Kirkland's Inc.'s
(
KIRK
) first quarter of fiscal 2012 earnings of 10 cents a share were in
line with the Zacks Consensus Estimate. However, it fell well short
of the year-ago quarter's earnings of 15 cents per share.
Quarterly earnings declined due to weaker margin on the back of
high inflation in the economy.
Quarter in Detail
Kirkland's net sales went up 3.6% year over year to $97.8
million from $94.4 million in the year-ago quarter. Sales, however,
missed Zacks Consensus Estimate of $99.0 million. Consolidated
comparable store sales declined 1.2% compared with an 8.4% decrease
in the year-ago quarter.
Comparable store sales fell due to a 5% decline in transactions
backed by a decline in conversion rate in its stores. Increase in
sales of art, mirrors, outdoor living and furniture were offset by
declines in decorative accessories, wall decor and lamps.
The company opened 5 stores and closed 17 stores during the
first quarter of 2012, bringing the total number of stores to 297
at the end of the quarter.
On a year-over-year basis, gross profit went up to $38.5 million
compared with $38.1 million in the year-ago quarter. Gross margin
contracted 100 basis points to 39.3% on the back of higher
occupancy cost, outbound freight cost as well as central
distribution cost partially offset by lower inbound freight costs
on inventory compared with the year-ago quarter. Operating income
during the first quarter of 2012 declined to $3.2 million, as
against an operating income of $5.2 million in the year-ago
quarter.
Other Financial Update
Kirkland's exited the quarter with cash and cash equivalents of
$73.2 million compared with $83.1 million in the prior quarter.
Deferred rent and other long-term liabilities stood at $38.6
million compared with $38.4 million in the prior quarter.
Kirkland used $2.7 million of cash for operating activities
compared with $2.1 million of cash provided in the year-ago
quarter. It used $4.2 million for investing activities compared
with $3.1 million in the year-ago quarter and $3.1 million for
financing activities compared with $0.07 million of cash provided
in the year-ago quarter.
During the quarter, the company repurchased 2.2 million shares
worth $3.2 million at an average price of $14.6 per share.
Guidance
Based on the first quarter results, the company expects earnings
per share for fiscal 2012 in the range of 87 cents to 97 cents.
Kirkland's expects to open approximately 40 to 45 new stores in
fiscal 2012, representing square footage growth of 8% to 10%.
Kirkland's expects total sales growth in fiscal 2012 in the
range of 7% to 9% compared with fiscal 2011.
For the second quarter of 2012, the company expects earnings in
the range of 7 cents to 11 cents per diluted share. Net sales are
expected to be $94 million to $96 million.
During the second quarter, the company undertook promotional
activity to help change customer's response towards its stores.
However, the company continued to witness weak margins and
comparable store trends in the early part of the second quarter.
The company expects comparable sales to remain flat or decline up
to 3% during the quarter.
Kirkland's closely competes
The TJX Companies Inc
. (
TJX
) and
Ross Stores Inc
. (
ROST
). Currently, we have a long-term Underperform recommendation on
Kirkland's, which carries a Zacks #5 Rank (short term Strong Sell
rating).
KIRKLANDS INC (KIRK): Free Stock Analysis
Report
ROSS STORES (ROST): Free Stock Analysis Report
TJX COS INC NEW (TJX): Free Stock Analysis
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