Kirkland’s Announces Financial Results for First Quarter

June 7, 2024  by HFBusiness Staff in Business Strategy, Industry   

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
Amy Sullivan, CEO of Kirkland's Home, said, "We are continuing to see progress on our strategic initiatives as demonstrated by our comparable sales growth of 2.8% in our brick-and-mortar stores for the first quarter. While this positive momentum was offset by continued pressure in our e-commerce business, we are encouraged by the early signs of traction driven by our marketing and merchandising repositioning strategies."

Ms. Sullivan continued, "Given the slower than anticipated start to the year and the continued headwinds associated with higher ticket categories, particularly with our value conscious customer, we are taking swift actions to better align our cost structure to current demand trends and are taking steps to improve our e-commerce business while remaining laser-focused on driving long-term, profitable growth.”

“As we look to the future, we remain confident that our strategic initiatives that include re-engaging our core customer, refocusing our product assortment, and strengthening our omni-channel capabilities are key to driving sales growth. We believe these initiatives coupled with maintaining disciplined operational effectiveness and improvement in our liquidity position, should enable us to achieve $600 million in revenue and an adjusted EBITDA margin in line with our historical performance in the next five years."

First Quarter 2024 Financial Results
Net sales in the first quarter of 2024 were $91.8 million, compared to $96.9 million in the prior year quarter. Comparable sales decreased 3.5%, including a 19.1% decline in e-commerce sales and a 2.8% increase in comparable store sales. The decrease was primarily driven by a decrease in consolidated average ticket and e-commerce traffic, partially offset by an increase in store traffic and conversion.

Gross profit in the first quarter of 2024 was $27.1 million, or 29.5% of net sales, compared to $25.9 million, or 26.7% of net sales in the prior year quarter. The improvement as a percentage of net sales was primarily a result of favorable outbound freight costs and improved merchandise margin.

Operating expenses in the first quarter of 2024 were $34.6 million, or 37.7% of net sales, compared to $36.2 million, or 37.4% of net sales in the prior year quarter. The decline in operating expenses was driven by reduced corporate salaries and benefits expenses and expense declines across multiple categories, partially offset by increased consulting costs for strategic advisory services.

Operating loss in the first quarter of 2024 was $7.5 million compared to operating loss of $10.3 million in the prior year quarter. The improvement was primarily a result of the aforementioned increase in gross profit and lower operating expenses.

EBITDA in the first quarter of 2024 was a loss of $4.9 million compared to a loss of $6.9 million in the prior year quarter. Adjusted EBITDA in the first quarter of 2024 was a loss of $4.5 million compared to a loss of $5.8 million in the prior year quarter.

Net loss in the first quarter of 2024 was $8.8 million, or a loss of $0.68 per diluted share, compared to a net loss of $12.1 million, or a loss of $0.95 per diluted share in the prior year quarter.

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 May 14, 2024, the Company retained Consensus, an investment banking firm specializing in consumer-facing companies, to serve as financial advisor to the Board of Directors in the pursuit and evaluation of potential strategic opportunities to support the Company and its initiatives.

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 May 4, 2024, followed by a question-and-answer period with President and CEO, Amy Sullivan, and EVP and CFO, Mike Madden.

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 June 13, 2024.

Toll-free replay number: (877) 344-7529
International replay number: (412) 317-0088
Replay ID: 9351728