KIRKLAND'S, INC (KIRK) SEC Filing 10-Q Quarterly report for the period ending Saturday, November 3, 2018

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KIRKLAND’S REPORTS THIRD QUARTER 2018 RESULTS

Net sales increased 6.6% to $154.6 million
Comparable sales increased 1.4%; e-commerce revenue up 22.9%
Loss per diluted share of $0.18; adjusted loss per diluted share of $0.13 on improved EBITDA margin
Annual EPS guidance reaffirmed at $0.50 to $0.60, excluding new CEO charges

NASHVILLE, Tenn. (November 29, 2018) — Kirkland’s, Inc. (NASDAQ: KIRK) today reported financial results for the 13-week and 39-week periods ended November 3, 2018.
“I am excited to join the Kirkland’s team and encouraged with the ongoing initiatives as well as the energy across the company,” said Steve “Woody” Woodward, Chief Executive Officer. “At the same time, I believe there is significant opportunity to improve the consistency and relevancy of our assortments to make Kirkland’s the destination of choice for quality home décor at an affordable price.”
Mike Cairnes, President and Chief Operating Officer added, “Quarterly performance benefitted from strong sell through of seasonal merchandise and continued progress in operating performance. E-commerce trends improved in the quarter while expenses and inventory remained well managed. We are operating the business with greater efficiency and believe we are well positioned to deliver a solid holiday season.”
Financial Performance
Net sales for the 13 weeks ended November 3, 2018 increased 6.6% to $154.6 million compared with $145.0 million for the 13 weeks ended October 28, 2017. Net sales for the third quarter were driven by an increase in both store count and e-commerce revenue. Kirkland’s opened six stores and closed no stores during the third quarter, bringing the total number of stores to 432 at quarter-end. Comparable store sales, including e-commerce sales, increased 1.4% compared with an increase of 0.7% in the prior-year quarter. Brick and mortar traffic trends improved versus year-ago levels; negative store traffic was partially offset by an improvement in conversion and average ticket. E-commerce sales were driven by gains in traffic and conversion.
Net loss for the 13 weeks ended November 3, 2018 was $2.8 million, or ($0.18) per diluted share compared with a net loss of $2.4 million, or ($0.15) per diluted share, for the 13 weeks ended October 28, 2017. Adjusted loss, excluding charges associated with the transition of the Company’s Chief Executive Officers, for the 13 weeks ended November 3, 2018 was $2.0 million, or ($0.13) per diluted share. The decline in gross profit as a percentage of sales in the third quarter was driven by a decline in merchandise margin primarily due to higher inbound freight costs and the deleverage of store occupancy costs. Total operating expenses as a percentage of sales declined versus the prior-year period.
Net sales for the 39 weeks ended November 3, 2018 increased 5.2% to $430.9 million compared with $409.5 million for the 39 weeks ended October 28, 2017. Comparable store sales for the 39 weeks ended November 3, 2018, including e-commerce sales, decreased 0.3% compared with a decrease of 0.6% in the prior-year period. Kirkland’s opened 22 stores and closed eight during the 39-week period ended November 3, 2018.
Net loss for the 39 weeks ended November 3, 2018 was $10.4 million, or ($0.66) per diluted share compared with a net loss of $7.6 million, or ($0.48) per diluted share, for the 39 weeks ended October 28, 2017. Adjusted loss, excluding severance and other charges associated with the transition of the Company’s Chief Executive Officers, for the 39 weeks ended November 3, 2018 was $8.5 million, or ($0.54) per diluted share.


The following information was filed by KIRKLAND'S, INC on Thursday, November 29, 2018 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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  • 18487863_18
    Financial - Expense
    Cost of sales has various distinct components including: product cost of sales (including inbound freight, damages and inventory shrinkage), store occupancy costs (including rent and depreciation of leasehold improvements and other property and equipment), outbound freight costs (including e-commerce shipping) and central distribution costs (including operational costs and depreciation of leasehold improvements and other property and equipment).
  • 18487863_47
    Financial - Expense
    The decrease in the tax rate for the third quarter of fiscal 2018 compared to the prior-year quarter was primarily due to the effect of the U.S. Tax Cuts and Jobs Act, which reduced the U.S. federal corporate rate from 35% to 21% effective as of January 1, 2018, which was partially offset by additional tax expense related to stock compensation activity.
  • 18487863_78
    Financial - Expense
    The decrease in the tax rate for the first nine months of fiscal 2018 compared to the prior-year period was primarily due to the effect of the U.S. Tax Cuts and Jobs Act, which reduced the U.S. federal corporate rate from 35% to 21% effective as of January 1, 2018, which was partially offset by additional tax expense related to stock compensation activity.
  • 18487863_149
    Revenue - Product
    Our business is highly seasonal and our fourth quarter contributes a disproportionate amount of our net sales, net income and cash flow, and any factors negatively impacting us during our fourth quarter could reduce our net sales, net income and cash flow, leaving us with excess inventory and making it more difficult for us to finance our capital requirements.
  • 18487863_132
    Other - Other
    The factors listed below under the heading "Risk Factors" and in the other sections of this Form 10-Q provide examples of risks, uncertainties and events that could cause our actual results to differ materially from the expectations expressed in our forward-looking statements.
  • 18487863_44
    Revenue - Product
    The decrease as a percentage of net sales was primarily due to cost control initiatives and favorable self-insured workers? compensation and general liability claims trends.
  • 18487863_75
    Revenue - Product
    The decrease as a percentage of net sales was primarily due to cost control initiatives and favorable self-insured workers? compensation and general liability claims trends.
  • 18487863_62
    Revenue - Product
    For e-commerce, comparable sales benefited from an increase in transactions due to higher website traffic.
  • 18487863_140
    Other - Other
    We may not be able to successfully respond to technological change, our website could become obsolete and our financial results and conditions could be adversely affected.
  • 18487863_90
    Financial - Expense
    The change in the amount of cash from operations as compared to the prior-year period was primarily due to timing of accrued expenses and other noncurrent liabilities and a decline in operating performance.
  • 18487863_119
    Financial - Shares / Equity
    The table below sets forth selected stock repurchase plan information (in thousands, except share amounts) for the periods indicated: As of November 3, 2018, we had approximately $9.0 million remaining under our new stock repurchase plan.
  • 18487863_113
    Other - Other
    On August 22, 2017, we announced that our Board of Directors authorized a stock repurchase plan providing for the purchase in the aggregate of up to $10 million of our outstanding common stock.
  • 18487863_115
    Other - Other
    On September 24, 2018, the Company announced that its Board of Directors authorized a new stock repurchase plan providing for the purchase in the aggregate of up to $10 million of the Company?s outstanding common stock.
  • 18487863_16
    Revenue - Product
    Increases in comparable store sales are an important factor in maintaining or increasing the profitability of existing stores.
  • 18487863_103
    Financial - Debt
    Borrowings under the Credit Agreement are subject to certain conditions and contain customary events of default, including, without limitation, failure to make payments, a cross-default to certain other debt, breaches of covenants, breaches of representations and warranties, a change in control, certain monetary judgments and bankruptcy and ERISA events.
  • 18487863_134
    Other - Other
    We caution readers that the following important factors, among others, have in the past, in some cases, affected and could in the future affect our actual results of operations and cause our actual results to differ materially from the results expressed in any forward-looking statements made by us or on our behalf.
  • 18487863_143
    Other - Other
    Our results could be negatively impacted if our merchandise offering suffers a substantial impediment to its reputation due to real or perceived quality issues.
  • 18487863_24
    Revenue - Product
    The impact of net new store growth contributed an increase in net sales of $7.6 million.
  • 18487863_55
    Revenue - Product
    The impact of net new store growth contributed an increase in net sales of $22.6 million.
  • 18487863_97
    Other - Other
    Net cash used in financing activities was approximately $10.5 million for the first nine months of fiscal 2018 and was primarily related to the repurchase and retirement of common stock pursuant to our stock repurchase plan.
  • 18487863_98
    Financial - Shares / Equity
    Net cash used in financing activities was approximately $166,000 for the first nine months of fiscal 2017 and was related to the repurchase and retirement of common stock pursuant to our stock repurchase plan and net share settlement of stock options and restricted stock, partially offset by employee stock purchases.
  • 18487863_161
    Revenue - Product
    We depend on a number of vendors to supply our merchandise, and any delay in merchandise deliveries from certain vendors may lead to a decline in inventory which could result in a loss of net sales.
  • 18487863_146
    Revenue - Product
    We are exposed to the risk of natural disasters, pandemic outbreaks, global political events, war and terrorism that could disrupt our business and result in lower sales, increased operating costs and capital expenditures.
  • 18487863_118
    Financial - Shares / Equity
    The stock repurchase plan does not require us to repurchase any specific number of shares, and we may terminate the repurchase plan at any time.
  • 18487863_67
    Financial - Expense
    Store occupancy and depreciation costs increased approximately 90 basis points as a percentage of net sales, primarily due to a favorable $1.2 million one-time out-of-period adjustment of ancillary rent payments in the prior-year period and an unfavorable $0.7 million one-time out-of-period adjustment to deferred rent in the current period, as well as deleverage from negative comparable store sales.
  • 18487863_34
    Financial - Earnings
    Gross profit as a percentage of net sales decreased 120 basis points from 31.4% in the third quarter of fiscal 2017 to 30.2% in the third quarter of fiscal 2018.
  • 18487863_65
    Financial - Earnings
    Gross profit as a percentage of net sales decreased 150 basis points from 31.4% in the first nine months of fiscal 2017 to 29.9% in the first nine months of fiscal 2018.
  • 18487863_9
    Revenue - Geography
    This combination of ever-changing and stylish merchandise, value pricing and a stimulating online and store experience has led to our emergence as a leader in home decor and enabled us to develop a strong customer base.
  • 18487863_167
    Other - Other
    The market price for our common stock might be volatile and could result in a decline in the value of your investment.
  • 18487863_26
    Revenue - Product
    Comparable store sales, including e-commerce sales, increased 0.7% in the prior-year period.
  • 18487863_144
    Financial - Shares / Equity
    We face an extremely competitive specialty retail business market, and such competition could result in a reduction of our prices and a loss of our market share.
  • 18487863_39
    Financial - Expense
    Central distribution costs, including depreciation, decreased 10 basis points as a percentage of net sales.
  • 18487863_25
    Revenue - Product
    This was in addition to an increase in comparable store sales, including e-commerce sales, of 1.4%, or $2.0 million for the third quarter of fiscal 2018 compared to the prior-year period.
  • 18487863_95
    Other - Other
    We expect that capital expenditures for fiscal 2018 will be in the range of $29 to $31 million, primarily for the purpose of leasehold improvements at new stores and investments in supply chain and omni-channel technologies.
  • 18487863_4
    Other - Other
    Factors that could cause or contribute to any differences include, but are not limited to, those discussed under the caption "Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private Securities Litigation Reform Act of 1995" and under Part II, Item 1A - "Risk Factors".
  • 18487863_163
    Revenue - Product
    Our success is highly dependent on our planning and control processes and our supply chain, and any disruption in or failure to continue to improve these processes may result in a loss of net sales and net income.
  • 18487863_166
    Other - Other
    If we fail to maintain an effective system of internal control, we may not be able to accurately report our financial results.
  • 18487863_108
    Other - Other
    As of November 3, 2018, we were in compliance with the covenants in the Credit Agreement, and there were no outstanding borrowings under the credit facility, with approximately $75.0 million available for borrowing.
  • 18487863_94
    Other - Other
    Capital expenditures in the prior-year period related primarily to the opening of 26 new stores during the period, improvements to our supply chain and information technology systems, and investments in our existing stores.
  • 18487863_23
    Revenue - Product
    Net sales increased 6.6% to $154.6 million for the third quarter of fiscal 2018 compared to $145.0 million for the prior-year period.
  • 18487863_54
    Revenue - Product
    Net sales increased 5.2% to $430.9 million for the first nine months of fiscal 2018 compared to $409.5 million for the prior-year period.
  • 18487863_12
    Revenue - Product
    We use comparable store sales to measure our ability to achieve sales increases from stores that have been open for at least 13 full fiscal months.
  • 18487863_160
    Other - Other
    Our hardware and software systems are vulnerable to damage that could harm our business.
  • 18487863_128
    Other - Other
    Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact.
  • 18487863_150
    Other - Other
    Failure to control merchandise returns could negatively impact the business.
  • 18487863_93
    Other - Other
    The capital expenditures in the current year period related primarily to the opening of 22 new stores during the period, investments in information technology systems, investments in our existing stores, hardware lease buyouts and improvements to our supply-chain.
  • 18487863_38
    Financial - Expense
    Outbound freight costs, which include e-commerce shipping, increased approximately 20 basis points as a percentage of net sales, which was driven by an increase in e- commerce shipping costs due to the further expansion of this channel.
  • 18487863_68
    Financial - Expense
    Outbound freight costs, which include e-commerce shipping, increased approximately 50 basis points as a percentage of net sales, which was driven by an increase in e-commerce shipping costs due to the further expansion of this channel.
  • 18487863_159
    Other - Other
    Failure to protect the integrity and security of individually identifiable data of our customers and employees could expose us to litigation and damage our reputation; the expansion of our e-commerce Business has inherent cybersecurity risks that may result in business disruptions.
  • 18487863_148
    Financial - Earnings
    Our profitability is vulnerable to inflation and cost increases.
  • 18487863_162
    Revenue - Geography
    We are dependent on foreign imports for a significant portion of our merchandise, and any changes in the trading relations and conditions between the United States and the relevant foreign countries may lead to a decline in inventory resulting in a decline in net sales, or an increase in the cost of sales resulting in reduced gross profit.
  • 18487863_19
    Financial - Expense
    Product and outbound freight costs are variable, while occupancy and central distribution costs are largely fixed.
  • 18487863_164
    Other - Other
    We depend on key personnel, and, if we lose the services of any member of our senior management team and are unable to replace them with qualified individuals on a timely basis, we may not be able to run our business effectively.

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  • Form Type: Quarterly
  • Number of times amended: 0
  • Accession Number: 0001056285-18-000086
  • Submitted to the SEC: Thursday, December 6, 2018 4:25:31 PM EST
  • Accepted by the SEC: Thursday, December 6, 2018
  • Period ending: November 2018
  • Industry: Retail Stores