The second quarter was a difficult one for Kirkland’s, but its CEO, Ann Joyce, said the company is primed to deliver better results with the help of merchandising and marketing improvements.
An analyst consensus estimate published by Yahoo Finance called for a loss of $1.10 per diluted share and revenues of $91.9 million.
Comparable sales decreased 9.7%, in the quarter year over year including a 16.6% decline in e-commerce revenue. A decrease in traffic drove the decline along with a shortfall in average ticket. Net sales in the quarter were $89.5 million versus $102.1 million in the year-before period. Operating loss improved to $18.1 million from an operating loss of $21.8 million in the year-previous quarter. The improvement primarily resulted from lower compensation costs and advertising expenses.
The company noted that, as of July 29, it had a cash balance of $4.9 million, with $46 million of outstanding debt under its $90 million senior secured revolving credit facility.
“The second quarter sales results were challenged by lower traffic and the aggressive liquidation efforts in Q2 of last year that presented a tough sales comparison, period-over-period,” said Joyce, Kirkland’s interim CEO. “Although we remained promotional during the quarter, we believe the shifting of our brand voice towards value and a normalizing supply chain allowed us to improve our merchandise margin by 320 basis points year-over-year. We also believe we exercised improved control of our inventory as we rebalanced our merchandise assortment for the back half of the year, resulting in 30% lower inventory levels and lower borrowings than the prior year.”
Joyce added, “We knew this quarter would be a transition period as we focused on having the necessary merchandising and marketing plans in place heading into the harvest and holiday selling seasons. While there are persistent macro-headwinds that continue to impact the consumer environment and our customers, we believe we are well-positioned with what we can control to capitalize on our highly important selling seasons over the next two quarters. We are encouraged by the early response to our seasonal assortments and our renewed emphasis on home décor, both of which will become more prominent as we get deeper into the holiday period.
Joyce pointed out that management has been performing an overall health check on key areas of the business to ensure its running efficiently and effectively. “
“While macro-economic challenges have certainly impacted our results, there are a number of other challenges that we are working to resolve,” Joyce said. “First, we are making changes quickly to our merchandise assortment and our marketing strategy to ensure that we are reconnecting with our core customers and attracting more to the fold. We are also optimizing our inventory flow through supply chain improvements, improving the omni-channel experience through technology, and ensuring stores are fully supported to deliver a superior customer experience. We believe these changes will put us on a path to positive adjusted EBITDA in the back-half of fiscal 2023 and, as we execute, position us for a return to historical adjusted EBITDA margins. While our journey has only just begun, the more I become ingrained into our day-to-day operations, the more I believe in our ability to return to profitable growth and deliver value to our shareholders over the long run.”
