- Published: 20 March 2009
- Written by Editor
Kirkland's Reports Fourth Quarter Results
Fourth Quarter Highlights: -- Comparable store sales increase 5.3%, Diluted EPS increases 850% to $0.76, Available cash improves to $36.4 million, or $1.84 per diluted share
Fiscal 2008 Highlights: -- Comparable store sales increase 3.6%, EPS of $0.47 reverses prior-year loss, Ends the year with no debt and no draws all year on the line of credit, Issues general operating and financial guidance for Fiscal 2009
JACKSON, Tenn., March 20 /PRNewswire-FirstCall/ -- Kirkland's, Inc. (Nasdaq: KIRK) today reported financial results for the 13-week and 52-week periods ended January 31, 2009.
Net sales for the 13-week period ended January 31, 2009, were $133.6 million compared with $138.3 million for the 13-week period ended February 2, 2008.
Comparable store sales for the fourth quarter of fiscal 2008 increased 5.3% compared with a 12.6% comparable store sales decrease in the fourth quarter of fiscal 2007. Comparable store sales in mall stores increased 8.2% for the fourth quarter, and comparable store sales in off-mall stores increased 4.0%. The Company closed 22 stores during the quarter to end the period with 299 stores, compared with 335 stores at the end of the prior-year quarter.
Net sales for the 52-week period ended January 31, 2009, were $391.3 million compared with $396.7 million for the 52-week period ended February 2, 2008. Comparable store sales for the 52-week period ended January 31, 2009, increased 3.6% compared with a 13.3% decrease in the prior-year period. During the 52-week period ended January 31, 2009, comparable store sales in mall stores increased 6.9% while comparable store sales in off-mall stores increased 2.1%.
The Company reported net income of $15.0 million, or $0.76 per diluted share, for the 13-week period ended January 31, 2009, compared with net income of $1.5 million, or $0.08 per diluted share, in the 13-week period ended February 2, 2008. Income tax expense for the 13-week period ended January 31, 2009 includes a benefit of approximately $3.4 million, or $0.17 per diluted share, related to the reversal of a portion of the valuation allowance on the Company's deferred tax assets established in fiscal 2007. The prior-year period included an impairment charge of $1.4 million, or $0.07 per share, related to 100% of the carrying value of its goodwill, and impairment charges totaling $1.3 million, or $0.07 per share, related to fixed assets associated with underperforming stores.
The Company reported net income of $9.3 million, or $0.47 per diluted share, for the 52-week period ended January 31, 2009, compared with a net loss of $25.9 million, or $1.33 per share, for the 52-week period ended February 2, 2008. Income tax expense for the 52-week period ended January 31, 2009 includes a benefit of approximately $3.4 million, or $0.17 per diluted share, related to the reversal of a portion of the valuation allowance on the Company's deferred tax assets established in fiscal 2007. The results for the prior year included the following items:
(i) The Company recorded an impairment charge of $1.4 million, or
$0.07 per share, related to 100% of the carrying value of its
goodwill.
(ii) The Company recorded impairment charges totaling $2.1
million, or $0.11 per share, related to fixed assets
associated with underperforming stores.
(iii) In connection with a restructuring and personnel reduction
completed in the third quarter of fiscal 2007, the Company
recorded severance charges totaling $1.0 million, or $0.05
per share.
(iv) The Company recorded $1.3 million, or $0.07 per share, in
relocation costs associated with its establishment of a
corporate office in Nashville, Tennessee.
(v) The Company recorded a valuation allowance of $8.2 million,
or approximately $0.42 per diluted share, on its deferred tax
assets in fiscal 2007.
Robert Alderson, Kirkland's President and Chief Executive Officer, said, "We finished fiscal 2008 on a very strong note with our fourth consecutive quarter of positive comparable store sales, strong year-over-year improvement in merchandise and operating margins, an extraordinary increase in fourth quarter earnings and over $36 million of cash. Our goal for the year was to show improvement in every quarter, and we more than exceeded that target. Inventories remain on-plan and current, and our liquidity position is the strongest it has been in several years. While it is early yet, we are also encouraged by positive sales and margin trends experienced so far in the first quarter of 2009.
"The decisions many retailers are being forced to make in today's economy related to paring unproductive stores, renegotiating leases, and cutting overhead costs were already made or underway at Kirkland's over the last 16 months. With solid momentum and the merchandise reconnection we have made with our core customers, we believe we are in the unique position of pursuing a disciplined strategy with respect to new store openings. These openings will consist of replacements of closing mall stores and selected new openings in core geographic areas. We expect to return to net store growth in the 2010 to 2011 timeframe. The expectations set out below for fiscal 2009 reflect our confidence in our business strategy and our excellent financial condition. While we cannot control the macroeconomic environment and its effect on consumer spending, we believe we are well-positioned. We are confident that we have assembled the right team, have the merchandise in the stores that resonates with and delivers value for customers, and have the operational and financial resources and requisite discipline to execute in this environment."
Fiscal 2009 Outlook
Based on current sales and margin trends, the Company has established the following targets and expectations for fiscal 2009. These expectations do not account for a year-over-year deterioration in the macroeconomic environment on the scale experienced in fiscal 2008. Should the recession continue to worsen throughout fiscal 2009, the Company will revise its expectations accordingly.
Store Base: The Company started fiscal 2009 with 299 stores compared with
335 stores a year ago. For fiscal 2009, the store base is
expected to average approximately 30 stores less per quarter
than the comparable quarters of fiscal 2008. Closings for
the year are expected to reach approximately 35 to 40 stores
with approximately half of those closing during the first
half of 2009 and the other half closing after the holiday
season in January 2010. New store openings are expected to
be approximately 15 to 20 stores in fiscal 2009 with the
largest concentration in the third and fourth quarters.
Net Sales: Full year sales are expected to be moderately below fiscal
2008 based on the smaller store base throughout the year and
new store openings weighted towards the second half of the
year. While first quarter sales trends to date are positive,
future comparable store sales gains are difficult to predict
in the current environment.
Margins: Full year merchandise and operating margins are expected to
be comparable to or modestly above fiscal 2008 levels. Should
the economy continue to weaken through the year, merchandise
margin would most likely come under more pressure compared
with operating margin, which should continue to benefit from
lower store occupancy costs and lower depreciation expenses.
Earnings: Full year pre-tax earnings are expected to be comparable to
or modestly above fiscal 2008 levels. The Company's income
tax rate will be difficult to model in fiscal 2009 due to the
status of the remaining valuation allowance on the deferred
tax assets and the accounting rules that govern the timing of
any changes to the amount of the valuation allowance.
Therefore, operating income and pre-tax income will be more
relevant measurements of business performance in fiscal 2009.
Cash Flow: The Company expects to generate positive cash flow for the
year with no borrowings expected on its revolving line of
credit.
Investor Conference Call and Web Simulcast
Kirkland's will host a conference call today, at 11:00 a.m. ET to discuss its results of operations for the fourth quarter of fiscal 2008. The number to call for this interactive teleconference is (303) 262-2053. A replay of the conference call will be available through March 27, 2009, by dialing (303) 590-3000 and entering the confirmation number, 11125881#.
The live broadcast of Kirkland's quarterly conference call will be available online at the Company's website, www.kirklands.com, or at http://www.videonewswire.com/event.asp?id=55365 on March 20, 2009, beginning at 11:00 a.m. ET. The online replay will follow shortly after the call and continue for one year.
Kirkland's, Inc. was founded in 1966 and is a specialty retailer of home decor in the United States. Although originally focused in the Southeast, the Company has grown beyond that region and currently operates 295 stores in 34 states. 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.
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. 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 decor industry in general and in Kirkland's specific market areas, inflation, product availability and growth opportunities, seasonal fluctuations, 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 May 1, 2008. 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
(dollars in thousands, except per share amounts)
13 Weeks 13 Weeks
Ended Ended
January 31, February 2,
2009 2008
Net sales $133,638 $138,285
Cost of sales 81,991 95,429
Gross profit 51,647 42,856
Operating expenses:
Operating expenses 30,995 29,277
Relocation expenses - 101
Impairment charges - 2,641
Depreciation and amortization 4,901 5,647
Operating income 15,751 5,190
Interest expense 30 250
Interest income (10) (24)
Other income (178) (47)
Income before income taxes 15,909 5,011
Income tax provision 887 3,522
Net income $15,022 $1,489
Earnings per share:
Basic $0.76 $0.08
Diluted $0.76 $0.08
Shares used to calculate earnings per
share:
Basic 19,649 19,570
Diluted 19,837 19,570
KIRKLAND'S, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share amounts)
52 Weeks 52 Weeks
Ended Ended
January 31, February 2,
2009 2008
Net sales $391,277 $396,701
Cost of sales 256,228 283,040
Gross profit 135,049 113,661
Operating expenses:
Operating expenses 106,287 113,484
Severance charges - 965
Relocation expenses - 1,306
Impairment charges 352 3,453
Depreciation and amortization 18,741 20,391
Operating income (loss) 9,669 (25,938)
Interest expense 123 644
Interest income (73) (204)
Other income (469) (112)
Income (loss) before income taxes 10,088 (26,266)
Income tax provision (benefit) 783 (360)
Net income (loss) $9,305 $(25,906)
Earnings (loss) per share:
Basic $0.47 $(1.33)
Diluted $0.47 $(1.33)
Shares used to calculate earnings (loss)
per share:
Basic 19,628 19,516
Diluted 19,691 19,516
KIRKLAND'S, INC.
UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS
(dollars in thousands)
January 31, 2009 February 2, 2008
ASSETS
Current assets:
Cash and cash
equivalents $36,445 $5,820
Inventories,
net 38,686 41,246
Income tax
receivable - 2,900
Deferred income
taxes 1,831 -
Other current
assets 4,360 7,968
Total current
assets 81,322 57,934
Property and
equipment, net 41,826 63,002
Non-current
deferred income
taxes 2,998 -
Other long-term
assets 618 1,196
Total assets $126,764 $122,132
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $13,501 $15,786
Income taxes
payable 5,349 -
Other current
liabilities 24,981 25,566
Total current
liabilities 43,831 41,352
Deferred rent
and other long-
term liabilities 30,582 38,210
Total
liabilities 74,413 79,562
Net
shareholders'
equity 52,351 42,570
Total
liabilities and
shareholders'
equity $126,764 $122,132
KIRKLAND'S, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(dollars in thousands)
52 Week Period Ended
January 31, February 2,
2009 2008
Net cash provided by (used in):
Operating activities $29,562 $(4,879)
Investing activities 960 (14,762)
Financing activities 103 103
Cash and cash equivalents:
Net increase (decrease) $30,625 $(19,538)
Beginning of the period 5,820 25,358
End of the period $36,445 $5,820
