For the first quarter, Kirkland’s posted a net loss on lower sales but e-commerce sales rose as it adapted to the coronavirus pandemic-impacted retail environment.
Net loss was $7.4 million, or 53 cents per diluted share, versus a net loss of $8.9 million, or 62 cents per diluted share, in the quarter a year previous. Adjusted for one-time events, net loss was $18 million, or $1.29 per diluted share, versus $7.4 million, or 51 cents per diluted share, in the year-before period.
A MarketBeat analyst consensus estimate was for a 52 cents adjusted diluted per share loss in the quarter.
Kirkland’s posted net sales of $77.2 million versus $129.6 million in the quarter a year earlier. Operating loss was $27.6 million versus an operating loss of $12.7 million in the year-prior period.
Of Kirkland’s 404 stores, 357 are now open to customer traffic and another 43 stores offer contactless curbside pickup only. E-commerce sales for the quarter increased 32.3% to $26.3 million.
Kirkland’s pointed out that a pre-tax loss of $27.7 million during the quarter had an offsetting tax benefit of $20.3 million that includes the impact of the net operating loss carryback provisions of the CARES Act. Versus the prior year, higher pre-tax losses occurred due to a significant reduction in sales from the store closures and lower product margin from the higher mix of e-commerce sales. The company continued to incur certain payroll expenses while stores were closed as well as fixed occupancy, distribution and corporate overhead expenses that further contributed to the pre-tax loss. Actions and cost reductions executed during the quarter partially offset the lost sales and should continue to benefit the company for the remainder of the fiscal year, Kirkland’s maintained.
First quarter cash flow was also negatively impacted by the temporary store closures, Kirkland’s noted. The need to continue paying merchandise and freight costs, payroll for store management and the corporate office, and essential payables, with the significant reduction in sales, drove cash use. Kirkland’s drew $40 million on its revolving credit facility during the quarter, ending the period with $30.1 million of cash and $22.6 million available on its credit facility. Kirkland’s has approximately $17 million of cash on hand and $20 million of borrowings on its revolving credit facility available.
“The positive sales momentum we saw in the fourth quarter continued through the first month of this quarter prior to the store closures,” said Woody Woodward, Kirkland’s CEO. “While the stores were closed, we were pleased with the acceleration of our online sales, and the customer reception of our contactless curbside pickup option. Since reopening most of our stores, we have seen a quick ramp up in demand along with margin improvement. The customer is reacting positively to our expanded merchandise assortment that can furnish a home of any size on a budget. The actions we took to ensure we have the right cost structure and infrastructure have resulted in improved efficiencies in the stores, supply chain, liquidity and an enhanced customer experience online and in the stores. We have worked in partnership with our vendors, landlords and employees to preserve these improvements as a new operating reality at Kirkland’s that should enable us to better leverage an improving sales trend.”
Woodward added, “Through these challenging times, I am proud of the quick action of our leaner teams as we quickly stood up contactless curbside pickup, fueled online demand with targeted, margin-friendly offers and safely opened our stores as soon as local governments allowed. The continued loss of store-based competition, the increase in first-time customers to our website and the benefit of stimulus funds on consumer demand are clearly having a positive effect on our sales and margin trends to date in May, and we believe will provide a bright future for Kirkland’s.”