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Kirkland's Reports Fourth Quarter And Fiscal 2017 Results

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NASHVILLE, Tenn., March 16, 2018 /PRNewswire/ -- Kirkland's, Inc. (NASDAQ: KIRK) today reported financial results for the 14-week and 53-week periods ended February 3, 2018.

Kirkland's Inc. Logo (PRNewsFoto/Kirkland's, Inc.)

Net sales for the 14 weeks ended February 3, 2018 were $224.6 million compared with $203.2 million for the 13 weeks ended January 28, 2017. The extra week in fiscal 2017 was responsible for approximately $10.0 million of net sales during the fourth quarter. On a 13-week comparison, comparable store sales, including e-commerce sales, increased 2.0% against a decline of 4.6% in the prior year. Kirkland's opened five stores and closed two during the period, bringing the total number of stores to 418 at year end.

Net sales for the 53 weeks ended February 3, 2018 were $634.1 million compared with $594.3 million for the 52 weeks ended January 28, 2017. On a 52-week comparison, comparable store sales, including e-commerce sales, increased 0.3% against a decline of 2.9% in the prior year. Kirkland's opened 31 stores and closed 17 during the 53-week period ended February 3, 2018.

For the 14 weeks ended February 3, 2018, the Company reported net income of $12.9 million, or $0.79 per diluted share compared with net income of $14.5 million, or $0.90 per diluted share, for the 13 weeks ended January 28, 2017.

For the 53 weeks ended February 3, 2018, the Company reported net income of $5.3 million, or $0.33 per diluted share compared with net income of $11.0 million, or $0.68 per diluted share, for the 52 weeks ended January 28, 2017.

"Our fourth quarter results were in line with our February performance update and reflected the ongoing shift in consumer buying patterns in the retail space," said Mike Madden, President and Chief Executive Officer. "We made important investments in 2017 to improve execution and refocus our merchandise assortments, and these are driving better results in metrics including average ticket, conversion and clearance margin. We're encouraged by our progress and believe these initiatives can improve earnings performance as they continue to mature. We're also pleased with the 37% growth rate and improved efficiency we achieved in e-commerce during 2017."

"As we look to 2018, we plan to build on this momentum and address the changing landscape by prioritizing investments such as 'Buy Online, Pickup in Store,' the expansion of our vendor direct program, and enhancements to the mobile experience while maintaining our focus on operating discipline. We're also fast-tracking more testing to drive innovation and pursue new avenues for growth. Our goal is to leverage our omni-channel platform to inspire customers within our well-established value model combining style and affordability. Our balance sheet remains strong, providing us with the flexibility to invest further in these critical areas while returning excess cash to shareholders."

Fiscal 2018 Outlook
Kirkland's is introducing its outlook for fiscal 2018 as follows:

Store Growth:

For the 52-week period ending February 2, 2019 ("fiscal 2018"), the Company expects square footage growth of approximately 2% to 3% compared to 5% in 2017, with 20 to 25 new store openings and 10 to 15 store closings.



Sales:

On a 52-week basis, the Company expects total sales for fiscal 2018 to increase 3% to 5% compared with fiscal 2017. This level of sales performance implies a comparable store sales increase in the range of 1% to 2%, driven by growth in e-commerce through kirklands.com.



Earnings:

The Company expects fiscal 2018 diluted earnings per share to be in the range of $0.50 to $0.60. The full year earnings projection assumes a tax rate of approximately 24% compared with a rate of 46% in fiscal 2017.



Cash Flow:          

Capital expenditures in fiscal 2018, which are driven primarily by new store openings and investments in omni-channel and supply chain capabilities, are estimated to range between $26 million and $29 million compared with approximately $28 million in fiscal 2017.

This updated performance outlook is based on current information as of March 16, 2018. The information on which this outlook is based is subject to change, and investors are cautioned that the Company may update its full year business outlook 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 11:00 a.m. ET. Participating on the call will be Mike Madden, President and Chief Executive Officer, and Nicole Strain, Interim 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 23, 2018, by dialing (412) 317-0088 and entering the confirmation number, 10116761.

A live webcast of Kirkland's quarterly conference call will be available online at ir.kirklands.com or https://www.webcaster4.com/Webcast/Page/957/24474 on March 16, 2018, beginning at 11:00 a.m. ET. The online replay will follow shortly after the call and continue for one year.

About Kirkland's, Inc.
Kirkland's, Inc. was founded in 1966 and is a specialty retailer of home décor in the United States. Although originally focused in the Southeast, the Company has grown beyond that region and currently operates 420 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 framed art, mirrors, candles, lamps, picture frames, accent rugs, garden accessories and artificial floral products.  The Company's stores also offer an extensive assortment of gifts, as well as seasonal merchandise.  More information can be found at www.kirklands.com.

Forward-Looking Statements
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 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 31, 2017 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.

 

KIRKLAND'S, INC.

UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF INCOME

(In thousands, except per share data)



14-Week Period
Ended


13-Week Period
Ended


February 3, 2018


January 28, 2017

Net sales

$                224,614


$                203,160

Cost of sales (1)

145,483


128,965

Gross profit

79,131


74,195

Operating expenses:




Compensation and benefits

36,339


32,770

Other operating expenses

19,798


16,816

Depreciation (exclusive of depreciation included in cost of sales) (1)

1,901


1,631

Total operating expenses

58,038


51,217

Operating income

21,093


22,978

Other income, net

(211)


(10)

Income before income taxes

21,304


22,988

Income tax expense

8,439


8,445

Net income

$                  12,865


$                  14,543

Earnings per share:




Basic

$                      0.80


$                      0.91

Diluted

$                      0.79


$                      0.90

Shares used to calculate earnings per share:




Basic

15,991


15,904

Diluted

16,223


16,221



(1)

During the fourth quarter of 2017, we reclassified supply chain and store-related depreciation expense to cost of sales whereas it was previously included in depreciation on our financial statements. We also reclassified prior year amounts to reflect this change. This reclassification increased cost of sales by approximately $5.4 million and $5.0 million for the 14 and 13 weeks ended February 3, 2018 and January 28, 2017, respectively, with equal and offsetting decreases to depreciation. This reclassification had no impact on net sales, operating income, net income or earnings per share.

 

 

KIRKLAND'S, INC.

UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF INCOME

(In thousands, except per share data)



53-Week Period
Ended


52-Week Period
Ended


February 3, 2018


January 28, 2017

Net sales

$                634,117


$                594,328

Cost of sales (1)

426,581


391,836

Gross profit

207,536


202,492

Operating expenses:




Compensation and benefits

116,895


110,277

Other operating expenses

74,299


68,873

Depreciation (exclusive of depreciation included in cost of sales) (1)

6,990


6,343

Total operating expenses

198,184


185,493

Operating income

9,352


16,999

Other (income) expense, net

(464)


24

Income before income taxes

9,816


16,975

Income tax expense

4,520


5,929

Net income

$                    5,296


$                  11,046

Earnings per share:




Basic

$                      0.33


$                      0.70

Diluted

$                      0.33


$                      0.68

Shares used to calculate earnings per share:




Basic

15,973


15,859

Diluted

16,166


16,145



(1)

During the fourth quarter of 2017, we reclassified supply chain and store-related depreciation expense to cost of sales whereas it was previously included in depreciation on our financial statements. We also reclassified prior year amounts to reflect this change. This reclassification increased cost of sales by approximately $20.2 million and $19.0 million for the 53 and 52 weeks ended February 3, 2018 and January 28, 2017, respectively, with equal and offsetting decreases to depreciation. This reclassification had no impact on net sales, operating income, net income or earnings per share.

 

 

KIRKLAND'S, INC.

UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS

(In thousands)



February 3,
2018


January 28,
2017

ASSETS




Current assets:




Cash and cash equivalents

$                  80,156


$                  63,937

Inventories, net (1)

81,255


73,191

Prepaid expenses and other current assets (1)

15,988


15,912

Total current assets

177,399


153,040

Property and equipment, net

113,039


110,870

Deferred income taxes

2,216


1,198

Other assets

6,543


5,038

Total assets

$                299,197


$                270,146





LIABILITIES AND SHAREHOLDERS' EQUITY




Current liabilities:




Accounts payable

$                  53,125


$                  37,898

Income taxes payable

4,943


6,273

Accrued expenses

38,872


30,270

Total current liabilities

96,940


74,441

Deferred rent

53,303


52,656

Deferred income taxes


479

Other liabilities

8,193


8,757

Total liabilities

158,436


136,333

Net shareholders' equity

140,761


133,813

Total liabilities and shareholders' equity

$                299,197


$                270,146



(1)

During the fourth quarter of 2017, we reclassified supplies inventory to prepaid expenses and other current assets whereas it was previously included in inventories, net, on our financial statements. We also reclassified prior year amounts to reflect this change. This reclassification increased prepaid expenses and other current assets by approximately $2.3 million for the years ended February 3, 2018 and January 28, 2017, with equal and offsetting decreases to inventories, net.

 

 

KIRKLAND'S, INC.

UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(In thousands)



53-Week Period
Ended


52-Week Period
Ended


February 3, 2018


January 28, 2017

Net cash provided by (used in):




Operating activities

$                  45,125


$                  51,926

Investing activities

(28,424)


(32,176)

Financing activities

(482)


(165)

Cash and cash equivalents:




Net increase

16,219


19,585

Beginning of the period

63,937


44,352

End of the period

$                  80,156


$                  63,937

 

 

Contact:               

Kirkland's

SCR Partners


Nicole Strain

Jeff Black: (615) 760-3679


(615) 872-4800                                   

Tripp Sullivan: (615) 760-1104



IR@Kirklands.com

 

 

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SOURCE Kirkland's, Inc.

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