Kirkland's Reports $7.68 Million Net Loss, Revenue Decline in Latest Quarter

Kirkland's, Inc. reported a net loss of $7.68 million for the 13-week period ending November 2, 2024, compared to a net loss of $6.4 million for the same period in the previous year. Revenue for the quarter decreased by 1.7% to $114.42 million, down from $116.37 million in the prior year. The company's gross profit increased to $32.14 million, reflecting a gross margin of 28.1%, up from 26.3% in the previous year. This improvement in gross profit margin was attributed to reduced distribution center and outbound freight costs, despite challenges in merchandise margins due to increased promotional activity.

For the first 39 weeks of fiscal 2024, Kirkland's reported a net loss of $31.01 million, an improvement from a loss of $37.87 million in the same period last year. Revenue for this period also declined by 3.4% to $292.47 million, compared to $302.74 million in the prior year. The company noted a decrease in comparable sales of 2.7%, with e-commerce sales down 15% while store sales increased by 2%. The decline in sales was influenced by reduced consumer spending and adverse weather conditions impacting store traffic.

Strategically, Kirkland's entered into a partnership with Beyond, Inc. on October 21, 2024, which includes a $17 million credit agreement aimed at enhancing collaboration and driving growth. The partnership involves a combination of debt and equity financing, with an $8 million equity purchase subject to shareholder approval. The funds from this agreement were utilized to repay existing debt and reduce borrowings under the revolving credit facility. The company is also focused on cost reduction initiatives, including cuts in corporate overhead and marketing expenses, to improve liquidity and operational efficiency.

Operationally, Kirkland's operated 325 stores across 35 states as of November 2, 2024, a decrease from 339 stores a year earlier. The company reported a slight increase in cash and cash equivalents to $6.76 million, up from $5.77 million at the end of the previous fiscal year. The total liabilities increased to $306.95 million, primarily due to the new debt incurred from the Beyond partnership. The company is actively managing its liquidity and has implemented measures to streamline operations in response to ongoing macroeconomic challenges, including inflation and reduced consumer spending.

Looking ahead, Kirkland's management expressed cautious optimism regarding its financial outlook, contingent on the successful execution of its strategic initiatives and the approval of the proposed equity purchase by Beyond. The company aims to stabilize its operations and improve profitability through enhanced sales performance and cost management. However, management acknowledged the uncertainty in the retail environment and the potential need for further adjustments to its business strategy if conditions do not improve.