NASHVILLE, Tenn-- Kirkland's, Inc. (Nasdaq: KIRK) ('Kirkland's Home' or the 'Company'), a specialty retailer of home decor and furnishings, announced financial results for the 13-week and 39-week periods ended October 29, 2022.
Third Quarter 2022 Summary
Net sales were $131.0 million, with comparable sales decreasing 7.0%.
Gross profit margin of 25.0%.
GAAP net loss of $7.3 million, or a loss of $0.58 per diluted share, and adjusted net loss of $4.8 million, or an adjusted loss of $0.38 per diluted share.
Adjusted EBITDA of $(1.7) million.
Ended the period with a cash balance of $11.2 million, $60.0 million in outstanding debt and total liquidity of $26.2 million.
Closed one store and opened one store to end the quarter with 356 stores.
'In the third quarter, we made progress re-engaging with our customers and reported results in-line with our internal expectations,' said Steve 'Woody' Woodward, president and CEO of Kirkland's Home. 'We experienced an encouraging rebound in sales through August and our Labor Day promotional event, but we believe persistent macro-economic pressures hampered our customers during the Harvest selling season, resulting in softer sales for the back half of the quarter. Although the consumer environment was volatile, we continued to execute initiatives within our control to improve our liquidity position and enhance our overall margin profile.
'Sales trends have improved thus far in the fourth quarter as customers have responded favorably to our holiday merchandise offering. We expect the environment to remain promotional for the balance of the quarter as we rationalize our inventories for 2023. We've made good initial progress reducing inventories, and we have already made a substantial reduction in our borrowings. Additionally, supply chain disruptions have eased, and inbound freight rates have declined. While we won't see a significant benefit from these factors until we've worked through our current inventory, we expect it to show in our merchandise margin in fiscal 2023 and beyond.
'Overall, we believe fiscal 2023 will be a year of stabilization for our organization. We are well on track to hit our targets of meaningfully paying down our credit line and reducing our inventories, which should provide us a healthier balance sheet as we move into next year. While the broader consumer environment is difficult to predict, we are focused on stabilizing our store comps, increasing e-commerce sales and maintaining strict cost control measures to improve the overall profitability of our platform. This will allow us to further invest in future sales growth initiatives. We believe there is immense value to still be unlocked from Kirkland's Home, and we look forward to delivering long-term value for our shareholders.'
Third Quarter 2022 Financial Results
Net sales in the third quarter of 2022 were $131.0 million, compared to $143.6 million in the prior year quarter. Comparable same-store sales decreased 7.0%, including an 8.6% decline in e-commerce sales. The decrease was primarily driven by a decline in traffic and conversion, partially offset by an increase in average ticket.
Gross profit in the third quarter of 2022 was $32.7 million, or 25.0% of net sales, compared to $49.8 million, or 34.7% of net sales in the prior year quarter. The decline was primarily a result of increased promotional activity to drive sales and reduce inventory along with higher freight costs, as well as the deleverage of fixed cost components on the lower sales base.
Operating loss in the third quarter of 2022 was $6.7 million compared to operating income of $9.0 million in the prior year quarter. The decrease was primarily a result of the aforementioned decline in gross profit and the deleverage of fixed operating costs.
EBITDA in the third quarter of 2022 was a loss of $2.6 million compared to income of $14.1 million in the prior year quarter. Adjusted EBITDA in the third quarter of 2022 was a loss of $1.7 million compared to income of $14.8 million in the prior year quarter.
Net loss in the third quarter of 2022 was $7.3 million, or a loss of $0.58 per diluted share, compared to net income of $7.2 million, or earnings of $0.51 per diluted share in the prior year quarter. Adjusted net loss in the third quarter of 2022 was $4.8 million, or a loss of $0.38 per diluted share, compared to an adjusted net income of $7.3 million, or income of $0.51 per diluted share in the prior year quarter.
At October 29, 2022, the Company had a cash balance of $11.2 million and total liquidity of $26.2 million, with $60.0 million of outstanding debt under its $75 million senior secured revolving credit facility. The Company repaid $30 million of its outstanding borrowings during November 2022.
Investor Conference Call and Web Simulcast
Kirkland's Home management will host a conference call to discuss its financial results for the third quarter ended October 29, 2022, followed by a question-and-answer period with Steve Woodward, President and CEO, and Mike Madden, EVP and CFO.
Date: Friday, December 2, 2022
Time: 9:00 a.m. Eastern Time
Toll-free dial-in number: (855) 560-2577
International dial-in number: (412) 542-4163
Conference ID: 10173480
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 December 9, 2022.
Toll-free replay number: (877) 344-7529
International replay number: (412) 317-0088
Replay ID: 6245216
About Kirkland's, Inc.
Kirkland's, Inc. is a specialty retailer of home furnishings in the United States, currently operating 356 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.
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, 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 transformation strategy, the timing of normalized macroeconomic conditions from the impacts of global geopolitical unrest and the COVID-19 pandemic 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 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 decor 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 March 25, 2022 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.
See full results at: https://ir.kirklands.com/KIRKLAND--S-HOME-REPORTS-THIRD-QUARTER-2022-RESULTS-12-2-2022
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