll-free dial-in number: (855) 560-2577
International dial-in number: (412) 542-4163
Conference ID: 10189094
Please call the conference telephone number 10-15 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact ICR at KIRK@icrinc.com.
The conference call will be broadcast live and available for replay here and via the investor relations section of the Company's website at www.kirklands.com. The online replay will follow shortly after the call and continue for one year.
A telephonic replay of the conference call will be available after the conference call through June 13, 2024.
Toll-free replay number: (877) 344-7529
International replay number: (412) 317-0088
Replay ID: 9351728
About Kirkland's, Inc.
Kirkland's, Inc. is a specialty retailer of home décor and furnishings in
Forward-Looking Statements
Except for historical information contained herein, certain statements in this release, constitute forward-looking statements that are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and are subject to the finalization of the Company's quarterly financial and accounting procedures. Forward-looking statements deal with potential future circumstances and developments and are, accordingly, forward-looking in nature. You are cautioned that such forward-looking statements, which may be identified by words such as "anticipate," "believe," "expect," "estimate," "intend," "plan," "seek," "may," "could," "strategy," and similar expressions, involve known and unknown risks and uncertainties, many of which are outside of the Company's control, which may cause the Company's actual results to differ materially from forecasted results. Those risks and uncertainties include, among other things, risks associated with the Company's liquidity including cash flows from operations and the amount of borrowings under the secured revolving credit facility and term loan, the Company's ability to successfully implement cost savings and other strategic initiatives intended to improve operating results and liquidity positions, the Company's actual and anticipated progress towards its short-term and long-term objectives including its brand strategy, the risk that natural disasters, pandemic outbreaks (such as COVID-19), global political events, war and terrorism could impact on the Company's revenues, inventory and supply chain, the continuing consumer impact of inflation and countermeasures, including raising interest rates, the effectiveness of the Company's marketing campaigns, risks related to changes in
Contact: | Kirkland's Home Mike Madden 1-615-872-4800 | ICR Caitlin Churchill 1-203-682-8200 |
KIRKLAND'S, INC. UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (In thousands, except per share data) | ||||||||
13-Week Period Ended | ||||||||
May 4, | April 29, | |||||||
2024 | 2023 | |||||||
Net sales | $ | 91,753 | $ | 96,875 | ||||
Cost of sales | 64,685 | 71,004 | ||||||
Gross profit | 27,068 | 25,871 | ||||||
Operating expenses: | ||||||||
Compensation and benefits | 19,286 | 20,039 | ||||||
Other operating expenses | 14,318 | 14,738 | ||||||
Depreciation (exclusive of depreciation included in cost of sales) | 961 | 1,206 | ||||||
Asset impairment | 11 | 225 | ||||||
Total operating expenses | 34,576 | 36,208 | ||||||
Operating loss | (7,508) | (10,337) | ||||||
Other expense, net | 1,011 | 410 | ||||||
Loss before income taxes | (8,519) | (10,747) | ||||||
Income tax expense | 311 | 1,360 | ||||||
Net loss | $ | (8,830) | $ | (12,107) | ||||
Loss per share: | ||||||||
Basic | $ | (0.68) | $ | (0.95) | ||||
Diluted | $ | (0.68) | $ | (0.95) | ||||
Weighted average shares outstanding: | ||||||||
Basic | 12,965 | 12,778 | ||||||
Diluted | 12,965 | 12,778 | ||||||
KIRKLAND'S, INC. UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS (In thousands) | ||||||||||||
May 4, | February 3, | April 29, | ||||||||||
2024 | 2024 | 2023 | ||||||||||
ASSETS | ||||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | $ | 3,836 | $ | 3,805 | $ | 7,072 | ||||||
Inventories, net | 75,789 | 74,090 | 83,332 | |||||||||
Prepaid expenses and other current assets | 6,540 | 7,614 | 4,905 | |||||||||
Total current assets | 86,165 | 85,509 | 95,309 | |||||||||
Property and equipment, net | 27,737 | 29,705 | 36,146 | |||||||||
Operating lease right-of-use assets | 121,410 | 126,725 | 131,289 | |||||||||
Other assets | 7,271 | 8,634 | 7,137 | |||||||||
Total assets | $ | 242,583 | $ | 250,573 | $ | 269,881 | ||||||
LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY | ||||||||||||
Current liabilities: | ||||||||||||
Accounts payable | $ | 39,963 | $ | 46,010 | $ | 38,092 | ||||||
Accrued expenses | 23,020 | 23,163 | 25,499 | |||||||||
Operating lease liabilities | 38,590 | 40,018 | 41,173 | |||||||||
Total current liabilities | 101,573 | 109,191 | 104,764 | |||||||||
Operating lease liabilities | 94,529 | 99,772 | 110,165 | |||||||||
Long-term debt, net | 47,541 | 34,000 | 33,000 | |||||||||
Other liabilities | 4,405 | 4,486 | 3,872 | |||||||||
Total liabilities | 248,048 | 247,449 | 251,801 | |||||||||
Shareholders' (deficit) equity | (5,465) | 3,124 | 18,080 | |||||||||
Total liabilities and shareholders' (deficit) equity | $ | 242,583 | $ | 250,573 | $ | 269,881 | ||||||
KIRKLAND'S, INC. UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (In thousands) | ||||||||
13-Week Period Ended | ||||||||
May 4, | April 29, | |||||||
2024 | 2023 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (8,830) | $ | (12,107) | ||||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation of property and equipment | 2,624 | 3,257 | ||||||
Amortization of debt issue costs | 131 | 20 | ||||||
Asset impairment | 11 | 225 | ||||||
Gain on disposal of property and equipment | (6) | (21) | ||||||
Stock-based compensation expense | 292 | 490 | ||||||
Changes in assets and liabilities: | ||||||||
Inventories, net | (1,699) | 739 | ||||||
Prepaid expenses and other current assets | 1,063 | 184 | ||||||
Accounts payable | (5,653) | (5,792) | ||||||
Accrued expenses | (133) | (570) | ||||||
Operating lease assets and liabilities | (1,365) | (1,555) | ||||||
Other assets and liabilities | (90) | 349 | ||||||
Net cash used in operating activities | (13,655) | (14,781) | ||||||
Cash flows from investing activities: | ||||||||
Proceeds from sale of property and equipment | 6 | 60 | ||||||
Capital expenditures | (770) | (846) | ||||||
Net cash used in investing activities | (764) | (786) | ||||||
Cash flows from financing activities: | ||||||||
Borrowings on revolving line of credit | 9,000 | 21,000 | ||||||
Repayments on revolving line of credit | (4,100) | (3,000) | ||||||
Borrowings on term loan | 10,000 | — | ||||||
Debt issuance costs | (399) | (456) | ||||||
Cash used in net share settlement of stock options and restricted stock units | (51) | (76) | ||||||
Net cash provided by financing activities | 14,450 | 17,468 | ||||||
Cash and cash equivalents: | ||||||||
Net increase | 31 | 1,901 | ||||||
Beginning of the period | 3,805 | 5,171 | ||||||
End of the period | $ | 3,836 | $ | 7,072 | ||||
Supplemental schedule of non-cash activities: | ||||||||
Non-cash accruals for purchases of property and equipment | $ | 390 | $ | 844 | ||||
Non-cash accruals for debt issuance costs | 860 | — | ||||||
Non-GAAP Financial Measures
To supplement our unaudited consolidated condensed financial statements presented in accordance with generally accepted accounting principles ("GAAP"), this earnings release and the related earnings conference call contain certain non-GAAP financial measures, including EBITDA, adjusted EBITDA and adjusted operating loss. These measures are not in accordance with, and are not intended as alternatives to, GAAP financial measures. The Company uses these non-GAAP financial measures internally in analyzing our financial results and believes that they provide useful information to analysts and investors, as a supplement to GAAP financial measures, in evaluating the Company's operational performance.
The Company defines EBITDA as net loss before interest and the provision for income tax, which is equivalent to operating loss, adjusted for depreciation and asset impairment, adjusted EBITDA as EBITDA with non-GAAP adjustments and adjusted operating loss as adjusted EBITDA including depreciation.
Non-GAAP financial measures are intended to provide additional information only and do not have any standard meanings prescribed by GAAP. Use of these terms may differ from similar measures reported by other companies. Each non-GAAP financial measure has its limitations as an analytical tool, and you should not consider them in isolation or as a substitute for analysis of the Company's results as reported under GAAP. The Company's non-GAAP adjustments remove stock based compensation expense, due to the non-cash nature of this expense, and remove severance, as it fluctuates based on the needs of the business and does not represent a normal, recurring operating expense.
The following table shows a reconciliation of operating loss to EBITDA, adjusted EBITDA and adjusted operating loss for the 13-week periods ended May 4, 2024 and April 29, 2023:
KIRKLAND'S, INC. UNAUDITED NON-GAAP MEASURE RECONCILIATION (In thousands, except per share data) | ||||||||
13-Week Period Ended | ||||||||
May 4, 2024 | April 29, 2023 | |||||||
Operating loss | $ | (7,508) | $ | (10,337) | ||||
Depreciation | 2,624 | 3,257 | ||||||
Asset impairment (1) | 11 | 225 | ||||||
EBITDA | (4,873) | (6,855) | ||||||
Non-GAAP adjustments to operating expenses: | ||||||||
Stock-based compensation expense(2) | 292 | 490 | ||||||
Severance charges(3) | 73 | 529 | ||||||
Total non-GAAP adjustments | 365 | 1,019 | ||||||
Adjusted EBITDA | (4,508) | (5,836) | ||||||
Depreciation | 2,624 | 3,257 | ||||||
Adjusted operating loss | $ | (7,132) | $ | (9,093) | ||||
(1) | Asset impairment charges are related to property and equipment. Asset impairment was previously shown as a non-GAAP adjustment. The current presentation includes asset impairment as a reconciling item between operating loss and EBITDA. Prior periods have been reclassified to conform to the current period presentation. |
(2) | Stock-based compensation expense includes amounts amortized to expense related to equity incentive plans. |
(3) | Severance charges include expenses related to severance agreements and permanent store closure compensation costs. |
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SOURCE Kirkland's, Inc.
FAQ
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