KIRK Kirklands Inc

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of Earliest Event Reported):		September 6, 2023

Kirkland's, Inc.

 

(Exact name of registrant as specified in its charter)

 

Tennessee		000-49885		62-1287151
(State or other jurisdiction of incorporation)		(Commission File Number)		(I.R.S. Employer Identification No.)
5310 Maryland Way, Brentwood, Tennessee				37027
(Address of principal executive offices)				(Zip Code)

 

Registrant’s telephone number, including area code:		615-872-4800

 

Not Applicable

 

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	KIRK	NASDAQ Global Select Market

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

 

 

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Item 2.02 Results of Operations and Financial Condition.

On September 6, 2023, Kirkland’s Inc. (“the Company”) issued a press release reporting its results of operations for the 13-week and 26-week periods ended July 29, 2023 (the “Press Release”).

A copy of the Press Release is attached hereto as Exhibit 99.1, and is being furnished, not filed, under Item 2.02 of this Current Report on Form 8-K.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

 

Exhibit Number		Description
99.1		Press Release dated September 6, 2023 announcing the Company's second fiscal quarter financial results.
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

		Kirkland's, Inc.
September 6, 2023		By:	/s/ Carter R. Todd
			Name: Carter R. Todd
			Title: Vice President and General Counsel

 

 

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Exhibit 99.1

 

KIRKLAND’S HOME REPORTS SECOND QUARTER 2023 RESULTS

 

NASHVILLE, Tenn. (September 6, 2023) — Kirkland’s, Inc. (Nasdaq: KIRK) (“Kirkland’s Home” or the “Company”), a specialty retailer of home décor and furnishings, announced financial results for the 13-week and 26-week periods ended July 29, 2023.

Second Quarter 2023 Summary

 

Management Commentary

“The second quarter sales results were challenged by lower traffic and the aggressive liquidation efforts in Q2 of last year that presented a tough sales comparison, period-over-period,” said Ann Joyce, interim CEO of Kirkland’s Home. “Although we remained promotional during the quarter, we believe the shifting of our brand voice towards value and a normalizing supply chain allowed us to improve our merchandise margin by 320 basis points year-over-year. We also believe we exercised improved control of our inventory as we rebalanced our merchandise assortment for the back half of the year, resulting in 30% lower inventory levels and lower borrowings than the prior year.

“We knew this quarter would be a transition period as we focused on having the necessary merchandising and marketing plans in place heading into the harvest and holiday selling seasons. While there are persistent macro-headwinds that continue to impact the consumer environment and our customers, we believe we are well-positioned with what we can control to capitalize on our highly important selling seasons over the next two quarters. We are encouraged by the early response to our seasonal assortments and our renewed emphasis on home décor, both of which will become more prominent as we get deeper into the holiday period.

“Our management team has also been performing an overall health check on key areas of the business to ensure we’re running as efficiently and effectively as possible. While macro-economic challenges have certainly impacted our results, there are a number of other challenges that we are working to resolve. First, we are making changes quickly to our merchandise assortment and our marketing strategy to ensure that we are reconnecting with our core customers and attracting more to the fold. We are also optimizing our inventory flow through supply chain improvements, improving the omni-channel experience through technology, and ensuring stores are fully supported to deliver a superior customer experience. We believe these changes will put us on a path to positive adjusted EBITDA in the back-half of fiscal 2023 and, as we execute, position us for a return to historical adjusted EBITDA margins. While our journey has only just begun, the more I become ingrained into our day-to-day operations, the more I believe in our ability to return to profitable growth and deliver value to our shareholders over the long run.”

Second Quarter 2023 Financial Results

Net sales in the second quarter of 2023 were $89.5 million, compared to $102.1 million in the prior year quarter. Comparable same-store sales decreased 9.7%, including a 16.6% decline in e-commerce sales. The decrease was primarily driven by a decline in traffic, along with a decrease in average ticket.

Gross profit in the second quarter of 2023 was $17.4 million, or 19.5% of net sales, compared to $18.5 million, or 18.1% of net sales in the prior year quarter. The improvement as a percentage of net sales was primarily a result of improved merchandise margin, partially offset by the deleverage of fixed cost components on the lower sales base.

Operating loss in the second quarter of 2023 improved to $18.1 million compared to an operating loss of $21.8 million in the prior year quarter. The improvement to the prior year period was primarily a result of lower compensation costs and lower advertising expenses.

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EBITDA in the second quarter of 2023 improved to a loss of $15.0 million compared to a loss of $17.5 million in the prior year quarter. Adjusted EBITDA in the second quarter of 2023 improved to a loss of $13.5 million compared to a loss of $16.4 million in the prior year quarter.

Net loss in the second quarter of 2023 improved to $19.4 million, or a loss of $1.51 per diluted share, compared to a net loss of $25.7 million, or a loss of $2.02 per diluted share in the prior year quarter.

As of July 29, 2023, the Company had a cash balance of $4.9 million, with $46.0 million of outstanding debt under its $90 million senior secured revolving credit facility.

Investor Conference Call and Web Simulcast

Kirkland’s Home management will host a conference call to discuss its financial results for the second quarter ended July 29, 2023, followed by a question-and-answer period with Ann Joyce, Interim CEO, Amy Sullivan, President and COO, and Mike Madden, EVP and CFO.

Date: Wednesday, September 6, 2023

Time: 9:00 a.m. Eastern Time

Toll-free dial-in number: (855) 560-2577

International dial-in number: (412) 542-4163

Conference ID: 10181728

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 Gateway Group at (949) 574-3860.

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 September 13, 2023.

Toll-free replay number: (877) 344-7529

International replay number: (412) 317-0088

Replay ID: 3150036

About Kirkland’s, Inc.

Kirkland’s, Inc. is a specialty retailer of home décor and furnishings in the United States, currently operating 339 stores in 35 states as well as an e-commerce website, www.kirklands.com, under the Kirkland’s Home brand. The Company provides its customers an engaging shopping experience characterized by a curated, affordable selection of home furnishings along with inspirational design ideas. This combination of quality and stylish merchandise, value pricing and a stimulating online and store experience allows the Company’s customers to furnish their home at a great value. More information can be found at www.kirklands.com.

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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, 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 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 U.S. policy related to imported merchandise, particularly with regard to the impact of tariffs on goods imported from China and strategies undertaken to mitigate such impact, the Company’s ability to retain its senior management team, continued volatility in the price of the Company’s common stock, the competitive environment in the home décor industry in general and in the Company's specific market areas, inflation, fluctuations in cost and availability of inventory, increased transportation costs and potential interruptions in supply chain, distribution systems and delivery network, 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 the Company's information or its customers’ information, seasonal fluctuations in consumer spending, and economic conditions in general. Those and other risks are more fully described in the Company's filings with the Securities and Exchange Commission, including the Company’s Annual Report on Form 10-K filed on April 4, 2023 and subsequent reports. Forward-looking statements included in this release are made as of the date of this release. Any changes in assumptions or factors on which such statements are based could produce materially different results. Except as required by law, the Company 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.

 

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KIRKLAND’S, INC.

UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

 

		13-Week Period Ended
		July 29,				July 30,
		2023				2022
Net sales		$	89,504			$	102,101
Cost of sales			72,065				83,576
Gross profit			17,439				18,525
Operating expenses:
Compensation and benefits			19,217				21,507
Other operating expenses			14,090				16,994
Depreciation (exclusive of depreciation included in cost of sales)			1,222				1,596
Asset impairment			1,001				228
Total operating expenses			35,530				40,325
Operating loss			(18,091	)			(21,800	)
Other expense, net			623				283
Loss before income taxes			(18,714	)			(22,083	)
Income tax expense			650				3,622
Net loss		$	(19,364	)		$	(25,705	)
Loss per share:
Basic		$	(1.51	)		$	(2.02	)
Diluted		$	(1.51	)		$	(2.02	)
Weighted average shares outstanding:
Basic			12,857				12,740
Diluted			12,857				12,740

 

 

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KIRKLAND’S, INC.

UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

 

		26-Week Period Ended
		July 29,				July 30,
		2023				2022
Net sales		$	186,379			$	205,386
Cost of sales			143,069				158,569
Gross profit			43,310				46,817
Operating expenses:
Compensation and benefits			39,256				42,399
Other operating expenses			28,828				33,792
Depreciation (exclusive of depreciation included in cost of sales)			2,428				3,293
Asset impairment			1,226				228
Total operating expenses			71,738				79,712
Operating loss			(28,428	)			(32,895	)
Other expense, net			1,033				367
Loss before income taxes			(29,461	)			(33,262	)
Income tax expense			2,010				298
Net loss		$	(31,471	)		$	(33,560	)
Loss per share:
Basic		$	(2.46	)		$	(2.65	)
Diluted		$	(2.46	)		$	(2.65	)
Weighted average shares outstanding:
Basic			12,817				12,653
Diluted			12,817				12,653

 

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KIRKLAND’S, INC.

UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS

(In thousands)

 

 

		July 29,				January 28,				July 30,
		2023				2023				2022
ASSETS
Current assets:
Cash and cash equivalents		$	4,890			$	5,171			$	10,330
Inventories, net			98,949				84,071				141,702
Prepaid expenses and other current assets			5,697				5,089				7,273
Total current assets			109,536				94,331				159,305
Property and equipment, net			33,878				38,676				45,934
Operating lease right-of-use assets			133,352				134,525				140,310
Other assets			6,818				6,714				7,891
Total assets		$	283,584			$	274,246			$	353,440
LIABILITIES AND SHAREHOLDERS’ (DEFICIT) EQUITY
Current liabilities:
Accounts payable		$	56,483			$	43,739			$	61,569
Accrued expenses			26,432				26,069				27,636
Operating lease liabilities			40,249				41,499				40,801
Total current liabilities			123,164				111,307				130,006
Operating lease liabilities			111,746				114,613				123,426
Revolving line of credit			46,000				15,000				55,000
Other liabilities			3,834				3,553				4,897
Total liabilities			284,744				244,473				313,329
Shareholders’ (deficit) equity			(1,160	)			29,773				40,111
Total liabilities and shareholders’ (deficit) equity		$	283,584			$	274,246			$	353,440

 

 

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KIRKLAND’S, INC.

UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(In thousands)

 

		26-Week Period Ended
		July 29,				July 30,
		2023				2022
Cash flows from operating activities:
Net loss		$	(31,471	)		$	(33,560	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation of property and equipment			6,349				8,837
Amortization of debt issue costs			50				46
Asset impairment			1,226				228
(Gain) loss on disposal of property and equipment			(18	)			183
Stock-based compensation expense			614				1,165
Changes in assets and liabilities:
Inventories, net			(14,878	)			(27,673	)
Prepaid expenses and other current assets			(713	)			3,489
Accounts payable			12,529				(1,165	)
Accrued expenses			(1,174	)			(1,264	)
Income taxes payable (refundable)			1,642				(2,136	)
Operating lease assets and liabilities			(2,976	)			(3,840	)
Other assets and liabilities			291				(377	)
Net cash used in operating activities			(28,529	)			(56,067	)
Cash flows from investing activities:
Proceeds from sale of property and equipment			74				33
Capital expenditures			(2,294	)			(5,019	)
Net cash used in investing activities			(2,220	)			(4,986	)
Cash flows from financing activities:
Borrowings on revolving line of credit			36,000				55,000
Repayments on revolving line of credit			(5,000	)			—
Debt issuance costs			(456	)			—
Cash used in net share settlement of stock options and restricted stock units			(76	)			(2,383	)
Proceeds received from employee stock option exercises			—				16
Repurchase and retirement of common stock			—				(6,253	)
Net cash provided by financing activities			30,468				46,380
Cash and cash equivalents:
Net decrease			(281	)			(14,673	)
Beginning of the period			5,171				25,003
End of the period		$	4,890			$	10,330
Supplemental schedule of non-cash activities:
Non-cash accruals for purchases of property and equipment		$	914			$	1,502

 

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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, adjusted EBITDA as EBITDA with non-GAAP adjustments and adjusted operating loss as operating loss with non-GAAP adjustments.

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 asset impairment and stock-based compensation expense, due to the non-cash nature of these expenses, and remove severance charges and lease termination costs, as those expenses can fluctuate based on the needs of the business and do not represent a normal, recurring operating expense.

The following table shows a reconciliation of operating loss to EBITDA and adjusted EBITDA (in thousands) for the 13-week and 26-week periods indicated:

 

		13-Week Period Ended								26-Week Period Ended
		July 29, 2023				July 30, 2022				July 29, 2023				July 30, 2022
Operating loss		$	(18,091	)		$	(21,800	)		$	(28,428	)		$	(32,895	)
Depreciation			3,092				4,338				6,349				8,837
EBITDA			(14,999	)			(17,462	)			(22,079	)			(24,058	)
Non-GAAP adjustments:
Closed store and lease termination costs in cost of sales(1)			—				(162	)			—				46
Asset impairment(2)			1,001				228				1,226				228
Stock-based compensation expense(3)			124				617				614				1,165
Severance charges(4)			378				366				907				379
Total adjustments in operating expenses			1,503				1,211				2,747				1,772
Total non-GAAP adjustments			1,503				1,049				2,747				1,818
Adjusted EBITDA			(13,496	)			(16,413	)			(19,332	)			(22,240	)
Depreciation			3,092				4,338				6,349				8,837
Adjusted operating loss		$	(16,588	)		$	(20,751	)		$	(25,681	)		$	(31,077	)

 

(1) Costs associated with asset disposals, closed store and lease termination costs and any gains on lease terminations.

(2) Asset impairment charges are related to property and equipment, software costs and cloud computing implementation costs.

(3) Stock-based compensation expense includes amounts amortized to expense related to equity incentive plans.

(4) Severance charges include expenses related to severance agreements and permanent store closure compensation costs.

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v3.23.2

Document and Entity Information	Sep. 06, 2023
Cover [Abstract]
Document Type	8-K
Amendment Flag	false
Document Period End Date	Sep. 06, 2023
Entity Registrant Name	Kirkland's, Inc.
Entity Central Index Key	0001056285
Entity Emerging Growth Company	false
Security12b Title	Common Stock
Trading Symbol	KIRK
Security Exchange Name	NASDAQ
Entity File Number	000-49885
Entity Incorporation State Country Code	TN
Entity Tax Identification Number	62-1287151
Entity Address Address Line1	5310 Maryland Way
Entity Address City Or Town	Brentwood
Entity Address State Or Province	TN
Entity Address Postal Zip Code	37027
City Area Code	615
Local Phone Number	872-4800
Written Communications	false
Soliciting Material	false
Pre Commencement Tender Offer	false
Pre Commencement Issuer Tender Offer	false

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