As its relationship with Beyond evolves and China tariffs loom, Kirkland’s expressed optimism about the future as the retailer topped a Wall Street earnings estimate while posting comparable sales gains in bricks-and-mortar locations.
Net income was $7.9 million, or 51 cents per diluted share, in the fiscal fourth quarter, versus $10.1 million, or 78 cents per diluted share, in the year-prior period. Adjusted for one time events, net income was $8.5 million, or 54 cents per diluted share, versus $10.7 million, or 82 cents per diluted share, in the year-earlier quarter, the company indicated.
Earnings per adjusted diluted share beat an analyst estimate from Zacks Investment Research by four cents.
The year-past quarter included an extra week as compared to the most recently completed period.
On a 13-week basis, fourth-quarter comparable sales slipped 0.6% year over year, which includes a 1.6% increase in store comps and a 7.9% decline in e-commerce. A decrease in consolidated average ticket and e-commerce traffic drove the comp decline, partially offset by an increase in consolidated conversion and store traffic.
Net sales were $148.9 million versus $165.9 million in the year-previous quarter. The extra week in the year-past quarter, a 4% decrease in store count and a decline in e-commerce sales drove the number lower, partially offset by growth in comp store sales, Kohl’s maintained.
Operating income was $9.2 million versus $10.7 million in the year-before quarter while adjusted operating income was $9.7 million versus $11.3 million.
For the full fiscal year, net loss was $23.1 million, or $1.77 per diluted share, versus $27.8 million, or $2.16 per diluted share, in the prior year. Adjusted net loss was $17.8 million, or $1.36 per diluted share, versus $23.7 million, or $1.84 per diluted share, in the year earlier, the company reported.
Net sales were $441.4 million versus $468.7 million in the previous year while comparable sales declined 2%, with store comps up 1.9% and e-commerce down 12.9%. Operating loss was $14 million compared to an operating loss of $24.4 million in the year before while adjusted operating loss was $12 million compared to $20.4 million.
In a conference call, Amy Sullivan, CEO of Kirkland’s, said the company has been in active discussions to finalize a commitment that would provide an additional $5 million from Beyond as an expansion of an existing credit agreement. Kirkland’s would use funds for general working capital purposes, including the conversion of certain locations to Bed Bath & Beyond and Overstock stores.
Sullivan added Kirkland’s views Bed Bath & Beyond as a sibling brand to Kirkland’s. As such, Bed Bath & Beyond will allow Kirkland’s to maximize the contribution from its existing home decor and furnishings inventory while capitalizing on the iconic Bed Bath & Beyond brand name through storefront conversions that won’t require capital-intensive remodels. The Bed Bath & Beyond stores will have an assortment differentiated from what’s available in current Kirkland’s stores as the company expands bedroom and bathroom, and reduces slower turning categories such as wall and lighting, Sullivan said. Kirkland’s expects the Bed Bath & Beyond operations to deliver more consistent foot traffic and improved inventory turns, driving store productivity gains compared to current Kirkland’s locations.
In addition, Sullivan said Beyond’s Overstock platform provides a “tremendous” opportunity as a true off-price banner that can feature treasure hunt deals from Kirkland brand vendors. Overstock stores can move excess inventory from top brand vendors and represents a more profitable solution for return liquidation, she observed. Kirkland’s has tested off-price operations in its stores and experiences an incremental lift. Sullivan said she expects Overstock stores to deliver at least two times the revenue of a current Kirkland’s store driven by an increase in average ticket.
The company is working to establish physical Bed Bath & Beyond and Overstock stores while reconstituting e-commerce to improve performance and boost buy online pick up in store business, the company reported.
Sullivan also addressed tariff issues in the conference call, noting Kirkland’s has reduced its sourcing exposure to China from more than 90% a few years ago to about 70% in 2024, and the company is exploring mitigation strategies to lessen the impact of elevated duties.
In announcing the financial results, Sullivan 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.”
Sullivan acknowledged current market environment has become more challenging with tariff uncertainty and the potential impact of carry-through price increases 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,” Sullivan said. “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.”
