Kirkland's Q1 Earnings & Revs Beat Ests - Analyst Blog

Kirkland's Inc.'s KIRK first-quarter 2014 earnings of 12 cents per share surpassed both the year-ago results as well as the Zacks Consensus Estimate of 10 cents by 20.0%, backed by higher sales and comps which offset the highly promotional environment in the industry. Earnings were at the higher end of management's guidance range of 10 to 12 cents.

Quarter in Detail

Net sales went up 6.9% to $108.3 million compared with $101.2 million in the first quarter of fiscal 2014. Sales exceeded management's expected range of $105–$106 million due to higher-than-expected comps.

Although sales were soft in the first two months (February and March) of the quarter due to inclement weather, the situation improved as the quarter progressed. Sales surpassed the Zacks Consensus Estimate of $106.0 million by 5.7%.

Kirkland's reported 5% gain in comps against a decline of 2.3% in the prior-year quarter driven by decent gains in transactions and tickets. E-commence sales went up 38% year over year. Same-store sales also surpassed management's guidance of comps growth of 2–3% announced during fourth-quarter fiscal 2013 earnings conference call.

Strong comps in Florida, Texas and South East drove sales during the quarter. Merchandise like textiles, lamps, housewares and holiday items recorded strong sales during the quarter.

On a year-over-year basis, gross profit went up 8.2% to $42.6 million, while gross profit margin inflated 40 basis points to 39.4% of sales from the prior year buoyed by higher sales and lower inbound freight costs.

During first-quarter fiscal 2014, Kirkland's opened seven stores and closed seven stores, higher than its guidance.

OtherFinancial Updates

During the first quarter earnings conference call, Kirkland's announced a stock repurchase plan of $30 million to be completed within a year.

Kirkland's exited the quarter with cash and cash equivalents of $82.4 million compared with $89.1 million in the prior quarter. Deferred rent and other long-term liabilities were $44.8 million compared with $44.2 million in the last quarter.

Fiscal Second-Quarter 2014 Guidance

Based on higher operating expenses due to higher depreciation, corporate personnel and e-Commerce expenses, management expects fiscal second-quarter 2014 loss per share in the range of 3 to 6 cents. Net sales are expected in the range of $104 to $105 million with 3–4% increase in comparable store sales. The company expects to open approximately eight stores while closing approximately two during the quarter.

Fiscal 2014 Guidance

For fiscal 2014, Kirkland's maintained its guidance and expects earnings in the range of 90 cents to $1.00 per share.  Net sales are expected to increase 8% to 10%. Kirkland's expects to open 35 to 40 stores while closing 10 to 15 during the period. For the fiscal year, Kirkland's expects margins to improve due to lower markdown rate and lower inbound freight costs.

Kirkland's carries a Zacks Rank #3 (Hold). Other stocks to consider in the retail sector include Citi Trends Inc. CTRN, Foot Locker Inc. FL and Genesco Inc. GCO. While Citi Trends sports a Zacks Rank #1 (Strong Buy), Foot Locker and Genesco carry a Zacks Rank #2 (Buy).