KIRKLAND'S HOME REPORTS FIRST QUARTER 2024 RESULTS
NASHVILLE, Tenn.,
First Quarter 2024 Summary
-
Net sales of
$91.8 million ; Overall comparable sales decreased 3.5%, inclusive of 2.8% 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 , a$2.8 million improvement compared to Q1 2023. -
Adjusted EBITDA loss of
$4.5 million , a$1.3 million improvement compared to Q1 2023. - 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 and$48.9 million in outstanding debt. - Announces cost savings initiatives and retains financial advisor to review strategic alternatives.
Management Commentary
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
As 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
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 $6 million of savings in fiscal 2024 and estimates approximately $7 million in ongoing annual pre-tax savings from these initiatives.
In addition, on
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
Date:
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
Toll-free replay number: (877) 344-7529
International replay number: (412) 317-0088
Replay ID: 9351728
About
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
1-615-872-4800 |
ICR
1-203-682-8200 |
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (In thousands, except per share data) |
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13-Week Period Ended |
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2024 |
|
|
2023 |
|
||
Net sales |
|
$ |
91,753 |
|
|
$ |
96,875 |
|
Cost of sales |
|
|
64,685 |
|
|
|
71,004 |
|
Gross profit |
|
|
27,068 |
|
|
|
25,871 |
|
Operating expenses: |
|
|
|
|
|
|
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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 |
|
UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS (In thousands) |
||||||||||||
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2024 |
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2024 |
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|
2023 |
|
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ASSETS |
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Current assets: |
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|
|
|
|
|
|
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|||
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 |
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Current liabilities: |
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|
|
|
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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 |
|
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (In thousands) |
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13-Week Period Ended |
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|
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) |
|
|
|
|
|
|
|
|
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Cash flows from investing activities: |
|
|
|
|
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|
||
Proceeds from sale of property and equipment |
|
|
6 |
|
|
|
60 |
|
Capital expenditures |
|
|
(770) |
|
|
|
(846) |
|
Net cash used in investing activities |
|
|
(764) |
|
|
|
(786) |
|
|
|
|
|
|
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Cash flows from financing activities: |
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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: |
|
|
|
|
|
|
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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
UNAUDITED NON-GAAP MEASURE RECONCILIATION (In thousands, except per share data) |
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|
13-Week Period Ended |
|
|||||
|
|
|
|
|
|
|
||
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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