Kirkland's Reports Fourth Quarter and Fiscal Year Results

May 4, 2025  by Karen Parrish in Business Strategy, Industry   

Fourth Quarter 2024 Summary
- Net sales of $148.9 million; Consolidated comparable sales decreased 0.6%, inclusive of comparable store growth of 1.6% and e-commerce decline of 7.9% compared to the fourth quarter of fiscal 2023.Gross profit margin of 30.3%.

- Operating income of $9.2 million.

- Adjusted EBITDA of $12.0 million.

- Opened one store and closed 9 stores during the period.

 Fiscal Year 2024 Summary

- Net sales of $441.4 million, with comparable sales decreasing 2.0%, inclusive of comparable store growth of 1.9% and e-commerce decline of 12.9% compared to fiscal 2023.

- Gross profit margin expanded 50 bps to 27.6% compared to fiscal 2023.

- Operating loss of $14.0 million, a $10.4 million improvement year-over-year.

- Adjusted EBITDA was a loss of $2.3 million, a $6.1 million improvement year-over-year.

- Opened 2 stores and closed 15 stores to end the year with 317 stores.

Management Commentary

Amy Sullivan, CEO of Kirkland's, said, "Fiscal 2024 was an important year in our transformation journey. We continued to make progress towards the revitalization of our Kirkland's Home brand with our strategic initiatives, re-engaging our core customer, refocusing our product assortment and strengthening our omni-channel capabilities enabling us to deliver positive brick-and-mortar comparable sales growth throughout the year and achieve significant improvement in bottom-line performance. In addition, through our partnership with Beyond, we began to open up new avenues for growth allowing us to reimagine the future opportunities for our company and each brand.

Ms. Sullivan continued, "While the current environment has become increasingly challenging with the uncertainty around tariffs and the potential impact on consumer behavior, we are executing strategies to navigate the tariff impact while maximizing the assets available to us to accelerate a capital light store conversion strategy that leverages our full house of brands to deliver style and value. We have identified the first of many potential store conversions under the Bed Bath & Beyond Home and Overstock banners that we believe will not only drive stronger brand awareness and customer acquisition but also support our ongoing transformation efforts. We are intently focused on delivering results, returning to profitability and driving value for all of our shareholders."

Subsequent Events

On February 5, 2025, the Company converted the $8.5 million Beyond convertible note to equity and received $8.0 million in additional equity financing from Beyond.

Subsequent to February 1, 2025, the Company repaid a net $4.1 million under the revolving credit facility and issued $5.1 million in letters of credit.

As of April 30, 2025, the Company is in active discussions to finalize a commitment for an additional $5.0 million from Beyond as an expansion of the existing Beyond Credit Agreement. The funds are intended to be used for general working capital purposes, including the conversion of certain locations to Bed Bath & Beyond Home and Overstock stores. The transaction is subject to customary closing requirements and is expected to close next week.

As of May 1, 2025, the Company had $38.9 million of outstanding debt and $5.1 million of letters of credit under its revolving credit facility with minimal availability pending the closing of the expanded term loan. Availability under the Company's revolving credit facility 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.

Additional Information Regarding the Company's 10-K Disclosure

The Company is taking actions to mitigate the impact that the current tariff policy has on its business, as will be detailed in the Company's 10-K Filing expected to be published no later than May 2, 2025. The Company's assessment includes the preparation of cash flow forecasts considering the financing transactions, annualized savings from the cost-savings initiatives and improvements in profitability and cash flow from operations for a period 12-months after the financial statements are issued. However, there can be no assurance of improved profitability due to potential factors, including, but not limited to, uncertainties surrounding tariff policy and the potential impact on the Company's sales and margin, especially related to the Company's imports from China, and the likelihood of challenging macroeconomic conditions that further constrain consumer demand. Given these uncertainties and the consequences they may have on the projected cash flow, there is substantial doubt about the Company's ability to continue as a going concern for a period of at least 12 months from the date of issuance of the consolidated financial statements.

Based on the going concern uncertainty, the Company is not in compliance with the covenants under the revolving credit facility and the Beyond Credit Agreement and has classified the outstanding borrowings under these agreements as current on the consolidated condensed balance sheet as of February 1, 2025.  The Company expects to receive a waiver of this default from both lenders in connection with the financing planned to close next week.

Conference Call

The conference call will be broadcast live and available for replay 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.