NASHVILLE, Tenn. -- Kirkland's, Inc. (Nasdaq: KIRK) ("Kirkland's" or the "Company"), a multi-brand specialty retailer of home décor, housewares and furnishings, announced financial results for the 13-week and 52-week periods ended February 1, 2025.
Amy Sullivan, CEO of Kirkland's, said, "Fiscal 2024 was an important year in our transformation journey. We continued to make progress towards the revitalization of our Kirkland's Home brand with our strategic initiatives, re-engaging our core customer, refocusing our product assortment and strengthening our omni-channel capabilities enabling us to deliver positive brick-and-mortar comparable sales growth throughout the year and achieve significant improvement in bottom-line performance. In addition, through our partnership with Beyond, we began to open up new avenues for growth allowing us to reimagine the future opportunities for our company and each brand.
Sullivan continued, "While the current environment has become increasingly challenging with the uncertainty around tariffs and the potential impact on consumer behavior, we are executing strategies to navigate the tariff impact while maximizing the assets available to us to accelerate a capital light store conversion strategy that leverages our full house of brands to deliver style and value. We have identified the first of many potential store conversions under the Bed Bath & Beyond Home and Overstock banners that we believe will not only drive stronger brand awareness and customer acquisition but also support our ongoing transformation efforts. We are intently focused on delivering results, returning to profitability and driving value for all of our shareholders."
Fourth Quarter 2024 Financial Results
Net sales in the fourth quarter of 2024 (13 weeks) were $148.9 million, compared to $165.9 million in the prior year quarter (14 weeks). The decrease was primarily driven by the extra week in the prior year quarter fiscal calendar, a decline in store count of approximately 4% and a decline in e-commerce sales, partially offset by growth in comparable store sales. On a 13-week comparison, comparable sales decreased 0.6% compared to the fourth quarter of 2023, including a 1.6% increase in comparable store sales and a 7.9% decline in e-commerce sales. The decrease in comparable sales was primarily driven by a decrease in consolidated average ticket and e-commerce traffic, partially offset by an increase in consolidated conversion and store traffic.
Gross profit in the fourth quarter of 2024 was $45.1 million, or 30.3% of net sales, compared to $53.0 million, or 32.0% of net sales in the prior year quarter. The decline is primarily a result of lower merchandise margins, due to higher promotional activity, and the deleverage of store occupancy costs, partially offset by lower outbound freight costs.
Operating expenses in the fourth quarter of 2024 were $36.0 million, or 24.1% of net sales, compared to $42.4 million, or 25.5% of net sales in the prior year quarter. The decline in operating expenses was driven by one less week in the fourth quarter of fiscal 2024, lower store and corporate compensation and benefits expenses and reduced advertising costs.
Operating income in the fourth quarter of 2024 was $9.2 million compared to operating income of $10.7 million in the prior year quarter. Adjusted operating income in the fourth quarter of 2024 was $9.7 million compared to $11.3 million in the prior year quarter. Adjusted operating income removes the impact of asset impairment, stock-based compensation expense, severance charges and any financing related legal or professional fees that, due to their nature, did not qualify for capitalization as deferred debt or equity issuance costs.
EBITDA in the fourth quarter of 2024 was $11.5 million compared to $13.5 million in the prior year quarter. Adjusted EBITDA in the fourth quarter of 2024 was $12.0 million compared to $14.2 million in the prior year quarter. Adjusted EBITDA removes the impact of asset impairment, stock-based compensation expense, severance charges and any financing related legal or professional fees that, due to their nature, did not qualify for capitalization as deferred debt or equity issuance costs.
Net income in the fourth quarter of 2024 was $7.9 million, or earnings of $0.51 per diluted share, compared to $10.1 million, or earnings of $0.78 per diluted share in the prior year quarter.
Adjusted diluted net income in the fourth quarter of 2024 was $8.5 million, or adjusted earnings of $0.54 per diluted share, compared to adjusted net income of $10.7 million, or adjusted earnings of $0.82 per diluted share in the prior year quarter. Adjusted net income removes the impact of asset impairment, stock-based compensation expense, severance charges and any financing related legal or professional fees not subject to capitalization.
Fiscal Year 2024 Financial Results
Net sales in 2024 (52 weeks) were $441.4 million, compared to $468.7 million in the prior year (53 weeks). The net sales decrease was primarily driven by a decline in store count of approximately 4%, the extra week in the prior year fiscal calendar and a decrease in e-commerce sales, partially offset by an increase in comparable store sales. On a 52-week comparison, comparable sales decreased 2.0%, which included a 1.9% increase in comparable store sales and a 12.9% decrease in e-commerce sales. The decrease was primarily driven by a decline in consolidated average ticket and e-commerce traffic, partially offset by increased store traffic and conversion.
Gross profit in 2024 was $122.0 million or 27.6% of net sales, compared to $127.0 million or 27.1% of net sales, in 2023. The improvement as a percentage of net sales was primarily a result of favorable outbound freight costs, distribution center costs and depreciation, partially offset by the deleverage of store occupancy costs on the lower sales base and lower merchandise margin.
Operating expenses in 2024 were $136.0 million, or 30.8% of net sales, compared to $151.4 million, or 32.3% of net sales in 2023. The decline in operating expenses was driven by reduced advertising costs, corporate salaries, asset impairment expenses and one less week in fiscal 2024.
Operating loss in 2024 was $14.0 million compared to an operating loss of $24.4 million in 2023, as lower operating costs were partially offset by the decline in gross profit. Adjusted operating loss in 2024 was $12.0 million compared to $20.4 million in 2023.
EBITDA in 2024 was a loss of $4.3 million compared to a loss of $12.4 million in 2023. Adjusted EBITDA in 2024 was a loss of $2.3 million compared to a loss of $8.4 million in 2023.
Net loss in 2024 was $23.1 million, or a loss of $1.77 per diluted share, compared to a net loss of $27.8 million, or a loss of $2.16 per diluted share, in 2023.
Adjusted net loss in 2024 was $17.8 million, or a loss of $1.36 per diluted share, compared to an adjusted net loss of $23.7 million, or a loss of $1.84, in 2023.
Balance Sheet
As of February 1, 2025, inventory was $81.9 million, a 10.5% increase compared to the prior year, mainly due to planning inventory to be higher than the prior year and not selling through inventory in the fourth quarter at anticipated levels.
As of February 1, 2025, the Company had a cash balance of $3.8 million, with $43.0 million of outstanding debt under its $90.0 million senior secured revolving credit facility and $17.0 million in debt to Beyond, Inc. ("Beyond"). As of February 1, 2025, the Company had approximately $4.3 million available for borrowing under the revolving credit facility, after the minimum required excess availability covenant.
Subsequent Events
On February 5, 2025, the Company converted the $8.5 million Beyond convertible note to equity and received $8.0 million in additional equity financing from Beyond.
Subsequent to February 1, 2025, the Company repaid a net $4.1 million under the revolving credit facility and issued $5.1 million in letters of credit.
As of April 30, 2025, the Company is in active discussions to finalize a commitment for an additional $5.0 million from Beyond as an expansion of the existing Beyond Credit Agreement. The funds are intended to be used for general working capital purposes, including the conversion of certain locations to Bed Bath & Beyond Home and Overstock stores. The transaction is subject to customary closing requirements and is expected to close next week.
As of May 1, 2025, the Company had $38.9 million of outstanding debt and $5.1 million of letters of credit under its revolving credit facility with minimal availability pending the closing of the expanded term loan. Availability under the Company's revolving credit facility fluctuates largely based on eligible inventory levels, and as eligible inventory increases in the second and third fiscal quarters in support of the Company's back-half sales plans, the Company's borrowing capacity increases correspondingly.
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