Although total sales beat a Wall Street estimate, Kirkland’s Home suffered significant second-quarter comparable sales and earnings declines and now is working on bolstering inventory and liquidity positions.
Net loss was well above a Yahoo Finance-published analyst consensus estimate of 87 cents although net sales beat a Wall Street expectation of $97.17 million.
Comparable sales slipped 8.6% in the quarter year over year, including a 9.1% decline in e-commerce sales. A decline in traffic and conversion drove the decrease, partially offset by an increase in average ticket, the company stated.
Net sales were $102.1 million versus $114.8 million in the prior-year quarter. Operating loss was $21.8 million versus operating income of $200,000 in the year-earlier period, Kirkland’s reported, with the decline primarily due to a decline in gross profit and a larger percentage of fixed operating costs relative to the lower sales base.
In announcing second-quarter financials, Steve “Woody” Woodward, president and CEO of Kirkland’s Home, said, “For the remainder of fiscal 2022, we are focused on improving our liquidity position and appropriately managing our inventory. As the broader consumer environment remains volatile, we also plan to continue actively adjusting our promotional strategy to drive sales and work through our inventory. We feel confident in our ability to maintain a lean operational cost structure and drive cash flow during the upcoming harvest and holiday seasons as we work to begin paying down our borrowings. Overall, we are committed to our long-term transformation strategy and unlocking the full potential of Kirkland’s Home.”
During the second quarter, Woodward said, Kirkland’s focused on re-engaging with customers in-store and online to drive sales in a difficult market environment.
“Throughout the quarter, we intentionally elevated promotions to work through inventory levels, resulting in compressed margins but an improved sales trend from the first quarter across our omnichannel platform,” he said. “Specifically, we experienced notable sales momentum in our furniture category, which gives us confidence that we remain on the right track to drive growth in this segment of the market. In addition, our in-home delivery program has been showing steady adoption as we work to streamline processes and improve efficiency.
Woodward said that, as summer ends, “early indicators are showing demand for our harvest collection, and we are pleased to report that we experienced improvements in sales and gross profit margin in the first few weeks of August. With the majority of our harvest inventory already in place and our holiday inventory on schedule, we believe we are in a healthy position to fulfill the expected seasonal demand in the back half of the year.”
