Is Kirkland's (KIRK) Poised to Beat Earnings this Season? - Analyst Blog


Kirkland's Inc. ( KIRK ) is set to report second-quarter fiscal 2014 results on Aug 21. Last quarter, the company posted a 20.0% positive surprise. Let us see how things are shaping up for this announcement.

Factors to be Considered this Quarter

The company turned around in the first quarter after posting decline in comps for the last few quarters. In the first quarter the company posted positive comps backed by decent gains in transactions and average tickets at its stores.

The new merchandising and marketing strategies undertaken during the first quarter of fiscal 2014 are helping Kirkland's expand its customer base and also drive strong margin gains. These initiatives have helped Kirkland's witness witnessing strong traffic in its stores for the past few months, which is expected to boost comps in the second quarter.

Management issued an optimistic outlook for the second quarter of fiscal 2014. The company expects net sales in the range of $104 to $105 million, up 7% to 8% from prior-year level. Comps are expected to increase in the range of 3% to 4% versus a decrease of 0.2% in the prior-year quarter.

We are encouraged by the positive outlook and strong comps of the home furnishing retailer. Moreover, with a flourishing housing sector, demand for home furnishings is growing and it is expected to boost sales in the to-be-reported quarter.

Earnings Whispers?

Our proven model does not conclusively show that Kirkland's is likely to beat earnings this quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. However, that is not the case here due to the following factors:

Positive Zacks ESP: ESP for KIRK is 25.00%. The Most Accurate Estimate stands at a loss of 3 cents and the Zacks Consensus Estimate stands at 4 cents.

Zacks Rank: Kirkland's has a Zacks Rank #4 (Sell) which when combined with a 25.00% ESP makes surprise prediction difficult.

We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

Other stocks in the consumer staples sector that have both a positive Earnings ESP and a favorable Zacks Rank are:

Sanderson Farms Inc. ( SAFM ), with an Earnings ESP of +4.92% and a Zacks Rank #1.

Abercrombie & Fitch Company ( ANF ), with an Earnings ESP of +20.00% and a Zacks Rank #2 (Buy).

Shoe Carnival Inc. ( SCVL ), with an Earnings ESP of +5.88% and a Zacks Rank #2.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: ANF , KIRK , SCVL , SAFM

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