Kirkland's Reports Fourth Quarter and Fiscal 2013 Results

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Mar 13, 2014

Kirkland's Reports Fourth Quarter and Fiscal 2013 Results

Kirkland's, Inc. (NASDAQ: KIRK) today reported financial results for the 13-week and 52-week periods ended February 1, 2014.

Net sales for the 13 weeks ended February 1, 2014, decreased 4.2% to $156.1 million compared with $162.9 million for the 14 weeks ended February 2, 2013. On a 13-week basis, comparable store sales for the fourth quarter of fiscal 2013, including e-commerce sales, were flat compared with a decrease of 2.6% in the prior-year quarter. Kirkland's opened 8 stores and closed 7 during the fourth quarter, bringing the total number of stores to 324 at quarter end.

Net sales for the 52 weeks ended February 1, 2014, increased 2.7% to $460.6 million compared with $448.4 million for the 53 weeks ended February 2, 2013. On a 52-week basis, comparable store sales for fiscal 2013, including e-commerce sales, increased 0.5% compared with a 3.0% decrease in fiscal 2012. The Company opened 24 stores and closed 23 during fiscal 2013.

The Company reported net income of $12.3 million, or $0.69 per diluted share, for the 13 weeks ended February 1, 2014, compared with net income of $14.3 million, or $0.82 per diluted share, for the 14 weeks ended February 2, 2013.

For the 52 weeks ended February 1, 2014, the Company reported net income of $14.5 million, or $0.82 per diluted share, compared with net income of $13.8 million, or $0.77 per diluted share, for the 53 weeks ended February 2, 2013.

Robert Alderson, Kirkland's President and Chief Executive Officer, said, "Our results for the fourth quarter were slightly better than our adjusted guidance, and we finished fiscal 2013 in a solid position with over $89 million in cash. Despite continued adverse weather events throughout February and into March, the early first quarter sales and margin trends have been positive and encouraging. As we look to fiscal 2014, we remain excited about the investments in store growth, merchandise systems and process improvement, greater e-commerce capabilities and focused branding initiatives that we expect to drive improved traffic, sales and earnings results."

Fiscal 2014 Outlook

Store Growth:			For the 52-week period ending January 31, 2015 ("fiscal 2014"), the Company expects to achieve approximately 10% square footage growth with 35 to 40 new store openings and 10 to 15 store closings. New store openings will be weighted more toward the second half of the year, and store closings will be weighted more toward the first half of the year.

Sales:			Total sales for fiscal 2014 are expected to increase approximately 8% to 10% compared with fiscal 2013. This level of sales performance would imply a comparable store sales increase of approximately 3% to 4% for fiscal 2014.

Margin & Expenses:			The Company expects year-over-year improvement in merchandise and gross profit margins that is expected to result from a lower markdown rate, lower inbound freight costs, and sales leverage. Operating expenses are expected to increase on a dollar basis due to the growth in stores and incremental investments in corporate headcount. The Company is also anticipating approximately $0.03 to $0.04 per diluted share in additional costs associated with its second half lease expiration and transition to replacement corporate headquarters space.

Earnings:			Based on the above assumptions, the Company expects fiscal 2014 earnings per share to be in the range of $0.90 to $1.00. The Company expects its full year tax rate to be approximately 39%.

Cash Flow:			Capital expenditures in fiscal 2014 are estimated to range between $33 million and $36 million. Based on the above assumptions, the Company expects to generate positive cash flow in fiscal 2014.

First Quarter Fiscal 2014 Outlook

The Company issued guidance for the first quarter ending May 3, 2014, of net income of $0.09 to $0.12 per diluted share. Net sales are expected to be in the range of $105 million to $106 million with a comparable store sales increase in the range of 2% to 3%. The Company expects to open approximately 6 stores and close approximately 7 stores during the quarter.

Investor Conference Call and Web Simulcast

Kirkland's will issue its earnings release for the fourth quarter before the market opens on Thursday, March 13, 2014, and will host a conference call on the same day at 11:00 a.m. ET. The number to call for the interactive teleconference is (212) 231-2918. A replay of the conference call will be available through Thursday, March 20, 2014, by dialing (402) 977-9140 and entering the confirmation number, 21706372.

A live broadcast of Kirkland's quarterly conference call will be available online at the Company's website www.kirklands.com under Investor Relations or http://www.videonewswire.com/event.asp?id=97960 on March 13, 2014, beginning at 11:00 a.m. ET. The online replay will follow shortly after the call and continue for one year.

About Kirkland's, Inc.

Kirkland's, Inc. was founded in 1966 and is a specialty retailer of home décor in the United States. Although originally focused in the Southeast, the Company has grown beyond that region and currently operates 321 stores in 35 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.

Forward-Looking Statements

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 décor 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 April 18, 2013.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
(In thousands, except per share data)


	13-Week Period Ended		14-Week Period Ended
	February 1,		February 2,
	2014		2013
Net sales	$	156,073	$	162,885
Cost of sales		91,441		96,751
Gross profit		64,632		66,134

Operating expenses:
Operating expenses		39,939		39,245
Depreciation		4,157		3,833
Operating income		20,536		23,056

Other income, net		4		4
Income before income taxes		20,540		23,060
Income tax expense		8,214		8,807
Net income	$	12,326	$	14,253

Earnings per share:
Basic	$	0.71	$	0.83
Diluted	$	0.69	$	0.82

Shares used to calculate earnings per share:
Basic		17,297		17,076
Diluted		17,903		17,440







KIRKLAND'S, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(In thousands, except per share data)


	52-Week Period Ended			53-Week Period Ended
	February 1,			February 2,
	2014			2013

Net sales	$	460,563		$	448,365
Cost of sales		279,747			279,749
Gross profit		180,816			168,616

Operating expenses:
Operating expenses		140,877			133,913
Depreciation		15,947			13,175
Operating income		23,992			21,528

Other expense, net		(33	)		(34	)
Income before income taxes		23,959			21,494
Income tax expense		9,429			7,699
Net income	$	14,530		$	13,795

Earnings per share:
Basic	$	0.84		$	0.79
Diluted	$	0.82		$	0.77

Shares used to calculate earnings per share:
Basic		17,207			17,463
Diluted		17,685			17,856







KIRKLAND'S, INC.
UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands)


	February 1,		February 2,
	2014		2013
ASSETS

Current assets:
Cash and cash equivalents	$	89,050	$	67,797
Inventories, net		52,637		49,577
Income taxes receivable		446		832
Deferred income taxes		2,777		1,602
Other current assets		8,371		9,370
Total current assets		153,281		129,178

Property and equipment, net		80,329		78,499
Other assets		1,838		1,559

Total assets	$	235,448	$	209,236


LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
Accounts payable	$	23,102	$	21,642
Income taxes payable		5,875		1,352
Other current liabilities		23,670		21,009
Total current liabilities		52,647		44,003

Non-current deferred income taxes		3,337		3,128
Deferred rent and other long-term liabilities		44,235		44,230
Total liabilities		100,219		91,361

Net shareholders' equity		135,229		117,875

Total liabilities and shareholders' equity	$	235,448	$	209,236







KIRKLAND'S, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)

	52-Week Period Ended			53-Week Period Ended
	February 1,			February 2,
	2014			2013
Net cash provided by (used in):
Operating activities	$	39,213		$	32,347
Investing activities		(17,954	)		(31,373	)
Financing activities		(6	)		(16,300	)

Cash and cash equivalents:
Net increase (decrease)		21,253			(15,326	)
Beginning of the period		67,797			83,123
End of the period	$	89,050		$	67,797

Kirkland's, Inc.
W. Michael Madden, 615-872-4800
Senior Vice President & CFO
or
Corporate Communications, Inc.
Tripp Sullivan, 615-324-7335

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