Zacks_Analysts' Blog : Kirkland's Misses Consensus - Analyst Blog

Kirkland’s Inc. (KIRK) reported second-quarter 2010 earnings of 16 cents, which missed the Zacks Consensus Estimate of 18 cents. Earnings were up 14.3% year over year.



Quarterly net sales grew 2.1% to $89.5 million as against $87.7 million posted in the year-ago quarter. Consolidated comparable store sales rose 1.0% for the quarter compared with an increase of 6.1% in the prior-year quarter.



On a year-ago basis, quarterly operating income surged 6.1% to $5,064 million. Kirkland’s exited the quarter with cash and cash equivalents of $65.7 million and no debt.



The company ended the quarter with 286 stores, including the commencement of 7 stores and closure of 2 stores.



Guidance



Kirkland’s anticipates opening an additional 22 to 27 new stores and shutting down 10 to 12 stores in the remaining half of 2010. For fiscal 2011, Kirkland’s is targeting a net store unit growth of about 10% and net square footage growth of about 15%.



For fiscal 2010, Kirkland’s forecasts total sales to advance in the range of 4% to 6%. The company anticipates comparable store sales to range from slightly negative to slightly positive in the second half of 2010, based on a net increase in store base.



The company projects fiscal 2010 operating margin to almost flat or slightly improve compared with fiscal 2009.



Kirkland’s forecasts fiscal 2010 earnings per share to improve slightly compared with adjusted earnings per share of $1.42 in fiscal 2009. For fiscal 2010, the company expects effective tax rate to be approximately 39% compared with 26.4% in fiscal 2009.



The company expects to generate positive cash flow in fiscal 2010 and fully fund its new store growth and technology improvements through cash generated from operations.



Capital expenditures are estimated to range between $23 million to $26 million in fiscal 2010.



The protracted sluggishness in economy and the slack job market make the consumers cautious with their discretionary spending. However, attractive promotional initiatives increased footfall and transactions.



To cope up with the current macroeconomic scenario, Kirkland’s continues to upgrade existing products, introduce new ones, open stores at attractive locations, shut down underperforming outlets and maintain relatively stable product pricing.
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