Kirkland's Reports Fourth Quarter And Fiscal 2019 Results
March 13, 2020 at 07:00 AM EDT
NASHVILLE, Tenn., March 13, 2020 /PRNewswire/ -- Kirkland's, Inc. (NASDAQ: KIRK) today reported financial results for the 13-week and 52-week periods ended February 1, 2020.
Net sales for the 13 weeks ended February 1, 2020 decreased 3.1% to $209.4 million compared to $216.1 million for the 13 weeks ended February 2, 2019. Kirkland's did not open or close any stores during the period, ending the year with 432 stores. Comparable store sales, including e-commerce sales, decreased 2.7% compared to a decrease of 3.3% in the prior-year quarter. Negative brick-and-mortar traffic was partially offset by an improvement in average ticket. The 37.9% increase in e-commerce sales was driven by an increase in transactions.
Gross profit declined from 34.4% to 29.8% of net sales for the 13 weeks ended February 1, 2020, primarily driven by a decline in merchandise margin from increased promotional activity. Incremental promotions also led to deleverage through the supply chain from more units needed to achieve sales. Total operating expenses, excluding depreciation and asset impairment charges, increased from 24.7% to 25.9% of net sales for the 13 weeks ended February 1, 2020 due to an increase in severance costs, stock compensation expense and a supplies write-off. Adjusted for certain one-time and non-cash special items, operating expenses, excluding depreciation and asset impairment charges, decreased by $2.2 million, or 30 basis points as a percentage of net sales for the 13 weeks ended February 1, 2020.
Net loss for the 13 weeks ended February 1, 2020 was $4.9 million, or $0.35 per diluted share, compared to net income of $14.2 million, or $0.95 per diluted share, for the 13 weeks ended February 2, 2019. Adjusted for certain one-time and non-cash special items, net income for the 13 weeks ended February 1, 2020 was $0.59 per diluted share.
Net sales for the 52 weeks ended February 1, 2020 decreased 6.7% to $603.9 million compared to $647.1 million for the 52 weeks ended February 2, 2019. Comparable store sales, including e-commerce sales, decreased 7.1% compared to a decrease of 1.3% in the prior-year period. Kirkland's opened five stores and closed one during the 52-week period ended February 1, 2020. Negative brick-and-mortar traffic was the primary driver of the decline. The 25.3% increase in e-commerce sales was driven by a gain in transactions partially offset by a drop in average ticket.
Gross profit declined from 31.4% to 27.4% of net sales for the 52 weeks ended February 1, 2020, primarily driven by a decrease in merchandise margin due to increased promotional activity, supply chain cost pressures and the deleverage of store occupancy costs. Total operating expenses, excluding depreciation and asset impairment charges, increased from 29.5% to 31.9% of net sales for the 52 weeks ended February 1, 2020, due to the deleverage of store payroll expenses, incremental advertising costs, corporate severance and stock compensation expense. Adjusted for certain one-time and non-cash special items, operating expenses, excluding depreciation and asset impairment charges, remained relatively flat year-over-year and increased by 210 basis points as a percentage of net sales for the 52 weeks ended February 1, 2020.
Net loss for the 52 weeks ended February 1, 2020 was $53.3 million, or $3.79 per diluted share, compared to net income of $3.8 million, or $0.24 per diluted share, for the 52 weeks ended February 2, 2019. Adjusted losses for the 52 weeks ended February 1, 2020 was $22.0 million, or $1.57 per diluted share.
Strategic Priorities and Financial Goals
"We accomplished a great deal in 2019 to evolve our merchandise assortment and improve the omni-channel experience," said Woody Woodward, Chief Executive Officer. "We're encouraged that some of the hard work began to take hold in the fourth quarter, with strong e-commerce growth and better revenues in segments of the assortment including furniture and tabletop.
"Fourth quarter results also reflect additional steps to right size our infrastructure with the planned closure of 28 underperforming stores in the first quarter and approximately $14 million in additional expense reductions as we transition to 2020. We believe there are more opportunities to streamline our supply chain, and we'll continue to optimize our store base and related expenses."
"As we begin 2020, we're focused on realizing our vision to deliver an expanded assortment that can furnish a home of any size on a budget," continued Mr. Woodward. "The growth of pure-play e-commerce operators and the impact on the brick-and-mortar segment has created a void that we believe can be exploited to leverage Kirkland's unique design capabilities and value heritage."
Kirkland's key strategic initiatives include:
Kirkland's financial goals include:
"We have a strong balance sheet to support our objectives and remain optimistic that our plan can return Kirkland's to earnings growth over time. We look forward to providing updates on our progress in future quarters," concluded Mr. Woodward.
The key strategic initiatives and financial goals are based on current information as of March 13, 2020. The information on which these initiatives and financial goals is based is subject to change, and investors are cautioned that the Company may update the initiatives and goals, or any portion thereof, at any time for any reason.
Investor Conference Call and Web Simulcast
Kirkland's will hold its earnings call for the fourth quarter later today at 9:00 a.m. ET. Participating on the call will be Steve Woodward, Chief Executive Officer, and Nicole Strain, Chief Financial Officer. The number to call for the interactive teleconference is (412) 542-4163. A replay of the conference call will be available through Friday, March 20, 2020, by dialing (412) 317-0088 and entering the confirmation number, 10139676.
A live webcast of Kirkland's quarterly conference call will be available online on the Company's Investor Relations Page on March 13, 2020, beginning at 9:00 a.m. ET. The online replay will follow shortly after the call and continue for one year.
About Kirkland's, Inc.
Kirkland's, Inc. is a specialty retailer of home décor in the United States, currently operating 425 stores in 36 states as well as an e-commerce enabled website, www.kirklands.com. The Company's stores present a broad selection of distinctive merchandise, including holiday décor, framed art, furniture, ornamental wall décor, fragrance and accessories, mirrors, lamps, decorative accessories, textiles, housewares, gifts, artificial floral products, frames, clocks and outdoor living items. The Company's stores also offer an extensive assortment of holiday merchandise during seasonal periods as well as items carried throughout the year suitable for gift-giving. More information can be found at www.kirklands.com.
Except for historical information contained herein, the statements in this release are forward-looking and made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and are subject to the finalization of the Company's quarterly financial and accounting procedures. Forward-looking statements involve known and unknown risks and uncertainties, which may cause Kirkland's actual results to differ materially from forecasted results. Those risks and uncertainties include, among other things, the impact of store closures in 2020, the effectiveness of the Company's marketing campaigns, risks related to changes in U.S. policy related to imported merchandise, particularly with regard to the impact of tariffs on goods imported from China and strategies undertaken to mitigate such impact, risks associated with the spread of COVID-19 and its possible impact on the Company's revenues and supply chain, the Company's ability to retain its senior management team, continued volatility in the price of the Company's common stock, the competitive environment in the home décor industry in general and in Kirkland's specific market areas, inflation, fluctuations in cost and availability of products, interruptions in supply chain and distribution systems, including our e-commerce systems and channels, the ability to control employment and other operating costs, availability of suitable retail locations and other growth opportunities, disruptions in information technology systems including the potential for security breaches of Kirkland's or its customers' information, seasonal fluctuations in consumer spending, and economic conditions in general. Those and other risks are more fully described in Kirkland's filings with the Securities and Exchange Commission, including the Company's Annual Report on Form 10-K filed on March 29, 2019 and subsequent reports. Kirkland's disclaims any obligation to update any such factors or to publicly announce results of any revisions to any of the forward-looking statements contained herein to reflect future events or developments.
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, adjusted loss and adjusted diluted loss per share. These measures are not in accordance with, and are not intended as alternatives to, GAAP. 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 measures, in evaluating our operational performance.
The Company defines EBITDA as net income or loss before interest, provision for income tax, and depreciation and amortization and adjusted EBITDA as EBITDA excluding the impact of special items. The Company defines adjusted net loss and adjusted diluted loss per share by adjusting the applicable GAAP measure to remove the impact of certain one-time and non-cash special items.
Non-GAAP 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 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 following table shows a reconciliation of operating (loss) income to EBITDA and adjusted EBITDA for the 13 weeks and 52 weeks ended February 1, 2020 and February 2, 2019 and a reconciliation of net (loss) income and diluted (loss) earnings per share to adjusted net income (loss) and adjusted diluted earnings (loss) per share for the 13 weeks and 52 weeks ended February 1, 2020 and February 2, 2019.
View original content to download multimedia:http://www.prnewswire.com/news-releases/kirklands-reports-fourth-quarter-and-fiscal-2019-results-301022697.html
SOURCE Kirkland's, Inc.