Kirkland’s touted opportunities presented by its recent deal with Beyond while reporting a reduced adjusted loss and positive comparable store sales in its third quarter.
Net loss in the quarter was $7.7 million, or 59 cents per diluted share, versus a net loss of $6.4 million, or 50 cents per diluted share, in the prior-year quarter.
Adjusted for one-time events, net loss was $3.8 million, or 29 cents per diluted share, versus a net loss of $5.9 million, or 45 per cents per diluted share, in the prior-year quarter. Adjusted net loss removes the effect of debt extinguishment, stock-based compensation expense, severance charges, asset impairment and any financing related legal or professional fees not subject to capitalization, Kirkland’s pointed out.
The company fell short of a Yahoo Finance analyst consensus estimate for adjusted diluted loss per share, which was for 27 cents, but bettered a revenue forecast of $110.23 million
Overall comparable sales decreased 3%, but comp store sales gained 1.6% year over year in the quarter. According to Kirkland’s, the overall comp decrease resulted from a decline in consolidated average ticket and e-commerce conversion, partially offset by an increase in consolidated traffic and store conversion. Hurricane-related disruption across a significant number of stores negatively impacted comps by approximately 1%, the company added..
Net sales were $114.4 million versus $116.4 million in the prior-year quarter. Operating loss was $2.4 million versus $6.7 million in the year-earlier period.
Amy Sullivan, Kirkland’s CEO said in a conference call the third quarter marked a significant turning point for the company as it entered into a strategic partnership with Beyond. The transaction allowed Kirkland’s to retire expensive debt and strengthen its balance sheet while beginning to position the company for growth, she noted. The transaction also provided the company with additional capital to continue progressing on its Kirkland’s Home strategic initiatives and enabling it to pursue new growth opportunities as it revitalizes the Bed Bath & Beyond brand, Sullivan added. She said Kirkland’s will be able to leverage Beyond’s robust customer database, more effectively engage with existing shoppers and acquire new customers. The partnership also gives Kirkland’s a chance to expand customer loyalty and retention through unified loyalty and credit programs, she said.
In the quarter, Kirkland’s anniversaried the strategic shift initiated in September of 2023, which focuses on reengaging core customers with an emphasis on lapsed loyalty program members. The company also has taken steps to sign up new loyalty members and build its social media following.
Kirkland’s experienced year-over-year gains in holiday, gift, textiles, floral, fragrance and housewares, reflecting a shift in emphasis to faster-turning, lower-price point items. Still, those gains were not enough to offset declines in the higher ticket categories of furniture, mirrors, wall decor, art and lamps.
In announcing the financial results, Sullivan said: “The third quarter marked our fourth consecutive quarter of positive comparable store sales growth and significant year-over-year improvement in adjusted EBITDA. I am immensely proud of our team’s ability to deliver progress towards our initiatives of re-engaging our core customer, refocusing our product assortment and strengthening our omni-channel capabilities while we continued to conservatively deploy capital based on our near-term financial priorities. This quarter also marked a pivotal moment for Kirkland’s as we entered into a strategic partnership with Beyond enabling us to strengthen our financial position and providing new avenues for growth as the exclusive licensee of Bed Bath & Beyond neighborhood stores. We are thrilled to leverage our merchandising and brick-and-mortar strengths while positioning Kirkland’s as a multi-brand retailer, with the first Bed Bath & Beyond neighborhood store opening next year. We believe in the opportunities that lie ahead as we build the foundation for growth and drive value for all stakeholders.”
